By TIOL News Service

MUMBAI, FEB 24, 2016: THE appellant received Moulds and Dies from their own unit under cover of challan issued under Rule 4(5)(a) of CCR, 2002. On the said Moulds and Dies, appellant carried out modification as per the requirement of their own supplier unit. After doing modification, the moulds and dies are returned back and the same are used by their Boisar unit for manufacture of plastic product used in switchgear industry.

The Revenue contended that the activity of modification of moulds and dies amount to manufacture, therefore, it is liable to excise duty.

Both the lower authorities were firm in their view that the activity amounts to manufacture and the appellant was, therefore, saddled with CE duty liability.

Before the CESTAT, the appellant submitted that theyare engaged in the manufacture of moulds and dies as well as activity of repair, maintenance and modification of existing moulds; that after modification, the goods remained as moulds only and there is no change in the identity of the goods except some modification; hence activity remained as repair and maintenance or modification which does not amount to manufacture. Moreover, their Boisar Unit was supplying the moulds under Challan issued under Rule 4(5) (a) of CCR, 2002 which permits an assessee to send capital goods to job worker for further processing, testing, repair and re-conditioning or for any other purpose, and the same (moulds) has been returned within the prescribed period for further use in the manufacture of final product on which duty is paid and, therefore, duty cannot be demanded on this ground too.

The AR reiterated the findings of the impugned order.

The Bench observed -

++ The appellant has undisputedly received moulds, which were earlier being used as moulds for the manufacture of plastic articles in their own other unit therefore at the time of receipt of the moulds there is no dispute that the product remains as moulds only. The appellant carried out the activity of modification on the existing moulds. After the said activity, moulds remained as moulds only except some changes but the said changes does not alter the identity of the moulds into some different product. In nutshell, before and after process carried out by the appellant the product remained as moulds only therefore in our considered view, the activity, by any stretch of imagination cannot be treated as manufacture.

++ From a plain reading of the Rule 4(5)(a), it is clear that rule permits to send the capital goods to job worker for further processing, testing, repair, re-conditioning or manufacture of intermediate goods necessary for manufacturing of final product or any other purpose. In view of these clear provisions, the appellant has correctly followed the procedure laid down under Rule 4(5)(a).

++ Even if it presumed that the activity is manufacture it will remain exempted under Notification No. 214/86-CE dated 25/3/1986 according to which if any goods manufactured on job work basis on material supplied by the principal manufacturer and said manufactured goods is used in the factory of the principal manufacturer, the said goods are exempted from the payment of whole of duty. In the present case the moulds supplied by Boisar unit to the appellant and appellant after carried out the activity returned back the moulds to the Boisar unit where it was used for the manufacture of other final product i.e. plastic parts on which excise duty is undisputedly paid. In this position even if by any stretch of imagination the activity held to be manufacture though not accepted by us, the moulds will remain exempted under the notification No. 214/86-CE.

++ In view of the above we are of the considered view, firstly the activity is not amount to manufacture, secondly the movement and activity of modification is squarely covered by Rule 4(5)(a) of CCR, 2002 therefore the demand is illegal and incorrect.

The impugned order was set aside and the appeal was allowed with consequential relief.

(See 2016-TIOL-500-CESTAT-MUM)