By TIOL News Service

NEW DELHI, SEPT 29, 2016: THE appellant imported Singer brand sewing machines (period 2002-03, 2004-05) and availed exemption from payment of CVD under serial No. 201 of notification No. 6/2002-CE dated 1 st March 2002. The said exception was available if sewing machines were imported without any inbuilt motor.

The machines imported have a cavity for fitment of an electric motor which can be connected to the treadle through a V-belt. The machines, as imported, also have a facility to connect the belt for manual operation of the machine. The imported machines were extended the benefit of notification under serial No. 201 for CVD purposes.

The appellant, thereafter, procured indigenously manufactured motors and fitted them into imported machines and sold them to various customers.

The Department issued a SCDN alleging that fitting of electric motor into the imported sewing machine amounts to "manufacture" in terms of section 2(f) read with section note 6 of Section XVI of the CETA, 1985 and the resultant electric sewing machine was not eligible for the exemption under serial No. 201 of notification No. 6/2002-CE. Goods seized during investigation were also proposed to be confiscated through separate SCN.

The SCNs were confirmed and the said order(s) were upheld by the Commissioner(A) on 27th January 2009.

Before the CESTAT, the appellant submitted -

+ Machine imported without the motor is not incomplete or semi-finished, but is a complete machine; fitment of the motor has not changed the essential character or name or use of the sewing machine; section note relied by revenue is applicable only in respect of conversion of an incomplete or unfinished article into a finished article; imported machine is capable of operation manually in the form in which it is imported and fitment of the motor has only made the machine operational through an alternate mode.

+ Even if the process of fitting of electric motor to the imported sewing machine amounts to manufacture, the same will be eligible for exemption under serial No. 201 Notification No. 6/2002-CE dated 01/03/2002 as the entry excludes from exception only the sewing machines with inbuilt motors; that fixing of motors in the sewing machines will not render the sewing machine as one with an inbuilt motor.

After considering the submissions, the Bench observed -

Manufacture - erroneous view of adjudicating authority:

++ In the present case what has been imported is sewing machine even though the motor has not been fitted. After fitment of the motor it remains sewing machine. It cannot be said that the addition of motor has brought into existence any new article which has a character, name or use which is different from the components which have gone into it. Accordingly, it cannot be said that the addition of motor has brought into existence any new product and consequently no ‘manufacture' has taken place and hence, no liability for payment of Central Excise Duty arises in this case.

Exemption:

++ Even if a view is taken that addition of motor results in a complete article liable for payment of excise duty, it will be covered by the exemption given in serial No. 201 of notification 6/2002-CE (as available to those sewing machines which do not have an inbuilt motor). [Gabbar Engineering Co. Vs. CCE, Ahmedabad - 2010-TIOL-101-CESTAT-AHM refers]

Conclusion:

++ Addition of motors to the imported sewing machine does not bring into existence any new manufactured article requiring the payment of excise duty. Even if the view is taken that new item is manufactured, the exemption under serial No. 201 Notification No. 6/2002-CE will be extendable to the resultant machines.

The impugned orders were set aside and the appeals were allowed.

(See 2016-TIOL-2563-CESTAT-DEL)