2019 (3) TMI 34 – CESTAT HYDERABAD – TMI – Process amounting to manufacture or not – uncoiling the sheets, cutting them to sizes and corrugating them into form to be used as roofs – excisability – extended period of limitation – confiscation – penalties – Held that:- As the appellant is bringing into existence a new commodity as known in the market, there is no hesitation in holding that the appellant has indeed manufactured the profiles from the sheets – the process amounts to manufacture – demand of excise duty upheld.
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Time Limitation – Held that:- Appellant would not have gained much by evading any excise duty as the overwhelming part of the cost is of sheets on which they are entitled to CENVAT credit paid by the suppliers anyway. They are also paying service tax on corrugation element on it. So what is escaping tax is the small profit margin between the purchase price of the sheets and the sale price of the sheets. If the appellant is required to pay excise duty they will b
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cords. 3. The facts of the case in brief are that the main appellant MSC are registered with Central Excise department as a trader for issue of duty paid documents in respect of the steel sheets which they purchase from M/s JSW Steel Ltd and sell to others. They also have taken registration from the Central Excise department for rendering business auxiliary services and storage and warehousing services . The officers of the DGCEI gathered intelligence that the appellant is, under the guise of trading activity, manufacturing colour coated profile sheets (in short profiles ) and cleared the same without accounting for them and without discharging the Central Excise duty. On gathering such intelligence, the officers of DGCEI conducted searches at the factory premises and also premises of their dealers both local and outstation. They have also recorded statements of various officers of the appellant and came to a conclusion that the appellant has indeed manufactured profiles out of steel s
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edge of the department and they have been paying service tax on the process of corrugation under the head of business auxiliary service . He takes the bench through some of the invoices and shows that whenever they sold corrugated sheets to their customers, they have issued tax invoices for the sheet as shown in Pg.191 of the paper book in appeal E/30306/2017. Correspondingly, they have also issued a separate invoice for the corrugation work undertaken by them for the same goods as shown in Pg.210 of the same paper book. He would argue that mere uncoiling sheets from the rolls, cutting them into sizes and corrugating them into corrugated sheets does not amount to manufacture. The sheet continues to be sheet whether or not the profiles are made in the sheet. The profiles are made so as to make it suitable for use as roof. The entire activity of the appellant, both on the trading front and on the profiling is known to the department. They have always held the belief that corrugation does
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s and appropriate service tax has been paid on the same. Therefore, the entire demand is time barred and the show cause notice is not sustainable. (c) The demand is also not computed correctly because if it is held that they are liable to pay excise duty on the final products, they are entitled to the credit of the duty paid on the steel sheets which are their inputs. Once, the CENVAT credit is allowed, the bulk of the demand would extinguish anyway as can be seen from the invoices. Bulk of the price which they recover from their customers is towards steel sheets and only a small amount is collected towards the corrugation. (d) In view of the above, it cannot be alleged that they had an intention to evade payment of duty because on the raw material cost they would have got CENVAT credit anyway and on the value addition by way of corrugation, they have been paying service tax at the rate of 12%. Therefore, by no stretch of imagination can it be said that they have gained anything by eva
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xcise duty. Therefore, the demands are sustainable on merits. He also submits that the appellant neither took Central Excise registration for manufacture of the products nor has he paid the duty thereon. While he was selling the profiles to be used as roof, he was invoicing them as sheets and was raising separate invoices for service charges. This shows that the appellant had the malafide intention of evading payment of Central Excise duty and accordingly, he has been misdeclaring the description of the goods in the invoices and evading excise duty. On the question of payment of service tax on the corrugation, the learned department representative would assert that the appellant never disclosed the nature of the activities to the department and has only filed ST-3 returns indicating that they have paid some amounts as service tax under business auxiliary service . There is nothing on record to show that they appellant has described nature of the activity or sought any clarification fro
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o pieces and corrugated them by putting them through a machine and sold them. Such corrugated sheets/ profiles are used as roofs. The question as to whether this process of corrugation brings into market a new distinct commodity or it is only a minor processing of the goods itself and the commodity continues to be the same has been settled in the case of Proflex Systems (supra) held by the Hon ble High Court of Gujarat and affirmed by the Hon ble Apex Court. The decision in that case is that corrugated sheets meant to be used as roofs are distinct commodities from the sheets which are purchased in the form of coils. As the appellant is bringing into existence a new commodity as known in the market, we have no hesitation in holding that the appellant has indeed manufactured the profiles from the sheets. We do not agree with the learned counsel for the appellant that the processing does not amount to manufacture. 9. On the issue of limitation of time, we find that the appellant was regis
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ure of the activity being undertaken by the assessee. We also find force in the argument of the learned counsel for the appellant that they would not have gained much by evading any excise duty as the overwhelming part of the cost is of sheets on which they are entitled to CENVAT credit paid by the suppliers anyway. They are also paying service tax on corrugation element on it. So what is escaping tax is the small profit margin between the purchase price of the sheets and the sale price of the sheets. If the appellant is required to pay excise duty they will be entitled the CENVAT credit. In this factual matrix, we do not find that the revenue has made out a case to invoke extended period of limitation. 10. We find the entire demand in the show cause notice is beyond the normal period of limitation and therefore, the demand and interest do not sustain. Consequently, the confiscations and penalties also do not sustain. In view of the above, we find that appeals are liable to be allowed
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