Whether repair of defective motors amounts to manufacture?

PJ/CASE LAW/2014-15/2405

Case: COMMISSIONER OF CENTRAL EXCISE, JALANDHAR VERSUS M/s MUKERIAN PAPERS LTD.

Citation:- 2014 (299) E.L.T. 382 (Tri. – Del.)
Issue:- Whether repair of defective motors amounts to manufacture?

Brief facts:- A very short issue is involved in the present appeal. The appellant is engaged in the manufacture of traction motors. They also received defective traction motors from their customers and after repairing, clearing the same, under due intimation to jurisdiction Central Excise authorities. During the course of repair of such goods, the appellant uses some of the fresh inputs on which they have taken the credit but such credit was reversed by them at the time of clearance of repaired motors. The respondent by entertaining a view that such repaired motors were required to be assessed to duty in terms of provisions of Rule 8 of Central Excise Valuation Rules, raised the demand of duty to the extent of Rs. 28,811/- for the period July, 2001 to December, 2001 and confirmed the salty. Penalty of Rs. 10,000/- was also imposed. The said order was upheld by the Commissioner (Appeals). Hence, the present appeal.

Reasoning of judgment:-After carefully considering the submissions made by both sides, the Tribunal finds that the lower authorities have advanced their case on wrong premises that repair of damaged and defective motors amount to manufacture. Admittedly provisions of Rule 8 are applicable in respect of captively consumed goods and cannot be held to be invocable in case of clearances of repaired items. Though the said issue does not need the support of any precedent decision but we may refer to Tribunal's decision in the case of CCE, lndore v. Hotline CPT Ltd. [2010 (262) E.L.T. 312 (Tri.-Del.)] observing that the process of repair does not amount to 'manufacture. If that be so, the provisions of Rule 8 are not applicable. As such, we find no merits in the Revenue's contention. The impugned orders are accordingly set aside and the appeal allowed with consequential relief to the appellant.

Decision:- Appeal allowed.

Comment:- The gist of the case is that repair of defective goods does not amount to manufacture and so the provisions of Rule 8 as regards valuation cannot be invoked.

Prepared by: Kushal Shah

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PJ/CASE LAW/2014-15/2405

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