IMPORTANT POINT
The Tribunal was right in its conclusion that assembly of imported kits of components into VTR/colour monitors by using the fasteners constituted the process of manufacture and the appellant was liable to pay duty on the end product.

Headnote:Central Excise and Salt Act, 1944-Sections 2(f), 11-A and 35F-Central Excise Tariff Act, 1985 tariff item Nos. 68 and 37BB-Import of components of V.T.R. and colour monitors in Semi Knocked Down condition after paying countervailing duty of 8% under Tariff Item 68-Assembly of these imported kits of components into VTR/colour monitors by using the fasteners-Whether constituted the process of manufacture and such product of VTR/colour monitors as finished product liable to duty under item 37BB? (Yes)-Contention that once countervailing duty was paid on VTR/colour monitors components they were not liable to duty after assembly-Whether rightly rejected? (Yes)-Contention on question of limitation-Whether tenable? (No) -Contention that Collector could not have issued more than one show cause notice-Whether rightly rejected? (Yes)-Result-Appeal dismissed. (Paras 13 to 17)
       Held : It is well settled that a question as to when a manufacture of product takes place within the meaning of Section 2(f) of the Act is a mixed question of law and fact. The nature and the extent of processes may vary from case to case. When a change takes place and a new and distinct article comes into existence known to the consumers and the commercial community as a commercial product, which can be no longer regarded as the original commodity, such a change constitutes a process of manufacture. It is not disputed that the imported kits of components of VTRs and colour monitors in SKD condition were items falling under Item 68 for levy of countervailing duty. It is clear from the material placed on record that by the process undertaken by the appellant a change is brought about facilitating the utility of the product for which they were meant. In other words, pursuant to the process, a transformation has taken place at the hands of the technical experts or skilled persons and not by laymen, which made the product to have a distinct character and use. Such product of VTR/colour monitor as finished product was classified under Item 37BB. The Collector as well as the Tribunal recorded a finding of fact based on the material placed on record that the assembly of imported kits of components into VTRs/colour monitors by using the fasteners constituted the process of manufacture and rightly so in our opinion. We have no good reason to take a contrary view on this finding of fact. (Paras 10, 11 and 12)
       Thus, we find no merit in this appeal. Hence it is dismissed. No costs. (Para 18)

JUDGMENT

Shivaraj V. Patil, J.-The appellant imported 100 kits of VTR with colour monitors in disassembled condition. These items were described in invoices and bills of entry as "sets of assembly, sub-assembly and other hardware items for assembly of complete VTR and colour motinors". The said goods were subjected to countervailing duty @ 8% ad valorem falling under tariff item No. 68. During the period 2.12.1981 to 26.2.1982, the appellant started assembling these goods into VTRs and colour monitors at their factory at Palghat and cleared the sets without payment of duty, without intimation and without observing the Central Excise formalities.

2. The Superintendent of Central Excise, Range-II, Palghat, while perusing advice notes of the factory observed that certain VTRs and colour monitors were manufactured and cleared by the appellant during the period June, 1982 to August, 1982 and issued letter dated 12.8.1982 asking the appellant to furnish details of the sets cleared and to explain why duty should not be demanded on such sets and why action should not be taken for contravention of Central Excise rules. However, the appellant did not furnish the required information. Thereafter, the Superintendent issued a show cause notice dated 6.12.1982 asking the appellant why a duty of Rs. 5,58,000/- due on 56 sets of VTRs and colour monitors should not be demanded under Section 11-A of the Act and another show cause notice dated 2.4.1983 was issued for Rs. 1,78,500/- due on 17 sets of VTRs and colour monitors. The appellant in response gave replies by letters dated 31.1.1983 and 11.2.1984 respectively.

3. On 9.6.1983, the Central Excise Officers searched the factory of the appellant and on 14.6.1983 the Offices of the Directorate of Anti-Evasion searched the factory premises on 20, K.H. Road, Bangalore. 20 Nos. of VTRs were detained which were reported to have been brought there from the factory of the appellant at Palghat. The Manager was not able to produce any document to show that the Central Excise Duty had been paid on these sets. In subsequent investigations, it was found that the appellants had manufactured and cleared VTRs and colour monitors without disclosing details thereof to the Department and without observing the Central Excise formalities. Evidence to show actual price at which VTRs and colour monitors were sold to independent wholesale buyers was also collected during the course of investigation. One more notice was issued on 20.2.1986 by the Collector, Central Excise, in continuation of show cause notices dated 6.12.1982 and 2.4.1983 issued earlier giving the detailed facts asking the appellant why Central Excise duty of Rs. 9,43,884.38 on 100 VTRs and 100 colour monitors cleared without payment of duty should not be demanded. In reply dated 7.4.1986 given on behalf of the appellant, it has stated that two show cause notices were already issued and replies were furnished and request was made to dispose of the earlier show cause notices before deciding the last one. A further reply dated 14.7.1986 was furnished by the appellants.

4. The stand of the appellant was that assembly of components imported in Semi Knocked Down (SKD) condition into VTRs/colour monitors did not amount to manufacture for the purpose of levy of excise duty. According to them, the imported components in SKD condition were only put together by using fasteners; that no manufacturing activity or use of power was involved in the process; the show cause notice dated 2.4.1983 was hit by limitation in respect of the clearances effected prior to 3.10.1982. Extended period of limitation under Section 11-A was not available to the Revenue. The appellant also took up the stand that the valuation adopted was not correct. Further, without completing the proceedings pursuant to the two earlier show cause notices issued, the Collector could not have issued the third notice and proceeded against the appellant in confirming the demand for Rs. 9,43,884.38 and dir

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2002 Supreme(SC) 628

IMPORTANT POINTThe Tribunal was right in its conclusion that assembly of imported kits of components into VTR/colour monitors by using the fasteners constituted the process of manufacture and the appellant was liable to pay duty on the end product.

IMPORTANT POINT
The Tribunal was right in its conclusion that assembly of imported kits of components into VTR/colour monitors by using the fasteners constituted the process of manufacture and the appellant was liable to pay duty on the end product.