2026-VIL-1830-CESTAT-AHM-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Whether assembly of bought-out components in a box and sale as LPG/CNG conversion kit amounts to manufacture under Section 2(f) of the Central Excise Act, 1944 - Appellant procured imported as well as indigenous duty paid and non-duty paid parts, packed them in a box with brand name, printed MRP and car model, and sold the same as LPG/CNG kit, with tank and tank stand supplied separately - SCN proposed classification of the kits under CTH 8409, recovery of duty with interest and penalty, which was confirmed by the Commissioner - The Tribunal earlier remanded the matter only for re-quantification, which the High Court set aside, directing fresh decision on merits - Appellant contended that mere packing of duty paid parts into a kit is not manufacture and that payment of duty on clearances to vehicle manufacturers is no evidence of manufacture - Respondent contended that the kit has a distinct name, character, use and marketability, being a complete system selected for a specific car model - Whether putting bought-out items in a box and selling them as LPG/CNG kit amounts to manufacture and is leviable to central excise duty - HELD - Excisability requires a cumulative two-fold test, namely that a distinct commercial product with new identity, character or use emerges indicating transformation and that the transformed goods are marketable, the burden of establishing marketability lying on Revenue. Goods that retain their substantial identity after processing are processed and not manufactured. The bought-out items did not undergo any processing and retained their individual character, and though the kit is known as a distinct commodity in trade parlance, the goods fail the transformation test and remain a mere assembly of bought-out items. The decisions relied upon by Revenue are not applicable since there was some transformation of the bought-out items in those cases. The identical activity of packing imported and indigenous components as CNG kit was held not to be manufacture by a coordinate Bench, upheld by the Hon'ble Supreme Court, so that the issue is no longer res integra - The impugned order confirming duty demand is set aside and the appeal is allowedrnrn rnrnIssue 2: Penalty on authorised signatory of the company under Rule 26 of the Central Excise Rules, 2002 - Penalty was imposed under Rule 26 on the authorised signatory, an employee of the appellant company, in the same proceedings in which duty demand was confirmed against the company - Whether penalty under Rule 26 can be sustained on the employee when excise duty is held not leviable on the company - HELD - Since the activity of the company does not amount to manufacture and excise duty is not leviable, the employee cannot be faulted, and the charges against him of violation of the Central Excise Rules, 2002 are not sustainable - The penalty imposed on him is set aside and his appeal is allowed.
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