CESTAT: ‘Gripple Hanger System’ Production is Manufacture, Sets Aside Time-Barred Excise Demand
Pranav B Prem
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Principal Bench, New Delhi, has held that the processes involved in producing the “Gripple Hanger System” amount to manufacturing under the Central Excise Act, 1944, as the activity results in a distinct, marketable commodity with a different name, character, and use from its components. However, the Tribunal set aside a substantial portion of the demand after finding that the extended period of limitation had been wrongly invoked.
The bench of Ashok Jindal (Judicial Member) and P. Anjani Kumar (Technical Member) was hearing an appeal by M/s Gripple Hanger & Joiner Systems India Pvt. Ltd. against an order of the Commissioner (Appeals) that had upheld a combined duty demand of ₹2.30 crore along with penalties, arising from three show cause notices (SCNs) covering April 2011 to June 2017. The dispute began after a departmental audit in August 2015 revealed that the company had exceeded the ₹1.5 crore exemption limit for central excise during 2011–12 and 2012–13 but neither obtained registration nor paid duty on clearances of wire rope hangers with accessories.
Following the audit, the Anti-Evasion Branch searched the appellant’s premises in September 2015, seizing records and forming the view that the company was engaged in manufacturing hangers without registration or payment of duty. The first SCN dated 07.10.2016 demanded ₹62.45 lakh for April 2011 to April 2013, alleging clandestine manufacture and clearance. Two more SCNs — dated 14.08.2017 and 29.01.2019 — demanded ₹1.11 crore and ₹63.65 lakh, respectively, for January–December 2016 and January–June 2017. The Additional Commissioner confirmed the total duty demand along with an equivalent penalty of ₹55.46 lakh for the first period.
Appellant’s case
The company contended that its activities — importing steel wire rope in running lengths, cutting and fusing the ends, crimping studs, and packing with accessories such as anchors, eyebolts, nuts, washers, and ferrules — did not amount to “manufacture.” It argued that no new product emerged, relying on Supreme Court rulings including Delhi Cloth & General Mills, South Bihar Sugar Mills, Moti Laminates, and J.G. Glass Industries to assert that manufacture requires the emergence of a distinct commodity with a new name, character, and use. The appellant likened its activity to assembling bought-out goods in a kit, citing XL Telecom Ltd. (AP High Court), where packing items together without altering their identity was held not to be manufacture.
The appellant also argued that the first SCN was time-barred. It claimed that the notice was based purely on an audit objection without evidence of suppression or intent to evade duty, citing multiple judgments, including Pushpam Pharmaceuticals, Anand Nishikawa, and Uniworth Textiles, which held that mere non-registration or non-payment does not justify invoking the extended limitation period under Section 11A(4).
Department’s stand
The Revenue maintained that the processes undertaken — cutting, fusing, crimping, bundling, and packing with accessories — transformed the raw materials into a commercially distinct product marketed as “Gripple Hanger System” with its own identity, description, and use. It argued that the product could no longer be regarded as steel wire rope and that all parameters for manufacturability were met. On limitation, the Department asserted that the appellant’s failure to declare past clearances and obtain registration demonstrated suppression, justifying the extended period.
Tribunal’s findings
After reviewing the process in detail, the Tribunal found that the transformation from galvanized wire rope and accessories into the Gripple Hanger System resulted in a new commodity “clearly marketable” and sold at a higher value than the sum of its parts. It agreed with the lower authorities that the hanger system had a distinct name, character, and use from its components, stating: “The commodity does not remain just steel wire rope with stud; it becomes a totally new commodity… manufacturing activity takes place and a new product with new usage and marketability comes into existence.”
The Tribunal noted that the appellant’s own invoices described the product as “Gripple Hanger System,” not wire rope with studs, undermining its claim that no new product emerged.
On limitation, however, the Bench held that the first SCN for April 2011–April 2013 was unsustainable. It found that the notice was issued solely on the basis of an audit objection and lacked any positive evidence of suppression or intent to evade duty. Citing settled law, it reiterated that mere non-registration, non-payment, or non-filing of returns is insufficient to invoke the extended period. The Tribunal also accepted that the appellant could have reasonably believed its activity was non-excisable.
The Tribunal partly allowed the appeal, setting aside the duty demand of ₹55.46 lakh and the equivalent penalty for the first period on limitation grounds. The remaining demands for 2016 and 2017 — falling within the normal limitation period — were upheld, and the order was modified accordingly.
Appearance
Counsel For Appellant: S.C. Kamra, Advocate
Counsel For Respondent: Rakesh Agarwal, Authorized Representative
Cause Title: Gripple Hanger & Joiner Systems India Pvt. Ltd. V. Commissioner of CGST, Delhi South
Case No: Excise Appeal No. 51170 of 2020
Coram: Ashok Jindal [Judicial Member], P. Anjani Kumar [Technical Member]
