Authority: Supreme Court of India, Civil Appellate Jurisdiction
Order Date: August 5, 2026
Case Overview
- Parties: Commissioner of Central Excise, Hyderabad‑IV (Revenue) as appellant versus M/s Xerox India Ltd. and its officers (respondents).
- Appeals: Civil Appeal Nos. 5939‑5941 of 2010 (arising from CESTAT Order dated 09‑11‑2009) and Civil Appeal Nos. 11870‑11872 of 2018 (arising from Order dated 31‑07‑2017).
- Dispute period: April 2002 to November 2006 concerning activities at Xerox’s Hyderabad and Rampur warehouses.
- Revenue’s allegation: Import of CKD/SKD modules, their grouping and fitting (including DADF and HCF) amounted to “manufacture” under Section 2(f) of the Central Excise Act, 1944 and Note 6 to Section XVI of the Central Excise Tariff Act, 1985, warranting excise duty and ED Cess of Rs 17,86,47,382 plus penalties under Rules 26, 11A, 11AB, 11AC.
- Assessee’s defence: The imported goods were complete machines classified under tariff heading 8471, the warehouse activity was merely “kitting” for packaging and customer‑specific configuration, no physical assembly occurred, and the Commissioner lacked jurisdiction over activities at customer sites.
- CESTAT findings (appeal‑in‑original): The Tribunal held that the modules were received in CKD condition, no conversion into a finished article took place in the warehouse, and the alleged assembly was unsupported by evidence; therefore, the activity did not attract Section 2(f) or Note 6.
- Arguments before the Supreme Court: Revenue counsel (Additional Solicitor General) argued that irreversible assembly by trained engineers transformed components into functional machines, invoking Section 2(f)(i) and relevant precedents. Assessee counsel contended that no transformation occurred, the process was merely kitting, and Note 6 was inapplicable because the goods were imported as complete machines.
Final Outcome
- The Supreme Court, after reviewing the factual record and legal precedents, concluded that the activity at Xerox’s warehouses did not constitute “manufacture” within the meaning of Section 2(f) CE Act nor trigger Note 6 of the Tariff Act.
- Consequently, the demand for excise duty and ED Cess of Rs 17,86,47,382, as well as penalties under Rule 26, were rejected.
- Civil Appeal Nos. 5939‑5941 of 2010 and Civil Appeal Nos. 11870‑11872 of 2018 were dismissed.
- Any pending applications were ordered disposed of.
Topics: Central Excise Law, Manufacturing Definition