Activity Of Fitting Power Lens Into Spectacle Frames Does Not Amount To Manufacture, Excise Duty Demand Not Sustainable: CESTAT

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the activity of fitting power lenses into frames does not amount to manufacture, and the demand for excise duty is not sustainable.

The bench of Sulekha Beevi C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that post-manufacture of the spectacle frames and lenses, the goods are sent separately to the petitioners' show rooms, and what is undertaken in the show room is only an assembly of the prescription lenses and the spectacle frames, wherein the lenses are merely mounted upon the frames to result in a spectacle.

The appellant/assessee runs a store that vends Spectacles with nil power. In other words, what is displayed on the rack in the shop is a spectacle with no power. What happens in the case of a patient who has his power tested in the hospital is only the fitment of the lens onto a frame available on the rack in the shop.

The assessees, according to the department, are manufacturers of spectacles falling under Chapter 9004 of the Central Excise Tariff Act, 1985. Based on the intelligence gathered that the appellant is engaged in manufacturing spectacles and is clearing them without payment of Central Excise Duty, the officers of the Preventive Unit visited the premises of the appellant.

It was noted that the main inputs for the manufacture of spectacles are lenses and frames. The lenses (blanks) were procured from various listed vendors in standard sizes and fixed to the frame using a sophisticated technical process that involves a higher level of precision.

The department was of the view that after fitting the lens into the frames, a distinct new marketable commodity, viz., "spectacle,” emerges. Hence, it appeared that these activities undertaken by the appellant amounted to the manufacture of spectacles as provided in Section 2(f) of the Central Excise Act, 1944, which attracts Central Excise duty.

The appellant did not obtain registration from the Central Excise Department for the manufacture of excisable goods. A show cause notice was issued to the appellants, proposing to demand duty for the spectacles cleared by them for the period from August 2012 to June 2017, along with interest, and also for imposing penalties.

The assessee contended that the frames and glasses were exempted from tax. There was no manufacturing activity. All that an optician does is fit the lens into a spectacle frame. It carries out no process of manufacture, and no separate or distinct commodity emerges.

The department contended that the appellant procured the lens (blanks) and the frames from separate sources. However, the blanks are not simply mounted on the frames and sold to patients or customers. These two distinct items, even though billed separately, cannot be used by the customers. The spectacles prescribed to the customers attained the specification only at the hands of the appellant’s technicians, who are employed to do various processes on the frames and lenses.

The issue raised was whether the activity of the appellant in fitting the lens onto the frames to make spectacles that can be used by a customer amounts to manufacture.

The tribunal held that the end result of all the processes only results in the assembly of the lens with the frame. It does not amount to manufacturing. The process of assembly is bound to involve some amount of refining and fine-tuning of the individual components, and this, by itself, will not amount to manufacture.

Counsel For Appellant: Vishnu Priya

Counsel For Respondent: Harendra Singh Pal

Case Title: M/s. Medical Research Foundation Versus The Commissioner of GST & Central Excise

Case No.: Excise Appeal No. 40413 Of 2019

Click Here To Read The Order