Customs, Excise and Gold Tribunal - Delhi
Andhra Sugars Limited vs Collector Of Central Excise on 21 January, 1987
Equivalent citations: 1987(11)ECR799(TRI.-DELHI), 1987(29)ELT241(TRI-DEL)
ORDER H.R. Syiem, Member (T)
1. The appellants, M/s. Andhra Sugars Ltd., manufacture, among other things, SS tanks, SS heat exchangers, SS bleachers, dust catchers and so on from raw materials and components received from various parties. They execute the manufacture as job work in accordance with the contract entrusted to them by the customers. They claimed that duty was payable only on the amount charged by them for the job work and not on the full value of the goods including the value of the raw materials. The Assistant Collector of Central Excise, Eluru, by his adjudication order No. 63/81 dated 20-11-1981 decided that they were not entitled to charge duty only on the job work charges. Therefore, he directed them to pay duty of Rs. 75,396.68 on the total value of goods of Rs. 942,458.55 as they were not entitled to the benefit of exemption under notification No. 119/75-CE. The Appellate Collector of Central Excise, Madras in his order No. 146/82(G), dated 3-5-1982 agreed with this assessment.
2.' M/s. Andhra Sugars' appeal was called on 7-1-1987, but the Bench was shown a telegram received on 6th January, 1987 in the Tribunal (Registry) from the appellants seeking adjournment of the case "for taking instructions". The Bench did not consider this an acceptable reason for asking for adjournment as the principals themselves do not need to seek instructions. The request for adjournment was, therefore, rejected. The Bench then called upon the learned SDR to present the department's case.
3. The learned SDR, Mr. Verma, argued that appellants make tanks and other goods from primary materials they receive from their customers and, therefore, the duty must be paid on the full value of the new goods so manufactured namely, tanks, bleachers, dust catchers etc. We agree with him.
4. M/s. Andhra Sugars record in their appeal dated 29th November, 1982 that the changes made on the materials as judicially interpreted by courts including the Supreme Court from the DCM judgment do not constitute manufacture. No doubt, there was a change in the material, but, according to the Supreme Court, evey change was not a manufacture unless from the change new goods emerge. The work bestowed on the material' supplied by the customers did not result in the emergence of new goods. This work amounted only to cutting to shape, perforating, channeling, ribbing and rounding the edges etc. The materials did not thereby assume the character of articles or products falling within other heads, and such changes did not render the worked material to be considered or classified under any item other than 26A. For this, they quoted a letter of the Central Board of Excise and Customs, No. 15/26/68-Cus. I dated 13th September, 1968. They explained further that bought out articles were not worked but used only as such in fabrication of the goods.
5. But the error in M/s. Andhra Sugars' interpretation is that the works of shaping, perforating, channeling and ribbing are the very works that are necessary to create the new goods, the tanks, dust catchers etc. etc. It is perhaps quite true that the purchased articles are not worked, but they became fittings, fixtures and attachments for the new products, tanks, in order to complete the manufacture of such tanks etc. It is impossible to define precisely the meaning of manufacture. But whenever a new article emerges from the labours, manipulations and work bestowed on any material so that in place of the material, a new article, product, commodity turns up, then it is a fair inference to say that there has been a manufacture.
6. The Supreme Court said every change is not a manufacture. But here it is not a change without manufacture. The change in the material received by M/s. Andhra Sugars from their customers by cutting to shape, perforating, rounding the edges and ribbing produced tanks, bleachers where no tank or bleacher was to be found or seen. The steel sheets and plates are subjected to cutting and moulding or shaping into storage tanks and steel containers and even though that steel sheet still can be seen more or less as a flat piece of material i.e. steel sheet, it has taken part or has gone through a process which has made it a part of a tank. The steel sheet is no longer a sheet but has become a tank in association with other components like channels, ribs, bolts and nuts etc. etc. It is possible that the steel sheet itself has received certain shaping or cutting, bending, though it is possible to say that this was the flat steel sheet and to identify the new product with the plain unformed sheet. But after the forming and shaping, cutting, bending, the steel sheet left its character of a steel sheet plain and simple, and became a tank or a part of a tank. The steel sheet may not be the only sheet used in bringing the tank into existence; there may be other sheets, which are shaped in similar ways or in other ways. But all the sheets together form a new commodity. The sheet that has been formed, shaped and worked upon will never be a steel sheet again to be used as such, but has become a tank or a part of a tank.
7. The amount of work bestowed on the sheet may not be much, so that it can be said that there has been little or no manufacture as far as that sheet is concerned. But when that sheet, however, little the working it received, forms, in confederation with other sheets, materials, Darts, a new product, then the meagreness of the work bestowed on it (sheet) will not prevent the new product from acquiring a new personality, a new utility, a new title; a product of the working the sheet received.
8. The Assistant Collector has brought out that in one case, M/s. Andhra Sugars received only stainless steel sheets for the fabrication of wet dust catcher. It is obviously impossible to manufacture this dust catcher from steel sheets only. They would have assembled it, fabricated it by adding to the assembly other goods which they must have obtained from other sources. It would hardly add up to a simple job work of the kind the appellants see in their manufacture. Of course, there is no denying that they did job work, because they manufactured the goods, tanks, dust catchers etc. from materials or largely from materials they received from the customers. But even though it is a job work, it was a job work that gave birth to new articles. When that is the case, duty must be assessed on the full value. There is, therefore, no merit in the appeal and so it is rejected.