Customs, Excise and Gold Tribunal - Delhi
Raga Industries vs Collector Of Central Excise on 27 May, 1987
Equivalent citations: 1991(36)ECR462(TRI.-DELHI)
ORDER
G. Sankaran, Vice-President
1. Under the enplaned order, the Additional Collector of Central Excise, Madras(a) demanded duty of Rs. 32,810.80 from M/s. Raga Industries (the appellants) on the heating elements manufactured and cleared by them from 1.3.1979 to 28.7.1981 under Rule 9(2) of the Central Excise Rules, 1944 (the "rules", for short); (b) confiscated under Rule 173Q, 72 heating elements and 17 band heaters, valued at Rs. 20.505/- seized from die appellants but gave them an option to redeem the goods on payment of a fine of Rs. 2,0007-; and (c) imposed a penalty of Rs. 2,0007- on the appellants under Rule 173Q.
2. The dispute arose because the department held that heating elements manufactured by the appellants fell under sub-item (iv) of Hem 22F of the Central Excise Tariff Schedule (CET, for short) since, on analysis, it was found that the mineral fibre/yarn constituent of the unities piodnminated over the other constituents (M.S. ring, Nichromc wire, copper strand) in the proportion of 97.5 : 37.5. It was admitted by the partner of the appellant firm that that was the pattern in respect of heating tapes and band heaters also manufactured by them. The firm did not possess a Central Excise licence for manufacture of these goods, they did not pay any duty on the said goods and the goods were sold direct to customers as spares and also captive consumed in the manufacture of heating elements in the appellant's factory. During adjudication proceedings, it had been claimed on behalf of the appellants that what was manufactured with the aid of power was only the heating coil (this claim was found, on verification by the department, to be correct), a part of the healing element which was a composite product, as noted earlier, and that duly was payable only on heating coil under item 22F(4) but not on the composite product i.e. heating element. It was further urged that the appellants, on enquiries with other manufacturer, were given to understand that no duty was payable on heating coils. The Additional Collector, in his order, held that in view of the wording of the entry 2.2F(4) "Mineral Fibres and yarn and manufactures therefrom in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power"-the composite product (the healing element) was chargeable to duty since one of its component parts (the heating coil) was manufactured with the aid of power. The result of this finding, viz. demand for duty, penally and confiscation have been already referred lo.
3. We have heard Mr. C. Chidambaram, Consultant, for the appellant and Smt. Dolly Saxcna, Sr. D.R., for the department.
4. The process of manufacture of the subject heating clement is as follows:
Glass fibre yam is first knitted in y hand-operated knitting machine to the desired lengui and width. Nichrome were is wound spirally on a separate glass fibre yarn strand in winding machine operated with the aid of power. Two H.P. Electric Motors are fitted to the adove winding machine for operation on power. The strand thus wound is pushed into the two layers of Glass Fibre Sleeves. The same is then stitched by hand below the knitted fabric and M.S. Ring is placed inside the knitted fabric and stitched lo give final shape to the heating element so that it can be conveniently housed in the Aluminium housing of the Heating Mantle. Finally, testing of the heating elements, tapes and band heaters is done with the aid of power.
5. Shri Chidambaram's contention is that die goods arc not known in common parlance as articles of mineral fibre and yarn but as electric healing elements which, according to the Collector's Trade Notice dated 25.9.1979 (reproduced on P. 11/110 of Cen-Cus 1985-86 Budget Edition), falls under item 68 GET, Under the new tariff also, they are shown under heading 85.1400 and not under the heading for manufacture of mineral fibre or yarn. Duty could be charged under item 22F(4) only in respect of the heating coils manufactured with the aid of power, it could not be charged on the heating elements as such.
6. Smt. Saxena submitted that the goods as cleared from the factory viz. heating elements, contained mineral fibre/yarn which predominated. Since one of its component parts was manufactured with power, the final product fell under item 22F(4).
7. We have considered the submissions of both sides. Shri Chidambaram has contended before us that if the reasoning adopted in para 20 of the impugned order (i.e. duty was chargeable on heating elements only from 1.3.1979 since glass fabrics were exempted from duty by notification No. 87/76 dated 16.3.1976 till 28.2.1979) is correct, then, the present demand is not sustainable because notification No. 87/76 continued to be in force even after 1.3.1979. But we may note that though there is seeming logic in this line of reasoning (the reasoning itself is faulty) it is of no avail to the appellants since what was sought to be charged to duty by the Additional Collector was heating elements, and not glass fabrics.
8. The basic question still remains whether the subject heating elements were classifiable and assessable to duty under item 22F(4).
9. Item 22F(4) reads as follows:
Mineral fibres and yarn, and manufactures therefrom, in or in relation to the manufacture of which, any process is ordinarily carried on with the aid of power":
Explanation I "Mineral fibres and yarn and manufactures therefrom shall be deemed to include xx xx xx
(iv) manufactures in which mineral fibres or yarn or both predominate or predominates in weight
10. The heating coils have been admittedly manufactured with the aid of power. They are, therefore, liable to be classifiable under Item No. 22F(4) and there is no dispute before us about this position. The question is whether the heating elements in which heating coils are one of the components would also be liable to duty under Item No. 22F(4). The composition of the finished products, as cleared from the factory and as already noted, shows that the mineral fibre/yarn predominates therein. And since power has been used in relation to the manufacture of heating coils, an essential component of the heating elements, it must be held that power has been used in relation to, if not in, the manufacture of heating elements following the ratio of the Supreme Court judgment in Standard Fire Works Industries, Sivakasi v. Collector of Central Excise, Madurai in which the Court held that use of power in cutting of steel wires and shredding of paper for use in the manufacture of fire works (without the use of power) would amount to use of power in the manufacture of fire works. In this view, the heating elements would be classifiable under Item No. 22F(4). The duty thereon has been correctly demanded on the same.
11. Since the appellants had not taken a licence for manufacture of these excisable goods and had not, therefore, evidently complied with the provisions of the Central Excise Rules, penalty, confiscation and fine are justified. The demand for duty for the longer period of limitation is also justified having regard to the facts and circumstances of the case. In the result, the impugned order is upheld and the appeal is rejected.