Customs, Excise and Gold Tribunal - Bangalore
Geekay Wires Pvt. Ltd. vs The Commissioner Of Central Excise on 30 August, 2006
Equivalent citations: 2006(113)ECC284, 2006ECR284(TRI.-BANGALORE), 2007(207)ELT476(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. These appeals have been filed against the Order-in-Original No. 12/05 dated 31.5.2005 passed by the Commissioner of Central Excise, Hyderabad.
2. The Revenue proceeded against the appellants on the ground that they cleared stranded wire clandestinely without payment of duty. Initially the Commissioner in his Order-in-Original No. 20/97 dated 21.10.97 passed the order confirming the demands made in the show cause notice and proposing the penalty. However, the appellant approached the CEGAT, Madras. The CEGAT in its Final Order No. 1782 & 1783/98 dated 10.09.98 remanded the case directing the adjudicating authority to examine whether stranding of wires amounts to manufacture particularly in terms of the new tariff. Accordingly, the adjudicating authority passed the impugned order. In the impugned order, the Commissioner held that the process of stranding amounts to manufacture. Therefore, he confirmed a duty demand of Rs. 75,57,768/- under Rule 9(2) read with proviso to Sub-section 1 of Section 11A of the Central Excise Act, 1944. Interest under 11AB was demanded. Further, he confirmed the demand of Rs. 80,364/-under Rule 9(2) read with proviso to Section 11A on the goods found short. He imposed a penalty of Rs. 15,00,000/- under Rule 173Q of the Central Excise Rules 1944. Further he imposed a penalty of Rs. 1,50,000/- on Shri K. Gopal Rao, Managing Director of the appellant's company under Rule 209A of the Central Excise Act, 1944. The appellants are highly aggrieved over the impugned order.
3. Shri Anjaneyulu, learned Chartered Accountant appeared for the appellants and Shri K.S. Reddy, learned JDR for the Revenue.
4. The learned Chartered Accountant urged the following points:
(i) The adjudicating authority's decision to effect that the process of stranding does not amount to manufacture is not in line with the decision of the Apex Court in 155 ELT 209.
(ii) The learned Chartered Accountant relied on C.B.E.&C. Circular No. 720/36/2003-Cx. dated 29.5.2003 holding that "the process of drawing or redrawing a rod, wire or any other similar article, into wire does not amount to manufacture.
(iii) The adjudicating authority has not followed the directions of CEGAT in the remand order. It was strongly contended that the stranding was done only by job workers and not by the appellants. There is evidence of payments made through cheque to those job workers. This points has not been appreciated by the adjudicating authority.
(iv) Since the appellants brought every fact to the notice of the Department, it is not correct to invoke a longer period under Section 11A.
(v) All the job workers are registered SSI units. They filed declaration under Rule 173B and 173G. They cleared goods on payment of duty under Rule 173F or at nil rate of duty to APSEB on account of the appellants and submitted RT 12 returns as per Rule 173G of Central Excise Rules.
(vi) The Commissioner has relied on the Tribunal's decision in the case of General Industrial Corporation v. Collector of Central Excise, Kanpur which held that "Conversion of galvanised stranded stay wire (GSS wire) out of GI wires by stranding 7 or 8 single galvanised wires amounts to manufacture in terms of Section 2(f) of Central Excise and Salt Act, 1944, utility and strength having been improved." While coming to the above conclusion, the adjudicating authority ignored the facts that only amended provision of Finance Act 2004, in Note 10 of Section XV, it has been stated "in relation to the products of this Section, the process of drawing or redrawing a rod, wire or any similar article, into wire shall amount to "manufacture". Hence the decision of the Tribunal in 77 ELT 210 is no longer holds goods. This position has not been considered by the adjudicating authority.
(vii) It was informed that the appellant is not appearing against the levy of penalty of Rs. 1,50,000/- under Rule 209A on Shri K. Gopal Rao since the management was changed long back and whereabouts of Shri K. Gopal Rao is not known to the assessee.
5. The learned JDR urged that the adjudication order of the Commissioner has examined all the aspects of the case and come to the correct conclusion that process of stranding amounts to manufacture and the appellants are liable to pay the duty demanded.
6. We have gone through the records of the case carefully. The first issue under consideration is whether the process of stranding amounts to manufacture. The finding of the adjudicating authority given in Para 27 & 28 of the impugned order is as follows:
27. In this case also, Galvanised single wire is manufactured out of galvanized single wire by the process of stranding on a stranding machine. A number of galvanized single wires were stranded, twisted and tied in knots. In terms of strength and utility, Galvanized stranded wire is different form Galvanised single wire. Galvanised stranded wire is fit for use, as stay wire while the Galvanised single wire out of which Galvanised stranded wire was produced was not usable for such purposes. Thus, Galvanised stranded wire is a new and different article with distinct name, character and use.
28. Any commodity is said to have marketability if it comes to the market for being bought and sold. In this case also, stranded wire is also a marketable commodity, since it is capable of being bought and sold in the market.
The case laws relied on by the appellants relates to drawing of wire from wire rods. We agree with the learned Commissioner that these case laws are not relevant to the facts of the instant case. When the appellants relied on the decision in the case of Machine Builders v. CCE which has followed an earlier decision of the Tribunal and the decision of the Apex Court in the case of Aluminium Industries 1987 (30) 442, the Commissioner has examined and has stated that the main issue dealt with in the case of Aluminium Industries (supra) was classification of stranded wire under the old tariff. He has stated that there was no discussion regarding the stranding process in the above said decision. Further he relied on the decision of General Industrial Corporation v. Collector of Central Excise, Kanpur which has categorically held that conversion of galvanized stranded wire out of GI wires by stranding 7 or 8 Galvanised wires amounts to manufacture in terms of Section 2(f) of Central Excises and Salt Act, utility and strength having been improved. In the above said decision the Tribunal has observed that in case laws relied on by the appellants, there is no discussion about the process of manufacture, transformation of the GI wires into GSS wires, the usage of the finished products, vis-a-vis, the raw material and understanding of the resultant commodity GSS wire by the people who use it. They have also held that in the light of latest decision by the Apex Court on the subject, there is no doubt in the manufacture of GSS wires, there is a process of manufacture under the provisions of the Central Excise Law. There is also a specific entry under chapter heading No. 7312.10 for stranded wire which is not the case in the old tariff. In view of the above, the contention of the learned Chartered Accountant that the case law relied on by the adjudicating authority is against the Apex Court decision in Aluminium Industries case (supra) is not correct because the issue of whether stranding amounts to manufacture is not at all an issue in the Aluminium Industries case decided by the Supreme Court. The Commissioner has rightly held that the stranding process amounts to manufacture and the decision of the Tribunal in the General Industrial Corporation (supra) is rightly applicable.
6. On the point that the impugned goods were actually got done by job workers and cleared to APSEB through them, the Commissioner has relied on statement of Shri K. Gopala Rao, Managing Director of the company wherein he has admitted that they have manufactured stranded wire in their factory and supplied substantial quantity of stranded wire to APSEB without payment of duty and undertook to pay duty payable on the goods cleared by them without payment of duty. Further the Commissioner has examined the photo copies of the journal and balance sheet of the appellants as per the remand order of the Tribunal. His finding is that the details of the job charges mentioned in the balance sheet do not tally with the entries in the journal. He has also sent a team of officers to find out if they have any evidence to substantiate that the job workers paid any Excise duty. The verification in no way helps the appellants. He has verified the challans of the assessee wherein they have sent the material to the job workers. The challans mention that the material as GS wires. GS wires means Galvanized Stranded wire. Hence the Commissioner has dismissed the contention that they have sent single wire to job workers for stranding. Moreover after examining the balance sheet, the Commissioner has found that the appellants had incurred a meager amount of Rs. 0.613 lakhs for the total job work for the said period. According to the Commissioner, 1899.116 Mts of stranded wire on job work for which manufacturing and other expenses on prorate basis works out to Rs. 91.39 lakhs as job charges. However the appellants incurred Rs. 0.613 lakhs for the total job work. In view of the above theory advanced by the appellant at later stage is not acceptable to the Commissioner. In view of Sri K. Gopala Rao's admission, there is enough justification for invoking the longer period. As regards the duty demand on the goods found short, the appellants is not contesting. In the case of penalty on Shri K. Gopal Rao, the same is not being contested. In view of the above findings, we uphold the Order-in-Original with the following modification. The penalty on the appellants under Rule 173 is reduced to Rs. 7,50,000/- (Rupees Seven lakhs and fifty thousands only) from Rs. 15,00,000/-. These two appeals are disposed of in the above terms.
(Pronounced in the open court on 30 AUG 2006)