Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise & St, ... vs M/S. Gravita Metals on 17 October, 2017
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH 160 017 COURT NO. I Appeal No. E/51871/2015 Date of Hearing : 17.02.2017 Date of Decision : 17/10/2017 [Arising out of Order-in-Original No. JNK-CEX-000-021-2014 dated 20.01.2015 and JNK-CEX-000-021-2014 dated 27.02.2015 passed by the Commissioner Central Excise & ST, Jammu & Kashmir] For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. Devender Singh, Member (Judicial) Commissioner of Central Excise & ST, Jammu & Kashmir : Appellant vs. M/s. Gravita Metals : Respondent
AND Appeal No. E/51089,52408/2015 M/s. Gravita Metals : Appellant M.s. Gravita Metals Inc. vs. Commissioner of Central Excise & ST, Jammu & Kashmir : Respondent Appearance:
Shri A.R. Madhav Rao and Shri R.K. Hasija, Advocates for the Appellant(s) and vice versa Shri Atul Handa, A.R. for the Respondent(s) and vice versa CORAM:
Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. Devender Singh, Member (Judicial) Final Order No. 62014-62016/2017 Per : Ashok Jindal M/s. Gravaita Metal (hereinafter referred to as GM for short) and M/s. Gravita Metals Inc. (hereinafter referred to as GMI for short) have filed appeals against the impugned orders passed by Commissioner/ Commissioner (Appeals) against the confirmation of demand of duty and imposing penalty and Revenue is also in appeal against allowing Cenvat credit to M/s. GM.
2. Brief facts of the case are that, M/s. GM is enjoying the benefit of backward area exemption notification 56/2002-CE dated 14.11.2002 since 2006. The exemption under the notification is granted by way of refund/ self-credit of excise duty paid through PLA in excess of the available CENVAT credit. The appellants were manufacturing from unrefined lead ingots to refined lead ingots and thereafter from the refined lead ingots to lead alloys to exacting specifications as required by battery manufacturers. Revenue is of the view that the appellant is not entitled for the benefit of notification, on the grounds that the process of making refined lead ingots and lead alloys, does not amount to manufacture.
3. In these set of facts, show cause notice was issued to M/s. GM to deny the benefit of Notification No. 56/2002-CE dated 14.11.2002 wherein the duty paid from PLA by M/s. GM has taken as refund which is recoverable from them and to deny the Cenvat credit on the said goods and to impose penalty on M/s. GM. The matter was adjudicated by the adjudicating authority. The amount of duty paid through PLA as self-credit was held to be recoverable from M/s. GM and the Cenvat credit availed on the inputs was allowed and penalty was also imposed. M/s. GM is in appeal against the confirmation of amount of self-credit taken by them and imposing penalty whereas, the Revenue is in appeal against the order of allowing Cenvat credit to M/s. GM.
4. M/s. GMI is doing job work under notification 214/86-CE for M/s GM. They were receiving lead scrap and converting it into unrefined lead ingots. All procedures under notification 214/86-CE were followed by M/s. GMI. M/s. GM, the supplier of the raw material, lead scrap had given an undertaking to the Department to discharge the duty after carrying out manufacturing process in their factory. It has been alleged that the activity undertaken by M/s. GM does not amounts to manufacture therefore, no duty was payable by M/s. GM. Consequently, M/s. GMI is liable to pay duty on the said goods cleared by them to M/s. GM. In these set of facts, show cause notice issued to them and after adjudication, demand was confirmed. Aggrieved from the said order, M/s. GMI is also in appeal.
5. As the issue is inter-connected, whether the activity undertaken by M/s. GM amounts to manufacture and M/s. GMI is not liable to pay duty. Therefore, all the appeals are taken-up together for disposal by this common order.
6. Ld. Counsel for the appellants-assessee submits that in the case of M/s. GM and in the case of other manufacturers, the same process was adopted by the other manufacturers as well as M/s. GM and report on that effect was called by this Tribunal from the ld. AR and the report shows that duty is being collected on the process of M/s. GM, the appellant herein on the same process held to be manufacture. He relied on the report in the case of Chloride Metals, Pune, a 100% subsidiary of Excide Industries Limited, duty is being collected on the identical process. This is of relevance in as much as the Tribunal in the case of Exide Industries - 2003 (154) ELT 110 has held that, making lead alloy ingots from refined lead, does not amount to manufacture and this decision has been relied upon by the Commissioner in the impugned order. Therefore, it is his submission that it is clear that for uniformity, manufacturers similarly placed, cannot be discriminated and it would be in violation of Article 14 of the Constitution of India, as held by the Honble Apex Court in the case of Unipatch Rubber Limited vs. CCE- 2011 (272) ELT 340 (SC) and Damodar J. Malapani vs. CCE 2002 (146 ELT 483 (SC). Hence M/s. GM cannot be discriminated only because Revenue is seeking to deny the benefit of notification 56/2002-CE while all over the country, the duty is being collected on identical process being carried out, including the factory of M/s. GM situated in Gujarat at Gandhidham.
7. He further submitted that the process of making refined lead from unrefined lead shows that when unrefined lead is obtained, it has impurity ranging from 79.34% to 95.64% and in other test report, it is ranging from 97.84% to 99.42%. It is pertinent that the refined lead ingots are made after going to ground zero, namely the metal is totally melted and thereafter to remove impurities, chemically the same is treated and the purity of the lead obtained to the highest degree. The refined lead ingots are defined as per the sub-heading note to Chapter 78, requiring composition of 99.9% of lead and also limiting the content by weight and percentagewise of various other elements like silver, arsenic etc. Therefore, the refined lead being made by the M/s. GM has the exact specifications, and is a commercially recognised as separate identifiable product. After getting the refined lead, thereafter the same is again melted to make it alloy lead ingots. That, each manufacturer of batteries has its own specifications of the refined lead and lead alloy ingots, and these are made to very exact specifications, including the use of spectrometric analysis. The case of M/s. GM is different from the case of Exide Industries (supra) where from the pure lead ingots only alloying was done, whereas M/s. GM is starting its process from unrefined lead ingots containing huge number of impurities. Chapter 78 itself classifies refined lead and lead alloys separate from unrefined lead, as separate commercial products obtained by a manufacturing process. In fact the HSN itself specifies that the refined lead is used to manufacture lead alloys. The recognition for use in the batteries, the specification of the lead should be very high as per Indian Standards specifications i.e. IS 12292 which requires a purity of 99.96%. The literature shows that the industry for making batteries in United States collapsed as compared to their counterpart factories in Europe, in the case of Valve regulated lead acid batteries, as primary lead was not used but secondary lead was used. In fact, Exide Industries itself suffered in the United States due to the use of lead in the batteries which were not of exacting specifications. Hence, the purity of the lead is very essential for the life of the batteries and there can be no compromise on this issue. The opinion of the Lead and Zinc Development Association submitted to the Commissioner by M/s. GM specifically confirms the requirement of lead of the highest purity to make the lead acid batteries. Against all this, the Commissioner has relied on the evidence of one Mr. Sunil Bhat, who is not aware of the melting point of lead and its atomic number/ weight. He was not aware of IS specifications of Lead for battery though he claimed to have 14-15 years of experience in battery manufacturing. In any case cross examination shows that, if the requisite purity of lead is not used, the life of the battery is at risk. Hence the lead of exact specifications is required to make batteries.
8. Ld. Counsel further submitted that advance licences were issued to M/s. GM wherein they were importing unrefined lead and after manufacturing, were exporting refined lead and alloy ingots and availing benefit of Customs exemption Notification No. 96/2009-Cus. Therefore, it is recognised that there is a process of manufacture when making refined lead from unrefined lead even as per the Customs authorities, read with the Import Export Policy. It is his submission that the contention of the AR is not acceptable in as much as even the definition in the FTP requires to bring into existence a new product having a distinctive name character and use, basis which the advance licences were granted to M/s. GM. Therefore, it is clear that even from this the evidence the process of making the refined lead and lead alloy ingots amounts to manufacture. He further submits that the process undertaken by M/s. GM amounts to manufacture and the reliance has been placed on the decision of the Tribunal in the case of Jindal Stainless Steelway Limited vs. Commissioner - 2014 (3 10) E.L.T. 194 (Tribunal) wherein it was held that as per the clarification given by the Central Board of Excise and Customs in 2006, there is no dual requirement in as much as the word and was missing between the various clauses in the definition of manufacture under Section 2(f) of Central Excise Act, 1944, and hence any process which is incidental and ancillary to the completion of the manufactured product also amounts to manufacture. He also relied upon the decision of the Honble Apex Court in the case of Brakes India Ltd.- 1998 (101) E.L.T. 241 (S.C.) where the incidental process of drilling trimming and chamfering of brake linings have been held to amount to manufacture, since the earlier product could not be used for the purpose without these operations. In the case of Mamta Surgical Cotton Industries- 2014-VIL-10-SC, to say that the surgical grade cotton was different from ordinary cotton, and was obtained by process of manufacture. Therefore, the judgment relates to purification of the cotton and held to amount to manufacture. He also relied on the decision of the Tribunal in the case of TT Recycling Management India Pvt. Limited vs. CCE, Bangalore 2016 (340) ELT 422 (AAR) wherein it has been held that held that segregation of steel scrap and bailing them of precise composition amounted to manufacture. He also relied upon the decision in the case of Kores India vs. CCE, Chennai 2004 (174) ELT 7 (SC), wherein the Honble Apex Court held that making of typewriter ribbons from jumbo rolls amounts to manufacture. Ld. Counsel submitted that M/s. GM is following the same process of making refined lead ingots and alloy ingots, as followed in the case of making ingots for the first time namely, by melting lead and casting the same. Therefore, it is his submission that, where the process of making is the same, as making of the original product then it amounts to manufacture, as held in the case of CCE, Ahmedabad vs. Tudor (I) Limited 2006 (197) ELT 53 (Tri. Mumbai) and Teumseh Products India Limited vs. CCE, Hyderabad 2004 (167) ELT 498 (SC). He also relied upon the decision of the Honble Apex Court in the case of Mahavir Aluminium Limited - 2007 (212) E.L.T. 3 (S.C.) wherein it is held that making billets by melting and casting the ingots amounts to manufacture, as it is a commercially different product.
9. He further submitted that the Revenue, in the case of Shyam Oil Cakes - 2004 (174) E.L.T. 145 (S.C.), proceeded on the basis that, cumulatively conditions are to be satisfied in the definition of manufacture due to the presence of and. As clarified by the Board itself in 2006, such a requirement is not necessary in the definition of manufacture as the same does not have any requirement of cumulative satisfaction of conditions. That during the course of hearing, reference was also made to the recent Honble Apex Court judgment in the case of Servo-Med Industries Pvt. Ltd. vs. CCE, Mumbai - 2015 (319) E.L.T. 578 (S.C.). In this decision, the Honble Apex Court was concerned whether sterilisation of syringes and needles amounts to manufacture. The Honble Supreme Court has laid down for clarity various principles. One of the tests laid down endorsing the judgement in the case of Brakes India Limited (supra), was that of test of no commercial use without the process. It was further explained that, when a different finished product comes into existence as a result of a process which makes the said product commercially usable, the same leads to manufacture. It has been held that there would be manufacture as in the Brakes India Limited (supra) case where after the particular process they achieve a new use. That also in cases where the goods are transformed into goods which are different or new after a particular process, manufacture of goods can be said to have taken place. Thus, applying either the analogy of Brakes India case or the test of new or different goods after a particular process, or the activity of M/s. GM of making refined lead ingots and lead alloy ingots, amounts to manufacture. He submits that, in fact the process of sterilisation whereby on the surface of the syringes etc. bacteria had to be removed was held not to be a process of manufacture in the Servo-Med case. The Honble Supreme Court observed that in such a case, each time the syringes were sterilised there will be fresh manufacture, which made the proposition absurd. The facts of the M/s. GM are more akin to the decision of the Honble Supreme Court in the case of Mamta Surgical (supra) where sterilisation of cotton for making surgical cotton has been held to be a process of manufacture. Similarly, making refined lead and lead alloys to exact specifications for battery manufacture definitely amounts to manufacture. Ld. Counsel submits that in view of the above detailed explanation and reasons, the order of the ld. Commissioner is incorrect, unjust, arbitrary to treat the process as not amounting to manufacture whereas in the case of the appellants factory at Gandhidham in Gujarat, duty is being collected right from 2004 onwards and even continues today on the same activities, apart from number of other units all over India who are paying excise duty on the same activities. He submits that the registration certificate has been granted to M/s. GM, treating them as manufacturers and this position has not undergone any change at the hands of the Department. It is further submitted that the Notification No. 56/2002-CE itself lays down a procedure as per paragraph 2C(e) thereof wherein, if the self-credit taken is wrong then within 15 days of the next month, the jurisdictional officer has to direct the reversal of the credit. In case the assessee fails to do so then the same becomes recoverable as erroneous refund. The provisions of clause 2C (e) are mandatory since shall has been used and thereafter, such an erroneous refund can be recovered under clause 2C (g). Therefore, once it is established that there is an erroneous refund after the determination, within 15 days of the succeeding month, as laid down under clause 2C (e), then and then only a show cause notice under section 11A can be issued. In the present case, the Commissioner himself records that no such proceedings have taken place in regard to the original credit taken and the same have become final. Consequently, since the claims for credits have become final, there is no question of any erroneous refund which can be recovered under section 11A. To support his contention he relied on the decision of the Honble Apex Court in the case of R.C.Tobacco Private Limited vs. UOI - 2005 (188) E.L.T. 129 (S.C.) wherein it has been categorically held that refunds made under the notification have no errors and hence, are not an erroneous refund, but benefit provisionally granted. Consequently applying this ratio, where the self-credits have attained finality and not dealt with as per the provisions of clause 2(C)(e), then invocation of Section 11A does not arise. That, when there is a special procedure laid down then the provisions of section 11 A cannot be invoked directly, but only by the procedure of clause 2(C)(e) to be followed. To support, he relied upon the decision in the case of Shree Bhagwati Steel Rolling Mills vs. CCE (2016) 3 SCC 643 and Hans Steel Rolling Mill vs. CCE (2011) 3 SCC 748. Further, the provisions of Section 11A cannot be invoked as has been done in the instant case since there is been no erroneous refund under the provisions of the notification under clause 2C(e) read with clause 2C(g).
Therefore, he prays that the impugned order is not sustainable and their appeal is allowed.
10. With regard to the appeal filed by Revenue against the impugned order, he submits that the ld. Commissioner has rightly dropped the demand of Cenvat credit. It is his submission that even assuming without admitting that process does not amount to manufacture, the utilisation of credit to pay duty would amount to reversal of credit. This position is well settled by the larger bench of the Tribunal in the case of Sterlite Opticals Technologies Limited vs.s CCE, Vapi 2012 (282) E.L.T. 392 (Tn. - Ahmd.). This position is also settled by the decision of the Tribunal in the case of Exide industries Limited - 2016 (333) E.L.T. 101 (Tn. - Del.) following the decision of the Honble Bombay High Court in the case of Commissioner vs. Ajinkya Enterprises - 2013 (294) E.L.T. 203 (Bom.). He submits that the ld. AR has relied upon the provisions of Section 5B of the Act that, where the process does not amount to manufacture, the credit taken could be legalised only if a notification is issued by the Central Board of Excise and Customs, in regard to the particular situation is also not well founded. It is clear that the provisions of section 5B can only be applied in case where there is no refund of duty paid by the assessee on the final product is granted to the assessee and was also not claimed by way of refund by the assessee. The appellants are working under the provisions of notification 56/2002-CE, as per the provisions of the notification, are getting the refunds. Hence, their case cannot fall under section 5B of the Act. Moreover, even after considering the provisions of section 5B and Circular No. 911/1/20 10-CX., dated 14.01.2010, relied upon by ld. AR, Tribunal in the case of Asian Colour Coated Ispat Limited vs. Commissioner of Central Excise, Delhi 2015 (317) E.L.T. 538 (Tn. - Del.) has held that where there are additional facts to distinguish from an earlier judgment holding no manufacture, section 5B cannot be invoked. Further, following the earlier judgments especially in Ajinkya Enterprises (supra), the Hon'ble Bombay High Court has held that there is no necessity to again pay back the credit once it has been reversed earlier. Therefore, he submits that the appeal filed by Revenue is liable to be rejected.
11. With regard to the appeal filed by M/s. GMI, it is his submission that in the impugned order the adjudicating authority has demanded duty on lead ingots made from scraps i.e. unrefined lead ingots and cleared to the raw material supplier. He submits that as far as the M/s. GMI are concerned, they had canvassed that no duty liability can be visited on them and, the demand should only be raised on the raw material supplier. In support, he relied upon the decision in the case of Aggarwal Rolling Mills vs. CCE , New Delhi 1997 (93) ELT 615 (Tri. Delhi), Moon Chemicals vs. CCE 2007 (215) ELT 434 (Tri. Chennai) and Bharat Industries vs. CCE, Mumbai-V 2008 (227) ELT 281 (Tri. Mumbai). In the alternative, it was also submitted that the appellants herein are themselves availing the benefit of exemption Notification 56/2002-CE for other products being manufactured and cleared from the factory, which the Commissioner also recognises in the impugned order, however denies the benefit on the ground that, procedure under Notification No. 56/2002-CE has not been followed. He submits that the raw material supplier had been granted a licence to manufacture the goods in the factory namely, refined lead as also alloy lead ingots from unrefined lead. For a number of years the benefit of the exemption Notification No. 56/2002-CE has also been extended to the raw material supplier i.e. M/s GM. Similarly, the benefit of Notification No.214/86-CE for converting the scrap into unrefined lead ingots has been extended to the appellants for a number of years and the present demand is confined only for the period Dec 2012 to Oct 2013. Therefore, all the arguments that process of manufacture has been undertaken by M/s GM and the present demand do not lie, are also being agitated by M/s. GM. Thus, if the process amounts to manufacture in the hands of M/s GM, then there will be no case for denying the benefit of Notification No.214/86-CE to M/s. GMI. In the alternative, in any case benefit of Notification No.56/2002-CE should be extended to M/s. GMI, in as much as all other criteria have been satisfied for this notification other than those being supplied on job work basis, and cleared from the factory of the appellants, have been extended the benefit of the Notification No.56/2002-CE. The non-following of the procedure was due to availment of benefit of Notification No. 214/86-CE, wherein all formal procedures have been followed by M/s. GMI. In that circumstances, as held by the Honble Apex Court in the case of Formica India Division vs. Collector of Central Excise - 1995 (77) ELT 511 (SC), non-following of procedures was an impossibility at the relevant time due to availing of the other Notification 214/86-CE and hence, the benefit of Notification No. 56/2002-CE should now be extended. He also submitted that the Commissioner has also confirmed the demand on dross, waste etc. of lead relying on the Larger Bench decision of the Tribunal in the case of Hindalco Industries Limited - 2014 (308) ELT 472 (Tri. LB). However, this decision stands overruled by the Honble High Court of Bombay in the case of Hindalco Industries Limited - 2015 (315) ELT 10 (Bom.). He therefore submits that demand on this count also liable to be set aside.
12. On the other hand, ld. AR for the Revenue reiterates the findings of impugned order to say that the adjudicating authority has examined the issue whether the activity undertaken by M/s. GM amounts to manufacture or not, in the light of Hindustan Cables Limited vs. CCE Calcutta 1985 (22) ELT 180 (Tri.) and Exide Industries Limited vs. CCE, Calcutta 2003 (154) ELT 110 (Tri. Kolkata) and also relied upon the decision of the Honble Apex Court in the case of UOI vs. Parle Products Pvt. Limited 1994 (74) ELT 492 (SC) to say that the activity or process in order to amount manufacture must lead to emergence of new commercial product, different from the one with which the process started. He also relied upon the following decisions; Gujarat Steel Tubes Limited vs. State of Kerala 1989 (42) ELT 513 (SC), CCE vs. Technoweld Industries 2003 (155) ELT 209 (SC), CCE vs. Kayes Agro Industries 2001 (132) ELT 701 (Tri. Chennai),CCE vs. S.R. Tissues Pvt. Ltd 2005 (186) ELT 385 (SC), Aman Marble Industries Pvt. Limited vs. Collector of Central Excise, Jaipur 2003 (157) ELT 393 (SC), Pemji Haridas vs. Municipal Corporation of Greater Mumbai 1997 (89) ELT 658 (Bom- HC), Mineral Oil Corporation vs. CCE 1994 (114) ELT 166 (CESTAT), Shyam Oil Cakes Limited vs. Collector of Central Excise, Jaipur 2004 (174) ELT 145 (SC), Tungabhadra Industries Limited vs. The Commercial Tax Officer, Kurnool 1961 (2) SCR 14, CCE vs. Osnar Chemical Pvt. Ltd (2012) 276 ELT 162 (SC), Dabur India vs. CCE 2004 (174) ELT 261 (CESTAT) and National Tar Products vs. CCE, Vadodara 2001 (135) ELT 1388 (Tri. Mumbai). Ld. AR therefore, prays that the impugned order has correctly confirmed the demand and M/s. GM is not entitled to avail Cenvat credit on the inputs and the same is recoverable from M/s. GM.
13. With regard to the appeal filed by M/s. GMI, ld. AR submits that it is admitted that the activity undertaken by M/s. GM does not amount to manufacture, therefore, M/s. GMI is required to pay duty on the goods cleared to M/s. GM. Therefore, he submits that the appeal filed by M/s. GMI is liable to be dismissed.
14. Heard both sides and perused the bulky material available on record. On the basis of arguments advanced by both sides, the following issues have been framed:-
(a) Whether the activity undertaken by M/s. GM, i.e. conversion of unrefined lead ingots into refined lead ingots and, after removing impurities and from refined lead ingots making lead alloys, amounts to manufacture or not.
(b) While holding that the activity undertaken by M/s. GM does not amount to manufacture; and the activity undertaken by a unit of M/s. GM situated in Gandhidham (Gujarat) and other similarly placed manufacturers, have been held to amount to manufacture, is in violation of Article 14 of the Constitution of India, or not.
(c) Whether the appellant has been treated as manufacturer or not, in terms of exemption notification under Customs Notification No. 96/2009-Cus.
(d) Whether the ld. Adjudicating authority is right to drop the demand on account of Cenvat credit utilised for payment of duty or not.
(e) Whether M/s. GMI is entitled for the benefit of exemption Notification No. 214/86-CE or not.
(f) Whether benefit of Notification No. 56/2002-CE can be granted to M/s. GMI, if the benefit of Notification No. 214/86-CE is held to be not entitled to them.
15. We find that the basic issue on merit is that whether the activity undertaken by M/s. GM is amounts to manufacture or not.
15.1 To decide whether the activity amounts to manufacture or not, first we need to see the expression manufacture as defined under Section 2(f) of the Act, which is as follows:-
2 (f) manufacture includes any process, -
(i) incidental or ancillary to the completion of a manufactured product;
(ii) which is specified in relation to any goods in the Section or Chapter notes of [the first Schedule] to the Central Excise Tariff Act, 1985 (5of 1986) as amounting to [manufacture; or]
(iii) [Which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labeling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer,] and the word manufacturer shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account. The said expression has been examined by various Courts and have examined severely and decided. In the impugned order, Ld. Commissioner has relied on the decision in the case of Hindustan Cables Limited (supra) to say that activity does not amount to manufacture. We have gone through the decision, wherein the claim of the appellant is that alloy itself contains certain percentage of antimony but for the purpose of increasing hardness, further 0.85% of antimony is mixed with lead by the process of melting the material. Admittedly the product itself was same but some antimony has been further mixed and in that situation, it was held by this Tribunal that activity does not amount to manufacture. Further, in the case of Exide Industries Limited (supra) this Tribunal has further held that activity of addition antimony to pure lead and obtaining lead alloy does not amount to manufacture. Admittedly, the facts of this case are different from the case laws relied on by the ld. Commissioner in the impugned order as, in this case M/s. GM is engaged in purification of unrefined lead to refined lead and thereafter manufacturing the alloy lead. Therefore, the process is one step ahead in this case and these two case laws are not relevant to the facts of this case.
15.2 Ld. Commissioner further relied on the decision in the case of Parle Products Pvt. Ltd (supra). In the said case, the Honble Apex Court has held that where the process of application is resulting in a new and commercially distinct article known to the market as such is emerging at the end then it would amount to manufacture, otherwise not. Further, in the case of Gujarat Steel Tubes Limited (supra), the Honble Apex Court held that galvanisation does not bring into a new commodity into existence therefore, the said activity does not amount to manufacture. Further, in the case of Technoweld Industries (supra), again the Honble Apex Court held that the process of drawing wires from wire rods not amounts to manufacture as both products being wires-product not to be considered excisable merely because wires and wire rods. Further, in the case of Premji Haridas & Co. (supra), the said decision is in respect of Octroi Refunds under Rule 3A of Bombay Municipal Corporation Octroi Refund Rules, 1965 and the issue was conversion of Castor Oil (Commercial) into Castor Oil (BP) by a process of filtration and in the said case, the expression manufacture has not been considered as per Section 2(f) of Central Excise Act, 1944. Therefore, the same is not relevant to the facts of this case. In the said case, this Tribunal relied upon the Honble Apex Court in the case of UOI vs. Delhi Cloth and General Mills Co. Limited 1977 (1) ELT J-199 (SC) to say that manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use. The ld. Commissioner in the impugned order, relied on the decision of S.R. Tissues Pvt. Limited (supra) to impress upon that slitting/cutting of jumbo rolls of plain tissue paper/ aluminium foil into smaller size does not amount to manufacture on first principles as character and end use did not undergo any change on account of winding, cutting/slitting and packing. Ld. Commissioner has also relied on the decision in the case of Aman Marble Industries Pvt. Limited (supra) to say that cutting of marble blocks into slabs is not bringing a new substance into existence therefore, does not amount to manufacture and it was held that said activity does not amount to manufacture. The ld. AR heavily relied upon the decision of Shyam Oil Cakes Limited (supra) to say that refining/ processing of edible vegetable oil, neither in Section note nor in Chapter note nor in Tariff item process indicated as amounting to manufacture and the product even after refining, remains edible vegetable oil. As actual manufacture has not taken place, deeming provision cannot be brought into play in absence of it being specifically stated that the process amounts to manufacture. The ld. Commissioner has concluded that the essence of the concept of manufacture in Central Excise is that whenever a commodity undergoes a change as a result of some operation performed on it, such operation would amount to processing of the commodity. But it is only when the change or a series of changes takes the commodity to the point where commercially, it can no longer be regarded as the original commodity but is recognized as a new and distinct article. In the instant case of the assessee, the test report of raw material of Batch No. 13/384 and 13/374 have shown the purity of unrefined lead ingots in the rage of 97.9% to 99.4% whereas the finished goods lead alloy ingots in the range of 99.9% to 99.98%. Therefore, it may be observed that the name and character of the lead ingots has not undergone any change as there is practically no difference between the character of the original ingots and the processed ingots. Admittedly, the original lead ingots may have undergone a minor change with respect to the purity percentage of the metal contained, however, the original character of the goods would not be lost and minor change in chemical composition would not amount to manufacture of a distinct commodity as specifically held in the case of Hindustan Cables and Exide Industries (supra).
15.3 We observed that expression manufacture under Section 2(f) was initially not correctly interpreted as per CBEC letter F.No. 4/3/2006 dated 16.06.2006 wherein it has been clarified that a number of departmental and private publications of Central Excise Act, 1944, published from time to time after 1986, contain(ed) an extra word and at the end of Section 2(f)(i) and before Section 2(f) (ii). The Section 2(f) reads as - manufacture includes any process, Incidental or ancillary to the completion of a manufactured product, which means that if the goods have been manufactured and any activity is done thereon for completion of the activity for further use, it shall amount to manufacture. A similar issue has been examined by this Tribunal in the Jindal Stainless Steelway Limited (supra) wherein the appellant was engaged in cutting and slitting of coils. In addition to that they have carried out the slitting into desirable width as per the customers requirement, larger weight coils are cut into smaller weight as per the customers requirement, that the coils are coated and layered with plastic for improving drawability besides applying inter-leaving paper for protection of material so as to be fit for end use application. The said activity was examined by this Tribunal, as defined under Section 2(f) wherein the process incidental or ancillary, was held to amounts to manufacture.
16. Admittedly, in this case, M/s. GM is engaged in the activity of removing impurities from unrefined lead ingots for making lead alloy and thereafter alloy ingots. The refined lead has been recognised in Chapter 78 of Central Excise Tariff Act, 1985. In this Chapter, the expression refined lead means metal containing by weight at least 99.9% of lead, provided that the content by weight of any other element does not exceed the limit specified in the following Table:
TABLE OTHER ELEMENTS Element Limiting content % by weight Ag Silver 0.02 As Arsenic 0.005 Bi Bismuth 0.05 Ca Calcium 0.002 Cd Cadmium 0.002 Cu Copper 0.08 Fe Iron 0.002 S Sulphur 0.002 Sb Antimony 0.005 Sn Tin 0.005 Zn Zinc 0.002 Other (for example Te), each 0.001 From the above reading, it is clear that refined lead means the metal weight at least 99.9% of lead and with some other antimony, as prescribed in the Chapter heading note. Therefore, to classify under Chapter 78, first it should be refined to the extent of 99.9% of lead. The Chapter 78 of CETA, itself recognise a separate new product of 99.9% of refined lead. Further, process of making refined lead from unrefined lead shows that when unrefined lead is obtained, it has impurity ranging from 79.34% to 95.64% and in other test report, it is ranging from 97.84% to 99.42%. The process of making refined lead ingots are after going to ground zero, namely the metal is totally melted and thereafter to remove impurities, chemically the same is treated and the purity of the lead obtained to the highest degree i.e. 99.9% of lead as per sub heading note of Chapter 78 which limiting the content by weight and percentagewise of various other elements like silver, arsenic etc. The refined lead so made by M/s. GM is commercially recognised as separate identifiable product and the said refined lead is again melted to make it alloy lead ingots. That, each manufacturer of batteries has its own specifications of the refined lead and lead alloy ingots, and these are made to very exact specifications, including the use of spectrometric analysis. The case of M/s. GM is different from the case of Exide Industries (supra) where from the pure lead ingots only alloying was done, whereas M/s. GM is starting its process from unrefined lead ingots containing huge number of impurities. The HSN itself specifies that the refined lead is used to manufacture lead alloys. The recognition for use in batteries, the specification of the lead should be very high as per Indian Standards specifications i.e. IS 12292 which requires a purity of 99.96%. The literature shows that the industry for making batteries in United States collapsed as compared to their counterpart factories in Europe, in the case of Valve regulated lead acid batteries, as primary lead was not used but secondary lead was used. In fact, Exide Industries itself suffered in the United States due to the use of lead in the batteries which were not of exacting specifications. Hence, the purity of the lead is very essential for the life of the batteries and there can be no compromise on this issue. M/s. GM specifically confirms the requirement of lead of the highest purity to make the lead acid batteries. The use of lead ingots from refined lead ingot of 99.96% is for manufacturing of lead acid battery, therefore, the use is different from the use of unrefined lead ingots. Therefore, as per the case of in the case of Brakes India Limited (supra), we find that without such process the unrefined lead is not marketable to manufacture lead acid battery and the said issue has been examined by Honble Apex Court and the observed as under :-
We have heard the learned Counsel for the appellant. The short question is whether brake lining blanks purchased by the appellant when put to the process of drilling, trimming and chamfering can be said to amount to manufacturing within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944. The High Court has examined this question in considerable detail and has then observed in paragraph 15 as under :
If by a process, a change is effected in a product, which was not there previously, and which change facilitates the utility of the product for which it is meant, then the process is not a simple process, but a process incidental or ancillary to the completion of a manufactured product. It will not always be safe solely to go by a test as to whether the commodity after the change takes in a new name, though in stated circumstances, it may be useful to resort to it. This may prove deceptive sometimes for it will suit the manufacturer to retain and stamp the same name to the end product also. The `character or use test has been given due importance by pronouncements of the Supreme Court. When adopting a particular process, if a transformation takes place, which makes the product have a character and use of its own, which it did not bear earlier, then the process would amount to manufacture within the meaning of Section 2(f) irrespective of the fact whether there has been a single process or have been several processes.
2.?The learned Single Judge from whose judgment the Division Bench was considering the appeal had pointed out that brake lining blanks could not be used by owners of motor vehicles without holes and trimming and chamfering. The learned Single Judge also pointed out that it was only after this process which the blank brake linings underwent that they could be used by automobile manufacturers in the manufacture of their vehicles. We are of the opinion that both the learned Single Judge as well as the Division Bench applied the correct test and we see no reason to interfere therewith. The appeals are, therefore, dismissed with no order as to costs.
17. Further, we find that a similar issue has come up in the case of Mamta Surgical Cotton Industries (supra) wherein the assessee was carrying on the business of processing cotton and transforming it into surgical cotton and in the said the Honble Apex Court has held as under:-
33. For both these commodities operational territories are different and both have a different consumer segments. For medical and pharmaceutical purposes, use of ordinary cotton is not permissible. The fixed medical standards for the quality of surgical cotton are definite and definable such that ordinary cotton would not suffice the purpose. Surgical cotton is only used in form of medicine or pharmaceutical product, thus it cannot be said that use of commodity is interchangeable and in that view of the matter, surgical cotton is a different commodity. It is a commodity which is used with a completely distinct identity in itself. As what is used for medical purpose is perfectly sterilized disinfected purified cotton. If raw cotton is used for surgical purposes, it would be counter-productive. Surgical cotton is extensively used for making napkins, sanitary pads and filters, etc. The surgical cotton is exclusively consumed into medical field while ordinary cotton has so many uses. The main chemical properties desired in a surgical dressing are inertness and lack of irritation in use, which is provided by the surgical cotton only if manufactured as per the standards specified. Raw cotton is purified by a series of processes and rendered hydrophilic in character and free from other external organic impurities for use in surgical dressings. Surgical cotton is, thus, completely different from ordinary cotton.
34. ..... ......
35. It is trite to state that manufacture can be said to have taken place only when there is transformation of raw materials into a new and different article having a different identity, characteristic and use. While mere improvement in quality does not amount to manufacture, when the change or a series of changes transform the commodity such that commercially it can no longer be regarded as the original commodity but recognised as a new and distinct article. In the instant case, after going through the various steps that are carried out by the assessee for getting surgical cotton from raw cotton, we can certainly say that cotton has undergone a change into a new commercially identifiable commodity which has a different name, different character and different use. The process of transformation is not merely processing to improve quality or superficial attributes of the raw cotton. The cotton looses its original form and it marketed as a commercially different and distinct product. This aspect of the matter is rightly noticed by the High Court by relying upon the decision of this Court in Empire Industries case (supra) wherein this Court has explained the meaning of the expression 'manufacture" as when the result of the treatment, labour and manipulation a new commercial commodity has emerged which has a distinctive new character and use. Admittedly, in this case, the refined lead is known with a separate name having characteristic of 99.9% of purity and having a different use by a particular Section of battery manufacturers. In that circumstances, M/s. GM has passed the test of Manufacture and in the light of the decision in the case of Delhi Cloth and General Mills Co. Limited (supra) the product which is known with different nomenclature and character and use is known to a manufactured item. Therefore, the activity undertaken by M/s. GM amounts to manufacture.
18. Further, we find that in the case of TT Recycling Management India Pvt. Limited (supra), the Advance Ruling has given findings that process of conversion of various grades of stainless steel scrap to blended metal scrap amounts to manufacture. Further, the Honble Apex Court in the case of Mahavir Aluminium Limited (supra) held that making billets by melting and casting the ingots amounts to manufacture, as it is a commercially different product. Further, we also take note of the fact that the Honble Apex Court in the case of Shyam Oil Cakes (supra) proceeded on the basis that, cumulatively conditions are to be satisfied in the definition of manufacture due to the presence of and. As clarified by the Board itself in 2006, such a requirement is not necessary in the definition of manufacture as the same does not have any requirement of cumulative satisfaction of conditions. Further, in the case of Servo-Med Industries Pvt. Limited (supra), the Honble Apex Court set-forth the following tests to found out whether the activity by the assessee amounts to manufacture or not:-
27.?The case law discussed above falls into four neat categories.
(1) Where the goods remain exactly the same even after a particular process, there is obviously no manufacture involved. Processes which remove foreign matter from goods complete in themselves and/or processes which clean goods that are complete in themselves fall within this category.
(2) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said process and the changes brought about by the said process.
(3) Where the goods are transformed into something different and/or new after a particular process, but the said goods are not marketable. Examples within this group are the Brakes India case and cases where the transformation of goods having a shelf life which is of extremely small duration. In these cases also no manufacture of goods takes place.
(4) Where the goods are transformed into goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place. We find that in the said case the issue was whether the activity undertaken amounts to manufacture or not and the Honble Apex Court held that a when a different product comes into existence as a result of a process which makes the said product commercially usable leads to manufacture. In this case also, as the goods are transformed which are different after a particular process, therefore, it is held that manufacture of goods has taken place.
19. As regards the point (b), whether there is a violation of Article 14 of the Constitution of India, or not.
We find that ld. Counsel for the appellant, during the course of arguments submits that similar activity undertaken by other manufacturers in all over India, in all the cases, the activity held to amount to manufacture. We also note that in the case of appellants own unit, situated in Gandhidham, Gujarat, a report was called for from the department, the same is produced by the ld. AR before us, wherein the activity treated to be as manufacture. The report is reproduced as under:-
(a) Extract from the letter from Jammu Commissionerate dated 07.10.2016 Sr. No. Name of the party (M/s.) Sr. No. in the list provided by your office Name of Commte Brief of report
1.
Gravita India Ltd. (Unit-II), Mithirohar, Gandhidham The unit is not mentioned in the list provided by CESTAT, Chandigarh Bench. The unit is mentioned in the forwarding letter dated 01.08.2016 issued by the CESTAT Kutch (Gandhi-dham) The jurisdictional Commissionerate, Kutch (Gandhidham) vide letter F. No. V/16-02/Tech/14-15 dated 05.10.2016 (received in this office on 06.10.2016) has now further clarified that the process adopted by M/s. Gravita Metals, Gandhidham is same as adopted by Gravita Metals, Gangyal, Jammu and the same is being treated as amounting to manufacture in their Commissionerate.
(b) Extract from the report submitted by Jammu Commissionerate dated 04.10.2016 Sr. No. Name of the party (M/s.) Sr. No. in the list provided by your office Name of Commte Brief of report
1. Starlit, Distt. Mewat, Haryana 7 Gurgaon The unit is manufacturing Pure Lead Ingots and Lead Alloy Ingots falling under CETH No. 78011000, 78019100 with the help of melting pots/ kettle and Ingot Casting ingots. The Unit is paying Central Excise duty on self assessment basis.
Vide Letter dated 20.09.2016, Gurgaon-I Commissionerate states that the process of manufacture adopted by them appears to be identical as is done by M/s. Gravita Metals.
(c) Para 4. of reply received from Hyderabad Commissionerate, letter dated 04.10.2016 4. By comparing these two flow charts, it is to submit that the process adopted by M/s. Supreme Batteries Pvt. Limited which falls under Kothur Division of this Commissionerate for manufacture of Lead appears to be identical to the process adopted by M/s. Gravita Metals. It is being treated as amounting to manufacture and the assessee, M/s. Supreme Batteries Pvt. Limited are discharging duty at the applicable rates i.e. presently @ 12.5%.
(d) Extract from reply received from Dankuni Range, Chandannagore, Hooghly, Kolkata, letter dated 07.10.2016 In this connection it is intimated here that M/s. Raj Finoxides Pvt. Limited, Kharial, Dankuni, Hooghly 712136 falls under the Range-III of Dankuni Division of Central Excise We find that in all the above mentioned cases, in all over the country, the activity undertaken identical to M/s. GM is held to be a process of manufacturing and all the units are paying duty. Therefore, the observation that process undertaken by other units, held to be a process amounts to manufacture, whereas the same process undertaken by M/s. GM does not amounts to manufacture, is not sustainable in the light of the decision of the Hon'ble Supreme Court in the case of Damodar J. Malapani (supra), held as under in the similar set of facts:-
The appellants before us have impugned the decision of the Tribunal by which the Tribunal upheld the decision of the Excise Authorities to classify the product manufactured by the appellant under Tariff Heading 24.04 viz., Manufactured tobacco. According to the appellant the product was properly classifiable under Heading 24.01 i.e. Unmanufactured tobacco.
2.?It is not in dispute that the appellants product is chewing tobacco. It is also not in dispute that chewing tobacco is not necessarily manufactured tobacco or classifiable under Tariff Heading 24.04. The classification of chewing tobacco as unmanufactured or manufactured tobacco will ultimately depend on the process adopted for and the composition of the chewing tobacco. The appellants have relied upon the instance of a particular manufacturer of chewing tobacco, namely, M/s. Chandulal K. Patel and Company who also manufactures chewing tobacco under the trade name Karta Chhap Zarda and whose product has been classified by the Excise authority under unmanufactured tobacco under Tariff Heading 24.01. According to the appellants, their product was, in substance the same as Karta Chhap Zarda and they had followed the same process as M/s. Chandubhai Patel & Co.
3.?It appears from the records that several letters were written by the appellants to the Excise Authorities requesting that a sample of the appellants product may be chemically analysed at the appellants cost for the purpose of determining whether the appellants product or process in any way differed from the product and process of M/s. Chandulal K. Patel and Company. However, the Excise Authorities decided against the appellants without heeding such request. On 4-8-88 a decision was taken by the Assistant Collector to classify the appellants product under Tariff Heading 24.04. On 11-8-88 a sample of the appellants product was taken by the respondents but returned within one week without testing on the ground that the issue was being finalised by the Assistant Collector. In the appeal preferred to the Collector, the appellants again raised the issue specifically that the process followed by and the product of the appellants were identical with that of M/s. Chandulal K.P. Patel and Company and that the appellants product should be similarly classified under Heading 24.01. While upholding the decision of the Assistant Collector, the Collector did not consider this aspect of the matter at all. The point was again taken specifically in the appellants appeal before the Customs, Excise and Gold (Control) Appellate Tribunal. The Tribunal however dismissed the appeal and said :
The appellants have stated that some of the manufacturers who were producing similar goods, were not paying any excise duty on their production. These matters are not before us and it is neither possible nor desirable for us to deal with these matters. Suffice it to say that each and very case has to be examined in the light of our above observations, and it is for the competent Central Excise Officers to come to correct decisions in consonance with the principles of uniformity, equity and justice.
4.?It is difficult to understand the reasoning of the Tribunal. The least that the Tribunal could have done in the interest of uniformity was to call upon the Revenue Authorities to explain why they were making a distinction between the appellants product and that of M/s. Chandulal K. Patel without subjecting the appellants product to any chemical analysis.
5.?In their appeal from the decision of the Tribunal before us the appellants have again raised the issue that the Tribunal should have considered the fact that the appellants and Chandulal K. Patel & Cos products were identical and were the outcome of an identical process, and that since the latter had been exempted from paying any central excise duty on the ground that their product was classifiable under Tariff Heading 24.04, the appellants should get the same benefit.
6.?At the hearing today we sought an explanation from the learned Counsel appearing on behalf of the Revenue Authorities as to why different stands had been taken in the cases of M/s. Chandulal K. Patel & Company and the appellant. Since the matter had not been squarely dealt with on facts at any stage by any of the authorities below, it was not possible for learned Counsel to give us the reasons for drawing this distinction between the two manufacturers and differently classify what were alleged to be materially the same product.
7.?In the circumstances we deem it appropriate to set aside the order of the Tribunal and remand the matter back to the Tribunal for considering whether the product and process followed by M/s. Chandulal K. Patel & Co. is the same as that of the appellants. For the said purpose, the Tribunal will send a sample of the appellants product for the chemical analysis if not already done. The Tribunal will thereafter consider the question of classification of the appellants product having regard to the classification of Karta Chhap Zarda the chemical analysis report and any other material that may be placed before it by the respective parties.
8.?The appeals are disposed of on the aforesaid terms. There will be no order as to costs. We note that the said decision is followed in the case of Unipatch Rubber Limited (Supra), the same is also reproduced:-
The point involved in these appeals is whether the criss-cross patches of vulcanized rubber manufactured by the appellant is classifiable under sub-heading 4008.21 of the Central Excise Tariff Act, 1985, as claimed by the Revenue or under sub-heading 4016.99 thereof, as claimed by the assessee appellant.
2.?The Tribunal, by the impugned order, has confirmed the order of the Commissioner (Appeals) holding that the criss-cross patches of vulcanized rubber manufactured by the appellant are classifiable under sub-heading 4008.21.
3.?One of the contentions raised by the appellant before the Tribunal was that the classification for identical rubber patches was being done by the Department under sub-heading 4016.99. In support of this submission, the appellant relied upon Order-in-Original No. V/40/3/5/87-VC dated 19th December 1991 passed by the Assistant Collector of Central Excise, Dindigul and Order-in-Original No. V/40/30/91/94-C.E., dated 29th November 1996 passed by the Assistant Commissioner of Central Excise, Coimbatorr, II Division, Coimbatore. Apparently, in the impugned order, the tribunal has not recorded any finding on the said contention.
4.?This Court in an identical situation arising in the case of Damodar J. Malpani v. Collector of Central Excise reported in 2002 (146) E.L.T. 483 (S.C.) held that the least the Tribunal could have done in the interest of uniformity was to call upon the Revenue Authorities to explain why they were making a distinction between the appellants product and that of another manufacturer allegedly manufacturing the same product. This court, in these circumstances, remanded the case to the tribunal for considering whether the product and process followed by the other manufacturer in the said case was the same as that of the appellants in the said case and thereafter consider the question of classification of the product manufactured by the appellant therein vis-`-vis the product manufactured by the other manufacturer.
5.?In view of the decision of this Court in the case of Damodar J. Malpani (supra), we deem it fit to set aside the impugned order of the Tribunal and remand a the matter back to the Commissioner (Appeals) for considering whether the process being followed by the manufactures, viz., M/s. Anand Engineering Works and M/s. Santha Raghu Industrial Products, Coimbatore, who were the assessees in the Order-in-Original dated 19th December 1991 passed by the Assistant Collector of Central Excise, Dindigul and Order-in-Original dated 29th November 1996 respectively is the same as being followed by the appellant herein who is relying upon the said decisions. The Commissioner (Appeals) shall thereafter determine as to whether the product manufactured by the other two manufacturers whose goods were classified under sub-heading 4016.99. The Commissioner (Appeals) will thereafter consider the question of classification of product being manufactured by the appellant vis-a-vis the manufacturers in the aforesaid cases.
6.?The appeals are allowed accordingly with no order as to costs.
20. We find that M/s. GM is located in the State of Jammu & Kashmir and working under Notification No. 56/2002-CE dated 14.11.2002 wherein the duty paid through PLA is entitled as credit to M/s. GM and to denial of credit to M/s. GM has resulted in discrimination when compared to other manufacturers of the same goods by same process. Moreover, in their own unit, located in Gandhidham (Gujarat) the benefit is extended. In the light of the above observation, we hold that there should be uniformity in the stand taken by the Revenue and there should be no discrimination in the case in hand and the other cases. In view of the fact that the Revenue itself has admitted that activity undertaken by the appellant amounts to manufacture, therefore, we hold that activity undertaken by M/s. GM cannot be discriminated.
21. As regards the issue framed at (c) whether the appellant has been treated as manufacturer or not, in terms of exemption notification under Customs Notification No. 96/2009-Cus.
We find that M/s. GM were importing unrefined lead and after manufacturing, were exporting refined lead and alloy ingots and availing benefit of Customs exemption Notification No. 96/2009-Cus. Therefore, it is recognised that there is a process of manufacture when making refined lead from unrefined lead even as per the Customs authorities, read with the Import Export Policy, the FTP requires to bring into existence a new product having a distinct name, character and use, basis which the advance licences were granted to M/s. GM. Therefore, it is clear that even from this evidence, the process of making the refined lead and lead alloy ingots amounts to manufacture. Therefore, we hold that the process undertaken by M/s. GM amounts to manufacture in terms of exemption notification under Customs Notification No. 96/2009-Cus.
22. As regards the issue (d) whether the ld. Adjudicating Authority is right to drop the demand on account of Cenvat credit utilised for payment of duty or not. We find that M/s. GM has utilised Cenvat credit of inputs for payment of duty on their final product. The case of the Revenue is that as the goods manufactured by M/s. GM are exempted from payment of duty therefore, they are not entitled for Cenvat credit. We find that a similar issue came up before the Hon'ble High Court of Bombay in the case of Ajinkya Enterprises (supra) wherein the Hon'ble High Court has held that in case of activity does not amount to manufacture, the payment of duty shall amount of reversal of Cenvat credit. Therefore, the ld. Commissioner has rightly allowed the claim of Cenvat credit to M/s. GM. Accordingly, the appeal filed by the Revenue is dismissed.
23. As regards the issue framed as point (e) - Whether M/s. GMI is entitled for the benefit of exemption Notification No. 214/86-CE or not.
We find that, in terms of Notification No. 214/86, the principal manufacturer has to file an undertaking before the jurisdictional Central Excise authority of job works that the principal manufacturer shall pay the duty on the manufactured goods. Admittedly, the said undertaking has been filed by M/s. GM before the authorities below. In that circumstance, there is no fault of the appellant and the benefit of Notification No. 214/86 cannot be denied.
A similar issue has come up before this Tribunal in the case of Moon Chemicals (supra), wherein the Tribunal observed as under:-
3.?After giving careful consideration to the submissions, we find that the lower appellate authority sustained the demand of duty on the ground that the condition laid down in para (2) of Notification No. 214/86 was not complied with by the appellants. The goods specified under the Notification were exempted from payment of duty of excise, where such goods were manufactured in a factory as a job work and utilized in relation to the manufacture of final products on which duty of excise was leviable. The exempted goods and the final products were specified respectively in Col. 1 & Col. 2 of the Table annexed to the Notification. It is not in dispute that the raw material received by the appellants from M/s. Vijay Detergent Products (P) Ltd. and the goods returned to the latter after job work were specified in the Table annexed to the Notification. Again, it is not in dispute that the goods after job work were supplied to M/s. Vijay Detergent Products (P) Ltd. under cover of commercial invoices and that only the labour charges mentioned in such invoices were collected from them by the appellants. The Revenue has no case that the work undertaken by the appellants did not fall within the scope of the expression job work under Explanation-I to the Notification. Their only case is that the condition laid down in para (2) of the Notification was not complied with by the appellants. The appellants have claimed that the Sodium Silicate Solution returned after job work to their customer was removed by the latter on payment of duty for home consumption from their factory. This claim has not been contested by the Revenue. In the circumstances, the appellants were eligible for the benefit of the Notification subject to the surviving condition that the raw material-supplier gave an undertaking to the Asst. Commissioner or Deputy Commissioner of Central Excise having jurisdiction over the appellants factory to the effect that the goods would be removed (by the raw material-supplier) on payment of duty for home consumption. The demand of duty is consequential to non-fulfillment of this condition. The appellants have resisted the demand of duty on the ground that it was for the raw material-supplier to comply with the said condition. It is their further case that the department could have recovered duty on the subject goods from M/s. Vijay Detergent Products (P) Ltd. on the ground of non-fulfillment of the said condition. We find that the Tribunals decision in Aggarwal Rolling Mills (supra) supports this case of the appellants. No binding decision to the contrary was cited by the DR. In view of the above observations, we hold that M/s. GMI is entitled to avail the benefit of Notification No. 214/86 (ibid) and therefore, we are not going to the issue of whether M/s. GMI is entitled for exemption Notification No. 56/2002 (ibid) or not.
24. In view of the above observations, we pass the following order:-
(i) The activity undertaken by M/s. GM amounts to manufacture. Therefore, the impugned order quo demand of duty against M/s. GM is not sustainable and the impugned order is set-aside. Consequently, the appeals filed by M/s. GM and M/s. GMI are allowed.
(ii) Appeal filed by Revenue is dismissed.
(Order pronounced in the court on 17/10/2017) Devender Singh Member (Technical) Ashok Jindal Member (Judicial) KL 2 Appeal Nos. E/51871,51089,52408/2015