Customs, Excise and Gold Tribunal - Hyderabad
Cce And C vs Asrani Steel Tubes Ltd. on 15 February, 2000
Equivalent citations: 2000(93)ECR76(TRI.-HYDERABAD)
ORDER V.K. Ashtana, Member (T)
1. This Revenue appeal is against the order in original No. 39.96 dated 13.5.1996 passed by the Commissioner of Central Excise & Customs, Hyderabad wherein he had dropped proceedings initiated against the present respondents which had been commenced by show cause notice dated 29.4.1995.
2. Heard Shri S. Kannan, learned DR for the Revenue and S/Shri AP Datar and Saravanan, learned Counsels for the respondents.
3. Briefly the issue concerns applicability of Notification No. 202/88-CE dated 20.5.1988 which provides exemption to steel tubes which are produced out of steel plates/sheets not exceeding thickness of 5 mm. Show cause notice had alleged that the respondents had manufactured tubes and pipes out of HR coils of thickness exceeding 5 mm. This allegation was based on the statement given by the respondents' employees and their quality control department. This showed that the estimated thickness of the end product i.e. tubes was more than 5 mm.
4. As against this, the learned Commissioner had in the impugned order also considered the submissions of the present respondents assessees heard before him that:
(a) Notification concerns itself only with the thickness of the input i.e. sheets and plates have not more than 5 mm thickness and therefore that thickness cannot be applied to the end-product i.e. tubes and pipes.
(b) Steel coils were purchased by the respondents from M/s. SAIL, as it was a controlled commodity, and the memorandum of understanding between the two as on record was for supply of coils of thickness not exceeding 5 mm only.
(c) It is on record that units of SAIL do not manufacture such coils in odd thickness; that is, they manufacture and supply coils only in thickness of 5 mm, 6 mm, 7 mm etc. only in round figures and not in 5.3 mm or 5.4 mm etc.
(d) It is on record that the respondents' machinery is not capable of processing sheets to manufacture pipes and tubes of wall thickness of beyond 5mm.
5. As against this, the learned Commissioner in his order impugned has held that since the raw material was clearly shown to be of 5 mm thickness and since the respondents' plant and machinery was not capable of producing tubes beyond 5 mm thickness and since the department could not produce an evidence to the effect that the respondents had procured sheets of thickness exceeding 5 mm either from SAIL or from any other agency, therefore, they had used the inputs in the manufacture of the pipes and tubes which conform to the thickness specified in the Notification.
6. The learned DR on the other hand takes us through the grounds of appeal and submits that no doubt the Notification stipulates that the input material should not exceed 5 mm thickness. But since the substantive benefit of the exemption is related to the output i.e. pipes and tubes, therefore, the two are connected and relatively inseparably. Secondly the respondents' own quality control inspection report of their slitting clearly shows that after slitting, the coils were measured at more than 5 mm thickness. Thirdly the quality control reports were authentic because they were also checked by the ISI officials. Fourthly the Revenue contends that the ISI tolerance limits are not to be applied as the Notification 202/88 does not specify any tolerance limit. Fifthly the respondents in their invoice issued for supply to certain State Government departments have clearly specified that thickness of these tubes to be more than 5 mm. Sixthly the respondents could have changed the capacity of their plant to enable them to manufacture tubes of these thickness beyond 5 mm by changing their dies, pressure welding etc. and since the respondents have not proved that they have not done so, through the balance sheet etc. therefore, the Commissioner's order is wrong. The learned DR submits that this is as per ground No. IV of the Board's order which are reproduced in the memo of appeal.
7. Shri AP Datar, learned Counsel submits as follows:
(a) The Notification is concerned only with the thickness of the inputs. More than this cannot be read into the Notification. Therefore, the first ground of appeal of the Revenue that the input and output being related the thickness of the output material is also going way beyond the terms of the said Notification. In effect the Revenue is trying to amend their Notification by this appeal.
(b) The respondents have clearly established with evidence on record that:
(i) They only asked for supply of 5 mm thickness sheet coils from SAIL and that the inputs were not purchased from any other source.
(ii) Since their plant was not capable of handling coils beyond 5 mm thickness for the purpose of manufacturing tubes and pipes, therefore, there was no question of buying thicker coils.
(iii) In fact when they were having the avenues of supplying tubes and pipes of thickness beyond 5 mm, they had therefore to resort to trading activity and proof of such trading activity is on record showing that they purchased ready-made pipes of higher thickness and supplied them where required.
(c) The learned Counsel further submitted that it is on record to the effect that SAIL did not manufacture steel sheets of intermediate thickness i.e. decimal point above 5 mm and that sheets of above 5 mm only in multiple of 1 mm thickness i.e. they do not manufacture sheets of 5.3 mm or 5.4 mm or 5.88 mm thickness at all.
(d) The learned Counsel submits that the only logical conclusion which can be obtained from these factual position, which are proved beyond doubt by evidence on record, is that only 5 mm thickness inputs were received and processed in their unit.
(e) With respect to their quality control reports, slitting reports as well as their invoice issued for sale of pipes to State Government departments, the learned Counsel has filed a logical explanation. This explanation is as per the tolerance limitations specified by the ISI code. This tolerance limit is of 5.4 mm thickness for medium grade tubes and pipes plus or minus 10%. Therefore, under the ISI scheme standard, it was feasible for the respondents to purchase 5 mm thickness and manufactured tubes and pipes throughout for the medium grade tubes under ISI specifications. That is why their invoices referred to tubes above 5.4 mm thickness. The learned Counsel explains that this figure of 5.4 mm is in the context of ISI specifications which have 10% tolerance either way and therefore they are not absolute figures by themselves showing the exact thickness of the tubes.
(f) The learned Counsel further submitted that in the grounds of appeal of the Revenue they had submitted that the respondents are capable of modifying their plant and that the onus of proof in this respect was not discharged by them, is a mere conjecture and not worthy of consideration. If it is the case of the department that they had in fact changed the capacity of their plant, then the burden of proof is on the Revenue to prove so and no whisper of evidence has been led to discharge this burden. As against this, they have submitted a certificate from the manufacturer that their plant is not capable of producing steel tubes and pipes beyond 5 mm thickness, as far back as 1984. In 1985 the Chartered Engineer's certificate was also submitted. This evidence should be read in the context of the certificate from SAIL. From 1990 onwards they have not supplied any HR coil or any other steel sheets beyond 5 mm thickness. He submitted that in the face of these evidence, the grounds of appeal of the Revenue are mere conjecture.
(g) The learned Counsel further submitted that in their own quality control reports which have been relied upon by the Revenue as evidence of thickness being more than 5 mm, there is mention that coil number was given by the manufacturer i.e. SAIL's Bokaro Steel Plant. He submitted that each coil number has a test certificate giving exact thickness of the coil manufactured throughout. He submitted that few copies of such certificates were submitted by them in this Court and a perusal of these would show that coil number given therein tallies with the coil number in their quality control reports. In such case, while their quality control reports had mentioned the thickness of above 5 mm, the thickness shown by the SAIL is 5 mm only. The learned Counsel submitted that the plethora of evidence available is in their favour and the same was rightly evaluated by the learned Commissioner in the order impugned and the order is totally legal and proper and may be upheld by this Tribunal.
8. We have considered the rival submissions as well as the records of the case. On a careful examination of the entire issue, we find that the Notification in question specifically and clearly fixes the thickness of the inputs. On the other hand, the Revenue in their grounds of appeal, have submitted that same thickness should be made applicable to the output also because the two are inseparable. We are unable to accept this contention, as it is well laid down law that there is no room for intendment to enlarge scope of any Notification. When the Notification specifically mentions only the thickness of the input, it would not be legally correct to link that thickness with the thickness of the output at all. Since the evidence relied upon by the Revenue pertains to the thickness of the output as contained in the quality control reports of the respondents as well as their invoice, therefore, on this evidence alone, the appeal does not seem to carry much strength. The learned Commissioner has, in great details, evaluated the evidence on record. We have no hesitation in agreeing with him that on the one side this evidence shows that the respondents had placed orders for purchase from SAIL only for HR coils thickness of 5 mm; that as per the test certificate etc. of the SAIL, only HR coils of 5 mm were delivered since 1990 as was required; and as per both manufacturer's certificate as well as later Chartered Engineer's certificate, Respondents' plant was designed only for 5 mm thickness to produce pipes and tubes of 5 mm thickness and not above. Therefore, taking into consideration the raw material procurement and the plant capacity and design, there is irrefutable evidence in favour of the respondents. The revenue in their grounds of appeal contended that the capacity of the plant was changed by modification. Even if this was so, in the face of the above evidence, it is our considered view that it falls on the Revenue to discharge the burden of proof in this respect. Secondly, so far as the assessment of the goods is concerned, the Notification is concerned only with the thickness of the inputs and not the capacity of the plant at all. Therefore, even assuming that the respondent's plant was capable of accepting and designing higher grade thickness, so long as the input used was only 5 mm thickness, the exemption could not be denied. We also note that as against this position, the learned Counsel has rightly explained the hiatus in the description in the quality control reports and their invoice as being due to their taking the legally available advantage in terms of the ISI specifications. We do not find anything wrong in this. The Commissioner has discussed in great details on this aspect and there is no need to repeat the same. We have perused these and we do not find any legal or logical infirmity therein. Therefore, in view of the aforesaid findings and analysis we do not find any infirmity in the order in original impugned vis-a-vis the grounds of appeal of the Revenue which compels us to interfere with the same. Therefore, the Revenue appeal is dismissed as without any merits.
(Dictated and pronounced in open Court).