Customs, Excise and Gold Tribunal - Delhi
Jagraon Machine Tools vs Collector Of Central Excise on 24 September, 1992
Equivalent citations: 1993ECR137(TRI.-DELHI), 1993(65)ELT300(TRI-DEL)
ORDER P.C. Jain, Member (T)
1. Brief facts of the case are as follows :
1.1 On 30-6-1984 the Preventive Staff paid a surprise visit to the appellants' factory and found them engaged what the department calls in the manufacture of cold rolled steel strips falling under T.I. 25 of the CET without obtaining L-4 licence and without following Central Excise formalities. On an enquiry, partner of the appellant firm informed that they were purchasing hot rolled strips of 10 guage from the market and subjecting it to rolling in rolling machines after washing and pickling with sulphuric acid. In this process the thickness of the strips was reduced to 13 guage. The cold rolled strips so produced by the appellants were cleared to other units for the manufacture of cycle parts.
1.2 The preventive officers found that such strips of 13 guage weighing 1990 Kgs. valued at Rs. 11,000/- were available in the factory. They were seized by the officers since they were believed to be liable to confiscation.
1.3 The appellants vide their letters 4-12-1984 and 5-12-1984 furnished information showing clearance of such strips from February 1983 to January 1984 as 3,34,647.00 kg. valued at Rs. 18,40,913.12p.
1.4 It was alleged by the department that the appellants had engaged themselves in the manufacture of cold rolled strips without taking Central Excise licence and had removed the said goods without payment of duty to the tune of Rs. 2,38,844.32p during the period February 1983 to January 1984. A show cause notice was, therefore, issued as to why the seized goods be not confiscated, aforesaid duty be not demanded and penalty be not imposed under Rule 173Q.
1.5 On adjudication, the Collector has upheld the allegations, confiscated the seized goods with an option to redeem them on payment of fine of Rs. 3000/- in lieu of confiscation. He has also demanded the aforesaid duty of Rs. 2,38,844.32p for having cleared the cold rolled strips produced by them out of hot rolled strips during the period February 1983 to January 1984. He has also imposed a penalty of Rs. 1,00,000/- under Rule 173Q for contravention of Rules 9(1), 52A, 53,173B, 173F, 174 and 226.
1.6 The aforesaid order has been impugned in appeal before the Tribunal.
2.0 Learned consultant, Shri Raghbir Singh Saini, in the first instance has submitted that the basic issue whether the cold rolled strips produced out of hot rolled strips purchased from the market and presumed to be duty paid would again be liable to duty or not, is no longer in controversy. He points out to Tribunal's decision in the cases of -
(1) Atma Steel Private Ltd. v. CCE Chandigarh 1988 (36) E.L.T. 129 (Tribunal) and (2) Steel Strips Ltd. v. C.C.E. 1988 (38) E.L.T. 507 (Tribunal) In both these decisions it has been held that cold rolled strips manufactured out of duty paid hot rolled strips are not liable to pay duty again. Relevant Para 9 from the judgment of Tribunal in the case of Atma Steel is reproduced below :-
"9. The tariff classes all strips in one category. Therefore, all strips whether hot rolled or cold-rolled are, for purposes of law, one commodity subject to duty under one head or sub-head. Exemptions providing one concession to hot-rolled strips and another to cold-rolled strips do not alter this fundamental basis. Once a strips has paid the 'strip' duty under Sub-item (iii) of Item 26AA it will never have to pay that duty again whatever shape or form it is changed into, as long as it remains in the same 'strip' category of the tariff and no process and no alteration in the nature or name or any other thing can attract to it the duty of a strip. That was the law at the relevant time; (it is no longer the law now). The action of the Collectorate to levy on the cold-rolled strip the duty under Sub-item (iii) of Item 26AA which it had once paid (as a hot-rolled strip) is not sanctioned by the law and is void. The Collector's order is quashed."
2.1 Similarly, in Tribunal's judgment in Steel Strips, supra, the Tribunal observed as follows :-
"7. Also, as correctly submitted by Shri Sinha the judgment of the Tribunal related to the same question and of the same appellants as are now before us. This order has not been set aside by the Supreme Court. There is no other order on the same question before us. Therefore, we disregard the arguments of the learned SDR against following the earlier order of the Tribunal which, individually, is in accordance with the Supreme Court's judgment in Kiran Spinning Mills. We allow this appeal."
On the basis of aforesaid judgment alone, the learned consultant has submitted that the impugned order should be set aside and the demand of duty, confiscation of goods and imposition of penalty be quashed.
3.0 Learned JDR appearing for the Revenue while conceding that the judgments of the Tribunal in Atma Steel and Steel Strips, as mentioned supra which are against the Revenue has submitted that those judgments do not lay down the correct law because in the market the two products, namely hot rolled strips and cold rolled strips are known separately and therefore, they are to be treated as different goods. Tariff Heading levies duty on iron and steel strips. This would mean the tariff duty is leviable on all types of strips as known to the market. If therefore, cold rolled strips have come into existence, duty would be leviable on them; it is immaterial that they have been manufactured from duty paid hot rolled strips. He relies for the aforesaid proposition on the Supreme Court's judgment in the case of Empire Industries 1985 (20) E.L.T. 179 (SC).
3.1 If the appellants are entitled to the benefit of proforma credit they could be given the same. On this point, he urges that no benefit of proforma credit could be extended to them, as held by the adjudicating authority, since the appellants were manufacturing the goods without obtaining the L-4 licence and without having applied for the benefit of proforma credit.
4.0 We have carefully considered the pleas advanced on both sides. We notice that there are two judgments of the Tribunal delivered by three Members in each case which are in favour of the appellants. Both these judgments have taken note of Supreme Court's judgment in the case of Empire Industries relied upon by the learned JDR. The judgments of the Tribunal are very categorical and clearly apply to the appellants in their favour. Learned JDR has not brought to the notice of the Bench whether these judgments have been appealed against by the department and whether the Supreme Court has given any stay against those judgments of the Tribunal. Accordingly, said two judgments of the Tribunal in the cases of Atma Steel and Steel Strips, mentioned supra, are binding on this Bench. Following respectfully the ratio of the said judgments, we are of the view that so far as demand of duty for the period February 1983 to July 1983 is concerned, the matter will be governed by the ratio of the aforesaid judgments of the Tribunal in Atma Steels and Steel Strips.
4.1 Position would, however, have to be examined for the period 1st August, 1983 onwards to January, 1984 and for the goods under seizure.
4.2 Tariff Entry has undergone a change w.e.f. 1-8-1983. It reads as follows in so far as the iron and strips are concerned :-
"25. Iron and steel products thereof the following namely :
(1) to (12)...
(12) Hoops, strips and skelp of iron or steel whether galvanised or not - (i) hoops and strips, (ii) skelp"
In the said Tariff Entry 'Strips' have been further defined in Clause (xiv) to the Explanation to the Tariff Entry as follows :-
"(xiv) 'strips' means hot or cold-rolled products, approximately in rectangular cross-section of thickness usually 10 millimetres and below with mill, rolled, trimmed or sheared edges and supplied in coil or flattened coil (straight length) form but excludes hoop and skelp."
4.3 It is apparent that the strips occurring in Tariff Entry 25 brought into effect from 1st August, 1983 means hot rolled product or cold rolled product. In other words, the tariff now recognises two types of strips - hot rolled strips and cold rolled strips. With this change in tariff description cold rolled strips would become liable to duty irrespective of the fact whether they are manufactured from the hot rolled strips or otherwise. The adjudicating authority after considering all the submissions of the appellants before him which have largely been reiterated before us in the appeal memo, has held that there is a reduction in thickness to the extent of 30% and on appellants' own admission they have undertaken the process of cold reduction by means of rolling of iron and steel products. The appellants have now submitted in rebuttal of the aforesaid finding of the adjudicating authority that this process of reduction in thickness of the hot rolled strip is achieved by repeated mechanical process of passing the strip in between two rollers. Percentage of reduction in one process of such passing of the hot rolled is not more than 3%. In other words, according to them, it would be treated as a cold rolling only when the thickness is reduced to the extent of 30% in a single pass between the rollers.
4.4 We observe that no evidence has been placed by the appellants that 30% reduction in thickness has to be achieved in a single pass so as to treat the process as one of cold rolling and not otherwise. In the absence of any evidence to this effect, we are unable to accept the contention of the appellants that they are not undertaking the process of cold rolling and cold rolled strips have not been produced by them.
4.5 Next contention of the learned advocate for the appellants is that what they had produced are not cold rolled strips as known to the market. Their machinery is of such crude character that these cannot be considered as cold rolling mills. In this connection, he relies on Tribunal's decision in Calcutta Steels 1991 (54) E.L.T. 90 (Tribunal).
4.6 We have considered this submission of the appellants but we do not find much substance in it. Classification of a product does not depend exclusively upon the type of mill or the process of manufacture undertaken by it. Learned consultant's reliance on 1991 (54) E.L.T. 90 (Tribunal) is not relevant to the issue involved in this appeal. Question involved in the case of Calcutta Steel Industries before the Tribunal was whether the goods produced by the appellants therein were "bars" or "strip or skelp or hoops". There is no such controversy in the present case. It is not disputed by the appellants that what he has purchased from the market are the hot rolled strips. He has further reduced the thickness of the strip from guage 10 to guage 13 by cold working or cold rolling. Hence the case of Calcutta Steel Industries relied upon by the learned consultant has no application in this case. Another argument submitted by the learned consultant is that the goods are not sold as cold rolled strips. We do not find any force in this argument, since the classification of the product does not depend upon the nomenclature given by a manufacturer to its product. Hence taking overall view of the evidence available on record, we hold that the product manufactured by the appellants is cold rolled strips and is liable to duty after 1-8-1983.
4.7 Next contention of the appellants is that the benefit of proforma credit would have been available to the appellants since these have been made out of paid hot rolled strips. The adjudicating authority has denied this benefit on the ground that the appellants did not take a Central Excise licence and consequently did not apply for availing of the procedure for proforma credit. This we think is not a sufficient reason for denying the proforma credit and determining the duty liability after reducing the element of duty paid on hot rolled strips. It is not disputed by the department that iron and steel products are covered under the scheme of Rule 56A. We, therefore, direct that the duty liability of the appellants should be redetermined for the period 1-8-1983 to January 1984 after reducing the element of duty payable on the hot rolled strips.
4.8 As regards the goods under seizure on the basis of our findings that they are cold rolled strips duty is leviable on them as well. Appropriate duty after reducing the liability of duty payable on hot rolled strips is liable to be paid by the appellants on the seized stock as well.
4.9 Having regard to the facts and circumstances of the case, particularly the legal position, as it obtained prior to 1-8-1983, we are of the view that there is no case for confiscation of the goods and consequent imposition of redemption fine as also to imposition of penalty. Accordingly, we set aside the confiscation as also the penalty of Rs. 1,00,000/-.
5. Appeal disposed of in the above terms.