Customs, Excise and Gold Tribunal - Delhi
Hindustan Zinc Ltd. vs Collector Of Central Excise on 19 November, 1997
Equivalent citations: 1998(99)ELT50(TRI-DEL)
ORDER
S.K. Bhatnagar, Vice President
1. This is a miscellaneous application for permission to allow urging of additional grounds.
2. Ld. Counsel stated that in the show cause notice it has been alleged that they supply raw material to job workers to fabricate aluminium /lead electrodes, therefore, if the process was considered as amounting to manufacture it is the job workers who will be required to be treated as manufacturers They may be allowed to urge this legal point based on the facts of the case in addition to those already taken in the appeal memorandum.
3. Ld. DR has no objection.
4. Request allowed.
Final Order No. E/1614/97-B S.K. Bhatnagar, Vice President
1. This is an appeal against the order of Collector of Central Excise, Jaipur dated 1-4-1992.
2. Ld. Counsel stated that the appellants are inter alia, engaged in the manufacture of zinc, lead and products thereof. The zinc is manufactured by electrolysis process wherein zinc sulphate solution (which is the electrolyte) is electrolysed with the help of electric current which is passed through it. The electric current is introduced into the solution by the electrodes. The positive electrode (anode) is the lead sheet and the negative electrode (cathode) is the aluminium sheet.
3. The lead anode sheet is made by casting molten high silver lead into a cast which is later attached to the header which is a lead bar. The cathode used in the electrolysis process is an aluminium sheet attached to the aluminium header. Aluminium sheet and aluminium headers are bought out items. The duty paid aluminium sheets and aluminium headers are supplied to the independent job workers. Similarly the lead sheet and lead header manufactured within the factory are also supplied to the job workers. These job workers attaching the aluminium header with the aluminium sheet and the lead header with the lead sheet. For this purpose, the job workers employ their own labour. The appellants pay job charges for the above job done by the job workers.
4. Action was initiated against the appellants to hold that they are the manufacturers of the aluminium and lead electrodes which are used in the electrolysis process for the manufacture of zinc. The show cause notice issued accordingly demanded duty on these lead and aluminium electrodes. The appellants replied that the process of attaching the header with the aluminium sheet or the header with the lead sheet would not amount to manufacture of a new product. Alternatively and without prejudice to the aforesaid submission they also submitted that the lead electrode and aluminium electrode are entitled to the benefit of full exemption under Notification No. 217/86 as these electrodes are used in the manufacture of zinc. The appellants also alternatively claimed exemption under Notification No. 281 /86.
5. The Collector has in the impugned order held that the aluminium electrode and lead electrode are distinct from the raw material viz., aluminium header and aluminium sheet and lead header and lead sheet respectively. He has accordingly held that the process of attaching the header with the sheets would amount to manufacture of a new item viz., electrodes. With regard to the exemption under Notification No. 217/86 the Collector of Central Excise in the impugned order had held that these electrodes are part of electrolysis apparatus and therefore, they are excluded under Notification No. 217/86-C.E.
6. It was however, their contention that the process of attaching the aluminium header with aluminium sheet or the lead header with the lead sheet does not amount to manufacture. The header is attached to the sheet for the purpose of keeping the sheet immersed in the electrolyte during the process of electrolysis for the purpose of manufacture of zinc. Thus, the process of attaching the header is only to facilitate the use of aluminium or the lead sheet in the process of electrolysis. No new product with distinct name, character or use has emerged; hence no duty is liable to be paid on aluminium sheet attached with the header or lead sheet attached with the header.
7. The lead sheet attached with the header or aluminium sheet attached with the header are not bought and sold as a distinct product. These are made accordingly to appellants' own specification and are not bought and sold. Hence, these are not marketable.
8. In any view of the matter, the appellants cannot be treated as manufacturer of the lead anode and aluminium cathode. Demand of duty from appellants is not sustainable since appellants only supplied the aluminium sheet, lead sheet and the headers to the independent job workers who did the job of attaching the headers with the sheets. The show cause notice has not alleged that these job workers are dummies of the appellant. Hence job workers alone can be treated as manufacturers and they alone are liable to pay duty, if any, on the lead/aluminium electrodes in question.
9. In any view of the matter and without prejudice to the above, the lead anode sheets, aluminium cathode sheets are wholly exempt from payment of duty in terms of Notification No. 217/86 since they are used in or in relation to the manufacture of zinc. In r/o the bought out aluminium sheet and bought out header the appellants claimed Modvat credit and this Hon'ble Tribunal in Final Order No. A/653/96-NB, dated 29-2-1996 held that the aluminium sheet which is immersed in electrolyte solution during the electrolysis process can be considered as inputs under Rule 57A, used in relation to the manufacture of finished product since the same participates in the reaction through which final products are extracted. However, with regard to the header the Tribunal held that it cannot be treated as input under Rule 57A. The aforesaid decision would squarely apply to the present case wherein the issue of applicability of Notification No. 217/86 is involved in r/o the item which is the combination of header and the sheet which is to be treated as an item used in relation to the manufacture of the zinc. The provisions of Rule 57A and the conditions imposed therein for treating an item as an input for the purpose of extending Modvat credit are pari materia with the conditions of Notification 217/86. When the sheet portion of the electrodes in question are treated as used in the manufacture by the Tribunal in the above order, the entire item which is nothing but the sheet attached to the header, has to be treated as used in the manufacture. Accordingly it is submitted that the demand for duty on the items in question is not sustainable.
10. Without prejudice and in any case, the appellants are entitled to exemption under Notification No. 281/86 by which goods manufactured in a workshop of a factory and intended for use in the said factory for repair or maintenance of the machinery installed therein are wholly exempt from payment of duty. If the items in question are held to be not used in the manufacture, they are certainly used for repair and maintenance of machinery and exempt under Notification No. 281/86.
11. In any view of the matter, the Modvat credit on the bought out aluminium sheet has to be extended and adjusted in the demand.
12. The entire demand is barred by limitation as the entire process of manufacture of zinc is known to the department.
13. Ld. DR reiterated the department's view as contained in the impugned order and emphasised that the appellants are manufacturing lead sheets in their own factory. They are paying duty on the lead sheet and on the lead headers and thereafter employing a fabrication process which gives rise to a new, different and identifiable product other than the raw material and the product becomes an electrode only after the header is attached to the sheet through welding. The electrode so manufactured is squarely covered by the definition of excisable goods under Section 2(f).
14. It was also his submission that the appellant's pricing policy is irrelevant in this respect. Further no Modvat is applicable on the items which are not inputs for the manufacture of the final product-zinc. It was also his submission that lead/aluminium electrodes were classifiable under 8548.00 as they are current carrying components for the electrolysis operation and the electric circuitry for electrolysis will not be complete without them.
15. It was also his submission that benefit of Notification No. 217/86 also cannot be extended as the electrodes cannot be treated as consumables and being part of the apparatus they are excluded from the purview of 217/86.
16. We have considered the above submissions. We observe that there is a lot of force in the ld. Counsel's contention that the process of joining header to the aluminium sheet or the lead sheet does not amount to manufacture and even if it does, the duty, if any due would be payable by the job worker.
17. Actually, it is well known that during the course of electrolysis the lead sheet and the aluminium sheet act as anode and cathode respectively. Ld. Counsel is right in drawing attention to this position and his submission that the header is required to be attached for ensuring that the sheet remains immersed in the electrolyte during the process of electrolysis is logical and has not been shown to be incorrect or wrong.
18. Electrode has been defined as "an electrical conductor through which an electric current enters or leaves a conducting medium whether it be an electrolytic solution, solid, molten mass, gas, or vaccum" vide McGraw Hill Encyclopedia of Science and Technology (P. 700); and there are various types of electrodes including metal on electrodes; and in the electrolytic process for production of zinc, it is lead silver alloy anodes and aluminium cathodes are used as per McGraw Hill Encyclopedia of Science and Technology (P. 805); The Condensed Chemical Dictionary, Tenth Edition by G.G. Hawley describes Electrode - 'Either of two substances having different electromotive activity, which enables an electric current to flow in the presence of an electrolyte. Electrodes are sometimes called plates or terminals. Commercial electrodes are made of a number of materials which vary widely in electrical conductivity, i.e. lead, lead dioxide, zinc, aluminium, copper etc
19. Since in the present case it is the aluminium and lead sheets which themselves act as electrodes, therefore, by attaching the header for the above purposes a new commodity known to the market does not come into existence. Hence, no duty is payable even after such attachment.
20. In view of the above position, it is not necessary to go into the question as to whether these electrodes were entitled to the benefit of Modvat or the benefit of Notification No. 217/86. (It may however be stated before parting that Tribunal in its orders has distinguished between different types of electrodes and the distinction is based, inter alia, on the fact as to whether in a particular process electrodes themselves get consumed or not and in which cases they constitute a part of the apparatus and in which they do not. Therefore, a generalisation is best avoided).
21. Further in view of the above position, the question of time bar itself becomes redundant.
22. In view of the above discussion, the impugned order is set aside and the appeal is accepted as already announced in the open court.