Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs D.K. Electricals Industries on 4 August, 1994
Equivalent citations: 1994(74)ELT272(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. This is an appeal by the Revenue against the order dated 3-5-1993 passed by the Collector (Appeals) Indore. The respondents are engaged in the manufacture of Electrical Wires and Cables falling under Chapter 85 of the Central Excise Tariff. They also undertake job-work of coating telecommunication G.I. Wires with PVC. On being directed by the Department, they paid duty on such PVC coated G.I. wires under sub-heading 8544.00 of the Schedule to the Central Excise Tariff Act, 1985 under protest and also filed a representation dated 11-12-1990 in which they insisted that the activity of coating G.I. Wires with PVC on job work basis did not amount to manufacture. After issuing a show cause notice and taking into account the respondents reply, the Assistant Collector passed the order dated 14-7-1992 holding the said goods as chargeable to Central Excise duty under sub-heading 8544.00. Being aggrieved by the order passed by the Assistant Collector, the respondents filed an appeal before the Collector (Appeal) who in the impugned order held that the activity of PVC coating of G.I. Wires does not amount to manufacture.
2. On behalf of the Revenue, Shri K.K. Dutta, the learned JDR stated that the orders reported in 1989 (42) E.L.T. 109, 1989 (44) E.L.T. 675 and 1982 (10) E.L.T. 10, which were relied upon by the Collector (Appeals) were passed having regard to the fact that Item 33B of the erstwhile Central Excise Tariff covered all types of electric wires and cables including insulated wires and cables. He contended that in view of the fact that under the present Tariff G.I. Wires are covered by sub-heading 7217.90 and Insulated Wires are specifically covered by sub-heading 8544.00 of the Schedule to the Central Excise Tariff Act, 1985, the activity of PVC coating of G.I. Wires has to be deemed as amounting to manufacture. He argued that PVC coating of the G.I. Wires amounts to manufacture within the meaning of Section 2(f) of the Central Excises & Salt Act, 1944 since the process results into a commercially new product having different name, character and use. In support of his contentions he placed reliance on the Tribunal's decision in the case of Collector of Central Excise v. Eastern Chemical & Industries, reported in 1991 (52) E.L.T. 290.
3. On behalf of the respondents, Shri K.K. Bassi, learned Advocate appeared before us. He contended that Collector (Appeals) had correctly held on the basis of the decisions of the Tribunal that the activity of PVC coating of G.I. Wires does not amount to manufacture. He stated that the respondents were receiving G.I. Wires from the Department of Telecommunication for the purpose of coating them with PVC on job work basis. He contended that the activity of coating of bare G.I. Wires with PVC does not amount to manufacture since such coating does not result in any new product having a different name, character and use. In support of his contentions he cited the following case law :-
Rexor India Ltd. v. Collector of Central Excise, New Delhi - 1991 (52) E.L.T 392 (Tri).
X.L. telecom Pvt. Ltd. and Anr. etc. v. Union of India and Ors. - 1994 (70) E.L.T. 530 (Bom.).
4. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the only question that arises for consideration in this case is whether the activity of insulation of bare G.I. Wires by coating them with PVC undertaken by the respondents on job work basis can be deemed as amounting to manufacture within the meaning of Section 2(f) of the Central Excises and Salt Act.
5. It is seen that in arriving at his finding that PVC coating of steel wires does not amount to manufacture, the Collector (Appeals) had mainly relied upon the Tribunal's order in the case of Cable House v. Collector, Central Excise, reported in 1989 (44) E.L.T. 675 in which the question that arose for consideration was whether steel wires after PVC coating continue to be steel wires classifiable under Tariff Item 26AA or such coating would amount to manufacture rendering the coated PVC steel wire as classifiable under Tariff Item 68. The Tribunal relying upon the Bombay High Court judgment in the case of Shakti Insulated Wires Pvt. Ltd. v. Union of India and Ors., reported in 1982 (10) E.L.T 10 held that if insulated copper strips continue to be under Item No. 26A(2) of CET ("copper manufacturers, the following ... strips ... in any form or size") and insulated aluminium strips under Item No. 27(b) ("aluminium manufacturers, the following, namely, ... strips ... in any form or size, not otherwise specified"), it could not be said that PVC coated G.I. Steel wires would cease to be classifiable under Item 26AA. ("Iron or steel products, the following, namely,: (i-a) Bars, rods, coils, wires ... not otherwise specified"). It is seen from paras 29 and 30 of the Tribunal's order reproduced below in the case of Cable House v. C.C.E. (supra) that the main consideration which weighed with the Tribunal in arriving at the finding that PVC coated G.I. steel wires were classifiable under Tariff Item 26AA was that they were more specifically covered by the said item and the question whether the process of PVC coating of G.I. Steel wires amounted to manufacture was not gone into -
"29. It is a cardinal principle of taxation that it is for the taxing authority to prove taxability of the goods sought to be taxed and to show that the goods fall under the particular entry of the Tariff Schedule under which they are sought to be taxed. In the present case, the Revenue, in my opinion, has not discharged this burden. Indeed, the proceedings before the Collector have gone on the (un-established) basis that there has been "manufacture" for the purpose of levy of excise duty. The question, as submitted by the counsel, does not seem to have been even raised before the Collector.
30. The learned DR has sought to draw an analogy with Item No. 33-B of the CET in support of his contention that, after the coating process, the goods constituted distinct and different goods attracting classification and duty under Item No. 68 of the CET. I am not impressed by this argument. Item No. 33-B of the CET is specific for electric wires and cables, all sorts, not otherwise specified. There are two sub-items, the first sub-item being for insulated wires and cables of copper, aluminium or other metals and alloys. The other sub-item is for "All others". Therefore, the question whether the process of insulating bare copper or aluminium wire amounts to "manufacture" resulting in different and distinct product simply does not arise for consideration. This is the settled position in law that when the goods are specified in the Tariff, there could be no question of considering whether "manufacture" is involved in the production of those goods unless, of course, the very vires of the entry are challenged."
6. The Collector (Appeals) also referred to the Tribunal's decision in the case of National Insulated Cable Co. v. Collector of Central Excise, reported in 1989 (42) E.L.T 109 in which the Tribunal held that copper strips insulated with varnish bonded glass fibre would continue to be copper strips classifiable under Tariff Item 26A in preference to the residuary Item 68 since Item 26A is specific for all copper strips.
7. In view of the above discussion and also for the reason that unlike Item 33B of the erstwhile Central Excise Tariff which covered Electric Wires and Cables all sorts which were not otherwise specified, sub-heading 8544.00 specifically covers all insulated wires, cables and conductors, in our view the Tribunal's decisions which were relied upon by the Collector (Appeals) are not relevant for deciding the question whether the process of conversion of G.I. Steel wires falling under sub-heading 7217.90 into PVC insulated wires falling under sub-heading 8544.00 of the Schedule to the Central Excise Tariff Act, 1985 will amount to manufacture.
8. It is seen that in the case of Empire Industries Ltd. v. Union of India reported in 1985 (20) E.L.T. 179, the Supreme Court has held that if by application of labour and skill an object is transformed to the extent that it is commercially known differently, it would constitute manufacture under Section 2(f) of the Central Excises and Salt Act, 1944. On the basis of this principle the Court further held that process of bleaching, mercerising, dyeing, printing, waterproofing, etc. conducted in respect of cotton fabrics, woollen fabrics and man-made fabrics would amount to manufacture subject to excise duty.
9. It is also seen that in the case of Union of India v. Babubhai Nyalchand Mehta, reported in 1991 (51) E.L.T. 182, the Supreme Court has held that Bituminised Water-proof packing paper, polythene-lined kraft packing paper, waxed kraft paper, Jute-line bituminised water-proof packing paper, waxed kraft packing paper and Hessian-lined kraft paper, manufactured from kraft paper would be dutiable as they are distinct, separate and different goods known in the market as such from the kraft paper.
10. In the case of K.S. Jhala v. N.H. Hokabay, reported in 1991 (55) E.L.T. 176, the Gujarat High Court has ruled that processing of grey fabrics amounts to manufacture within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944 since a commercially different commodity with its own price structure and custom emerges after processing.
11. It cannot be denied that bare G.I. Steel wires falling under sub-heading 7217.90 of the Schedule to the Central Excise Tariff Act, 1985 and PVC coated insterted wires falling under sub-heading 8544.00 are different commercial commodities having different price structure, name, character and applications. Hence, on the ratio of the judgments quoted above, it has to be held that conversion of G.I. Steel wires into PVC coated insulated steel wires amounts to manufacture in terms of Section 2(f) of the Act.
12. In our view, the judgment of the Bombay High Court in the case of X.L. Telecom Pvt. Ltd. v. Union of India (supra) cited by the Learned Counsel is not relevant to the facts of this case since in that case the issue which came up for consideration before the High Court was whether 'Cable Jointing Kits' merited classification under Heading 85.47 or Chapter 39 of the Customs Tariff Act. In support of his contention, the respondents have also placed reliance on the Tribunal's decision in the case of Rexor India Ltd., Faridabad v. Collector of Central Excise, Delhi (supra) in which it has been held that the activity of metallising of printed polyster films brought from outside does not amount to manufacture. The main consideration on which the Tribunal arrived at its finding was that the relevant tariff entry was ("Films whether or not metallised") not explicitly or implicitly capable of lending itself to two sub-classifications viz. films not metallised and films metallised. The Tribunal therefore held that the film which had discharged duty at the unmetallised stage would not attract further duty. In our view, this can also not be of any assistance to the respondents since as observed by us earlier, bare G. I. Steel wires are classifiable under sub-heading 7217.90 and after conversion into PVC coated Insulated Steel Wires, they become commercially different products falling under subheading 8544.00.
13. In view of the above discussion, we hold that conversion by the respondents of G. I. Steel Wires falling under sub-heading 7217.90 into PVC coated insulated wires falling under sub-heading 8544.00 amounted to manufacture in terms of Section 2(f) of the Central Excises and Salt Act, 1944 and on such conversion the product was chargeable to Central Excise Duty.
14. In view of the above discussion, we set aside the impugned order and allow the appeal.