Customs, Excise and Gold Tribunal - Mumbai
United Cables vs Collector Of Central Excise And Customs on 3 March, 1993
Equivalent citations: 1993ECR75(TRI.-MUMBAI), 1993(68)ELT423(TRI-MUMBAI)
ORDER R. Jayaraman, Member (T)
1. The appeal is directed against the order in original No. 11/MP/92 dated 19-5-1992 passed by the Collector of Central Excise, Surat.
2. The facts of the case for the purpose of disposal of the appeal can be briefly indicated as below:
The appellants are engaged in the manufacture of insulated electric wires and cables. For manufacture of this product, they are bringing inputs viz. rubber chemicals, synthetic rubber, organic and inorganic chemicals, copper wire rods/bars and aluminium rods/wires. They have filed the requisite mod-vat declaration in respect of the inputs claiming that these inputs are utilised in the manufacture of their final product viz. insulated wires and cables. Accordingly, they availed of this modvat facility for the period 12-4-1986 to 31-1-1991. However, a show cause notice came to be issued on 8-4-1991 by the Collector alleging that synthetic rubber, rubber chemcials and other chemicals go into the preparation of rubber compound, which is a distinct commercial product and it is not occurring at intermediate stage of manufacture of insulated wires and cables. Since the rubber compound cleared for captive consumption is exempted under Notification No. 217/86 and the aforesaid inputs are not used in the manufacture of insulated wires and cables, but are only used in the manufacture of rubber compound, which is an exempted product independently manufactured, modvat credit taken and utilised towards clearance of insulated wires and cables to the extent of Rs. 62,13,540.33 was ordered to be reversed or to be recovered in cash. The appellants were also imposed with a penalty of Rs. 20 lakhs. The present appeal is against the aforesaid order.
3. After hearing both the sides, we find that there is no dispute that the declaration has been filed in respect of all the aforesaid items as inputs used in relation to the manufacture of insulated wires and cables. There is also no dispute that the disputed inputs viz. rubber and rubber chemicals and other chemicals find part of the rubber compound and the rubber compound forms the insulating material for providing insulation to the electric wires and cables and thus it is actually a component of the insulated wires and cables. When this point is not disputed, we are unable to understand how a view has been taken that rubber and rubber chemicals are not inputs for the manufacture of electric wires and cables. Shri Mondal's plea is that they are inputs only for rubber compound. He does not deny that rubber compound is an input in the insulated wires and cables. If that is so, input for input of the final product is also an input for the final product. Hence, there is no mis-declaration in the modvat declaration. But the allegation of suppression is sought to be sustained on a ground that the appellants have not furnished the classification list with regard to the rubber compound claiming its exemption under Notification No. 217/86. Hence, suppression and extended period are sought to be applied. This argument is also amusing because of the fact that rubber compound, even if it is construed to be manufactured independently, is utilised only for providing insulation to wires and cables and it is captively consumed. When they are declared in the modvat declaration that they are manufacturing insulated wires and cables and also declared rubber and rubber chemicals as inputs for insulated wires and cables, no one need to be told that a compound made of rubber in the form of paste would arise for providing insulating material. What is obvious need not be told to the Department and there could not have been any suppression on this ground. Moreover, when there is no denial that such rubber compound is even otherwise used for captive consumption and is exempted vide Notification No. 217/86, there cannot be any reason for suppressing classification on this item. Any allegation of suppression or wilful mis-statement must lead to evasion of duty. In this case, even giving the maximum benefit to the argument of Shri Mondal holding Rubber compound as an independent product and is liable to duty, what is required is they could pay duty on rubber compound, in which case modvat benefit in respect of rubber and rubber chemicals would be available for payment of duty in respect of rubber compound and the duty paid on rubber compound can be taken as credit for utilisation in respect of payment of duty on the wires and cables. Hence, there could not have been any intention for evading any duty justifying the extended period. Hence, the proceedings are time barred for major part of the period.
4. Now examining the issue on merits, rubber chemicals and synthetic rubber form part of the compound providing insulation to the electric wires and cables. They are components in a sense, physically present in the final product namely insulated wires and cables. All the components of a final product cannot be produced in a single stream. There could be more than one stream for different components. Rubber compound, being a component, gets manufactured separately and used in the manufacture of wires and cables. Hence, viewed in this background, it has to be construed as an intermediate product. In view of this, the benefit of Rule 57D is available to them. Credit of duty paid on synthetic rubber and other chemicals would be available for payment of duty on insulated wires and cables, notwithstanding the fact that rubber compound, which is a component, occurring at the intermediate stage, is exempted. Hence, the appeal is to be allowed on merits as well.
5. In the result, the impugned order passed by the Collector is set aside.