Custom, Excise & Service Tax Tribunal
Geeta Bright Bar Works Pvt. Ltd vs Commissioner Of Central Excise, Mumbai ... on 2 August, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI APPEAL NO. E/3210/2000-Mum and E/3225,3226,3227/2000-Mum. (Arising out of Order-in-Original No. V.Adj.(Ch.72) 15-16/99/1715 dated 21.6.2000 passed by the Commissioner of Central Excise, Mumbai-V) For approval and signature: Honble Shri Ashok Jindal, Member (Judicial) Honble Shri Sahab Singh, Member (Technical) ============================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Yes
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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Geeta Bright Bar Works Pvt. Ltd.
Jayantilal Adukia
Rajiv Adukia
Smt. Geetadevi Adukia
:
Appellants
VS
Commissioner of Central Excise, Mumbai V
Respondents
Appearance
Shri M.H. Patil, Advocate for Appellants
Shri V.K. Agarwal, SDR Authorized Representative
CORAM:
Shri Ashok Jindal, Member (Judicial)
Shri Sahab Singh, Member (Technical)
Date of hearing :02/08/2011
Date of decision : 02/08/2011
ORDER NO.
Per : Ashok Jindal
These appeals are filed by the appellants against the adjudication order dt. 21.6.2000 wherein the adjudicating authority has held that process of conversion of M. S. rounds into M.S. bright bars by the process of cold drawing amounted to manufacture.
2. This is the second round of litigation. In earlier round of litigation, this Tribunal had allowed the appeals of the appellant holding that the Bright-drawing is a cold process in which bars or rods, whether or not in irregularly would coils, are drawn (at relatively low speed) through one or more dies to obtain products of smaller or different shaped section. Therefore, considering the judgment cited by the learned Counsel in the case of Vee Kayan Industries Vs. C.C.E. 1996 (83) ELT 262 (S.C.) the impugned order suffers legally and, therefore, set aide the impugned order and allow the appeals with consequential relief according to law. The said order was challenged by Revenue before the Honble Apex Court and the Honble Apex Court passed the order in Civil Appeal No. 4366-4369/2003. On 13.4.2011 reported in 2011 (267) E.L.T. 436 (S.C.) remanded the matter back with the following directions.
Therefore, it was required for the Tribunal to discuss the evidence and thereafter come to a finding as to whether or not there was any manufacturing activity on the part of the respondent on the facts and circumstances of the present case. That being the position, we set aside the impugned judgment and order and remit the matter back to the Tribunal for fresh and de novo consideration of all the issues. While doing so, the Tribunal shall record reasons for its decision.
Therefore this matter is before us.
3. Shri M.H. Patil the learned Advocate for the appellant appeared and submitted that the period involved in this matter is 1.4.1994 to 30.9.1995 whereas the show-cause notice have been issued on 26.3.2009. He further submitted that the appellants are not engaged in the process of manufacture as held by the Apex Court in the case of Vee Kayan Industries Vs. Collector of Central Excise, Chandigarh reported in 1996 (83) E.L.T. 262 (S.C.). He further submitted that w.e.f. 18.4.2006 by Finance Act, 2006 in Chapter 72, after Note3, the following Note shall been inserted, namely :-
4. In relation to the products of this Chapter, the process of drawing or redrawing a bar, rod wire rod, round bar or any other similar article, into bright bar, shall amount to manufacture.
4. Therefore, prior to 18.4.2006, the said activity was not amount to manufacture. He further submitted that as per Section 2 (f) manufacture includes any process incidental or ancillary to the completion of a manufactured product; and which is specified in relation to any goods in the Section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture, and the word manufacturer shall be construed accordingly. As the Apex Court, in the case of Vee Kayan Industries (Supra), has dealt the issue in detail and arrived at decision that the conversion of round bars into bright bars does not amounts to manufacture as no new product is in emergence. Mere finding as to change in form or shape not sufficient to hold drawing of round bar through a slight narrow diameter resulting in a new commodity. As there is no evidence or material adduced to show that in commercial circle, the bars and bright bars are different. Therefore, the process of conversion of M.S. Round into Bright bars does not amount to manufacture. He further submitted that the same view has been taken by the Honble Apex Court in the case of Collector of Central Excise Vs. Technoweld Industries reported in 2003 (155) E.L.T. 209 (S.C.). He further submitted that the duty is cast on the revenue to prove that the activity undertaken by the appellants amounts to manufacture. The activity under taken amounts to manufacture, the burden is on Revenue as held by the Honble Apex Court in the case of Collector of Central Excise, Chandigarh Vs. Steel Strips Ltd. reported in 1995 (77) E.L.T. 248 (S.C.). He further submitted that in the Writ Petition No. 22896 of 1996 of M/s. Amit Steel Pvt. Ltd. & Others, the issue came up before the Honble Aandhra Pradesh High Court transformation of M.S. round bars into bright bars does not amount to manufacture and no Central Excise duty is leviable on clearance of bright bars wherein it was held that transformation of round bars into bright bars does not result in bringing out a distinct and different commodity and further that said transformation of round bars into bright bars does not amount to manufacture within the definition of Section 2(f) of the Central Excise Act. He further submitted that vide Trade Notice No. 18/2003 dated 14.08.2003 the Board clarified that any activity out of which a new commodity having distinct name, character and use was held to be a process of manufacture, the activity of drawing of bright bars from wire rods, will continue to be treated as amounting to manufacture. The said Trade Notice was withdrawn by the Trade Notice No.15/2004 dated 16.6.2004 clarifying that relying on the decision of Honble Apex Court in the case of Vee Kayan Industries (supra) the manufacture of drawing bright bars from wire rods as a process of manufacture through their Trade Notice No. 18/2003 dated 14.8.2003 is hereby withdrawn. Therefore, the activity undertaken by the appellants does not amount to manufacture. He further submitted that Tribunal decision in the case of Commissioner of C.Ex.& Cus. Pune-I Vs. Arlabs Limited reported in 2000 (122) E.L.T. 470 (Tribunal) wherein this Tribunal has held that existence of a notification exempting duty on intermediate product does not have any bearing upon conversion of such intermediate product into a final product amounts to manufacture or not. The said decision was upheld by the Honble Apex Court reported in 2003 (130) E.L.T. A86 (S.C.)]. He further prayed that as the issue involved in this case is whether the activity undertaken by the appellant amounts to manufacture or not was in dispute, the extended period of limitation is not invokable. Therefore, he prayed that when the demand are not sustainable, therefore the liability of interest and penalties are also not sustainable and in result he prayed that the appeals be allowed with consequential relief.
5. On the other hand, the learned SDR submitted that the appellants are involved in the activity of conversion of round bars into bright bars through a process of pickling, cutting, drawing and polishing. Therefore, the decision of the Apex Court in the case of Vee Kayan Industries (supra) is not applicable. He further submitted that the goods are excisable and that duty was payable after exemption notification was withdrawn, therefore the plea that the activity does not amount to manufacture is not sustainable. As the Commissioner has dealt with issue in detail, therefore he reiterated the findings of adjudicating authority.
6. Heard both sides and considered their submissions.
7. After hearing both the sides, we find that the core issue emerges from the arguments advanced by both sides are that whether the activity of conversion of M.S. round into bright bars amounts to manufacture or not? Although, the activity of conversion of M.S. round into bright bars following the activity of pickling, cutting, drawing, polishing but does not change the identification of the goods i.e. bright bars. As held by the Honble Apex Court in the case of Vee Kayan Industries (supra) wherein the Honble Apex Court observed the finding of the Tribunal that the appellants have purchased the duty-paid round bars from the market and these bars were drawn through a slight narrow diameter and the bright bars emerged from the narrow die. It was not disputed before the Tribunal nor it is disputed in this Court that Tariff entry 26AA(ia) levies duty on bars. The Tribunal held that passing of the round bars through slight narrow diameter resulted in change of form and shape and since this transformation of round bars into bright bars resulted in bringing out a distinct and different commodity, the appellant was liable to pay duty on it. Thereafter, the Apex Court hold that this finding does not appear to be correct in law as in absence of any material on record or any finding by the Tribunal that mere drawing of a round bar through a slight narrow diameter resulted in bringing out a new commodity, the finding that it changed in form or shape without any evidence cannot be accepted. In the absence of any material to show that in commercial circle, the bars and bright bars are different, the inference drawn by the Tribunal cannot be upheld. In result the Honble Apex Court has held that transformation of round bars into bright bars does not amount to manufacture as no new product is emerges. We have gone through the facts of this case also, the department has failed to brought any evidence on record that the conversion of M.S. round into bright bars have changed in form or shape and their emerges new commodity. The same issue has been taken by the Honble Apex Court in the case of Technoweld Industries Ltd. (supra) wherein the Apex Court has held that the initial product was a wire rod. The ultimately product is also a wire. All that is done is that the gauge of the rod is made thinner and the product is finished a little better. In our view the earlier decision of the Tribunal are correct. There is no manufacture of a new product. Merely because there are two separate entries does not mean that the product becomes excisable. The product becomes excisable only if there is manufacture. Therefore it was held by the Honble Apex Court that process of drawing wires from wire rods not amounts to manufacture. In the case of Steel Strips Ltd. (supra) wherein the Honble Apex Court has observed that when it is the case of the Excise authorities that an article is the result of a process of manufacture and it is commercially distinct and known as such, it is for the Excise Authorities to lay evidence in this behalf before the first adjudicating authority regardless of the fact that he is an officer of the Excise Department. There should, ordinarily, be no difficulty in establishing that the article is the result of a process of manufacture; in the event of difficulty, it would be open to the Excise Authorities to seek a direction requiring the assessee to set out in writing what it does to obtain the articles. Therefore, the lack of evidence has led to the failure of the case of the Excise Authorities. In the case of Commissioner of C.Ex. Chennai-II Vs. Tarpaulin International reported in 2010 (256) E.L.T. 481 (S.C.) the Honble Apex Court has observed that manufacture implies a change, but every change is not a manufacture and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary There must be transformation, a new and different article must emerge, having a distinctive name character or use. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. However, this court in the case of India Cine Agencies Vs. Commissioner of Income Tax, Madras, [2008 (233) E.L.T. 8 (S.C.)] it was observed that, it is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. In the case of Commissioner of C.Ex.Chandigarh-I Vs. Markfed Vanaspati & Allied Indus. Reported in 2003 (153) E.L.T. 491 (S.C.) the burden to prove that there is manufacture and that what is manufactured in on the Revenue. Merely because an item fall in a Tariff Entry, that does not amount to manufacture.
8. We have gone through the decision of the Honble Andhra Pradesh in Writ Petition No. 22896 of 1996 in the case of Amit Steel Pvt. Ltd. and Others wherein the Honble Andhra Pradesh High Court had occasion to answer the question whether the transformation of M.S. round bars into bright bars does not amount to manufacture or not? The same has been answered that the transformation of round bars into bright bars does not result in bringing out a distinct and different commodity and further the said transformation of round bars into bright bars does not amount to manufacture within the definition of Section2(f) of the Central Excise Act. We have gone through the Finance Act 2006 wherein the activity of process of drawing or redrawing a bar, rod wire rod, round bar or any other similar article, into bright bar shall amount to manufacture has been introduced w.e.f.18.4.2006 and prior to that, in absence of the said specific entry into the statute, the activity of conversion of M.S. round into bright bars was not amounted to manufacture. The clarification of the Board through Trade Notice No. 15/2004 dated 16.06.2004 itself is clarificatory that the activity of manufacture of bright bars from wire rod does not amount to manufacture.
9. We have also gone through the decision of Arlabs Ltd. (supra) where this Tribunal further held that the existence of a notification exempting duty on intermediate product does not have any bearing upon whether the conversion of such an intermediate product into a final product amounts to manufacture. The said decision was confirmed by the Honble Apex Court.
10. From the above discussion, we find that the Revenue has failed to bring out any evidence on record that the activity of pickling ,cutting drawing and polishing have emerged a new distinct commodity except the conversion of M.S. round into bright bars. As no new distinct product has emerges, we are relying on the decision Vee Kayan Industries (supra) wherein the Honble Apex Court has held that conversion of M.S. round into bright bars does not amount to manufacture the same has been clarified by the Board Trade Notice No. 15/2004 dated 16.6.2004. The activity of drawing of M.S. round bars into bright bars is an activity of manufacture has specifically brought into statute book w.e.f.18.4.2006. Therefore we are concluding that during the impugned period i.e. from 1.4.1994 to 30.9.1995, the activity undertaken by the appellants i.e. conversion of M.S. round bars into bright bars through an activity of pickling, cutting, drawing and polishing does not amount to manufacture. When there is no manufacturing activity, no excise duty is payable. Therefore, the demands are not sustainable, when demand are not sustainable, the question of demanding interest and imposition of penalty also does not arise. Therefore the impugned order is set aside. The appeals are allowed with consequential relief if any.
(Pronounced in court) (Sahab Singh) Member (Technical) (Ashok Jindal) Member (Judicial) Sm 11