Customs, Excise and Gold Tribunal - Delhi
Hindustan Spg. And Wvg. Mills Ltd. vs Collector Of C. Ex. on 20 April, 1998
Equivalent citations: 1999(111)ELT878(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. This appeal has been filed by the appellants against the Additional Collector's order confirming the demand of Rs. 3,42,838.32 and imposing a penalty of Rs. 50,000/- on them.
2. The facts leading to the present appeal are that the appellants are engaged in the manufacture of man-made fabrics and cotton fabrics. They undertook the processing of man-made fabrics and cotton fabrics. For printing, the appellants used nickel cylinders which they purchased from the market. The department alleged that the appellants are manufacturing nickel cylinders and were clearing them without submission of price lists, classification lists, without obtaining Central Excise Licence and without paying duty on them. Accordingly, a show cause notice was issued to the appellants asking them to explain as to why the duty should not be demanded from them and why a penalty should not be imposed on them.
3. In reply to the show cause notice, the appellants submitted that the nickel cylinders in question are duty paid, purchased by them from the market; that the marketability is an essential ingredient to attract duty; that the Supreme Court in the case reported in 1986 (24) E.L.T. 169 (S.C.) held that the onus is on the department to prove that the goods are marketable; that the department did not discharge its burden. They also submitted that this Tribunal in the case of Amartara Industries [1988 (37) E.L.T. 152] held that in process material/intermediate products if not marketable are not excisable goods and, therefore, not liable to duty. It was argued by the appellants that merely because of certain designs are carried out to suit their requirements does not make these cylinders new products because cylinders remain cylinders even after carrying out these designs for their immediate use and no duty can be levied in view of the Apex Court's decision in the case of Union Carbide [1986 (24) E.L.T. 169]. It was also argued that the manufacture means to produce a new substance distinct in name, character and use. In support of his contention, the appellants cited and relied upon the decision of the Apex Court in the case of Union of India v. Delhi Cloth and General Mills Company Limited.
4. The appellants also claimed that such cylinders used in the textile industries are covered by Notification. No. 64/86-C.E., dated 10-2-1986 under which full exemption was granted to cylinders which are used for printing in the textile industries. The appellant's claimed that on representation of the Mills Owners' Association, the Government of India issued Notification No. 201/87 on 2-9-1987. It was also argued that Notification No. 39/90-C.E. (N.T.), dated 10-10-1990 under Section 11C, the Government has granted remission of duty retrospectively in respect of above nickel cylinders. After careful consideration of the submissions, the adjudicating authority confirmed the demand and imposed a penalty.
5. Dr. P.V. Jois, Id. Advocate appearing for the appellants submitted that the nickel cylinders were not manufactured by them but were procured from outside; that they were only making certain engraving to suit their design requirements; that since nickel screen cylinders were procured by them on payment of duty and cylinders even after engraving of the design remained the nickel cylinders no duty was leviable on them. It was also argued by the Id. Counsel that the marketability is one of the ingredients which in their case was not satisfied inasmuch as the designed nickel cylinders were not marketable as they contained design for their own use only.
6. The Id. Counsel submitted that there was Notification No. 64/86C.E. which gave total exemption to cylinders which are used for printing in the textile industries. They also drew attention to the Provisions of Notification No. 281/86, dated 24-6-1986. The Id. Counsel also submitted that on the request of Indian Cotton Mills Federation and Mill Owner's Association, Bombay, the Government issued Notification No. 201/87, dated 2-9-1987 and Notification No. 39/90, dated 10-10-1990 under Section 11C granting remission of duty retrospectively. He also submitted that the demand is time barred inasmuch as the show cause notice was issued on 7-2-1991 whereas the period covered is from 1-3-1986 to 2-9-1987. Summing up his arguments, the Id. Counsel submitted that their case was fully covered by the decision of this Tribunal in the case of C.C.E. v. New Great Eastern Spinning and Weaving Co. Ltd. [1997 (94) E.L.T. 140]. He submitts that the facts in the case decided by this Tribunal and those in their case were identical and, therefore, the ratio of the decision of this Tribunal is applicable to their case.
7. Shri S.N. Ojha, Id. JDR appearing for the respondent Commissioner submitts that the Tribunal in the case of New Great Eastern Spinning and Weaving Co. Ltd. did not consider the issues which are relevant to the present case inasmuch as the Collector (Appeals) in the case relied upon had relied on the Trade Notice and observed and there was nothing in the Revenue Appeal that the Trade Notice was not applicable. He submitts that thus the present case was clearly distinguishable.
8. Heard the submissions of both sides. For the sake of clarity we reproduce the facts of the case cited and relied upon by the appellants are as under :-
"There is a composite mill and they are inter alia engaged in printing of Cotton Fabrics on Rotary Printing Machine with the help of Nickel Screen Cylinders/Rollers. To undergo the said process they purchase perforated Nickel Screen Cylinders from the original manufacturers on payment of Central Excise Duty. Subsequently a special type of photosensitive emulsion is applied on said Cylinders/Rollers thereby a separate photographed transparent polyester film bearing required print/design is clearly placed around the lacquered (emulsion coated) Nickel Screen Cylinder/Rolls. Then by means of short wave source of light the design as per polyester film is given effect of polymerisation of the synthetic materials where the lacquers (hard varnish/emulsion) has been exposed to light. In short as per print/design of polyester film which is placed around the Lacquered Nickel Screen Cylinder/Roller the unwanted portion of emulsion (as per required design) is removed by light exposure and the perforations are made open again through which required colour passes. If the said screen is degreased the cylinderr requires its original state as perforated Nickel Cylinder/Roller."
9. We note that insofar as classification of the product is concerned, the admitted position is that the goods cannot be classifiable under Heading No. 84.42 of the Tariff. We note that the main contention in the present appeal was on three counts. The first count was whether the process undertaken by the appellants was a process of manufacture and the resultant product was the goods for the purpose of levy of duty. We note that the appellants purchased perforated Nickel Screen Cylinders from outside. They engraved certain design to use them in Rotary Printing Machine. The admitted position is that these cylinders are not marketable. The admitted position is also that the perforated Nickel Screen Cylinders are procured form the market on payment of duty. Thus, the question arises that in the absence of any evidence showing that the engraved Nickel Screen Cylinders were marketable. We hold that the process undertaken by the appellants is not process of manufacture. It is more so as product before engraving is cylinder and even after engraving designs remains cylinder as is held in the case of Delhi Cloth and General Mills Company Limited cited above that every change is not manufacture; that only such changes which bring into existence a distinct product, distinct in name, character and use is manufacture. In the instant case, perforated Nickel Screen Cylinder is not a new product so as to be classified to be goods. We are strengthened by the fact that the product is not marketable. We also note that there was a clarification given by the Department in Point No. 4 of the Minutes of the Regional Advisory Committee of Bombay Central Excise Collectorate stating that "According to the instructions contained in Board's letter F. No. 232/339/87-CX. 7, dated 12-2-1988, Nickel Screen Cylinders are covered by the exemption Notification No. 201/87-C.E., dated 3-9-1987. This may be clarified." The Chairman explained that field formations have been instructed to allow exemption to Nickel Rotary Screens under Notification No. 201/87-C.E., dated 3-9-1987. We note that the Trade Notice No. 25/87, dated 15-4-1987 is contemporary to the clarification given in point No. 4. Having regard to the above discussions, we hold that the process undertaken by the appellants does not bring into existence any new product and, therefore, no duty is chargeable on the Nickel Screen Cylinders again. In this view of the matter, the impugned order is set aside and the appeal is allowed.