1. In this matter, the facts, briefly, are that M/s. Unik Springs (India), Faridabad, claim that they are engaged primarily in carrying out certain jobs on behalf of various parties, apart from undertaking manufacture of Excisable goods on its own. Insofar as job work is concerned, it is pleaded by the appellants that this is done on spring steel flats, which are in the form of flat steel bars in lengths varying from 8 to 20 feet, which were received by the appellants after paying duty under Item 26-AA. These flat bars were subjected to the following processes in the factory of the appellants : (ii) Drilling of each piece with a hole in the centre, some pieces also being drilled with one or two holes at each end; and (iii) Subjection of such pieces after drilling to heat treatment in a furnace and subsequent immersion in quenching oil which brings about hardening and tempering of the bars.
Appellants have pointed out that after undertaking the above job work, the products are returned in loose condition to the suppliers of flat bars. For the job work so done, the appellants were receiving from the suppliers of the raw materials job charges @ Rs. 850 per M.T. as against the average prevailing price of flat steel bars @ Rs. 5,300 per M.T.2. For undertaking the job described above, the appellants have claimed that they were entitled to the benefit of duty concession as provided under Notification No. 119/75-C.E., dated 30th April, 1975. As per this Notification, goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944, manufactured in a factory as a job work were exempted from so much of the duty of Excise leviable thereon as is in excess of the duty calculated on the basis of the amount charged for job work. As per the explanation appended to this notification, it is stated that the expression "job work" usually means such items of work where an Article intended to undergo manufacturing process is supplied to the job worker and that Article is returned by the job worker to the supplier after the Article has undergone the intended manufacturing process and charging only for the job work done by him.
3. In their classification list submitted to the Central Excise authorities, appellants declared that they were manufacturing "spring leaves" by processing duty-paid steel flats which were returned to the customer without adding or using any material from the factory on job work basis. The department, however, took the stand that the value of raw material should be added to the job charges for the purpose of payment of duty. This stand was upheld at the level first of the Assistant Collector of Central Excise, Faridabad, and then the Collector of Central Excise (Appeals), New Delhi. It is against this latter order that the appellants have come in appeal before us.
4. Shri Lachman Dev, Consultant, has appeared on behalf of the appellants and Shri H. L. Verma, SDR, along with Shri S.C. Rohatgi, JDR, on behalf of the department.
5. The appellants have contended before us that since in their case the flat steel bars were being returned to the suppliers after undertaking job work and on payment of job charges, their case was covered fully by Notification No. 119/75. It is pointed out before us that the department's view that the raw material is completely converted into a finished product is entirely untenable in view, especially, of the judgment of the Gujarat High Court in Anup Engineering Ltd., Ahmedabad and Ors. v. Union of India and Ors. (1978 ELT J 533). The appellants have especially cited the following part of the Judgment :- "If a new Article does not emerge after the manufacturing process is completed, there is no occasion to levy Excise Duty. If a new Article is to be subjected to the levy of full Excise Duty without granting exemption under Notification No. 119/75, dated 30th April, 1975, the whole exemption would be totally meaningless. One cannot contemplate any possible occasion on which that particular notification would apply." 6. The appellants have cited the decision of the Calcutta High Court in the case of Collector of Central Excise, Calcutta v. Madura Coats Limited [1982 ECR 352D (Calcutta)], in which it was held that warpsheats manufactured out of nylon or rayon yarn, supplied by the customer, were entitled to the benefit of Notification No. 119/75, even though some additional articles were provided by the job worker on warpsheats.
7. Appellants have also cited the following other decisions in their favour :- (1) 1981 ELT 587 in the case of Bapalal and Co. v. Union of India and Ors.Indian Steel Rolling Mills Ltd., Madras v. C.C.E., Madras.
(4) 1985 ELT 80 (Bombay) in the case of Noble Paints and Varnish Co.
Pvt. Ltd. v. Union of India and Ors.
(5) 1984 ECR 2133 (CEGAT) in the case of Ajit India Pvt. Ltd., Madras v. CCE, Madras.
8. On behalf of the department, Shri H. L. Verma, SDR, and Shri S.C.Rohatgi, JDR, have reiterated the view taken in the order-in-appeal. It is stated that, as per the wordings of Notification No. 119/75, exemption; is available when the same Article is being returned after subjecting it to job processing. It is claimed that, in this particular case, the goods that are being received are in the nature of flat bars and these are converted into a totally new product, after various processes, as a result of which they are made into leaf springs. In such a situation, it is submitted, it cannot be claimed that basically the same Article is being returned after job work, as contemplated in Notification No. 119/75. On a query from the Bench, as regards the applicability of the judgment of the Gujarat High Court in the case of Anup Engineering Ltd., Ahmedabad (1978 ELT J 533), as well as the decision of CEGAT in the case of M/s. National Organic Chemical Industries Ltd., Bombay [Order No. 70/84-C., dated 25th January, 1985-Appeal No. ED (SB) (T) 190/76-C], the department have taken the stand that in this matter we should be guided by the decision of the Delhi High Court in the case of Metal Forgings Pvt. Ltd. (C.W.P. 214 of 1981, dated 12-12-1984).
9. We have carefully considered all the facts of the case and the submissions made by both sides. Insofar as the scope of Notification No. 119/75-CE, dated 30th April, 1975, is concerned, there are a number of decisions of various High Courts. These include the following :- (i) Gujarat High Court decision in the case of Anup Engineering Ltd. v. Union of India (1978 ELT J 533).
(ii) Calcutta High Court decision in case of M/s. Madura Coats Ltd. (1980 ELT 582) (iii) Calcutta High Court decision in the case of Associated Pigments Ltd. v. Collector of Central Excise (1983 ELT 876).
Apart from the above decisions of the various High Courts, there have been the following decisions of this Tribunal:-Orissa Construction Corporation v. Collector of Central Excise (1983 ELT 2382).Indian Steel Rolling Mills v. Collector of Central Excise (1983 ELT 2396).
(c) Waldies Ltd. v. Collector of Central Excise (Order No. C-17/83, dated 22nd February, 1983, in Appeal No. 177/80-C).Mysore Acetate and Chemicals Co. Ltd. v. Collector of Central Excise, Bangalore 10. With a view to clear any doubts as regards interpretations of the above decisions, a larger Bench of this Tribunal was constituted in the case of National Organic Chemical Industries Limited, Bombay v.Collector of Central Excise, Bombay (Order No. 70/84-C, dated 25-1-1985). It was pointed out in this decision of the Tribunal that there was no disagreement between the High Courts on the point that the mere fact that, by reason of the job work done, a new commodity, but not the one in which the Article supplied could not be identified, had emerged, would not exclude the new commodity from the benefit of Notification No. 119/75. There also appeared to be an agreement in the decisions of the various High Courts that, if the job worker supplied or sold his own materials in substantial proportion and they constituted an important element in the manufacturing process, the work would not be a job work. The CEGAT decision in NOCIL (National Organic Chemical Industries Limited) case, however, pointed out that it would be necessary to distinguish between 'process of manufacture in the primary sense and process of manufacture in secondary sense of incidental or ancillary processes leading to the completion of a manufactured product'. It is observed in this decision of the Tribunal that the words "manufacturing process", used in the explanation to Notification No. 119/75, would appear to refer to those processes, which are incidental or ancillary, leading to the completion of a manufactured product, and not to the usual activities that are normally understood to comprise manufacture. As per the findings in this decision, to enable a person to claim the benefit of Notification No.119/75, he will have to receive an Article from the supplier and subject the same to a manufacturing process in the nature of a process incidental or ancillary to the completion of the manufactured product and then return the same Article to the supplier, recovering from him charges for such job work only. It is conceded that the demand for duty or the claim for exemption can arise only on emergence of a new product. However, the importance of the use of the words "that Article" in the explanation to the notification was given importance and it was held that a correct interpretation would be that, for availing exemption under the relevant notification, the Article entrusted for job work should, after the application of the manufacturing process by the job worker, not lose its essential identity entirely but should retain this essential identity, subject to any manufacturing processes conducted by way of job work. We would specially point out here that, in this decision of the Tribunal, it was emphasised that the foregoing interpretation would be in accordance with the decision of the Madras High Court, reported in 1982 ELT 370, and also the decision of the Gujarat High Court, reported in 1978 ELT J 533.
11. Keeping in view the above findings of the Tribunal in the NOCIL case, it would appear to us that, in this case, the impugned goods would be covered by Notification No. 119/75. The reason for this is that we find that there is not a complete conversion of the goods originally received to an extent where such goods might completely lose their identity. The goods that are received are steel in the form of flat steel bars. These are subjected to cutting, lengthwise, drilling of holes and subsequent hardening and tempering through a process of heat treatment. It is to be noted that the steel flats are received for job work, after payment of duty and, on completion of the job work, are returned to the supplier, on payment of job charges only. It is true that, after the above job work, the goods are used by the supplier for spring leaf assemblies, which are used as motor vehicle parts. That, however, in not relevant. The point for decision before us is whether the processes undertaken by M/s. Unik Springs (India) are of a nature which amount to complete transformation of the basic material received, to the extent that such basic material loses its identity. It appears to us that the answer to this question has to be in the negative.
12. In the Order-in-Appeal, we find that the Collector of Central Excise (Appeals) had taken due note of the decision of the Gujarat High Court in the case of Anup Engineering Limited. He has, however, rejected the appeal on the basis of his finding that he disagrees with the findings of Gujarat High Court. Obviously, such a stand is not sustainable.
13. On behalf of the department, a lot of stress has been laid on the import of the decision of the High Court of Delhi in the case of Metal Forgings Private Limited v. Union of India. We have carefully gone through this judgment. We find that this judgment does not, at all, deal with the question of either job work or the scope of Notification No. 119/75.
14. In view of the foregoing findings, we set aside the order of the Collector of Central Excise (Appeals), New Delhi, and allow the appeal with consequential relief to the appellants.