1. This is a revision application field by M/s. B.K. Engineering & Company, Calcutta, on 1-6-1978 before the Joint Secretary, Government of India, Ministry of Finance, Department of Revenue and Banking against the Order-in-appeal No. 513/CO/1977 dated 23-9-1977 passed by the appellate Collector of Central Excise, Calcutta, which on transfer to this Tribunal was treated as an appeal before this Tribunal and is now being disposed of accordingly.
2. The facts of the case, in brief, are that on the basis of some information, the Central Excise Officers of Calcutta VII Division visited the factory of M/s. B.K. Engineering & Company (hereinafter referred to as the appellants) on 3-6-1974 and noticed that the appellants were manufacturing "24 Volts D.C. Armature" without obtaining L-4 licence from the Central Excise Department. According to the Officers those goods were liable to Central Excise duty under Item 30(4) of the First Schedule to the Central Excises and Salt Act, 1944.
On examination of the factory's challans and bills they also noticed that the appellants had removed from the factory 7424 pieces of "Armatures" without paying Central Excise duty amounting to Rs. 51,971.40 Paise during the period from 1-3-1973 to 30-5-1974 and on 30-10-1972.258 pieces of armatures which were lying in the stock after manufacture without observance of the excise formalities were seized by the Officers. Subsequently, on 20-11-1974, a show cause notice was issued by the Assistant Collector of Central Excise, Calcutta VII Division alleging that the appellants had contravened the provisions of Section-6 of the Central Excises and Salt Act, 1944 and of Rules 9(1), 174, 173-B, 173-C, 173-F, 173-G, 52A and 53 of the Central Excise Rules, 1944 by manufacturing D.C. armatures without obtaining a Central Excise Licence and removing 7424 pieces of armatures without observing the required excise formalities and without paying Central Excise duty to the extent of Rs. 51,971.40 Paise. The Deputy Collector of Central Excise, who adjudicated the case, held the charges as established and imposed a penalty of Rs. 500/- and also ordered the appellants to pay Central Excise duty of Rs. 51,971.40 Paise on the goods already removed from the factory and duty of Rs. 18Q6/- on 257 pieces of seized armatures (which were released to the appellants on furnishing a security deposit of Rs. 2500/-). An appeal filed before the Appellate Collector of Central Excise, Calcutta was also rejected. Hence, the present appeal.
3. The appellants contended that the goods manufactured by them were not complete armatures, but were armature windings and that those were not complete armatures as the ball bearings, retaining plates, Fibre Washers, fixing Screws, locking nuts etc. were not supplied to the buyers alongwith those armature windings which were further processed by turning the commutator etc. elsewhere by M/s. Advanced Apparatus and M/s. Jayshree Supply Agency to whom the goods were sold by the appellants. They argued that as the process of manufacture was not completed by them and they removed the goods in an unfinished condition, Central Excise duty was not payable by them, but it was to be paid by M/s. Advanced Apparatus and M/s. Jayshree Supply Agency who completed the manufacture of finished armature. The Adjudicating Officer and the Appellate Collector of Central Excise did not accept these contentions on the ground that the ball bearing, retaining plates, fibre washers, fixing screws and locking nuts did not constitute integral part of an armature and held that the goods manufactured by the appellants were liable to Central Excise duty under Item 30(4) of the Central Excise Tariff.
4. In their present appeal, the appellants have re-iterated that goods manufactured by them were not complete and finished armature, but the same were armature windings.
5. The point to be decided by us is whether the product manufactured by the appellants is actually finished armature, fit for being used as such or it was removed from the factory of the appellants in an unfinished condition and subjected to further processing elsewhere in order to make it usable as armature of D.C. Motors.
6. Shri A.C. Jain, learned Advocate, on behalf of the appellants, argued at the time of hearing on 27-5-1985 that the goods manufactured by them were not finished armature. They could not be used as armature of D.C. Motors in the condition in which the same were removed from the factory of the appellants and that after removal from their factory the goods were subjected to the process of grinding/turning and varnishing by M/s. Advanced Apparatus and M/s. Jayshree Supply Agency to whom the goods were supplied by them. He said that without completing these processes, the armature winding manufactured by them could not be put to use in D.C. Motors. The learned Advocate further argued that an armature of D.C. Motor becomes complete after the processes of laminations, core assembly, winding, grinding and varnishing are done.
He submitted a copy of Supplement to the Manual of Departmental Instructions on Excisable Manufactured Products-Electric Fans, published by the Central Board of Revenue (which is marked for departmental use only) and has drawn our attention to pages 27, 28 and 29 thereof in support of his arguments. He concluded by saying that as the appellants did not manufacture and remove complete and finished armature, no duty was payable by them under item 30 (4) of the Central Excise Tariff.
7. The learned Junior Departmental Representative argued that the goods manufactured by the Appellants are nothing but armatures which is a part of electric motor, and as such, liable to Central Excise duty under item 30 (4) of the Central Excise Tariff. He has drawn our attention to page 706 of McGraw Hills' Encyclopedia of Science and Technology which describes the various components of Armature. It has been mentioned therein that Armature is that part of Electric Rotating Machine which includes the main current-carrying winding. According to the learned Senior Departmental Representative the product manufactured by the appellants is known in the market as armature which is part of the electric motor and is dutiable under Item 30(4) of the Central Excise Tariff.
8. At the time of personal hearing two sets of samples were shown to us. One set consisting of an armature seized from the factory of the appellants, and another armature in finished condition obtained from M/s. Advanced Apparatus, was produced before us by the learned Senior Departmental Representative. The other set of the samples consisting of armature windings manufactured in the Appellants' factory and a finished armature obtained from the factory of M/s. Advanced Apparatus, was shown to us by the learned Advocate for the appellants. We find that the samples produced by the learned S.D.R. and those produced by the learned Advocate for the appellants are similar, although samples produced by the learned S.D.R. were obtained about 10 years ago and those produced by the learned Advocate were manufactured in the recent past.
9. We have carefully considered the arguments of both sides. We have also inspected the samples produced before us and after inspection of the same we are convinced that the product manufactured by the appellants required further processing of grinding/turning the commutator and varnishing. This processing was not done by the appellants before clearance of the goods from their factory.
Admittedly, the process of grinding or turning and also varnishing was done by M/s. Advanced Apparatus and Jayshree Supply Agency to whom the appellants supplied their product. We are also convinced that without this processing, armature windings manufactured by the appellants cannot function as armature for use in D.C. Motors. As the goods manufactured by the appellants are not complete armature, fit for use as such, the same cannot be treated as a finished part of electric motor. Accordingly, we are of the opinion that these armature windings are not liable to Central Excise duty under Item 30 (4) of the Central Excise Tariff. As a result, we allow the appeal with consequential relief to the appellants.