1. The issue involved in this appeal, which was originally a revision petition before the Central Government, is as to the availability of benefit of Notification No. 119/75-C.E., dated April 30, 1975 to appellants, in respect to the manufacturing process they carried out on brass rods received from their customers, by making valves and nuts, meant for different parts of LPG cylinders.
2. The facts as set out in the appeal, and also as indicated by the Order-in-Appeal, reveal that the appellants received from certain named customers brass rods by way of raw material for the manufacture of forged nuts and valve body forged and machined on job basis during period 1-7-1975 to 31-12-1975. They paid duty on job work charges received by them from their customers, in terms of Notification No.119/75, while the excise authorities took the view subsequently that value of the raw material had also to be included, inasmuch as the appellants manufacture complete equipment for cylinders, out of the raw material received from the customers, and as such, they had erroneously been allowed benefit of aforesaid Notification. Thus, a short levy demand on account of duty, on full assessable value of the nuts and valves cleared by the appellants, and delivered back to the customers, was raised which the appellants resisted. The Assistant Collector rejected their pleas on the view that the terms of Notification were clear to the effect that "only when an article is received from a customer and returned after some job work being carried out in respect thereto, that this Notification could apply, and not in cases where only the raw material such as brass rods or MS rods had been received, and complete identifiable parts, involving complete transformation into equipment for cylinders, had been manufactured.
3. On an appeal being carried to the Appellate Collector, he confirmed order of the Assistant Collector, inspite of appellants' arguments, as put forward through their Consultant, placing reliance specifically on a Trade Notice No. 99/75 dated 28-5-1975 clarifying with regard to the Notification under reference that it was not essential that the article received and article returned should have the same nomenclature.
4. The appellants, while filing revision petition, reiterated their plea that scope of Notification No. 119/75 was very explicit, and admitted of no doubt, that whenever an article, which term according to them, would include raw material such as brass rods, so received from customer and returned by the job worker to the supplier after carrying out the intended manufacturing process, by charging only for labour or job work, then excise duty only on the amount of such job work charges was to be recovered from the party concerned. They pleaded that lower authorities had erred in holding that what the appellant had received from the customer was not "the article", as contemplated by the Notification, or that what they did in respect thereto did not fall within the purview of the said Notification. They again placed reliance on Trade Notice No. 99 (MP), dated 28th May, 1975 in respect to this Notification, setting out in clear terms that so long it may be shown that the job worker was returning an article supplied to him after subjecting it to the manufacturing process, the exemption under Notification No. 119/75 would appear to be applicable, irrespective of trade nomenclature of the article at the time of receipt and at the time of despatch ; i.e., after subjecting it to a manufacturing process. The appellants contended that their case fully fell within the scope of this Trade Notice.
5. After the revision petition was transferred to the Tribunal, and registered as an appeal, and on a notice to that effect being sent to the appellants, they forwarded additional arguments under cover of their letter of September 2, 1984, in which they made reference to certain judgments giving elucidation on the scope of this Notification.
One of the judgments on which they place extensive reliance is that of Gujarat High Court in the case of Anup Engineering Ltd. Ahmedabad 1978 E.L.T. (J 533). They pointed out that in this judgment their Lordships took note of the Trade Notice, to which they had already made reference, and endorsing the views expressed therein, the High Court held that "the only interpretation which can be placed on Notification No. 119 of 1975 dated 30th April 1975 is to read it in the manner in which the Trade Notice issued by the Deputy Collector of Central Excise, Bombay reads it and as we read it above. To read it in the manner in which the Central Excise Authorities try to read it in Gujarat would be to render the Notification dated 30th April, 1975 totally otiose and redundant. 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 when granting exemption under Notification No. 119 of 1975 dated 30th April, 1975, the whole exemption would be totally meaningless. One cannot contemplate any possible occasion on which that particular Notification would apply. Under these circumstances, the stand taken up by the Excise Authorities in each of these matters with respect to the job work done by the respective petitioners cannot be upheld".
6. The appellants have also made reference to a judgment of Calcutta High Court in Madura Coats Limited 1980 E.L.T. 582 (Calcutta); and another judgment of Madras High Court : in Bapalal and Co. v.Government of India and Ors. 1981 E.L.T. 587 (Madras). They further relied on a judgment of Central Board of Excise and Customs, in the case of Saru Smelting Private Ltd. Meerut, 1982 E.L.T. 85 (C.B.E. & C.) when solder wire manufactured as a job work tin and lead, supplied by customers, was held entitled to the exemption contained in Notification No. 119/75. Finally, the appellants referred to a judgment of the Tribunal in the case of Indian Steel Rolling Mills Ltd., Madras v.Collector of Central Excise, Madras 7. In view of the judgments and orders, cited by them, laying down that even though the article returned after performing the job work is different from the article supplied by the customer, the benefit of exemption given under Notification No. 119/75 has to be given, and pleading that there was no judgment of any High Court holding a contrary view ; adding that since their factory was situated in Gujarat they were fatly entitled to the benefit of Gujarat High Court judgment in the case of Anup Engineering (supra); they intimated that they did not desire a personal hearing, and matter may be decided on the basis of written submissions.
8. Yet in another communication, which they sent in response to the Bench direction to furnish details of the manufacturing process, they made reference to a recent judgment of Bombay High Court in Noble Paints & Varnish Co. (P) Ltd.-1985 (19) E.L.T. 80 (Bom) on 17-11-1984 holding that in view of the wording of the Notification in the operative portion, employing the expression : "manufactured in a factory as a job work" and in the explanation "to undergo manufacturing process", it was obvious that the product that emerged after manufacturing process would be different from the material used at the commencement of the manufacturing process, and that the Notification was meant to apply to such manufacture. They also furnished samples in separate packets of what they received from the customers, and what they returned after carrying out the intended manufacturing process, giving details to the effect that one component was produced by them by hot forging and machining on a lathe, whereas in the case of second, the raw material was subjected to hot forging process only. They again pleaded that the matter be decided in the light of law as laid down by various High Courts and also in the light of the Tribunal's orders in case of Indian Steel Rolling Mills Ltd. (supra).
9. The appeal was accordingly taken up without further insistence on appellants' attendance, in the presence of Shri S.C. Rohatgi, Departmental Representative, who had also filed written submissions in reply to the arguments forwarded by the appellants. Shri Rohatgi both in his arguments before us as well as written submissions, placed reliance on a Larger Bench judgment of this Tribunal in the case of National Organic and Chemicals Industries Limited v Collector of Central Excise, Bombay, reported in 1985(21) E.L.T. 252 (Tribunal) : 1985 (5) E.T.R. page 504, laying emphasis on the fact that in appellants' case, the physical character of the raw material received, was completely changed. He urged quoting from the judgment in NOCIL case that there was manufacture in the primary sense inasmuch as the original article lost its identity ; the resultant product being completely distinct from the material received, and thus benefit of the Notification could not be claimed by the appellants. The learned DR further contended that it was obvious from the written submissions and the samples sent by the appellants that they were manufacturing new articles as components for gas cylinders by process of forging, machining or drilling and as such this process of transformation resulting in manufacture of articles different from that given by the customer should not be treated to be "job work" covered by explanation to Notification 119 of 1975. So far as the case law relied upon by the appellant is concerned, including the latest judgment of Bombay High Court, Shri Rohtagi placed sole reliance on the Larger Bench judgment of the Tribunal, stating that the said judgment, given on the scope of this Notification, takes into consideration all the judgments including that of Anup Engineering Limited, the "case on which the judgment of Bombay High Court in the case of Noble Paints & Varnish Company Private Limited, was based.
10. We have given careful thought to the matter. We find that the issue having been dealt with by various High Courts in respect to diverse type of articles from time to time ; the question of availability of Notification No. 119 of 1975 to the appellants does not admit of any doubt. The Gujarat High Court in the case of Anup Engineering Limited pertinently pointed out that the Notification itself contemplated : "manufacturing process", and observing that manufacture does result in some change in the raw material; otherwise it would not be manufactured within the meaning of Section 2 (f) of Central Excise Act, held that the view of the Excise authorities to the effect that in case of there being a change in the original article the Notification would not apply, was untenable. It is to be noticed that that was a case where the party was receiving raw material such as steel plates sheets, tubes, pipes etc., from customers, and subjected the said material to sophisticated manufacturing process, bringing into existence new articles having different descriptions in trade and popular parlance, with the result that the material received from a customer and the article returned to him, were entirely different in character and use, and it could not be said that the article supplied by the customer was being returned. Their Lordships quoted with approval the Trade Notice issued by the Bombay Collectorate clarifying the scope of this Notification, and held that so long the articles received from the customers was being returned, after carrying out the intended manufacturing process on recovery of only labour charges; the benefit of Notification would be available.
11. The Calcutta High Court in the case of Madura Coats Limited ; firstly, in a Single Bench (1980 E.L.T. 582) and then in the Division Bench (1982 E.L.T. 129) where the party was receiving nylon or rayon yarn from customers and were returning to them after conversion into warpsheets, after charging only for job work, allowed benefit of this Notification No. 119/75. It is noteworthy that this matter was taken up by Union of India to the Supreme Court by filing a special leave petition to appeal, against the Division Bench judgment of Calcutta High Court, but the leave petition was dismissed by the Supreme Court, thus endorsing the view that in such cases assessment had to be done on job work value only. We have also looked up other judgments, relied upon by the appellants, such as in the case of Bapalal & Company decided by Madras High Court (1981 E.L.T. 587), where crude diamonds were being supplied, and returned afterwards in the shape of diamond jewellery after cutting and setting the diamonds in gold. There also, it was held that since the appellants received only labour charges even though a new article had emerged, it remains a job work as contemplated under Notification No. 119/75, dated 30th April, 1975. The Bombay High Court in a very recent judgment in the case of Noble Paints & Varnish Co. (P) Ltd. 1985 (19) E.L.T. 80 (Bombay), where the party was receiving pigments, oils and toners and returning the finished product as rotary news ink, has held that so long it was established that what they received were their labour charges, and had returned the article after carrying out the intended manufacturing process, the benefit of this Notification was available. This judgment placed extensive reliance on the judgment of Gujarat High Court, in the Anup Engineering case, stating that since the Notification in the operative portion used the words : "manufacture in a factory as job work'', and the explanation again speaks of "a manufacturing process"; it was obvious that the products that emerged after manufacture or manufacturing process, would be different from the material used at the commencement of such process, and that the Notification was meant to apply to such manufactures. It was specifically held that the interpretation placed on the Notification by excise authorities ; namely, that the exemption under Notification was admissible only where the article returned by job worker to the customer was the same as the article received by the job worker, was untenable.
12. In another case before Calcutta High Court : Associated Pigments Limited v. Collector of Central Excise, Calcutta (1983 E.L.T. 876), where the customers supplied pure lead or lead ingots to the party for the conversion into lead suhoxide and lead monoxide, after subjecting the lead to certain processes, but the party charged only the agreed price to account of labour in the said process, they were held entitled to the benefit of this Notification No. 119/75-C.E., dated 30-4-1975.
The Tribunal has also held in the case of Indian Steel Rolling Limited, Madras (CEGAT) where the party was manufacturing wire nails out of wire supplied by the customers and charged for job work only, that this Notification would apply. Similar view has been taken in the case of Unik Springs (India), decided by this Bench recently vide Order No.454/1985-B dated 7-6-1985.
13. It is to be noted that the lower authorities have nowhere indicated that what the appellant was contending was not true ; namely that they were receiving brass rods or MS rods from their customers, and returning them to the same customers after charging for labour only, for the manufacturing process carried out in respect thereto. The only ground for denying benefit of the Notification to the appellants is that what they were receiving could not be considered as "article" but was only in the nature of "raw material", which was fully transformed in the process of manufacture, resulting in different articles with distinct trade name and identity. This assumption of the Excise authorities, in view of various judgments of the High Courts quoted above is manifestly erroneous inasmuch as, as pointed out by different High Courts, manufacturing process does entail transformation in the nature of article or material, and pertinently pointed out by Gujarat High Court in Anup Engineering case, that if the interpretation given by the Excise authorities were to be adopted then there will be no conceivable situation when this notification could be applied. The Tribunal in Larger Bench judgment in the NOCIL's case did no doubt held that there was to be distinction between manufacture in the primary sense, as compared to the one in the secondary sense. But apart from the fact that that was in the context of the facts of that case where it was a case of complete chemical reaction resulting in an entirely new product, and where the appellants were providing one essential chemical to react on the chemical supplied by the customers, and charging the price of the said chemical besides the job charges, otherwise also, the larger Bench took note, vide paragraph 15 of the judgment, of the fact that there was no disagreement between the High Courts on the point, inter alia, that " (i) that the mere fact that by reason of the job work being done, a new commodity but not one in which the articles supplied cannot be identified, emerged, would not rule out benefit under Notification No. 119/75.
14. This judgment also observed that each case will have to be dealt on facts, and decided on its own merits, and laid down that where the article entrusted by the customers after the application of the manufacturing process by the job worker, does not lose its essential identity entirely, but retains its essential identity subject to the effect of the manufacturing process carried out, the benefit of the Notification under reference would be available (reference paragraph 23).
15. On observation of the samples, sent by the appellants, the authenticity of which has not been disputed by the respondent, we find that the present is a case, which happens to be one of such cases, where the essential identity of the article (Brass Rods in this case) is not lost, and the same is kept intact, after the intended manufacturing process has been carried out. We, thus, find that the facts, here are entirely different from the facts of the case before the Larger Bench. On the other hand, the situation falls within the contingencies contemplated in that judgment itself, and is analogous to the cases decided by Gujarat, Calcutta, Madras and Bombay High Courts, and is the appellants cannot be denied benefit of this Notification.
We, accordingly, allow the appeal, with consequential relief.