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Collector of Central Excise Vs. U.P. Twiga Fibre Glass Ltd. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)(5)LC2147Tri(Delhi)
AppellantCollector of Central Excise
RespondentU.P. Twiga Fibre Glass Ltd.
Excerpt:
.....whether the respondents are entitled to take the remade bushings into use in their factory free of duty under rule 56c(2) or, in the alternative, under exemption notification no. 118/75-ce dated 30-4-1975.2. before commencing discussion on the point of dispute, it would be helpful to notice the relevant portion of the rule as well as the exemption notification : "56c. special procedure for the movement of finished goods falling under item no. 68 without payment of duty. (2) the finished goods brought by a primary manufacturer under sub-rule (1) may be removed. (c) without payment of duty, except for such goods which arc in the nature of complete machinery meant for producing or processing any goods, for use within his factory as raw materials or component parts for the manufacture of.....
Judgment:
1. respondents are primarily engaged in theanufacture of mineral fibres Appeal allowedd yarn. One of the components of their machinery, namely, platinum/rhodium bushings, gets worn out in course of use and requires to be remade. The department has permitted them to remake them with the help of a secondary manufacturer at Calcutta in terms of the special procedure laid down in rule 56C of the Central Excise Rules, 1944. The short point that falls for decision in this case is whether the respondents are entitled to take the remade bushings into use in their factory free of duty under Rule 56C(2) or, in the alternative, under exemption Notification No. 118/75-CE dated 30-4-1975.

2. Before commencing discussion on the point of dispute, it would be helpful to notice the relevant portion of the rule as well as the exemption notification : "56C. Special procedure for the movement of finished goods falling under Item No. 68 without payment of duty.

(2) The finished goods brought by a primary manufacturer under Sub-rule (1) may be removed.

(c) without payment of duty, except for such goods which arc in the nature of complete machinery meant for producing or processing any goods, for use within his factory as raw materials or component parts for the manufacture of excisable goods; or (d) without payment of duty to the secondary manufacturer for the purpose of refining, reconditioning, repairing or any process [after following the procedure specified in Sub-rule (1) ; orj (e) without payment of duty, to any manufacturer for further manufacture after following the procedure specified in Sub- rule (1)." "In exercise of the powers conferred by Rule 8(1) of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in the Ministry of Finance (DR&I) No. 58/75-CE, dated 1-3-1975 the Central Government hereby exempts goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), manufactured in a factory and intended for use in the factory in which they are manufactured, or in any other factory of the same manufacturer, from the whole of the duty of excise leviable thereon : Provided that where such use is in a factory of a manufacturer, different from his factory where the goods have been manufactured, the exemption contained in this notification shall be allowable subject to the observance of the procedure set out in Chapter X of the Central Excise Rules : Provided further that nothing contained in this notification shall apply to complete machinery manufactured in a factory and meant for producing or processing any goods, even if they are intended for use in the same factory in which they are manufactured or in any other factory of the same manufacturer." 3. The respondents claimed exemption under the notification in their classification list dated 10-6-1981. The Asstt. Collector rejected their claim holding that since the notification exempted the goods manufactured in a factory and intended for use in the same factory or in another factory of the same manufacturer, the said exemption was not available in respect of the goods manufactured under the provisions of rule 56C because the major part of the manufacturing work was carried out in the premises of the secondary manufacturer. The Collector (Appeals), before whom the respondents filed an appeal, set aside the Asstt. Collector's order and allowed their claim holding that the notification did not say that the goods must be produced completely in the user manufacturer's factory itself and that no part of the work, not even incidental or ancillary, should be done in any other premises.

The department is in appeal before us against this order of the Collector (Appeals).

4. The respondents made a preliminary objection at the outset that the copy of the subject appeal served on them showed that the order of the Collector (Appeals) was received by the appellant Collector on 22-5-1984 while his appeal was received in the Registry on 25-8-1984, that is, late by 3 days and the Collector had not filed any application for condonation of the said delay. The Collector thereupon filed an application for condonation of delay. It was taken up for consideration by us first. We observed from the original record of this appeal that the appeal was received in the Registry on 22-8-1984 (that is, in time) and not 25-8-1984. The photo copy of the appeal served on the respondents was evidently made from an extra copy of the appeal received in the Registry 3 days later. On these facts being pointed out on the basis of the original record, the respondents did not press for their objection. Hearing of the appeal then started.

5. The learned representative of the department made three points why the claim of the respondents for duty free captive use of the remade bushings could not be allowed :- (1) The bushings were neither raw material nor component parts for the manufacture of excisable goods. They were a spare part. Hence the condition of rule 56C(2)(c) for duty free removal was not satisfied.

(2) Rule 56C and Notification No. 118/75-CE were parallel provisions, hence mutually exclusive. The respondents, having availed of the rule, were no longer entitled to the notification.

(3) The notification, by itself, was also not available to the respondents since the major operation of re-melting the platinum crucible part of the bushings into sheets was carried out in the premises of the secondary manufacturer and so it could not be said that the bushings were manufactured in the respondents' factory.

6. The respondents came out with an entirely new plea as their main plank-that, remelting of one part notwithstanding, remaking of the wornout bushings into new ones was only a repair and reconditioning job which did not bring out any new and distinct goods into existance and hence the question of assessment of the remade bushings did not arise at all. Authorities of various High Courts were cited to the effect that repair was not manufacture. We pointed out to the respondents that their new plea involved going into questions of fact-the detailed process of remaking of the bushings-to decide whether it was just a repair job or it amounted to manufacture after scrapping the old bushings and since they had never raised this plea earlier, none of the lower authorities had gone into it. Secondly, we told them that it was a finding recorded by the Collector (Appeals) that the remade bushings were excisable goods and that the respondents had not challenged this finding in appeal or by way of cross objection. The respondents replied that the finding of the Collector (Appeals) related to brand new bushings and not remade bushings and that since his final order was in their favour, there could be no occasion for them to challenge it. The respondents simultaneously put forth an alternative plea that both rule 56C and notification No. 118/75-CE were statutory provisions and there was no bar laid down anywhere that an assessee could not avail of both.

The rule, as it read, was a "special procedure". The procedure could not take away their statutory right to exemption. Coming to the notification itself, they stated that it did not say that the goods should be fully manufactured in the user factory.

7. We have carefully considered the matter. We find that the department's objection regarding inapplicability of rule 56C(2) is misconceived. It is not that, the entire old bushing is sent to the secondary manufacturer for remaking into a new one. The facts as available on the record show that the bushing consists of about a dozen parts. The respondents dismantle the old bushing, retain the durable parts with them and send only the metal parts constituting the platinum crucible to the secondary manufacturer. The latter remelts the metal, renders it into sheet form and returns the sheets to the respondents.

The respondents do considerable fabrication (including welding) on the sheets to remake it into a crucible and thereafter remount the numerous durable parts on it. It is only then that it assumes the form of a bushing. The department's view that the bushing, in the respondents' factory, is neither a raw material nor a component part but is a spare part, is correct. But the point is that rule 56C(2) is not concerned with the removal of the complete bushings but with the goods brought by a primary manufacturer from the secondary manufacturer. The goods received by the respondents from their secondary manufacturer are only platinum sheets. It is common knowledge that platinum is a very costly metal, more valuable than gold. Platinum sheets are valuable goods in their own right. They are also in the nature of raw material and are used by the respondents in the manufacture of excisable goods, that is, bushings, as held by the Collector (Appeals). They thus squarely fall in the category of goods the manner of disposal of which is laid down in rule 56C(2)(C). The respondents are thus entitled to remove the platinum sheets for captive use free of duty. What they finally make out of them is bushings-an article falling under item 68 of the tariff.

Since it is they who manufacture the bushings and since they use them further as spare parts in the same factory, the exemption under the notification becomes available to them when it comes to assessing the bushings themselves. Rule 56C cannot be a bar at this stage in any case since the rule already stood complied with at the stage of sheets with which the rule was concerned.

8. There is another way to look at the problem. Assuming that rule 56C applied to the complete remade bushings, as contended by the department, clause (c) in rule 56C(2) is not the only method of disposal available. There are other clauses too. If clauses (b) to (e) are inappropriate, clause (a), which permits removal of the goods "on payment of duty at the appropriate rate", is always available as the last resort. It is settled law that the "appropriate" rate means the tariff rate of duty read with the relevant exemption notification(s) in force. The appropriate rate in this case would be the tariff rate read with the notification No. 118/75-C.E., that is, full exemption. Thus the respondents would be entitled to take their remade bushings into captive use free of duty under rule 56C(2)(a) also. We find no authority for the department's contention that the appropriate rate in the clause means only the tariff rate or what the learned representative of the department chose to call as the "actual" rate.

Further, we find no bar laid down either in rule 56C or in Notification No. 118/75-C.E. which says that a person availing of one provision would become ineligible for the other. The respondents are correct in their plea that both provisions being statutory and independent of each other, they, at their option, can avail of the either or both.

9. There is no substance in the third objection of the department. By permitting the respondents to avail of rule 56C procedure, the department accepted the position that the respondents were primary manufacturers. The record also shows that whereas the secondary manufacturer just remelts the worn-out platinum crucibles and converts them into sheets, all other work- precleaning, fabrication, welding and fitment of several parts-is done by the respondents. Their part of the work in remaking of the bushing is far greater than that of the secondary manufacturer. Assuming that the activity of remaking the bushings amounts to manufacture and not merely repair, the respondents, as the manufacturers of the bushings, would be entitled to claim assessment of the bushings under item 68 read with Notification No.118/75-C.E.10. In the view of the matter we have taken in paragraphs 7 to 9 above, we do not consider it necessary to go into the new plea of the respondents that their activity amounts to repair only and not manufacture.


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