1. The facts of this case in brief are that the appellants manufacture a number of excisable goods falling under different items of the Central Excise Tariff, aluminium wire (item 33B), bolts (item 52), steel wire (item 26AA), rivets and nails (item 68). In his Order-in-Original, the adjudicating Collector held that during the period from 1-4-1979 to 16-3-1981, the appellants clandestinely removed aluminium wire and bolts without payment of duty and also committed other violations of the Central Excises and Salts Act, 1944 and the Central Excise Rules, 1944 by their failure to take out a central excise licence and to maintain the statutory records and submit the prescibed returns. The Collector called upon the appellants to pay the central excise duty and also imposed a penalty of Rs. 5.000/- on them under rule, 173 read with rules 9 and 226 of the Central Excise Rules, 1944. The Central Board of Excise and Customs, acting as the appellate authority, gave the benefit of time-bar to the appellants so far as the period prior to 17-9-80 is concerned, held that charge of clandestine removal was not established but maintained the penalty imposed by the Collector. The appellants filed a revision application to the Central Government against the Board's Order-in-Appeal. The said revision application, on its transfer to this Tribunal, is now before us as the subject appeal.
2. The case was heard by us on 6-5-1983. The period to which the present demand relates is from 17-9-1980 to 16-3-1981. The appellants claimed that there was no liability on them to pay the duty demanded as their goods were exempt under notification No. 80/80-CE. This notification exempted specified goods upto a certain value if manufactured and cleared by small-scale industry units as defined in the notification. Paragraph 2(ii) of this notification states that this notification shall not apply to a manufacturer who manufactures excisable goods falling under more than one item number of the Tariff and the aggregate value of clearances of all excisable goods by him or on his behalf for home consumption, from one or more factories, during the preceding financial year, had exceeded rupees twenty lakhs. The appellants' plea was that aggregate value of clearances of all excisable goods by them in the previous financial year had not exceeded the limit of rupees twenty lakhs while the case of the Department is that they did exceed this limit and hence became ineligible for the exemption contained in notification No. 80/80-CE. In support of their plea, the appellants cited Explanation V contained in this notification which states that for the purposes of computing the aggregate value of clearances under this notification, the clearances of any specified goods, which are exempt from whole of the duty of excise leviable thereon by any other notification, was not to be taken into account.
The appellants maintained that they manufactured steel wire from duty-paid steel rods and since such wires were fully exempt under notification No. 206/63-CE, their clearances of steel wire should not be added to arrive at the aggregate value of their clearances in the preceding financial year. When it was brought to their notice that benefit of the Explanation V could not be extended to them because this Explanation applied only to specified goods and steel wire was not included in the list of specified goods in notification No. 80/80-CE, the appellants then relied on the following two arguments in support of their case : - (1) Steel wire rods and steel wire fell under the same Tariff Sub-item [226AA(ia)], were liable to the same rate of duty, were commercially considered as one and the same thing and thus conversion of rod into wire did not amount to manufacture (1977 ELT J. 199 SC-U.O.I. v. D.C.M. and General Mills. Presenting the Indian Standard Glossary of Terms Relating to Iron and Steel [IS : 1956 Part V)-1976] and citing the definitions of wire rods and steel wire contained therein, they contended that conversion of wire from rod did not amount to bringing into existence of a new product. As such, the value of steel wire manufactured by them out of duty-paid steel wire rods could not be added to arrive at their aggregate value of clearances in the preceding financial year. They also cited this Tribunal's decision relating to conversion of white plastic granules into coloured plastic granules known as Master Batch Chips.
(2) Even if steel wire was taken as a different commodity, it was nevertheless fully exempted from duty under notification No. 206/63-CE and hence it became a non-excisable item vide Delhi High Court judgment in Sulekh Ram & Sons v. Union of India and Ors. (1978 ELT J. 525).
The appellants added that imposition of penalty was not justified and, in any case, after the Board's findings at the appeal stage to the effect that the charge of clandestine removal had not been established and that the appellants were entitled to the benefit of time-bar for a big chunk of the original period of demand, it was excessive.
3. The Department's representative maintained that steel wire rod and steel wire were two distinct commercial products. Wire rod was a hot-rolled product for conversion into wire while wire was a drawn product. Regarding Delhi High Court judgment in Sulekh Ram's case, he cited a later judgment of Madras High Court in Tamil Nadu Handloom Weavers Cooperative Society Ltd. v. Assistant Collector of Central Excise, Erode (1978 ELT J. 57) in which the said High Court held that once the goods were exempted from excise duty, they did not cease to be excisable goods, that the words "as being subject to a duty of Excise" in the definition of the term "excisable goods" were only descriptive of the goods specified in the First Schedule to the Act and had no reference to the factum of their liability to duty, and that the character of a product as excisable goods did not depend on the actual levy of duty but on their description as excisable goods under the First Schedule.
4. We have carefully considered the matter. We reproduce below the definitions of "Wire Rod" and "Steel Wire" from the Indian Standard Glossary of Terms relied on by the appellants : - "2.102 Rod (Wire Rod)-Wire rod is generally square, round, half-round, rectangular or polygonal and usually between 5 to 20 mm in diameter, and is intended for conversion into wire." "2.138 Wire-A finished product, round, half-round, square, hexagonal, flat or of any other section including grooved section characterised by the fact that it has been subjected to a sizing operation at ambient temperature by the process of drawing through a die or by other mechanical means. Wire is generally supplied in coil form but in exceptional cases can also be supplied in straight lengths. It shall also fall within the following dimensional limits : -- 5. The appellants say that wire rod and wire are one and the same thing. But we find that the aforesaid I.S.I. definitions do not say so.
On the contrary, these definitions show that the two have a separate commercial nomenclature as well as separate charateristics even though both may have overlapping diameters within a particular range. The process of manufacture of the two is different. Wire rods are made out of steel ingots or semis by hot-rolling process and are an intermediate product. Wire is made from wire rods by the process of drawing through dies and is defined by the I.S.I., as a finished product. Their uses are also different. Wire rods are generally used for drawing into wires. Wires are used for making diverse products- wire ropes, barbed wire, nails, rivets etc. etc. In short, we find that steel wire has a separate name, separate characteristics and separate uses which are quite distinct from those of wire rod from which it is made. It thus passes all the tests of being a separate commercial product as laid down by the Supreme Court in the D.C.M. case cited by the appellants.
It is also listed separately by name in Sub-item 26AA(ia) of the Tariff. It is clear that the analogy of colouring of plastic granules mentioned by the appellants is hardly apt in the case of making wire out of wire rods. Since we hold that steel wire manufactured by the appellants was a distinct commercial product, it has also to be held that their said manufacturing activity attracted the provisions of the Central excises Act and Rules. As regards their second argument that since steel wire was fully exempt under notification No. 206/63-CE, it ceased to be excisable goods, we find that this notification gave exemption to certain iron or steel products (which included steel wire also) if they were made from- None of the above three source materials included wire rods which was the source material used by the appellants for making wires. This notification was, therefore, not applicable to the appellants. It became applicable to them only with effect from 7-4-1981 when the amending notification No. 103/81-CE added a fourth source material in it, namely, other duty-paid iron or steel products falling under Sub-item (ia) of item 26AA of the Tariff. Since the amending notification was applicable only from the date of its issue, that is, 7-4-1981, its benefit cannot be claimed by the appellants for the past period (17-9-80 to 16-3-81). During the material period, relief was available to the appellants only under Rule 56-A procedure which provided that the appellants could take proforma credit of the duty already paid on wire rods purchased by them and then pay duty on steel wire manufactured by them by debiting the proforma credit Account. This procedure requires prior permission of the Collector. Day to day receipt of the duty-paid raw material has to be intimated to the proper officer of Central Excise. The end-products have to be assessed to duty like any other dutiable goods. All the prescribed accounts have to be maintained and returns submitted. In fact, Excise supervision on Rule 56-A procedure has to be somewhat more detailed as compared to that on normal procedure. In such a situation, it can hardly be claimed that steel wires made from duty-paid wire rods were fully exempt and non-excisable. The facts in this case are, therefore, distinguishable from those of Sulekh Ram's case in which there was total exemption under notification No. 206/63-CE to iron or steel products made out of duty-paid fresh unused re-rollable scrap. Since steel wires manufactured by the appellants were excisable goods, their value had to be added to the aggregate value of their clearances in the preceding financial year, thus making them ineligible to the benefit of notification No. 80/80-CE.6. In the light of the above discussion, we find no force in any of the arguments of the appellants. Accordingly we uphold the impugned Order-in-Appeal in so far as it relates to the demand for duty.
However, since the Appellate Board has held that the charge of clandestine removal was not established and that the circumstances were such as to merit the quashing of the major portion of the original demand on the ground of time-bar, and singe the Department has accepted these findings, we find no adequate justification to maintain the penalty imposed by the adjudicating Collector. Accordingly, we set aside the penalty. The appeal is disposed of accordingly.