1. Aggrieved by the orders of the Additional Collector of Central Excise, Bangalore, in the Order-in-original No. 1/82 dated 29-3-1982, the appellants have preferred a revision application to the Central Government which is transferred to the Tribunal and treated as appeal.
M/s. V.S.T. Tillers Tractors Ltd., situated at Whitefield Road, Bangalore, held a licence for manufacture of Power Tillers and parts.
They filed classification lists on 21-1-75 indicating that (i) CT 85 Tillers with AD 8 Engine; (ii) AD 8 Engine and (iii) Job works were assessable to duty under Tariff Entry No. 68 and that the spare parts and attachments for tillers were not excisable as they were bought out and warehoused for trading purposes only. The Assistant Collector of Central Excise, Bangalore-I, visited the factory during January, 1980, and noticed that the licencee was manufacturing parts for power tillers for captive consumption availing exemption from payment of duty under Notification No. 118/75 dated 30-4-75. The present proceedings are confined to the clearance made between 1-4-76 and 31-3-80. The parts of power tillers have been valued at Rs. 22,73,015.30. A show cause notice was issued on the basis that the spare parts and attachments have been manufactured without payment of duty and without proper accounting. The appellants contended that they wrote to the department asking for clarification and that in the absence of any, they have been clearing the spare parts without payment of duty. It must be mentioned that there are more than 800 items of spare parts concerned in the appeal.
The Additional Collector found that the appellants have purchased parts from outside and subjected them for processing like machining including Broaching, Boring and drilling, either at their own factory or at the factory of their sub-contractors. The classification lists submitted by them did not disclose the manufacture of these items. He therefore found that the appellants have contravened the provisions of Rule 9(1), 52(A), 53 read with 173 B, 173 G(1) and 226, offences specified under Rules 173(Q) (1)(a), (b) and (d) of Central Excise Rules, 1944. He directed them to pay excise duty at appropriate rates and also imposed a penalty of Rs. 5000/-.
2. Shri S. Ravi, Advocate, appearing for the appellants, urged that among these spare parts, some were processed at the factory, some at the contractors' premises and some partly at the factory and partly at the contractors' premises. He drew the attention of the Bench to a letter sent by him to the Department dated 10-3-75 wherein the appellants have informed the Assistant Collector of Central Excise, Bangalore, that the appellants presumed that the spare parts did not attract Central excise duty as they were meant for trading only. Shri Ravi developed an argument that there was no reply to this letter which ex facie pointed out that the presumption of the appellants was not rebutted by the department at the earlier stage. He also drew our attention to the classification list, Annexure I, Form 10, filed on 21-3-75 wherein he had referred to the spare parts and attachments for tillers and the explanation in the remarks column that they were not excisable as they were bought out and warehoused for trading purposes only. It is also pointed out that the show cause notice issued on 23-3-81 was clearly barred by time. There was no allegation of fraud, suppression of particulars or mis-statement.
3. Shri Lakshmi Kumaran, appearing for the department, argued that the appellants had produced the invoices for supply of materials from third parties (El Forge Ltd., Aruna Industries, N.S. Krishnarao Body Works Pvt. Ltd., Bangalore Electro Platers, Madras Light Castings Pvt. Ltd.).
The items of work involved chromium plating, grinding, forging and zinc plating. Some of these processes did involve manufacture of new and identifiable excisable products which should be subjected to duty. On the point of limitation, he urged that the letter dated 10-3-75 was very vague and that the classification list did not indicate the details of the parts which fall within the ambit of the excisable product. He also relied on the decisions reported in 1983-ECR-1774-D, CEGAT decision in Appeal No. ED(SB)762/83-B, M/s. Metal Extruders (I) Pvt. Ltd. vs. Collector of Central Excise, Bombay, 1984 (16) ELT 148 (Tribunal) - Appeal No. 537/82-B, M/s. Ambika Steel Rolling & Engineering Works v. Collector of Central Excise, Meerut, Appeal No.1168/83-B, M/s. Abilities (India) Ltd. v. Collector of Central Excise, Meerut - 1984 (16) ELT 619 (Tribunal) and Appeal No. W/80-B, M/s.
Chandra Extrusion Products, Lucknow v. Collector of Central Excise, Kanpur.
4. The first issue that arises for consideration is whether the duty once charged on the parts at factories of the job workers can be charged to duty again. The appellants contend that some of the forgings and other, items are given to third parties and that there was no further manufacture of these parts at their end. In other words, it was urged that if parts had already been charged for excise duty from the job workers (as in the case of invoice from N.S. Krishnarao Body Works Pvt. Ltd. for Lever Side Clutch, teeth cutting operations, gears and transmissions), duty cannot be claimed all over again. It was further urged that these job workers are independent sub-contractors. In such circumstances also, it is pointed out that the goods cannot be charged with excise duty in the hands -of the appellants. The learned SDR conceded this issue. Hence we hold that duty once charged on the parts at the factories of job workers cannot be charged second time over again. Similarly duty if it is not chargeable under the relevant exemption notifications cannot be charged second time. This is, however, subject to the condition that the goods do not undergo any further process of manufacture in the premises of the appellants.
5. The learned Counsel for the appellants secondly argued that certain processes did not amount to manufacture. For example, chromium plating and zinc plating cannot amount to manufacture as it does not bring forth any new excisable article into existence. On the other hand, processes like cutting and drilling can be considered as part of manufacturing activity. We had the benefit of inspecting four of the items, but a scrutiny of all the items is perhaps necessary before excise duty, can be charged depending upon the process involved. If such process involved amounts to a manufacture, then it could be considered as resulting in an identifiable excisable product. Such of the processes as do not result in manufacture of a new excisable produce cannot be' subjected to excise duty. The Collector has not applied his mind specifically to the merits of each case before arriving at his decision regarding excisability or otherwise of the items in question. For the purpose of determining whether the items would be excisable, we are agreed that it is necessary for the Collector to arrive at a finding; whether an excisable product comes into existence after such processes.
6. On the question of limitation, the learned Counsel for the appellants relied only on the letter dated 10-3-75 and the classification list. He argued that there was no wilful suppression of facts and hence the longer period of five years under Rule 10 would not be attracted. In our view, the letter of 1063-75 is definitely vague and uncertain. The appellants cannot rely on that letter to make out that there was no wilful suppression of particulars. An opportunity arose when the appellants had necessarily to file classification lists in respect of the clearances when it was incumbent upon them to file the necessary classification. Failure to do so would attract Rule 10.
The rulings cited by the learned SDR are directly on the point and the omission to mention these "essential matters in the classification list would necessarily amount to mis-statement. We are of the view that in the light of the rulings already given, the limitation would not be six months but five years.
7. The learned counsel for the appellants urged that there was no justification for the imposition of penalty. In the light of the observations set out above, the Order-in-original No. 1/82 dated 29-3-82 is set aside and the matter remanded back to the Collector of Central Excise for de novo adjudication. The question of penalty is left open to be decided in the final adjudication.