2002 (8) TMI 792 - AT - Central Excise

Summary

Issues:
1. Duty demand on copper wire used in the manufacture of pumps.
2. Application of Notification 8/96 for exemption on winding wires.
3. Duty liability on job worker for winding wire manufacture.
4. Applicability of Modvat rules on finished goods.

Analysis:
1. The case involved the appellant, engaged in manufacturing electric motors and power-driven pumps, importing wire rods of copper for manufacturing pumps. The appellant utilized some part of the electric motor in making power-driven pumps and sent the rods to job workers for processing. The issue was the duty demand on copper wire used in pump manufacturing, as demanded in notices issued between January 1998 and February 2000.

2. The Commissioner confirmed the duty proposal in seven notices, citing the appellant's alleged consumption of copper wire under Chapter 85.44 of the Central Excise Tariff Act, 1985. The appellant contended that it did not claim the benefit of Notification 8/96 and did not apply the exemption to its products. The notification exempted goods under Chapter 85, excluding winding wires. The appellant's failure to pay duty on electric motors used in pumps did not imply exemption under Notification 8/96, which did not apply to winding wires.

3. The winding wire manufacture was done by the job worker, not the appellant. The department argued that since finished goods were duty-exempt, Modvat rules would not apply to inputs used in their manufacture. However, the duty liability should fall on the job worker, not the appellant. The job worker would have to pay duty on inputs processed unless another exemption applied. The duty liability could not be transferred to the appellant, leading to no basis for demanding duty or imposing a penalty.

4. The appeal was allowed, setting aside the impugned order. The judgment clarified the duty liability on winding wires, the inapplicability of Notification 8/96 to winding wires, and the responsibility of duty payment on inputs processed by job workers. The decision highlighted the correct application of Modvat rules and the absence of duty liability on the appellant for the job worker's activities.