2007 (6) TMI 11 - AT - Central Excise

Manufacture - Departmant contended that appellant activity i.e.received HOt Rolled Patta/Pattis from various parties; subjected them to cold rolling is covered under manufacture and demand were made alongwith penalty and interest - Held the contention correct

Issues Involved:
1. Whether the cold rolling process undertaken by M/s. Gujarat Industries amounts to manufacture.
2. Whether the demand of duty and imposition of penalty on M/s. Gujarat Industries is justified.
3. Whether the penalties imposed on other appellants under Rule 209A of the Central Excise Rules are justified.
4. Whether the extended period of limitation for demand of duty is applicable.
5. Whether the confiscation of land, building, and machinery of M/s. Gujarat Industries is justified.

Detailed Analysis:

1. Whether the cold rolling process undertaken by M/s. Gujarat Industries amounts to manufacture:
- Majority View: The cold rolling process undertaken by M/s. Gujarat Industries amounts to manufacture. Chapter Note 4 of Chapter 72 of the Central Excise Tariff Act, 1985, specifies that the process of hardening or tempering amounts to manufacture. The cold rolling process imparts hardening to the products, changing their characteristics and uses. The cold rolled products and hot rolled products are classified under different tariff headings (7220.20 and 7220.10, respectively). The Tribunal's decision in Indian Strips v. Commissioner of Cus. & C.Ex., Ahmedabad, 2004 (173) E.L.T. 265 (Tri. - Mumbai) supports this view.
- Dissenting View: The cold rolling process does not amount to manufacture. The activity of reducing the thickness of Hot Rolled SS Patta/Pattis from 15 gauge to 20 gauge does not constitute a process of hardening or tempering. The Supreme Court in CCE v. Steel Strips Ltd., 1995 (77) E.L.T. 248 (S.C.), held that cold rolling of steel strips does not amount to manufacture.

2. Whether the demand of duty and imposition of penalty on M/s. Gujarat Industries is justified:
- Majority View: The demand of duty amounting to Rs. 12,20,563/- and the imposition of an equal amount of penalty under Sec. 11AC is justified. The interest demanded from M/s. Gujarat Industries is also sustained. The cold rolling process undertaken by M/s. Gujarat Industries amounts to manufacture, and the goods cleared without payment of duty are excisable.
- Dissenting View: The demand of duty and imposition of penalty is not justified. The cold rolling process does not amount to manufacture, and there is no evidence of suppression of facts with an intention to evade duty. The extended period of limitation should not be invoked.

3. Whether the penalties imposed on other appellants under Rule 209A of the Central Excise Rules are justified:
- Majority View: The penalties imposed on other appellants are justified. These appellants sent hot rolled pattas/pattis to M/s. Gujarat Industries for cold rolling and received them back without excise invoices, knowing or having reason to believe that the goods were liable to confiscation. The penalties imposed are not excessive.
- Dissenting View: The penalties on other appellants are not justified. These appellants were further processing the goods in their own factories and paying duty accordingly. There is no justification for imposing penalties on them for the actions of M/s. Gujarat Industries.

4. Whether the extended period of limitation for demand of duty is applicable:
- Majority View: The extended period of limitation is applicable. M/s. Gujarat Industries did not take out a license or follow excise formalities, and there was deliberate intent to evade duty. The other appellants were aware of the excise duties applicable to cold rolled products and still dealt with the goods without proper documentation.
- Dissenting View: The demand is barred by limitation. Mere non-taking of a license and maintenance of records cannot justify invoking the longer period of limitation without evidence of suppression of facts with intent to evade duty. The appellants had a reasonable belief that their activities did not amount to manufacture based on existing legal precedents.

5. Whether the confiscation of land, building, and machinery of M/s. Gujarat Industries is justified:
- Majority View: The confiscation of land, building, and machinery of M/s. Gujarat Industries is harsh and is set aside. However, the demand of duty, penalties, and interest are sustained.
- Dissenting View: Not explicitly addressed separately, but implied that no penalties or confiscation should apply if the process does not amount to manufacture.

Final Order:
In view of the majority order, the appeal filed by all the appellants is rejected, except for setting aside the confiscation of land, building, and machinery of M/s. Gujarat Industries. The demand of duty, imposition of penalty, and interest on M/s. Gujarat Industries are upheld. The penalties imposed on other appellants are also sustained.

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