1983 (6) TMI 199 - AT - Central Excise

Issues Involved:
1. Composite contract for fabrication, supply, and erection of radial gates.
2. Failure to obtain a license under Section 6 of the Act read with Rule 174 of the Central Excise Rules, 1944.
3. Demand for duty and imposition of penalty under Rule 173Q of the Rules.
4. Definition and liability of "manufacturer" under the Act.
5. Applicability of excise duty on already duty-paid raw materials.
6. Exemption under Notification No. MF (DRI) 70/73-C.E., dated 1-3-1973.
7. Classification of the gates under Item 68 of the First Schedule.
8. Applicability of Notification No. 119/75, dated 30-4-1975, regarding job-work.
9. Exclusion of erection charges from the assessable value.

Detailed Analysis:

1. Composite Contract for Fabrication, Supply, and Erection of Radial Gates:
The Appellant entered into a composite contract with the State of Orissa for the fabrication, supply, and erection of radial gates. The contract did not quantify the consideration separately for fabrication, supply, and erection.

2. Failure to Obtain a License:
The Appellant failed to obtain a license under Section 6 of the Act read with Rule 174 of the Central Excise Rules, 1944, despite fabricating the gates without the aid of power and employing more than 49 workers. The adjudicating officer held that the Appellant commenced production from 1-7-1976 without a license, thereby contravening the provisions.

3. Demand for Duty and Imposition of Penalty:
A notice dated 12-4-1977 was issued to the Appellant requiring them to show cause why a penalty should not be imposed and why duty amounting to Rs. 20,860/- should not be demanded under Rule 173Q of the Rules. The adjudicating officer ordered duty to be determined and paid at 1% of the value of the goods cleared between 1-7-1976 and 17-6-1977, and 2% from 18-6-1977 till 23-11-1977. A penalty of Rs. 250/- was also imposed for violation of Rules 173Q and for manufacturing without a license.

4. Definition and Liability of "Manufacturer":
The Appellant contended that they were not a "manufacturer" as they merely undertook job-work and the ownership of the materials and finished goods remained with the State of Orissa. However, the Tribunal held that the Appellant is a "manufacturer" under the Act as they transformed sheets of steel into radial gates, which are new and different articles with distinct names, characters, and uses.

5. Applicability of Excise Duty on Already Duty-Paid Raw Materials:
The Appellant argued that the raw materials (plates and sheets of steel) were already assessed to duty under Item 26AA of the Central Excise Tariff and should not be subject to further levy. The Tribunal, however, held that the gates are assessable to duty under Item 68 of the First Schedule due to the transformation that occurred during fabrication.

6. Exemption under Notification No. MF (DRI) 70/73-C.E., dated 1-3-1973:
The Appellant claimed exemption from duty under Notification No. MF (DRI) 70/73-C.E., which applies to galvanised forms made from plates or sheets of iron or steel. The Tribunal found this claim misconceived as the gates are not galvanised forms as specified in the Notification.

7. Classification of the Gates under Item 68 of the First Schedule:
The gates were classified as excisable goods under Item 68 of the First Schedule. The Tribunal upheld this classification, noting that the transformation of steel sheets into gates constituted "manufacture" of new articles.

8. Applicability of Notification No. 119/75, dated 30-4-1975, Regarding Job-Work:
The Appellant argued that the gates should be classified as job-work and the duty liability should be limited to the remuneration for the work done. The Tribunal rejected this argument, stating that Notification No. 119/75 applies only when the identical article supplied by the customer is returned after undergoing the manufacturing process. In this case, the Appellant returned radial gates made from the supplied sheets of iron and steel, not the identical articles.

9. Exclusion of Erection Charges from the Assessable Value:
The Appellant contended that the consideration paid for erection should be excluded from the assessable value. The Tribunal found this contention unsustainable as the contract was a composite one for design, fabrication, and erection, with no separate quantification of consideration for each item of work.

Conclusion:
The Tribunal dismissed the Revision/Appeal, finding no merit in the Appellant's contentions. The gates were deemed excisable goods under Item 68, and the Appellant was held liable for duty and penalties as determined by the adjudicating officer.

Editor's Comments:
The decision of the Appellate Tribunal appears to conflict with several High Court judgments and the Central Board of Excise and Customs' orders, which have held that the benefit of Notification No. 119/75 cannot be denied merely because the material supplied by the customers undergoes a change at the hands of the job-worker, resulting in a new article. The Tribunal's view in this case contrasts with the more lenient interpretation of job-work exemptions in previous judicial pronouncements.

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