1983 (9) TMI 312 - AT - Central Excise

Summary

Issues Involved:
1. Whether the "outer races" manufactured by the appellants were excisable goods under Item 68 of the Central Excise Tariff Schedule.
2. Whether the processes carried out on the "outer races" constituted "manufacture."
3. Whether the penalty of Rs. 50,000 imposed on the appellants was justified.

Issue-wise Detailed Analysis:

1. Excisability of "Outer Races":
The appellants contended that the "outer races" could not be considered as excisable goods because they were semi-finished products requiring further processing by M/s. Metal Box India Ltd. and were not marketable. They argued that the articles were made specifically for incorporation in bearings patented by M/s. Metal Box India Ltd. and could not be sold in the market. They relied on the Supreme Court judgment in Union of India v. Delhi Cloth and General Mills, which stated that to become "goods," an article must be something that can ordinarily come to the market to be bought and sold. However, the Tribunal noted that the correspondence between the appellants and M/s. Metal Box India Ltd. described the articles as "races" or "pieces," indicating that they were known to the market. The Tribunal also referenced the judgment in Union India and Others v. Union Carbide India Ltd., which held that even products with a limited and specialized market could be considered goods. Therefore, the Tribunal concluded that the "outer races" were excisable goods under Item 68 of the Central Excise Tariff.

2. Process of Manufacture:
The appellants argued that the processes carried out on the outer races did not constitute "manufacture." They claimed that the outer races were in a semi-finished condition and required further operations such as shot blasting, hardening, grinding, honing, quality testing, and assembling. However, the Tribunal observed that the transformation of steel tubes into rings of particular dimensions with substantial machining constituted a substantial transformation, resulting in a new article with a distinctive name, character, and use. The Tribunal referenced the Supreme Court judgment in South Bihar Sugar Mills Ltd. v. Union of India, which stated that the mere fact that an article is not actually sold does not affect its excisability if it is covered by the description in the tariff. Therefore, the Tribunal concluded that the processes carried out on the outer races constituted "manufacture."

3. Imposition of Penalty:
The appellants did not advance specific arguments against the penalty of Rs. 50,000 imposed by the Additional Collector. The Tribunal noted that the correspondence between the appellants and M/s. Metal Box India Ltd. indicated that both parties believed the articles to be excisable. The Tribunal also noted that the appellants had been advised by the Central Excise authorities at Nagpur that the articles were excisable. The Tribunal found that the conduct of the appellants, including the removal of goods under seizure to the premises of their employee and the use of a "dummy" name to avoid detection, demonstrated their consciousness of the unlawfulness of their actions. Therefore, the Tribunal concluded that the Additional Collector was justified in imposing the penalty.

Conclusion:
The Tribunal confirmed the Additional Collector's order, holding that the "outer races" were excisable goods under Item 68 of the Central Excise Tariff, that the processes carried out on them constituted "manufacture," and that the penalty of Rs. 50,000 was justified. The appeal was rejected.