2015 (4) TMI 931 - AT - Central Excise

Rerolling process of the hot roll flat bars - Classification of process as hot rolling or cold rolling - Manufacturing activity or not - Held that - Merely on the basis on the types of customers who were buying the products or the statements of the suppliers of the rolling stands that the rolls supplied by them were suitable for cold rolling, it cannot be concluded that the product of the appellant was a cold roll product. In terms of the HSN explanatory notes, if a hot rolled product has been subjected to very light cold rolling process known as skin pass or pinch pass without significant reduction of thickness, the process does not result in change of the character of the finished product as hot roll product. In this case, the stand of the appellant from the very beginning has been that there has not been any significant change in thickness. No evidence has been produce that this claim of the appellant is not correct. The judgment of the tribunal in the case of BharatBhai B. Gala vs CCE Ahmadabad 2007 (6) TMI 11 - CESTAT,AHMEDABAD cited by the Ld. DR is not applicable to the facts of this case, as the dispute in this case is as to whether the process undertaken by the appellant is process of hot rolling or cold rolling and this point has to be decided on the basis of the criteria prescribed in this regard in the HSN explanatory notes. No tests have been done to establish as to whether the Appellant s final product has the characteristics of cold rolled product. In view of this, we hold that the impugned order is not sustainable. - Decided in favour of appellant.

Summary

Issues:
1. Classification of goods as cold rolled products under heading 7211 of the tariff.
2. Determination of whether the process undertaken amounts to manufacture.
3. Imposition of Central Excise Duty, interest, and penalties.

Analysis:

Issue 1 - Classification of goods:
The Departmental Officers contended that the process undertaken by the appellant constituted cold rolling as it was done at temperatures below 900oC, leading to the classification of goods as cold rolled flat products under heading 7211 of the tariff. The Commissioner upheld this view in the order-in-original, confirming the duty demand and penalties. However, the appellant argued that the goods remained hot rolled products, emphasizing that the process only eliminated surface unevenness without significant thickness reduction. The Tribunal noted that no tests were conducted to determine if the products had the characteristics of cold rolled goods as specified in the HSN explanatory notes. The Tribunal concluded that the evidence presented was insufficient to classify the goods as cold rolled products, ultimately setting aside the impugned order and allowing the appeals.

Issue 2 - Manufacturing process determination:
The appellant maintained that their process did not amount to manufacture, as it did not fundamentally change the character of the goods. They highlighted that the process only involved surface treatment and minor thickness reduction. The Department argued that the process constituted cold rolling, which would classify the goods as manufactured products. The Tribunal emphasized the need to distinguish between hot rolled and cold rolled products based on specific criteria outlined in the HSN explanatory notes. It was noted that no tests were conducted to establish the physical characteristics of the final product. As a result, the Tribunal found the Department's argument unsubstantiated and ruled in favor of the appellant.

Issue 3 - Imposition of Central Excise Duty, interest, and penalties:
The Show Cause Notice issued by the Department demanded Central Excise Duty, interest, and penalties from the appellant. The Commissioner confirmed the duty demand and imposed penalties based on the classification of goods as cold rolled products. However, the Tribunal, after considering the arguments from both sides and examining the evidence, found the impugned order unsustainable. The Tribunal set aside the order, allowing the appeals filed by the appellant.

In conclusion, the Tribunal's detailed analysis focused on the classification of goods, the determination of the manufacturing process, and the imposition of Central Excise Duty, interest, and penalties. The decision to set aside the impugned order was based on the lack of conclusive evidence supporting the classification of the goods as cold rolled products and the absence of tests to establish the physical characteristics of the final product.