2016 (11) TMI 508 - AT - Central Excise

Clandestine removal of goods - Copper Wire and Super Enamelled Copper Wire - denial of exemption under N/N. 8/2003-CE dated 01.03.2003 - whether drawing of Copper Wire from Thicker Gauge to Thinner Gauge and Varnishing of the same for the purpose of insulations would amount to manufacture or not? - Held that - the issue is decided by the Hon ble Supreme Court in the case of Techno Weld Industries referred 2003 (3) TMI 123 - SUPREME COURT OF INDIA . However Commissioner (Appeals) has distinguished the said judgment on the ground that in the case of Techno Weld it was wire of the Iron and iron-rod whereas in the present case it is Copper Rod and Copper Wire. I do not find any merits with the above distinction made by the Id Appellate Authority. It is the process of drawing of wire which has been held to be a non-manufacturing activity, whether of Iron and Steel or Wire of Copper. The ratio of the law declared by the Supreme Court would be fully applicable in respect of Copper Wire also. In fact the Board vide its Circular No. 720/36/2003 -CX dated 29/5/2003, has withdrawn its earlier Circular No. 570/7/2001 -CX dated 16/2/2001 which held to the contrary. The issue of insulation stand settled by laying down that the same does not amount to manufacture. Varnishing of Copper Wire which lead to Supper Enamelled Copper Wire is for the purposes of increasing the conductivity of the Copper Wire, and the Copper Wire remains Copper Wire only. In the case of Lenzohm Electrical Engg. Co. Pvt. Ltd. Vs. Commissioner of Central Excise, Mumbai-Il 2003 (6) TMI 261 - CESTAT, MUMBAI it was held that insulating a Copper Wire as not amounting to the manufacture. As much as the activity of the appellant did not amount to the manufacture, the question of availability of small scale notification or otherwise does not arise - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the process of drawing Copper Wire from Thicker Gauge to Thinner Gauge and Varnishing it amounts to manufacture.
2. Whether the goods in question were excisable and eligible for exemption under Notification No. 8/2003-CE dated 01.03.2003.
3. Whether the penalty imposed on the appellant is justified.

Issue 1:
The case involved the manufacturing activities of Copper Wire and Super Enamelled Copper Wire by the appellants. The central issue was whether the process of drawing Copper Wire from Thicker Gauge to Thinner Gauge and varnishing it amounts to manufacture. The appellant contended that these processes did not amount to manufacture based on various judgments. The Commissioner (Appeals) held that the processes undertaken by the appellants did amount to manufacture, as the judgments cited by the appellants were not directly applicable to the specific products in question. The Commissioner upheld the demand of duty, interest, and penalties imposed by the adjudicating authority.

Issue 2:
The second issue revolved around the excisability of the goods and their eligibility for exemption under Notification No. 8/2003-CE dated 01.03.2003. The appellants argued that the goods were not excisable based on certain judgments. However, the Commissioner (Appeals) found that the goods were excisable and not eligible for exemption under the said notification as the appellants had opted to pay the full rate of duty during the financial year 2002-2003. The Commissioner upheld the demand of duty, interest, and penalties.

Issue 3:
Regarding the penalty imposed on the appellant, the Commissioner (Appeals) found that the appellant had cleared goods clandestinely without discharging Central Excise duty liability, justifying the penal action under Rule 26. The Commissioner upheld the penalty imposed by the adjudicating authority.

In the final judgment, the Tribunal analyzed the processes involved in manufacturing Copper Wire and Super Enamelled Copper Wire. It held that the activities of drawing Copper Wire and varnishing it did not amount to manufacture, citing relevant judgments. The Tribunal disagreed with the Commissioner's distinction between different types of wire materials and upheld that the law declared by the Supreme Court applied universally. The Tribunal also clarified that varnishing Copper Wire for insulation purposes did not change its essential character, as established in previous cases. Consequently, the Tribunal set aside the impugned orders, allowing both appeals with consequential relief to the appellant.