1995 (5) TMI 26 - SC - Central Excise

Whether the effective rate of excise duty that the assessees were obliged to pay, according to the Excise Authorities, was ₹ 650/- per M.T.? Held that - Failure to lay the requisite evidence cannot be made up by reference to authoritative publications unless the Excise Authorities inform the assessee that they propose to rely upon the same before the adjudicating authority. As upon such material as has been referred to by learned counsel for the Excise Authorities we find it not proved' that hot rolled strips undergo a process of manufacture before they become cold rolled strips. We are, therefore, unable to accept the contention of the Excise Authorities that the assessees' cold rolled strips are liable to excise duty at the rate of ₹ 650/- per metric tonne.

Issues:
Interpretation of Central Excise Tariff for steel products, Exemption Notification applicability, Process of manufacture for cold rolled steel strips, Burden of proof on Excise Authorities, Use of technical evidence in excise matters.

Interpretation of Central Excise Tariff for steel products:
The case involved the interpretation of the Central Excise Tariff for steel products, specifically cold rolled steel strips made from hot rolled steel strips. The applicable entry was Tariff Item No. 26AA, which included various steel products like flats, skelp, and strips. The dispute arose regarding the classification and applicable duty rates for these products.

Exemption Notification applicability:
During the relevant period, an Exemption Notification (No. 55/80) was in operation, providing exemptions for specific types of steel strips from the basic excise duty leviable. The notification differentiated between galvanized and non-galvanized strips, setting different exemption limits based on the type of strip. The issue in question was whether cold rolled strips were entitled to the exemption and at what rate.

Process of manufacture for cold rolled steel strips:
The Excise Authorities contended that cold rolled strips were the result of a manufacturing process from hot rolled strips, thus subject to a specific excise duty rate. However, the court highlighted the lack of evidence regarding the transformation process from hot rolled to cold rolled strips. The Excise Authorities failed to establish the commercial distinction and known process of manufacture for cold rolled strips.

Burden of proof on Excise Authorities:
The judgment emphasized that when claiming an article is a result of a manufacturing process, the burden of proof lies with the Excise Authorities to provide evidence supporting their claim. Lack of evidence has previously led to the failure of cases, resulting in revenue loss for the State. The court stressed the importance of presenting technical evidence and authoritative publications before the adjudicating authority and the Tribunal.

Use of technical evidence in excise matters:
The court highlighted the significance of technical knowledge in excise matters and the necessity of presenting technical evidence and authoritative publications at the adjudicating stage. The Excise Authorities cannot rely on such material without informing the assessee and allowing them to contest its relevance or authority. The judgment emphasized that technical publications should be introduced early in the proceedings and not at a later stage.

In conclusion, the Supreme Court dismissed the appeals, stating that the Excise Authorities failed to prove that hot rolled strips undergo a manufacturing process before becoming cold rolled strips. The judgment underscored the importance of providing sufficient evidence, especially in cases involving technical aspects, to support claims related to excise duty liability.

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