1989 (8) TMI 185 - AT - Central Excise

Summary

Issues Involved:

1. Whether the coating of bare wires with PVC compound constitutes "manufacture."
2. Identification of the manufacturer.
3. Eligibility for the benefit of Notification No. 119/75-C.E.
4. Applicability of the extended period of limitation for duty demands.

Detailed Analysis:

1. Whether the coating of bare wires with PVC compound constitutes "manufacture":

The appellants argued that coating bare wires with PVC does not amount to "manufacture" as no new product emerges, citing the Bombay High Court's decision in Shakti Insulated Wires Pvt. Ltd. The Department contended that the process of coating changes the nomenclature, characteristics, and use of the wires, thus constituting "manufacture." The Tribunal noted that the Collector's order assumed the presence of manufacture without explicit discussion. The Tribunal held that the coated wires had distinct names, characteristics, and uses compared to bare wires, supported by the Central Excise Tariff where bare and coated wires are separately listed. Consequently, the Tribunal concluded that the process involved manufacture.

2. Identification of the manufacturer:

The appellants claimed that IDL, which supplied the raw materials, should be considered the manufacturer. The Tribunal reviewed judgments in similar cases, noting that the definition of "manufacturer" includes any person who engages in production or manufacture on their own account. The Tribunal found no evidence that the appellants' capital and machinery did not belong to them or that their products were manufactured under IDL's brand name. Therefore, the Tribunal concluded that the appellants, who had their plant and machinery and undertook the coating process, were the manufacturers.

3. Eligibility for the benefit of Notification No. 119/75-C.E.:

The appellants argued they were entitled to the benefit of Notification No. 119/75-C.E., which allows duty to be paid only on job charges. The Tribunal, referencing the NOCIL judgment, held that the appellants were not merely job-workers as the bare wires were returned as a different commodity (coated wires). Thus, the appellants were not entitled to the benefit of the notification. The Tribunal also clarified that the assessable value must include the cost of raw materials, processing charges, etc., as per the Supreme Court's judgments in Ujagar Prints.

4. Applicability of the extended period of limitation for duty demands:

The appellants argued against the invocation of the extended period of limitation, stating that all goods were properly documented and there was no intent to evade duty. The Tribunal observed that the information about production was provided to the Department on 8-1-1981, but the show cause notice was issued more than three-and-a-half years later. The Tribunal held that only the normal period of limitation would apply, not the extended period, and ordered the demands to be revised accordingly.

Separate Judgments:

Majority Decision:

The majority, comprising G. Sankaran and Harish Chandra, disagreed with the conclusion that the process amounted to "manufacture." They found the case analogous to Shakti Insulated Wires Pvt. Ltd., where the insulation process did not result in a distinct product. They concluded that PVC-coated galvanized steel wires should be classified as steel wires, not as a different commodity under Item 68. Consequently, they set aside the impugned order and allowed the appeal with consequential relief to the appellants.

Minority Opinion:

I.J. Rao, in the minority, held that the process of coating constituted "manufacture," resulting in a distinct product. He concluded that the appellants were the manufacturers and were not entitled to the benefit of Notification No. 119/75-C.E. He also agreed with the Department's valuation method but found the demands time-barred beyond the normal limitation period.

Final Decision:

In view of the majority decision, the impugned order was set aside, and the appeal was allowed. The Revenue Authorities were directed to give consequential effect to the order.