1994 (11) TMI 251 - AT - Central Excise

Summary

Issues Involved:
1. Whether manufacture of GSS Wire out of GI Wire amounts to manufacture as defined under Section 2(f) of CESA, 1944.
2. Whether GSS Wire would be classifiable under Item No. 68 of the Central Excise Tariff or under Item No. 26AA of the Tariff.
3. Whether both parties (GIC and Arkay) are under common proprietary interest and whether the value of goods cleared by both should be clubbed for computing the exemption limit under Notification Nos. 176/77 and 89/79.
4. Whether the total capital investment on Plant and Machinery installed in the industrial units of the parties exceeded Rs. 10 lakhs at the material time.
5. Whether the liability to pay duty on goods manufactured by GIC on job charges out of raw material supplied by Arkay rests with GIC or Arkay.
6. Whether the duty liability in respect of goods manufactured by GIC on job charges is limited to the remuneration for the job work only in terms of Notification No. 119/75 or on the total value of such goods.
7. Whether the petitioners were eligible for exemption from payment of duty under Notification Nos. 176/77 and 89/79 during the years 1978-79 and 1979-80.
8. Whether the seized goods belonged to GIC or Arkay.
9. Whether Arkay and GIC were required to take out a Central Excise License for the manufacture of goods falling under Item No. 68.
10. Whether the demand of duty was barred by limitation for the period of 6 months under Rule 9 of the Rules, or the extended limit of 5 years would apply.

Detailed Analysis:

1. Manufacture of GSS Wire out of GI Wire:
The Tribunal held that the process by which GSS Wire is manufactured from GI Wire constitutes a process of manufacture under Section 2(f) of the Central Excises and Salt Act, 1944. The transformation involved stranding, twisting, and knotting GI Wires, resulting in a product (GSS Wire) with different strength, utility, and commercial recognition compared to the original GI Wire. The Tribunal referred to various precedents, including the Supreme Court's decision in Laminated Packings (P) Ltd. v. C.C.E., to conclude that the process results in a new and distinct commodity.

2. Classification of GSS Wire:
The Tribunal determined that GSS Wire and GI Wire are distinct commodities. GSS Wire was not classifiable under Item No. 26AA but under Item No. 68 of the Central Excise Tariff. This classification was supported by the CBEC's Tariff Advice No. 53/78, which stated that stranded galvanised steel wires manufactured from duty-paid steel wires are classifiable under Item No. 68.

3. Common Proprietary Interest and Clubbing of Values:
The adjudicating authority decided that GIC and Arkay were not under common proprietary interest, and thus, the value of goods cleared by both parties should not be clubbed for computing the exemption limit under Notification Nos. 176/77 and 89/79. This decision was in favor of the appellants.

4. Total Capital Investment:
The adjudicating authority found that the total capital investment on Plant and Machinery in the industrial units of the parties did not exceed Rs. 10 lakhs at the material time. This finding was also in favor of the appellants.

5. Duty Liability for Goods Manufactured by GIC:
The Tribunal agreed with the adjudicating authority that GIC was the manufacturer and that the value of goods manufactured by GIC on a job work basis out of raw materials supplied by Arkay should be added to GIC's clearances, not Arkay's.

6. Determination of Value for Duty Liability:
The adjudicating authority concluded that the total value of goods, not just the job charges, should be considered for computing the value of clearances. The Tribunal upheld this finding, stating that the benefit of Notification No. 119/75 was not applicable to the appellants.

7. Exemption from Duty Payment:
The adjudicating authority allowed exemptions for Arkay and GIC under Notification Nos. 176/77 and 89/79 for the years 1978-79 and 1979-80. Arkay was granted exemption for goods valued at Rs. 7,34,297.10 cleared during 1979-80, and GIC was given relief for sales tax and surcharge included in the value of the Barbed Wire.

8. Ownership of Seized Goods:
The adjudicating authority concluded that the seized goods were manufactured by GIC and not Arkay, and thus GIC should have discharged the duty liability.

9. Requirement for Central Excise License:
The adjudicating authority held that while Arkay was exempted from licensing control, GIC had cleared GSS Wire with intent to evade payment of duty, thereby contravening the provisions of the Rules and being liable to penalty.

10. Limitation Period for Duty Demand:
The adjudicating authority applied the extended period of limitation under Rule 9(2) read with Section 11A, concluding that the demand was not time-barred. The Tribunal agreed with this finding, noting that the appellants had willfully suppressed facts to evade duty.

Conclusion:
The Tribunal found no merit in the appeals and upheld the adjudicating authority's decisions on all issues. Both appeals were rejected.