1996 (5) TMI 133 - AT - Central Excise

Summary

Issues:
Whether reducing the gauge of mild steel wire rods amounts to manufacture for excise purposes?
Whether the appellants are entitled to exemption under specific notifications?
Whether the Superintendent had jurisdiction to demand duty under Section 11A?
Whether the goods purchased in the open market are presumed to be duty paid?
Whether the principles of natural justice were observed in raising the demand without prior notice?

Analysis:
The appellants contended that reducing the gauge of mild steel wire rods did not constitute manufacturing, and hence, they were not required to hold a central excise license. However, they claimed exemption under Notification No. 75/67, 113/80, 111/78 for products made from duty paid iron and steel. They argued that the Superintendent had no authority to demand duty under Section 11A and that goods bought in the open market were presumed to be duty paid.

The Department argued that the process of drawing wires amounted to manufacturing, making the wire a different commodity from wire rods, thus subject to excise duty. They challenged the appellants' claim that raw materials were duty paid, stating that mere letters from the Steel Authority of India Ltd. were insufficient as proof. The Department also asserted that the Superintendent was authorized to demand duty under Rule 173(I).

The Tribunal noted that goods purchased from the open market were deemed duty paid unless proven otherwise. It held that wire rods, even after being drawn to reduce dimensions, remained wires for excise purposes. The Tribunal referenced a previous case where demands for duty on wires drawn from wire rods were dropped due to the process not constituting manufacture and the availability of specific exemptions.

The Tribunal found that the Collector (Appeals) erred in upholding the demands, as the appellants met the criteria for exemption and the goods were presumed duty paid. It concluded by setting aside the impugned order and accepting the appeals, emphasizing the importance of the burden of proof on the Department regarding duty payment on inputs and the nature of the manufacturing process involved.