9911796707
TMI Blog1999 (8) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... in Tamil Nadu and at Kazipally Village, Medak District in Andhra Pradesh. The chains manufactured by the appellants are classified under Heading 73.15 and are used in Cycle, Cycle rickshah, motor cycle etc. Appellants have commenced their production of the aforesaid items in the year 1960. Appellants have also been manufacturing and supplying automotive chains and connecting links to various OE manufacturers of two wheelers i.e. motor cycle. Besides this, appellants have also been supplying these items to the replacement market (domestic/overseas) as spare parts through its depot/dealership network. In the course of time the appellants earned market goodwill for their various types of chains popularly known as "Diamond chains" among the general public and the industrial consumers. In order to avoid spurious sprocket of lower quality and non-standard specifications, being sold along with their chains, they decided to market their automotive chains and connecting links along with the quality sprockets procured from various independent sprocket manufacturers and vendors in the country. They therefore, took up the following activities : (a) To buy sprockets from genuine independent ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a common packing would not bring into existence any new product and they are not classified as new product and are not dutiable as `transmission kit' as contended by the department in the show cause notice dated 5-11-1997 and they have classified the item under heading 84.14 of the CET. The department proceeded to classify the item which are put in a common packet as 'transmission kit' under sub heading 84.17 and demanded duty for the period from 1-10-1992 to 31-8-1997 under Rule 9(2) read with Section 11A of the CE Act, 1944 alleging clandestine manufacture and clearance of excisable goods and suppression of fact. It was also alleged that the appellants did not maintain statutory accounts for the manufacture and clearance of 'transmission kit' and they did not file classification list. Declarations were not filed for manufacture and clearance of transmission kit thereby contravening rule 173B and they had not filed price list for clearing the said goods and hence contravened rule 173C. The department also alleged contravention of Rule 174 for not taking out licence and registration. 3. The appellants' contention against the show cause notice was as under : (a) &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putting these items in a kit and clearance of the same amounts to manufacture bringing into existence new prouct classifable under sub-heading 87.14 of the CET and they are liable for excise duty. He has also held that larger period of limitation is invocable, as the appellants have not taken out licence and not paid duty for the clearance effected. The reason for holding that putting of these items into a kit is a new product, given by the Commissioner is that the appellants obtain automotive chain in packed condition from their other unit and gear box sprocket and rear wheel sprocket are procured from vendors and these sprockets are put to various tests like checking the number of teeth, tip diameter, root diameter, tooth thickness, radial run out and axial run out, wrap test, bore test, fitment test and visual examination. After conducting these tests, the sprockets are sent to job workers for heat treatment and then for electroplating. The finished sprockets received from the job workers are again put to various tests like hardness test, test for checking case depth and check for quality and thickness of electroplating. It is only at this stage, that these sprockets along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e another as they form integral part of the transmission kit of motor vehicle. Further he has taken notice of the fact that as already brought out the main process to the gear box sprockets and rear wheel sprocket are undertaken and the kit is marketable and as such they are being used in conjunction with each other and the kit is individually marketable. Further the Commissioner has noted that the party had submitted before the Sales Tax authorities that the materials procured by them are put to use in the packing of goods "manufactured by them". The Commissioner has rejected the plea of valuation on quantification and the benefit of Modvat Credit claimed on duty paid automotive chain on the ground that no declaration has been filed. 5. We have heard Shri V. Sreedharan, learned Counsel for the appellants and Shri S. Kannan, learned DR for the Revenue. Both the sides reiterated their position in the matter. 6. The learned Counsel relied upon the following judgments which according to him directly apply to the facts of this case: (1) XL Telecom and Others v. Supdt of Central Excise - Writ Petition No. 8282/98 of Andhra Pradesh High Court. (2)&nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, the Commissioner has already brought out the several processes carried out by the appellants and therefore, it resulted in the process of manufacture and that it satisfied the logic of treating it as new product. On consideration of these points and on examination of the said processes which are said to be done by the appellants, we notice that the appellants are manufacturing two items in their factory, i.e. automotive chain and connecting links and on which duty is paid. Appellants procure rear wheel sprocket and gear box sprocket from M/s. Pressmet Ltd. and M/s. ACME Ltd. They also procure raw materials/blanks and get semi-finished/unfinished sprockets manufactured on job work basis. These items are procured from the above two units before they are sent to job workers for heat treatment and electroplating and the appellants carried out the following tests : 1. No. of teeth 2. Tip diameter 3. Root diameter 4. Tooth thickness 5. Radial run out and axial run out 6. Wrap test 7. Bore test 8. Fitment test 9. Visual examination. After these tests the sprockets are stamped with their logo 'Speedex' and then sent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n manufactured according to the specification and design and quality. This quality check is only to find out the standard, it does not bring about any change on the product on such testing. Merely applying the logo 'Speedex' does not change the character of the item which is in unfinished form. The two major activity of heat treatment and electroplating admittedly is not carried out at the appellants's premises. But they are sent to job worker i.e. Madras Heat Treaters. We are not concerned about the question as to whether these two processes carried out in the job workers premises amounted to manufacture and as to whether the unfinished saprockets has become finished article for dutiability. It is well settled that job worker is the manufacturer and not the supplier of the raw materials. If the department had proceeded against the job workers on the premise that the unfinished sprocket after undergoing heat treatment and electroplating had become fully finished marketable item requiring discharge of duty liability at the hands of the job workers, then there would have been a case for the department. The department has not proceeded on these lines and has not demanded duty on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks Pvt. Ltd. reproted in 1998 (37) E.L.T. 392 it was held that re-packing and re-labelling and re-naming does not amount to process of manufacture. Further we also take note of the fact that similar activity of re-packing and selling same goods in the market by 18 individual chain manaufacturers have not been brought to excise net by the department. There is clear trade understanding that mere packing and putting into a kit of various items is not treated as process of manufacture in the trade. Appellants have explained that in the trade each of the chain manufacturer normally gets the sprockets manufactured according to specification of the chain to maintain certain quality and standard. Therefore, the plea that putting of the item in question and the appellants discharging duty on the two manufactured items and the other two items which are manufactured by the job workers cannot be treated as manufacturer at the hands of the appellants, has to be accepted. Merely because they carry out certain tests required to check the quality of the product, did not bring into new article as gear box sprocket and rear wheel sprocket as they had already come into existence at the hands of the j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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