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TMI Blog2001 (1) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... ts had crossed the exemption limit of Rs. 30 lakhs during the financial year 1997-98 (up to 21-1-1998) and that the party had not taken Central Excise registration under Rule 174 of the Central Excise Rules. The officers recorded statement of Shri M.M. Gupta, partner of the firm, who, inter alia, stated that they were engaged in the production of GIR Joints since 1994-95; that they were doing so on job work basis for the Railways; that the rails supplied free of cost by the Railways against security of Bank Guarantee were used for fabricating GIR Joints which were subsequently supplied to the Railways; and that the value of rails was not included in the value of clearances of the GIR Joints. Shri M.M. Gupta, in his statement, also gave his version of the process of manufacture of the GIR Joints. In this connection, the Department made enquiries with the Western Railway authorities, who informed that GIR Joints acted as an insulation between adjacent track circuits, and, therefore, it was a safety device for signalling purpose. On examination of the evidence yielded by the above enquiries, it appeared to the Department that GIR Joints were excisable goods falling under sub-heading N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34,31,702/- on the clearances of GIR Joints in excess of Rs. 30 lakhs limit during the years 1994-95 to 1997-98 (up to 21-1-1998) under Rule 9(2) of the Central Excise Rules read with the proviso to Section 11A(1) of the Central Excise Act and interest on the duty amount under Section 11AB of the Act, and proposing to impose penalties under Rules 9(2), 173Q and 209 as well as under Section 11AC of the Act. The SCN, further, proposed to impose penalty on Shri M.M. Gupta, partner of the firm, under Rule 209A of the Central Excise Rules. This SCN was adjudicated by the Commissioner of Central Excise as per order dated 29-10-1999 confirming the demand of duty to the extent of Rs. 32,86,222/- against M/s. Dynamic Engineers under Section 11A of the Act and directing payment of interest @ 20% per annum under Section 11AB of the Act. A penalty of Rs. 32,86,222/- and another penalty of Rs. 5 lakhs were imposed on M/s. Dynamic Engineers, respectively, under Section 11AC of the Act and Rules 173Q/209 of the Central Excise Rules. A penalty of Rs. 25,000/- was imposed on Shri M.M. Gupta under Rule 209A of the Central Excise Rules. The present appeal No. E/3264/99-B filed by M/s. Dynamic Enginee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of being taken to the market for being bought and sold. They were therefore not marketable goods and hence not excisable. 6.3 Challenging the classification of the GIR Joints as signalling equipments under CSH 8530.00, ld. Counsel submitted that, as at the time of clearance of the product from the appellants' premises, the same were only ordinary insulated rails intended solely for the purpose of laying LWR tracks by the Civil Engineering Department of the Railways and that any subsequent use of the item by the Railway's Signal and Telecom Department could not make it a 'part' of electrical signalling equipment for classification purposes. In this connection, he sought to rely on three certificates issued recently by Western Railway authorities. Ld. Sr. Counsel contextually moved an application (E/Misc./391/2000-B) for taking on record the three certificates along with certain 'calculation sheets'. Counsel further submitted that there was no evidence on the part of the Department to show that the insulated rails were intended to be used as part of an electrical signalling equipment falling under CSH 8530.00, nor was there even any specific allegation to this effect in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1997-98" [value/cost of rails based on Railway certificate]. Counsel prayed for taking on record the above documents and submitted that, if the valuation was revised and Modvat credit allowed in terms of this evidence, the duty liability of the appellants would be far below that fixed by the Commissioner erroneously by overvaluation of the rails and denial of the benefit of Modvat credit on inputs. 6.6 Ld. Sr. Counsel further argued that there was no warrant for imposing penalties on the appellants inasmuch as they had only acted with the genuine belief that their activity of fabricating GIR Joints was no manufacture and therefore the product was not excisable. He further pointed out that the Commissioner had wrongly invoked Section 11AC of the Central Excise Act for imposing mandatory penalty of an amount equal to the entire amount of duty confirmed against the appellants for the period 1994-95 to 21-1-1998 even though the said Section 11AC was not in force prior to 28-9-1996. On a similar ground, he challenged the levy of interest on the amount of duty under Section 11AB of the Act. Ld. Sr. Counsel concluded by praying for setting aside the impugned orders and allowing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise registration or file declaration with the Department, whereby they suppressed material facts with intent to evade payment of Central Excise duty. Therefore, according to ld. JDR, the larger period of limitation was rightly invoked for raising demand of duty on the appellants. Ld. JDR, further, justified the confiscation of the 129 GIR Joints seized by the Departmental officers from the appellants' premises, and also the imposition of penalties on the firm and its partner. He, therefore, prayed for rejecting the appeals. 8.1 We have carefully examined the rival submissions. M/s. Dynamic Engineers were admittedly engaged in the fabrication of GIR Joints. The necessary rails for the purpose were supplied free of cost by the Railways and the appellants fabricated the GIR Joints out of such rails on job work basis and supplied the same to the Railways. The appellants cut the rails into small pieces first and then made the required drillings therein. When two such small drilled pieces of rails were joined together with fish plates by making use of nuts and bolts after inserting the insulating materials (end-posts and liners) in between, the product viz. GIR Joint emerged. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongue rails, with stock rail and other components fitted at site, constituted a Switch Expansion Joint used by the Railways. The question which arose before the Tribunal was whether the above activity of cutting, bending, sharpening and smoothening amounted to 'manufacture' or not. The question was answered in the negative on the basis of the finding that, even after the aforesaid process, the rail remained as rail and no different commercial commodity came into existence. But the facts of the present case are quite distinguishable. The process undertaken by M/s. Dynamic Engineers, as we have already noted, involved fabrication of a commercially distinct marketable product, different from rail in name, character and use. It was principally the insertion of insulating materials that imparted to the product its different name and character and rendered it functionally different from the input-rail. This was not the case in J. Sons Corporation (supra). Therefore, the cited decision would lend no support to ld. Counsel's manufactural plea. 8.4 M/s. Dynamic Engineers' activity amounted to 'manufacture' under Section 2(f) of the Central Excise Act. They were, therefore, liable to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the duty liability on the basis of valuation of rails based on a certificate issued by the Chief Engineer (TS), Western Railways and also on the basis of the appellants' entitlement to Modvat credit of the duty paid on the inputs used for the manufacture of GIR Joints. We find that, in the context of paying duty on the GIR Joints, the appellants are entitled to Modvat credit of the duty paid on the inputs used in the manufacture of the Joints in question. The extent of such credit available to the appellants for payment of Central Excise duty on GIR Joints requires to be worked out by the adjudicating authority. The Miscellaneous application, further, seeks to take on record three certificates issued by the Western Railway authorities. These three certificates were issued on 20-7-2000, 1-8-2000 and 3-8-2000. All these three certificates are to the effect that GIR Joints are purely a Civil Engineering item and, further, that the procurement, laying and maintenance of these Joints are done by the Civil Engineering Department of Indian Railways. We note that one of the grounds of these appeals is that the GIR Joints are only a Civil Engineering item and therefore could not be categori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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