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TMI Blog1999 (9) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant s factory by coating the resin on sand and the same was captively used for making cores as aforesaid. The lower authority held that this process of coating the resin on sand amounted to manufacture within the definition of this term under Section 2(f) of the Central Excises and Salt Act (abbreviated hereinafter as CESA) and that the product viz. shell sand was marketable and hence excisable. Accordingly, the lower authority adjudicating the six show-cause notices mentioned in para (1) of the impugned order, confirmed the demand of duty on the shell sand cleared for captive consumption in the factory of the appellants for the ultimate manufacture of their final products viz. iron castings and dropped the demand of duty on all other sand mixes. The duty so confirmed was Rs. 1,26,84,335.65 for the period 1-5-1988 to 28-2-1994 for a part where of the adjudicating authority had invoked the larger period of limitation under the proviso to Section 11A of the CESA. The lower authority further imposed a penalty of Rs. 20 lacs on the appellants for the alleged contravention of various provisions of the Central Excise Rules mentioned in the show-cause notices. The present appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since no new commodity having distinct name, character or use resulted from the process. The resin-coating was done only to impart adhesive property to the sand particles so as to enable them to stick together to make the core. The refractory property of sand remained as such even after the process of resin-coating and the essential character and use of the sand continued to be the same, the learned Advocate submits. The resin-coated sand so prepared was not marketed but was captively used for making sand cores which were, in turn, used for casting of iron in the manufacture of their final products. The shell sand, which did not result from any manufacture under Section 2(f) of the CESA and was not marketable, was not an excisable commodity, the learned Advocate submits. 5. In connection with the above argument, the learned Advocate has further submitted that the reliance placed by the lower authority on the decision of the Tribunal in the case of TELCO Limited v. Collector of Central Excise [1990 (50) E.L.T. 644 (Tribunal)] was not correct. According to him, 1990 (50) E.L.T. 644 dealt with the aspect of marketability and not manufacture. This decision of the Tribunal was chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Schedule to the Central Excise Tariff Act, 1985. We further observe that the only issue considered by the Apex Court in 1997 (94) E.L.T. 4 (S.C.) was whether Modvat credit of the duty paid on the resins and other chemicals (inputs) used for producing sand moulds was allowable or not. We further observe that the decision of the Apex Court on such issue has no effect of disturbing the decision of the Tribunal on the question of manufacture in the TELCO s case. In making this observation, we would draw support from para (9) (rather than para 7) of the Hon ble Gujarat High Court s judgment cited by the learned Advocate, which is reproduced hereunder :- 9. The learned Counsel for the respondents has drawn our attention to a decision of the Supreme Court in the case of M/s. Goodyear India Ltd. v. State of Haryana reported in AIR 1990 S.C. page 781. In para 23 of the judgment, the Supreme Court has observed that it is well settled that a precedent is an authority only for what it actually decides and not for what may remotely or even logically follow from it . In para 34 of the judgment it is further observed as follows :- A decision on a question which has not been argued c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ife (bench-life) before the lower authority, the lower authority was right in holding that the goods were marketable for purposes of their excisability. Accordingly, we hold that resin-coated sand (shell sand) produced by the appellants in their factory for captive utilisation for the manufacture of sand cores; which were, in turn, used for the casting of iron was excisable and Central Excise duty was leviable thereon. 9. Regarding limitation, the learned Advocate for the appellants has reiterated the grounds (E) to (S) of the grounds of appeal before us and has submitted that in view of the facts and circumstances stated in the said grounds (E) to (S) the Department has to be held to have been in the knowledge of the production of shell sand by coating resin on sand during the period covered by the show-cause notice dated 4-6-1993 and that there is no evidence to substantiate the Department s allegation that the appellants wilfully suppressed information before the Department. It is not in dispute that the party had been manufacturing unmachined iron castings since 1977 and that the said product was exempt from duty under Notifications issued from time to time, throughout the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kind contemplated by the proviso to Section 11A of the CESA. 10. In the light of our finding on the issue of limitation stated above, we must also hold that the order of the lower authority imposing penalty on the appellant also not sustainable in the facts and circumstances of the case, since the evidence before the learned adjudicating authority did not suffice to reach a finding that the party contravened provisions of law with intent to evade Central Excise duty on shell sand. 11. On the question of admissibility of Modvat credit as claimed by the appellants, the learned Advocate has submitted that the lower appellate authority went wrong in disallowing the credit of duty paid on the resin used for producing resin coated sand; under Rule 57A of the Central Excise Rules on the ground of non-filing of declaration under Rule 57G of the Rules ibid. In support of this submission, he has relied on the decision of the Tribunal in the case of Jagraon Machine Tools v. C.C.E. [1993 (65) E.L.T. 300 (Tribunal)] wherein the question was whether proforma credit of the duty paid on inputs was liable to be denied on the ground that the party had not taken a Central Excise licence and cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty paid on input in regard to which Modvat credit was availed of by a manufacturer is not includible in the assessable value of the final product under Section 4(1)(b) of the Act and Rule 6(b)(ii) of the Rules. However, in every case of captive consumption it has to be verified whether the cost of input declared includes the excise duty paid on inputs or not. If the declared cost does not include the duty paid on input, the same cannot be deducted again. Question number one answered accordingly. 12.1 We observe that, in the present case too, the valuation of the goods was done in terms of Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 read with Section 4(1)(b) of the CESA. However, on examination of all the facts before us, we find that the adjudicating authority has not applied these provisions of Law properly to the appellant s case. The party s submissions have not been duly considered. The element of duty paid on the inputs used for the production of shell sand has not gone into the lower authority s consideration while determining the assessable value of the goods. This infirmity, of course, has resulted from the lower authority s decision on the Modvat issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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