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TMI Blog2006 (10) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... the clandestinely removed DTH hammers was also seized. Statements of persons concerned with the company in managing the day-to-day affairs, job workers who had undertaken job work for the company, raw material suppliers and transporters were recorded under Section 14 of the Central Excise Act, 1944. On the basis of the investigations, Show Cause Notices dated 10-12-2001 and 26-6-2002 were issued answerable to the Adjudicating Authority. The first Show Cause Notice proposes to confiscate cash seized and further, penalties were proposed on the company and on Shri Ravichandra, General Manager. The second Show Cause Notice has proposed the following actions. (i) Demand of Central Excise duty of Rs. 1,39,68,505/- being the duty payable on the hammers and their parts manufactured and clandestinely cleared during the periods from 1999-2000 to 27-6-2001. (ii) Demand of duty of Rs. 3,18,196/- being duty payable on the waste/scrap generated during the manufacture of hammer/parts during the above period. (iii) Demand of duty of Rs. 6,32,068/- being the differential duty payable on the DTH Hammers and their parts manufactured and cleared from 28-6-2001 to 21-11-2001 by irregular availmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avail SSI Exemption. The appellants clear the excisable goods under cover of the invoices. The clearances so effected by them are well within the SSI exemption limit. Reference was invited to pages 508 and 509 of additional paper book filed on 18-7-2006. In order to meet the orders received from the customers, which is beyond the manufacturing capacity, the appellants get the various of parts of hammer assembly manufactured on job work basis from a number of job workers. (ii) The learned advocate brought the different parts of a hammer assembly and showed it to the Bench. A hammer assembly consists of the following parts. (a) Top unit (b) Body (c) Chuck (d) Striker (e) Stem Sleeve (f) Control Tube (g) Air Distributor (h) Bit holder The appellants procure various grades of steel and supply the same to the job workers under cover of their document called as Material Out (MTO). The various processes are cutting, rough machining, which includes drilling, boring and turning, milling, induction hardening, honing, heat treatment and finish machining. Different job workers undertake different processes. In respect of certain job workers, the parts emerges finished pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng or an earth boring tool in the absence of a bit, the question is whether the assembly of various individual items would amount to manufacture. The various parts, which constitute the Hammer Assembly were received in fully finished conditions from the job workers. This is evident from the computer extracts relied upon by the Department. As against the factual position evident from the relied upon documents, the narration of the process of manufacture in Paras 17 to 24 of the Show Cause Notice is inaccurate. Between the positions as indicated in the documents and the Show Cause Notice, the former would prevail as it is an evidence relied by the department. Once the documents relied on by the department shows that all the operations culminating in the finished machining is done at the job workers premises, then the activity that is done by the appellants would be mere collection of various items and selling them. The activity of collecting the various components, parts and materials cannot be considered as an activity amounting to manufacture. The following case laws were relied on. (a) Bartronics India Ltd. v. CCE - 2003 (151) E.L.T. 396. (b) T.I. Diamond Chain Ltd. v. CCE - 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and the weight of the finished products and that too on the basis of statements tendered by individuals. There is no evidence to show actual manufacture and sale of scrap. (xi) The Commissioner has confirmed the demand of Rs. 5,94,036/- for the year 2001-2002 on the ground that the appellants had crossed the aggregate value of clearances of Rs. 3 crores during 2000-2001. Since the demand of duty itself for 2000-2001 is not sustainable, the order denying the benefit of exemption for 2001-2002 and consequent demand of Rs. 5,94,036/- is not sustainable. (xii) For the above reasons, the entire duty demand is not sustainable. Assuming that evidence furnished by the appellants to support their case that the duty liability in respect of parts would still lie on the appellants for the reason that no correlation between the parts dispatched and parts received by the appellants from the job workers under MTI is possible, then the duty liability would be confined only to parts. During the hearing, the learned advocate submitted Annexure-A along with the synopsis of the case, wherein the duty liability has been worked out. According to the Annexure, if they have to discharge the duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing edge of the hammer is neither manufactured by the appellants nor bought by them and supplied to their buyers. In other words, the hammer assembly assembled by the appellants do not contain the working edge. We reproduce below Chapter Note 1 to Chapter 82 :- "1.Apart from blow lamps, portable forges, grinding wheels with frameworks, manicure or pedicure sets, and goods of heading No. 82.04, this Chapter covers only goods with a blade, working edge, working surface or other working part of: (a) Base metal; (b) Metal carbides or cermets; (c) Precious or semi-precious stones (natural, synthetic or reconstructed) on a support of base metal, metal carbide or cermet; or (d) Abrasive materials on a support of base metal provided that the articles have cutting teeth, flutes, grooves, or the like of base metal, which retain their identity and function after the application of the abrasive." By virtue of Note 2 of Chapter 82, the parts of DTH Hammer would be falling under CH 82.07. Therefore, we find force in the contention of the appellant that the hammer assembly cleared by them would not fall under CH 8207.00. On the other hand, the parts of Hammer assembly/DTH Hammer w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part manufactured by the job worker is received under a document known as MTI. It is the contention of the appellant that what is received from the job worker is a complete manufactured product. The evidence is available in the computer statement which contains all the details. Therefore the conclusion arrived at by the Adjudicating Authority that the appellant only is the manufacturer of the parts of Hammer Assembly is not borne out by the factual records relied by the Revenue. For example, in respect of a part known as 'Chuck', there are three operations like Buttress Threading, Direct Hardening and Finish Machining. From the operations undertaken, it is seen that the item is completed by the job worker Bluemoon Industries. In this case, in view of the various decided case laws, we have to hold that the job worker only is the manufacturer. Similarly, in respect of other parts also, there is evidence to show that the finished parts have been received by the appellant under documents known as MTI. In view of this factual position, we do not agree with the Commissioner that the appellant is the manufacturer of the parts. In our view, based on the voluminous data relied on by the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The work-sheet is reproduced below :- "Assessable Value as per Show Cause Notice Total values as per work-sheet to Show Cause Notice 1-4-1999 to 31-3-2000 2,22,24,239 LESS: Value of hammer assemblies 1,56,98,500 Balance 65,25,739 LESS: First exemption of Rs. 50 lakhs 50,00,000 Balance 15,25,739 Cum-duty value 14,53,085 5% of duty 15,25,739 In excess of Rs. 50 lakhs 72,654 1-4-2000 to 31-3-2001 6,52,23,724 LESS: Value of hammer assemblies 4,98,14,500 Balance 1,54,09,224 LESS: First exemption of Rs. 1 Cr 1,00,00,000 Balance 54,09,224 Cum-duty value 46,63,124 16% duty 7,46,100 1-4-2001 to 27-6-2001 1,82,92,691 LESS: Value of hammer assemblies 1,06,44,005 Balance 76,48,686 Cum-duty value 65,93,695 16% duty 10,54,991 TOTAL DUTY 18,73,745 In view of the above findings, the duty liability in respect of the hammer assembly and parts cleared during th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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