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TMI Blog2015 (12) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... lt to accept that the assessee was under bona fide belief that excise duty was not payable and that it was not permissible for the Department to avail the larger period of limitation by invoking proviso to Section 11A of the Act. - impugned notice is not time barred - Decided against Assessee. - Civil Appeal Nos. 5784-5788 of 2007, Civil Appeal Nos. 9196-9202 of 2012 - - - Dated:- 14-12-2015 - A. K. Sikri And Rohinton Fali Nariman, JJ. JUDGMENT A. K. Sikri, J. The assessee/manufacturer in the instant appeals, has commended this Court to decide the following questions of law which arise for consideration in these appeals: (a) Whether the process of cold-rolling undertaken by the assessee on the hot-rolled stainless steel patta/pattis amount to 'manufacture' within the meaning of Section 2(f)(i) of the Central Excise Act, 1944? (b) Whether the Custom Excise Service Tax Appellate Tribunal (CESTAT) was correct in holding that the process of cold-rolling of stainless steel patta/pattis amounts to manufacture in view of Chapter No.4 of Chapter No.72 of the Central Excise Tariff Act, 1985, when the said Chapter Note was not even referred to or relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and imposing penalty of ₹ 12,32,563/- on the assessee. The Commissioner held the process of cold-rolling to be amounting to manufacture, in terms of Chapter Note 4 to Chapter 72. The Commissioner also imposed penalties on the suppliers of the materials. On the appeals filed by the assessee and the suppliers of the cold rolled SS patta/patti, the Tribunal by a 2-1 majority held that the process of cold-rolling amounts to manufacture in view of Chapter Note 4 to Chapter 72. The majority of the Tribunal further held that the extended period of limitation under proviso to Section 11A of the Act is invokable and accordingly confirmed the duty demands and the penalties imposed by the Commissioner. 5. It is in the aforesaid backdrop the questions of law formulated/raised by the appellants need to be decided. 6. We first advert to the central and crucial issue, namely, whether the gauge reduction of the hot rolled SS patta/pattis by coldrolling process will amount to manufacture of a new product attracting further central excise duty. As we have already pointed out above, the Department seeks to include the said item of the assessee under Chapter Heading 7220.20. Chapter 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surface finished, better aptitude to cold forming, stricter tolerances, generally reduced thickness, higher mechanical strength, etc.), the products of this heading are in general use for purposes different from those of their hot rolled counterparts, which they increasingly tend to replace. They are used, in particular, in the manufacture of automobile bodies, metal furniture, domestic appliance, and central heating radiators and for producing angles, shapes and sections by cold process (either forming or profiling). They are easy to coat (by tinplating, electroplating, varnishing, enamelling, lacquering, painting, coating with plastics, etc.). They are often delivered after annealing, normalizing or other heat treatment. 8. From the above, he concluded that the explanatory notes to HSN also lends support to the fact that hot rolled products and coldrolled products are two distinct products having their own identity, name, character and use. Cold-rolled strips are used for making cycle/auto-parts etc., whereas hot rolled strips cannot be used for this purpose. The order, thus, proceeded to hold that cold-rolled strips are entirely different than hot-rolled strips which forms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of Nomenclature known as HSN Explanatory Notes was referred to by both the sides. These notes correspond to the Chapter sub-headings of the Schedule to the Tariff Act. The HSN throw considerable light on the process of production in iron and steel industries. To begin with, in the present context, semi-finished products and in certain cases ingots are converted into finished products which are generally sub-divided into flat products ( wide flats including universal plates, wide coil, sheets, plates and strip) and long products (bars and rods, hot-rolled, in irregularly would coils, other bars and rods, angles, shapes, sections and wire). These products are obtained by plastic deformation, either hot, directly from ingots or semi-finished products (by hot-rolling, forging or hot-drawing); or cold, indirectly from hot finished products (by cold rolling, extrusion, wire, drawing, bright-drawing), followed in some cases by finishing operations (e.g., cold-finished bars obtained by centreless grinding or by precision turning). In the category of hot plastic deformation, hotrolling means rolling at a temperature between the point of rapid recrystallization and that of the beginning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly so by a cold-reducing or cold-rolling or cold-working, hardening of the flat rolled product/strips can be achieved. Heat treatment for hardening or tempering may be suited for particular products while cold-rolling or cold-working may be suited for hardening or tempering other kinds of products. Therefore, by merely referring to hardening or tempering by process of heat treatment, one cannot shut out the entire cold-rolling or cold-working processes which bring about hardening or tempering. In the midst of technical literature produced on behalf of the appellant, there are certain excerpts from 'Material Science and Metallurgy', Chapter 57 of which deals with mechanical working processes. Mechanical working of metals may either by (i) Hot working, or (ii) Cold working. Plastic deformation of a metal above the recrystallization temperature, but below the melting or burning point is called hot working whereas plastic deformation of a metal below its recrystallization temperature is known as cold working. In that chapter, there is an analysis done on principles of hot and cold working of metals and their effects on mechanical properties. The purposes of hot working and its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther areas of manufacturing. To meet the various end use requirements, cold-rolled sheet products are metallurgically designed to provide specific attributes such as high formability, deep drawabiliity, high strength, high dent resistance, good magnetic properties, enamelability and paintability. The primary feature of cold reduction is to reduce the thickness of hot-rolled coils into thinner thicknesses that are not generally attainable in the hot rolled state. Cold reduction operation induces very high strains (work hardening) into the sheet. Thus, the sheet not only becomes thinner, but also becomes much harder, less ductile, and very difficult to form. However, after the cold-reduced product is annealed (heated to high temperature), it becomes very soft and formable. Tempering is a form of cold rolling that gives the steel a precise amount of hardness on the outer surface of the steel. Cold rolling is undertaken to reduce the thickness, improve the surface finish, improve the thickness tolerances, to offer a range of tempers and as a preparation for surface coating. Thus, cold-rolling process is also a process of hardening or tempering which is applied to flat rolled products, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that the matter came to the notice of the Revenue which led to the exercise of issuing of notice. It so happened that on the basis of intelligence, the Officers of Central Excise Department visited and searched the said factory premises on 25.03.1999 in the presence of two independent panchas and Shri Rajnibhai Veljibhai Katharia, partner of assessee and seized certain records for which panchnama dated 25.03.1999 was prepared. Officers in the panchnama observed that the two housing of cold-rolling mills fitted with debapti and gearbox were found installed and other parts were not found in the said rolling mills. During the course of panchnama itself, it was stated by Shri Rajnibhai in presence of panchas: (a) That the said factory was engaged in the reduction of gauge (15 gauge to 20 gauge) of hot-rolled SS patta, received from various parties on two cold-rolling installed in the factory from November, 1995 to March, 1997; (b) That hot-rolled SS pattas after annealing and picking process were received from various units in his factory and after reducing the gauge from (15 to 20 gauge) in his factory, the same was sent back to senders on job charges of ₹ 1.50 per K ..... X X X X Extracts X X X X X X X X Extracts X X X X
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