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TMI Blog2003 (8) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... 987 to 31-7-1990 and Show Cause Notice dated 25-3-1991 demanding duty for the period 1-8-1990 to April, 1992 were issued. The Collector, Central Excise, Hyderabad, dropped further proceedings on the above said Show Cause Notices vide Order-in-Original No. 172/91 and O-I-O No. 61/92 holding that the stators received from job workers had all essential characteristics of fully manufactured goods i.e. stators and hence no new product emerged even when they underwent the processes of shaping, varnishing and baking. The Department filed an appeal to Tribunal and the Tribunal held that the processes undertaken on such stators received i.e. processes of shaping, varnishing and baking amounted to 'manufacture' vide their Order in Appeal Nos. E/257/93 and E/657/92. The appellants, aggrieved by this decision, have moved the Apex Court and the issue for the above said period i.e. from 1-1-1987 to April, 1992 is now pending decision in the Apex Court. 4. However, Show Cause Notices continued to be issued demanding duties and imposition of penalties under Rules 9(2), 57A and 173Q of Central Excise Rules, 1944 on very same grounds alleging that 'process of shaping, varnishing and baking was don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, the copper wire and insulating material are removed, scrapped and the stator stacks (outer lamination bundles) are reclaimed. Wherever reclaimed stator stacks are found damaged, they are remade and repaired by cutting out the damaged portion and adding new laminations in their place. In some cases, Stator stacks of one model are cut and made into stator stacks for another model. 9.5 Besides, stator stacks other raw materials required for the manufacture of stators are polyester films, copper enameled winding wire, cable and terminal clips. TPIL purchase these raw materials from outside. Polyester film received by TPIL factory is sent to job workers under Rule 57F(2) procedure for the manufacture of coils, wedges and barriers. The job workers cut polyester film into required shapes and sizes which are used as insulating material (mylar insulation) and return the same to TPIL factory. The Enameled copper wire received by the factory is coiled into required sizes and quantity in the factory as per technical specifications of different models of Compressors. Cables and terminal clips received are also sent to job workers for assembly into cable assembly and received back into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insulation and thereby shorten the life of the Compressor. In addition to this, varnishing and baking provide additional insulation to the winding wires for longer life. 10. On the basis of the above activities and processes undertaken at service centre by TPIL, it is clear that :- (i) The stators in a marketable form came into existence only in the hands of TPIL not at the hand of job workers. (ii) The job worker just fixes the winding wire and insulation pieces in their place in the lamination stacks and connects the copper coil with the cable assembly by brazing. (iii) After the receipt of stator stacks (from job worker) shaping of over hangs, testing, varnishing and baking are done in the service centre. (iv) Shaping is a process done by pressing in hydraulic press and this is essential to make stator sit into assembly perfectly. If shaping is not done it may lead to short circuit. After shaping stators are subjected to surge test. This is a quality test, which is important to locate any defect in the insulation and winding done on the stator stacks. Varnishing and baking are essential for imparting rigidity and this prevents vibration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage. They are not marketable at that stage. Only after further processing of shaping, testing, varnishing the manufacture of stator is complete. The fact that the stator at the job workers have all the characteristics of fully manufactured stators may be relevant for the purpose of classification but is irrelevant to decide if processes like shaping, testing, varnishing and baking carried out at the service centre amount to manufacture of stator. The stator becomes fully manufactured at the service centre only when it becomes ready for use in the compressors. Hence payment of duty at the job workers does not arise as there goods are only in semi-finished. thereafter he concluded, after noting that Tribunal, vide order in appellants own case, vide Order Nos. 3003 and 3004/97, dated 8-11-97 in Appeal Nos. E/257/93 and E/657/92 had held that stator is 'marketable product' coming into existence at the Service Centre of TPIL and not at job workers hands, the contention of the assessee that activities carried out at Service Centre do not amount to manufacture cannot be accepted, even if varnishing and baking at Service Centre was discontinued at Service Centre and undertaken at job w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced contemporaneous documents, like purchase orders and bills, etc. indicating that the rates to the job workers have been raised from Rs. 6/- to Rs. 56/-. Consequent to the additional processes required to be conducted at the job workers end. (ii) This was the very submission made in reply to the Show Cause Notice, the finding of the adjudicator that no evidence was produced, therefore, cannot be accepted. When the said contemporaneous documents have been produced, before us, there is no reason to believe that the company would not have produced the documents before the adjudicator. The reasons arrived at by the adjudicator to reject the plea of shifting the processes of Shaping, Varnishing and Baking to the premises of the job workers, therefore, cannot be upheld. Since the Tribunal order relied upon by the Commissioner in very clear terms held the items to be marketable and thus excisable only after the processes of Shaping, Varnishing and Baking were completed, it was incumbent upon the Commissioner to have determined without any ambiguity, as to at which premises, these processes were completed. When it is admitted by him that stators were received from job work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws, we cannot uphold the finding arrived at by the Commissioner, that the manufacture of the said stators took place at the premises of the appellant. The duty demands, therefore, directed on the appellants are misplaced, the Central Excise Law mandates that the manufacturer i.e. job workers in this case, shall be responsible for discharging the duty, demands should have been directed and made on them. (c) We are reinforced in coming to a finding that the appellants submissions as regards the fact whether the activities of shaping, varnishing and baking were discontinued at the Service Centre from May, 1992 and transferred to the job workers was true on facts or not, from the report of the Commissioner submitted to this Tribunal on the directions of the Tribunal dated 20-8-1999 and the Tribunal's observation thereon that prima facie the claim that activities were transferred from May, 1992 to job workers could be upheld. (d) From Para 11.3 of the adjudicator's findings, it is observed that it is admitted that at the stage of hearing, a statement on job work quantity, quantity received from factory and quantity fit for re-use and used was produced and submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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