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TMI Blog2004 (3) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... the process of reduction of gauge. It is contended that the appellants did not undertake any activity which amounted to process of manufacture and therefore the product emerging out of reducing the gauge is not a new product. The appellants produced a copy of certificate of posting to show that such a letter was written along with the letter so written. This contention has to be rejected as the appellants failed to produce any evidence that such a letter was received by the department. A certificate of posting does not establish that the letter was addressed to the department unless an acknowledgement of such receipt is produced. The department's contention that the appellant (M/s. I.S.) did manufacture goods in contravention of the Central Excise Rules and Act is thus established. The Commissioner has brought out clearly at page 15 of his order as to how the appellant was aware that the activity carried out at M/s. I.S. resulted in the manufacture of excisable goods liable to duty. They chose not to get themselves registered with an intent to evade duty. Larger period of limitation is therefore invokable. Regarding the penalty u/s 11AC as imposed by the learned Commissioner, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of power. Certain records were seized from the premises. The allegation was that M/s. I.S. manufactured stainless steel pattas classifiable under Chapter 72 of the schedule to the Central Excise Tariff Act, 1985; that such manufacture was done with cold rolled machines; that the said goods were excluded from the scope of exemption for small scale industries vide Notification 8/95-C.E.; that in respect of this, they failed to obtain a registration and M/s. I.S. contravened the provisions of the Central Excise Act and Rules. The officers seized the two rolling mills, fully manufactured S.S. pattas and handed over the same for safe custody to M/s. I.S. 2. Shri Jignesh Shah, the authorised signatory, in his statement before the officers, stated that with the help of two power operated cold rolled mills they used to reduce the gauge of strips received by them from 15 to 20 gauge. The officers searched the premises of M/s. Bhoomika Strips Pvt. Ltd. and seized various documents and records as annexed to the show cause notice. During the course of the search, the officers found that two cold rolling mills were also functioning in the said premises. M/s. Bhoomika Strips were paying compou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her statement stated that except gauge reduction, no other process was being carried out in the premises of M/s. I.S. He thereupon gave details as to the quantity produced in the factory of M/s. I.S. for three years commencing from 1996 to 1999. 5. The conclusions drawn from the above facts are that hot rolled patta/patties are pickled in dilute hydrochloric acid for removal of rust and scales and then they were cold rolled between plain rolls to obtain a bright surface, closely controlled gauge, thinner gauge and a variety of tempers by passing previously hot rolled patties through the set of rolls often many times until the final size is obtained. The department's contention is that cold rolling is a generic term applied to the operation of passing unheated metal through rolls for the purpose of reducing its thickness, producing a smooth dense surface and with or without subsequent heating treatment developing controlled mechanical properties. Any single one or combination of the above three effects are the reasons for cold rolling a particular product. The department relied upon the book of "Steels, Metallurgy and Applications, 3rd Edition by D.T. Lewellyn and R.C." wherein it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling a product and therefore duty has to be discharged on a cold rolled product. He discussed the process of manufacture, cited the various authoritative books on the subject and came to this conclusion. He demanded duty on the cold rolled products manufactured by M/s. I.S., confiscated the finished cold rolled patties which have been manufactured without the factory having been registered, imposed penalties on M/s. I.S., confiscated the cold rolling mills and imposed penalties under Section 209A on Shri Jignesh Shah, Shri Sheshmal Shah, director of M/s. Bhoomika Strips Pvt. Ltd. M/s. Bhoomika Strips Pvt. Ltd., M/s. Dhanlaxmi Metals Pvt. Ltd., M/s. Navkar Metals Pvt. Ltd. and M/s. Bhagyodaya Metals Pvt. Ltd. and also demanded interest on Central Excise duty of Rs. 1,33,87,791/- from M/s. I.S. for the clearances effected without payment of duty during the period 1-12-1996 to 23-2-1999 under Section 11AB of the Central Excise Act. 9. The appellants contend that a process amounting to manufacture within the meaning of the said term as defined under the provisions of Section 2(f) has to be undergone for levying duty on the cold rolled products. The adjudicating authority relied on Chap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a new product. In various judgments, it was held that for the purpose of levying excise duty a process or an activity must amount to manufacture. In the case of CCE, Meerut v. Rishabh Velveleen Pvt. Ltd. reported in 1999 (114) E.L.T. 839, it was held that unless a process of manufacture takes place, duty cannot be levied on the goods. The reliance on chapter note 4 of Chapter 72 is totally erroneous. The appellants relied upon the following case law. Venkat Durga Aluminising Works v. CCE - 1990 (50) E.L.T. 294, Jyoti Engineering Works v. CCE - 1989 (42) E.L.T. 100, Trade Notice No. 80/91 dated 26-8-1991 issued by Indore Collectorate reported in 1991 (55) E.L.T. T63. It was also further contended that the goods as produced by the appellants are not marketable. Marketability as per the settled legal position is a relevant and important criteria for the purpose of deciding the liability to excise duty. In the case of CCE v. Steel Strips Ltd. - 1995 (77) E.L.T. 248, the Supreme Court held that cold rolling of trimming undertaken by an assessee of hot rolled untrimmed sheet did not amount to manufacture. 10. It was further contended that the goods as produced by the appellants fell un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment failed to establish in the case before it that the process amounted to manufacture by leading evidence. 13. The latest pronouncement on the issue is again by the Supreme Court in the case of CCE, Chandigarh-II v. Steel Strips - 2003 (154) E.L.T. 336 (S.C.) where the Hon'ble Court considered its decision cited supra [1995 (77) E.L.T. 248] and remanded the case directing that the issue whether cold rolling a hot rolled product amounts to manufacture be examined on the following lines : "Whether the excise authorities have led any evidence before the first adjudicating authority on the question as to whether cold rolled strips are the result of a process of manufacture undertaken by the assessee or whether the material Referred to in the order of the Assistant Commissioner is based upon his own personal knowledge or is based on authoritative publications. The burden is on the department to prove that the process of manufacture resulted in emergence of a commercially distinct product." 14. We wish to put the present appeals to the same test as indicated by the Hon'ble Supreme Court in the case cited supra. 15. The evidence as led by the department is that M/s. I.S. had brought d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gauge, and a variety of tempers, cold working by cold rolling by passing unheated, previously hot rolled patta-patties (cleaned of scale) through a set of rolls often many times until the final size is obtained. It further appeared that cold rolling is a generic term applied to the operation of passing unheated metal through rolls for the purpose of reducing its thickness, producing a smooth, dense surface and with or without subsequent heat treatment, developing controlled mechanical properties. Any single one or combination of these three effects are the reason for the cold rolling of a particular product. Actually, in terms of modern nomenclature of the steel industry, cold rolling implies a rolling operation in which the thickness of the material is reduced by a relatively small amount usually just enough to produce a superior surface or impart the desired mechanical properties to the rolled material." 18. The evidence placed before the adjudicating authority is that hot rolled strips are annealed in M/s. Bhoomika Strips, they were then taken to M/s. Indian Strips where they were subjected to rolling at room temperature to reduce its gauge to the desired level, and after this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture. While the appellants are entitled to have their opinion on whether a process of manufacture takes place or not, the department has to establish that indeed a process takes place in the appellants' matter. 23. It is under these circumstances the principle enunciated by the Supreme Court in the case of CCE, Chandigarh v. Steel Strips Ltd. cited supra has to be examined. (a) Whether excise authorities led evidence before the adjudicating authority on the question as to whether cold rolled strips are the result of a process of the manufacture undertaken by the assessee? The answer is yes. (b) Whether the material Referred to in the order is based on his own (Commissioner's) personal knowledge or is based on authoritative publications? The answer is that authoritative texts are quoted in the show cause notice to indicate what cold rolling is and how the assessee is engaged in cold rolling by subjecting the hot rolled strips to a manufacturing process. It is brought out that reducing the gauge and hardening the strips amounts to manufacture. The appellants were given an opportunity in the show cause notice to rebut the department's contention. (c) The burden cast on the depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.S. strips fell under chapter subheading 7220.90 in 1996-97, 7220.30 in 1997-98 and 7220.30 in 1998-99. 26. The department's case is that during the period in dispute, the appellants manufactured goods 'not further worked than cold rolled (cold reduced') falling under chapter sub-heading 7220.20 in 1996-97, 7220.30 in 1997-98 and 7220.30 in 1998-99 — chargeable to duty at the rates specified against these headings. The appellants' contention that their product falls under chapter sub-heading meant for 'others' attracting nil rate of duty during the relevant period is not understandable. Products not further worked than cold rolled do fall under the chapter sub-headings stated above. We therefore reject this contention as well. 27. Regarding the penalty under Section 11AC as imposed by the learned Commissioner, we observe that such a penalty is imposable in the facts and circumstances of the case. 28. Regarding penalties imposed on various appellants under Rule 209A, we observe that all the persons involved are aware that they were dealing in goods on which duty at the appropriate rate has not been discharged. The persons on whom penalties are imposed are the ones who got the job ..... X X X X Extracts X X X X X X X X Extracts X X X X
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