Full Judgment
2. Shri M.P. Singh, ld. DR, submitted, that the Respondents, M/s.
Gwalior Electricals Industries manufacture power distribution transformers and parts thereof; that they were also undertaking the repairs of old transformers in which they were using L.V./H.V. coils made from DPC wire; a show cause notice was issued to them for demanding duty on DPC wire used as insulated wire; that the Dy.
Commissioner confirmed duty of Rs. 69,374/-and imposed penalty of equal amount under Rule 173Q of Central Excise Rules holding that the coil is not marketable and DPC wires in the form of LV/HV coils continue to be classified under Heading No. 85.44 of the Central Excise Tariff Act, attracting excise duty @ of 25%. He, further, mentioned that, however, Commissioner (Appeals) set aside the Adjudication Order holding that the findings of the Dy. Commissioner are contradictory to the order passed for confirmation of demand; that if DPC wire remained DPC wire after becoming HV/LV coil, no duty can be charged twice on the same product/items. The ld. DR, further, mentioned that the Appellate Tribunal, in the case of Punjab State Electricity Board v. CCE, Chandigarh - 1995 (76) E.L.T. 313, has held that a coil comes into existence as a coil only when the wire is wound around the core for the required number of turns. It becomes clear that the coil cannot be considered marketable. One cannot go and buy a coil as one could buy a transformer. Further, a coil, even if wound according to a Customer's order does not emerge as a commodity by itself. It comes into existence as a part of a transformer for the reasons that the wire is wound around the coil of the transformers. It is clear that in transformation from electrical wire into a part of transformer there is no moment in time when the coil itself exists independently as a coil.
3. Shri S.K. Agrawal, ld. Consultant submitted that transformer coils are classifiable under heading 85.04 attracting duty @ 10%; that it is well settled law that goods are to be assessed to excise duty in the form in which they are delivered to the buyer, as held in IOC Ltd. v.CCE-1987 (27) E.L.T. 482 (T); that when same goods are delivered in different forms, that form is relevant for the purpose of assessable value as held in the case of Dharamsi Morarji Chemical Ltd. v. CCE - 1996 (86) E.L.T. 538 (T). He, further, mentioned that the Tribunal in its earlier decision in the case of East India Transformers and Switch Gears Pvt. Ltd. v. CCE -1989 (43) E.L.T. 561 and further Misc. Order, as reported in 1990 (47) E.L.T. 442 (T), has held that duty should be paid on coils and other parts used in the repairing of old transformers; that on appeal the Supreme Court, in East India Transformers and Switch Gears Pvt. Ltd. v. CCE, Meerut - 1997 (92) E.L.T. 449 (S.C.), held that parts manufactured in the Factory and used for repair of old transformer within the factory are exempted under Notification No. 118/75-CE., dated 30.04.1975. The ld. Consultant, therefore, contended that it is thus clear that the coils are excisable product because the question of payment of duty or 'exemption would arise only when the goods are marketable and excisable. He also referred to the Trade Notice No. 30/98, dated 28.08.1998 issued by Commissioner, Central Excise, Bhopal, where it was mentioned that the excise duty at an appropriate rate should be paid on manufactured items (coils). He therefore, contended that coils made from DPC wire are excisable product and as such they were to pay duty only @ 10% applicable to Heading 85.04 of the Tariff and not @ 25%. Finally he submitted, that if at all it is held that they are liable to pay duty, the question of imposing penalty does not arise.
4. We have considered the submissions of both the sides. The Appellate Tribunal clearly in the case of Punjab State Electricity Board, supra, has held that fabrication of coil is not a commodity by itself and is not goods. The appeal filed by the Commissioner against the Tribunal's decision has been dismissed by the Supreme Court as reported in 1996 (83) E.L.T. 106 (S.C.). In view of the Supreme Court confirming the Tribunal's decision that coils are not goods within the meaning of Central Excise Act, we hold that the conversion of DPC wires into coils will not amount to manufacture and bringing into existence a new marketable product. The issue involved in East India Transformer and Switch Gears case, supra, was whether the repair work of transformers, undertaken by the appellants amounts to a process of manufacture and liable to fresh duty as transformers. In that case the issue was not whether the transformers coils are goods as was the situation in the case of Punjab Electricity Board. The Appellate Tribunal while deciding East India Transformers case held that the repair of transformer does not amount to manufacture and the appellants were liable to pay duty on the value of spare parts manufactured and used in the old transformers.
There was no mention of coils in the said decision. The Tribunal did not consider the question whether the coils are goods under the Central Excise Act. We also observe that excise duty cannot be charged second time on DPC wire when they are used in the repairing of old transformers as coils. However, if the Respondents had availed of Modvat Credit under Rule 57A of the Central Excise Rules they have to discharge the duty liability on DPC wires equivalent to the Modvat Credit availed of as held by the Larger Bench of the Tribunal in the case of CCE, Vadodara v. Asia Brown Boveri Ltd. - 2000 (120) E.L.T.228. We are in agreement with the ld. Consultant that the present matter is not a fit case for imposition of penalty and that too penalty equivalent to the amount of duty demanded. We, therefore, held that no penalty is imposable.