1. The brief facts of this case are that the appellants are manufacturers of glass and glassware falling under Chapter 17 of the Schedule to the Central Excise Tariff Act, 1985. They sell excisable goods from their factory as well as from depots situated at various places. They declared the price at which excisable goods are sold from depots as per the provisions of Rule 173C of the Central Excise Rules, 1944 in view of the amendment to Section 4 of the Central Excise Act, 1944 by Section 74 of the Finance Act, 1977. Show cause notice was issued to them proposing rejection of the assessable value declared in the price list for the period 28/09/1996 to 30/06/1998 in respect of decorated glassware sold from depots in view of fresh evidence available with the department and proposing addition of extra amount realised from the dealers to the assessable value for the recovery of differential duty due to change in the value of assessment arising out of realisation of additional amount from the dealers in respect of decorated glassware. Duty demand of Rs. 8,01,132/85 was proposed to be recovered. Further allegation in the show cause notice was that the appellant had wrongly classified products such as single neck spherical vessels and multi neck vessels of 50 litres capacity and buttress ends under CETA sub-heading 7015.00 instead of Chapter heading 70.07 and 70.01 respectively and on this ground duty of Rs. 2,65,791.80 was proposed to be recovered for the period 01/01/1998 to 27/02/1999.
2. The appellants filed reply to the show cause notice on 25/05/1999 explaining that plain glassware like drinking glasses were cleared from their factory premises on payment of appropriate duty. Assessable value of plain glasses were declared on the basis of the price charged in respect of plain glass sold from depots and some of the plain glasses which were removed from the factory on payment of duty were sent to job workers who carried out the process of decoration and returned them to the appellants' depot/godown. The appellants also submitted that the amendment to Section 4 of the Central Excise Act whereby "place of removal" was defined so as to include depots was not relevant in respect of assessable value of goods cleared on payment of duty and subsequently decorated by job workers and sold from depots. The appellants also contended that the process of decorating plain glasses did not amount to manufacture. As regards the spherical vessels and multi neck vessels the appellants contested the notice not only on the ground of time bar since such goods were cleared after approval of classification list but also on the ground that they were mostly used for chemical reaction in industries and therefore fall for classification under Chapter heading 70.15 and were not used for conveyance or packing so as to bring them within the coverage of heading 70.07. As regards the buttress ends they contested the proposed classification under heading 70.01 for the reason that the goods in question were not "closed rods or tubes unworked" but were further worked. The Additional Commissioner confirmed the demands raised in the show cause notice, imposed penalty equal to duty amount in respect of decorated glasses, imposed a penalty of Rs. 5,000/- on the second notice, who is the Director of the appellant company and also confiscated the plant and machinery with an option to redeem the same on payment of fine of Rs. 50,000/-. Hence the appeal.
3. We have heard Shri M.H. Patil, learned counsel for the appellants and Shri A.K. Jain, learned DR for the Revenue. Our findings on the various issues are as under: 4. Issue No : 1- Whether the cost of decoration of plain glasses is liable to be included in the assessable value of the decorated glass sold from the depots : First of all we see substance in the appellant's submission that the process of decoration by heat transfer of motifs on the plain glasses manufactured by them does not amount to manufacture in the light of the judgment of the Hon'ble Supreme Court in the case of Union of India v. J.G. Glass Industries Ltd. 1998 (97) ELT 5 (SC).
In this case the apex Court held that in order to determine whether a particular process amounts to manufacture a two fold test has to be applied. First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceased to exist, and, secondly whether the commodity which was already in existence will serve no purpose or will be of no commercial use but for the said process. Applying the twin tests set out above we find, first that the identity of the original commodity, namely plain glasses continues and it has not ceased to exist. Secondly plain glasses will serve the same purpose namely, of holding water or other liquids as that to be served by the decorated glasses. In fact the show cause notice, adjudication order and the impugned order do not proceed on the basis that the process of decoration carried out be the job workers on the plain glasses manufactured by the appellants amounts to manufacture. The grounds on which it proposes to add the cost of decoration to the assessable value of the glasses is that the extra charges collected by the assessees over and above the invoice value collected from dealers through sales invoices issued from depots is to be included in the light of the amended definition of "place of removal" in Section 4 (4)(b) of the Central Excise Act. Let us examine this. Prior to amendment of Section 4 (4)(b) the definition of place of removal was: "(i) a factory or any other place or premises of production of manufacture of excisable goods: or (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed....." After the amendment w.e.f. 28/09/1996 Section 4(4)(b) defined place of removal as: "(i) a factory or any other place or premises of production of manufacture of excisable goods, (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty.
(iii) a depot, premises of a consignment against or any other place of premises from where the excisable goods are to be sold after their clearance from the factory and, from where such goods are removed." 5. Thus after the amendment the scope of 'place of removal' has been widened. However, although the department can travel to the depots, etc., for the purpose of 'place of removal', it still has to go back to the factory when time of removal is to be ascertained, in view of the Clause (b)(a) of Section 4(4). This clauses states that "time of removal in respect of goods removed from the place of removal referred to in Sub-clause (iii) of Clause (b) shall be deemed to be the time at which such goods are cleared from the factory". In other words whenever goods are removed from the depots such goods are to be valued with reference to the time when they were removed from the factory. This is the view expressed by the Tribunal in the case of Castrol India Ltd. v.CCE, New Delhi 200 (118) ELT 35, the relevant paragraphs of which are reproduced below: "5. "Time of removal" has also been defined with reference to the place of removal, namely, depot by Sub-clause (ba) to Clause (iv) of Section 4. That definition reads: "'time of removal' in respect of goods removed from the place of removal referred to in Sub-clause (iii) of Clause (b), shall be deemed to be the time at which such goods are cleared from the factory." So, in the case of removal of goods from depot the time of removal should be the time at which such goods were cleared from the factory. In other words, time and place of removal provided by Section 4(1)(a), in relation to goods removed from the depot will be the factory gate and depot, respectively. Whenever goods are removed from depot, such goods are to be valued with reference to the time when it was removed from the factory.
Looking on it from another angle the price at which the decorated glasses are sold at depot gate cannot be applied to plain glasses removed from the factory gate for the reason that the goods are different and are not "such goods" for the purpose of determining the assessable goods in terms of Section 4(1)(a). In the case of Savita Chemicals Ltd. v. CCE, Mumbai VI 2000 (119) ELT 394 the Tribunal held that the price at which containerised goods are sold form the depot gate cannot be applied to bulk oil cleared from the factory gate to the depots and that the factory gate price has to be adopted. Since oil cleared in bulk cannot be even comparable with oil packed in containers of smaller tanks, let alone to be treated as "such goods" for the purpose of arriving at assessable value in terms of Section 4(4)(a) which provides that where excise duty is chargeable on any exercisable goods with reference to value, such value shall be deemed to be the normal price thereof, i.e., to say the price at which such goods are ordinary sole by the assessee to a buyer in the case of wholesale trade for delivery.
6. The Revenue's appeal against both the above judgments of the Tribunal have been dismissed by the apex Court. The dismissal of the appeal of Revenue against the order in Castrol India Ltd. v. CCE is reported in 2000 (121) ELT A224 while the dismissal of the Revenue's appeal against the order in Savita Chemicals Ltd. v. CCE is reported in 2001 (130) ELT A262. In addition we note that that the CBEC has issued circular F. No. 139/8/2000-CX.4 dated 03/01/2001 stating that the advice of Law Ministry that the department cannot charge duty on value addition outside the factory of clearance on account of certain process not amounting to manufacture of manufactured goods in a separate/other unit of the same group or by any independent job worker, has been accepted by the Board.
7. In the light of the above discussion we hold that the cost of decoration is not required to be included in the value of plain glasses manufactured and cleared by the appellants herein.
8. Issue No : 2 - Classification of single neck spherical vessels and multi neck vessels of 50 litres capacity : The department has confirmed the classification of these items under heading 70.07 holding them to be glass containers of a kind commonly used for commercially for the conveyance or packing of liquids or solid products. The department has relied upon certain investigations showing blow bottom cylinders are glass containers commonly used commercially for conveyance or packing of liquids or solids. The nature of the investigation is not disclosed.
On the other hand the assessees have filed evidence in the form of letters from various customers specifically stating that 50 litres multi neck vessels are used for distillation, reaction, etc., for the manufacture for fine chemicals. We have also seen the brochures for these items which bear out the contention of the assessees. The vessels and containers in question cannot be treated as those for conveying or packing anything as the single neck or multi neck are open and the container is also open, having no lid or stopper to prevent spillage, which is absolutely necessary particularly in the case of chemicals. In the light of the above we hold that the appellants' claim of classification of these items under heading 70.15, which covers "other articles of glass including those of a kind for table, kitchen, office, indoor decoration or similar purpose (other than that of heading 70.07 or 70.13)" is to be approved and accordingly uphold their contention and set aside their classification under heading 70.07.
9. Issue No: 3 - Classification of Buttress Ends : Right from the beginning the appellants' stand is that the buttress ends are not unworked rods or tubes so as to attract classification under heading 70.01. They have explained the process of manufacture in annexure IV to the reply to the show cause notice as under.
"The sizes 25 mm, 40 mm and 80 mm buttress ends are made from tubing. Tubing of the required diameter is taken and cut to the required sizes. It is then heated at one end and melted. The process is generally done on a lathe. The molten portion is then pressed by means of special tools and the required shape of the buttress ends is formed on the tube and then it is annealed.
"Buttress ends of sizes 100 mm and 150 mm are manufactured by pressing process. The molten glass from the furnace which is around 1600^ collected by means of a robot or manually by using a rod.
The collected glass is taken out of the furnace and then cut and dropped into a mould body. This molten glass is then pressed by means of a plunger and the shape is controlled by a ring. The molten glass takes the shape of the void between the plunger, ring and mould body. When the glass cools down, the pressed item is taken out of the mould and then it is annealed.
"Though the size of 25 mm to 80 mm are made out of tubing they cannot be treated as glass tubing, unworked. Hence they cannot be classified under 9001.90. As far as the bigger sizes like 100 mm and 150 mm are concerned, they have no relation with tubing. Hence they cannot be classified under 7001.90." 10. In the reply they have categorically stated that working takes place and hence Chapter 70.01 will not be applicable. We find that there is nothing to rebut the assessee's contention in this respect. We have also seen a sample of the product in dispute and are satisfied that working has been carried out. The authorities below have relied upon investigation that buttress ends are used in the industry as pipelines in chemical plant equipment. The appellants stated that the unworked glass rods/tubes are used in the industry but the demand is not on plain unworked rods/tubes but on buttress ends which are worked products. This contention is also not rebutted by the Revenue. We find that the contention is correct in the light of the language of the show cause notice proposing classification of buttress ends (and not plain unworked rods/tubes) under heading 70.01. Since buttress ends are not unworked rods/tubes, classification under heading 7001.90 is clearly erroneous. We therefore set aside the same and hold that this product has been correctly classified by the assessees under heading 70.15.
11. Issue No. 4 - Benefit of Notification No. 5/98 dated 02/06/1998 in terms of serial No. 189 of the table annexed thereof : The alternative contention of the appellants regarding single neck/multi neck vessels and flat bottom cylinders, even if they are held to be classifiable under heading 70.07, they are partially exempt from payment of duty under the above mentioned Notification where the rate of duty is 8% as against the rate of 16% applied by the authorities below. We have perused the notification which grants concessional rate of duty inter alia to glassware produced by mouth blown process falling under Chapter 70. The appellants' claim that 50 litre single/multi neck vessels and flat bottom cylinders are produced by the mouth blown process has not been disputed by the Revenue. In fact the second notice in his statement recorded on 12/03/1999 has stated that 50 litre vessels and cylinders are mouth blown and the notice does not rebut the same but accepts that these two are mouth blown vessels. Therefore, although we have held that duty was correctly paid on these items under heading 70.15 by the appellants we further hold that the benefit of concessional rate of duty @ 8% under Notification 5/98 is available to them.
12. Issue No. 5 - Whether the demand is barred by limitation : The appellants contend that the demand of 8,01,132.85 on decorated glassware is entirely barred by limitation since the period covered i.e. 28/09/1996 to 30/06/1998 is entirely beyond the period of 6 months from the date of issue of show cause notice i.e., 31/03/1999 and that the demand in respect of the other disputed products is partly time barred since the period is 01/01/1998 to 27/02/1999 while the show cause notice dated is 31/03/1999. The authorities below have relied upon the provisions of Section 110 of the Central Excise Act, 1944 to hold that the demand can be raised at any point of time. Further the adjudicating authority has sought to establish suppression in respect of the decorated glassware on the ground that the changing of higher value of decorated glassware was not reflected in the prescribed statutory documents such as price lists, annexures, declarations filed by the assessee.
13. As regards the protection under Section 110 of the Finance Act we note that this provisions removes the impediment placed on the Revenue for issue of show cause notices within the normal period of 6 months in the face of the earlier approval of a classification list. In other words where the prior period of 6 months is concerned the demand can be confirmed by resorting to Section 11A but whereas for the extended period, Section 110 does not disp(sic) with the prima facie requirement that mis-declaration or fraud by the assessee with intention to evade payment of duty, has to be established. This is the view expressed by the Tribunal in the case of M/S Gareware Polyester Ltd. v. CCE, Surat-II Order No. CI/1541/WZB/2001 dated 19/05/2001. Coming to the question of alleged suppression of charging of higher value of decorated glassware, we note that the fact of the appellants getting plain glass manufactured by them decorated by job workers after clearance from the factory on payment of duty was known to the department and hence suppression or mis-statement cannot be attributed to them. For the above reasons and following the ratio of the Tribunal's order in the case of Gareware Polyester Ltd. (supra) we hold that the demand of duty on decorated glassware is barred by limitation.
14. The argument that the demand on the remaining items is partly barred by limitation is also required to be accepted in the absence of any allegation of suppression, mis-statement, etc., in respect of these goods and in the light of the Tribunal's decision in the case of Gareware Polyester Ltd. cited supra .