Full Judgment
2. Since, the issues involved are similar in these three appeals, they are, therefore, clubbed together and are being disposed of by this common order.
3. The facts of the case in brief relating to these issues are that appellants M/s Texmaco Ltd. manufacturers of wagons. These wagons were supplied to the Railways on payment of duty calculated on the value of the wagon bodies only without including the value of the wheel sets supplied by the Railways and on which the wagon body was mounted on the ground that the appellants manufactured only the wagon body on the wheel sets supplied by the Railways and that they did not also charge for the value of such wheel sets in the invoices. The Assistant Collector who adjudicated the proceedings observed that a wagon is complete only when the wagon body is fitted to the wheel sets. That since they mount the wagon body on the wheel sets and deliver the wagons to the Railways after testing the operational capability, they become the manufacturers of the complete wagons and for that reason their duty liability rests on the value of complete wagons delivered to the Railways and accordingly he raised the demand on the value of wheel sets which was not included in the value of the wagons at the time of clearances. The contentions of the appellants that they were entitled to concession under Notification 120/75 dated 30-4-1975, required to pay duty on the charges contracted for the job work under Notification 119/75 dated 30-4-1975 and time barring aspect in raising demands were negatived by the Assistant Collector as well as by the Appellate Collector in appeal. Hence, these three appeals. We have heard Shri S.K. Bagaria with Ms. Rohina Agarwal learned advocate for the appellants and Smt. S. Baliga learned SDR for the respondent.
4. The following issues arise for our consideration in these three appeals : 1. Whether the demand is barred by limitation for the part of the period in Appeal No. 945/80-A. 2. Whether the appellants are entitled to the benefit of exemption Notification No. 120/75-CE, dated 30-4-1975.
3. On facts and circumstances of the case whether the appellants are entitled to the benefit of exemption Notification No. 119/75, dated 30-4-1975.
4. In the facts and circumstances of the case whether Appellate Collector was justified in invoking/substituting Rule l0A/for Rule 10, at the appeal stage in Appeal No. 586/81A. 5. Whether the proceedings initiated either under Rule 10 or Rule 10A can survive after 6-8-1977 in the absence of saving clause.
5. The first issue (a) relates to the part of the period in Appeal No.945/80-A. Shri S.K. Bagaria submitted that show cause notice dated 12-12-1977, related to the period from June, 1976 to November, 1977. In the absence of allegation of mis-statement or suppression of fact, notice issued under Rule 10 read with Rule 173 PP was barred by time beyond six months. He stated that this issue is covered by the decision of this Tribunal in the appellants' case as per Order No. 19/89-A, dated 10-1-1989 wherein the Tribunal held that longer period of limitation cannot be applied on similar worded notice for the earlier period. On going through the facts and circumstances and in view of the wordings used in the show cause notice, we fully concur with the earlier view taken by the Tribunal in this regard and accordingly we hold that show cause notice in so far as it related to the period from June, 1976 to December, 1976 was barred by time. Accordingly, appellants succeed on this issue.
6. The issue as regard the applicability of Notification No. 120/75, Sri Bagaria, contended that appellants are entitled to exemption under the said Notification as the formalities were complied with by the appellants and further this issue is covered by a decision of this Tribunal in the case of Bridge and Roof Company (India) Ltd. v.Collector of Central Excise [1986 (24) ELT 671]. But, on the other hand, Smt. Baliga appearing for the revenue submitted that this issue is settled by the decision of this Tribunal in the case of Bhartia Electric Steel Company Ltd. v. Collector of Central Excise [1988 (38) ELT 169]. While countering the arguments Shri Bagaria contended that issue in this case is not the issue as regards the determination of the assessable value under Section 4 of the Act, as it was considered in that case relying upon the decision of the Supreme Court in the case of Empire Industries Ltd. [1985 (20) ELT 179], Furthermore that case-did not relate to the fabrication of wagon bodies and mounting them on wheel sets, but it was as regards fabrication of bogies and use of wheels and axles in such fabrication works. In fact, bogies are essential parts of wheel sets and it is with the help of bogies that wheel sets are fitted to the wagon bodies. Wagons as such are altogether different from bogies. He said that Notification No. 120/75 was issued under Rule 8 for grant of exemption. It cannot be said to be a Notification providing only for doing away with the procedural formalities but to grant exemption as it was issued under Rule 8. The invoice price and assessable value under Section 4 are bound to be different and if both are equated there would be no scope to avail exemption under Notification 120/75. Notification 120/75 will not be available in cases where the invoice price itself is manipulated one, as the appropriate safeguards were provided in the said notification itself and as it was evident from the decision of this Tribunal in the cases of Diamond Clock Manufacturing Company Ltd. v. Collector of Central ExciseElecon (Madras) Ltd. v. Collector of Central Excise -1989 (41) ELT 589. He said that it is not the case of Department that the prices charged by the appellants were manipulated one or that any underhand consideration was received by the appellants from Government of India. He urged that invoice price mentioned in Notification No. 120/75-CE would be the price charged by the manufacturer for sale of the goods manufactured. The term sale has been defined in Section 2(b) of the Act which has been equated with the transfer of possession.
7. On going through the facts and in view of the clear findings given by the lower authorities that no wagon is complete without the wheels; what has been cleared and removed by the appellants is the wagon mounted on wheel sets and not the wagon body alone. We are unable to agree with the arguments of the appellants' counsel that assessable value of the article is different from the consideration received by the appellants to claim benefit under Notification 120/75. On the issue of determination of assessable value, the Supreme Court has held that for the purpose of levy of excise duty, the value of the article is the full intrinsic value of-the article inclusive of the cost of the materials and components supplied free by the customer and irrespective of the fact that no expenditure was incurred by the manufacturer on such components. To claim exemption on benefit under Notification 120/75 it should be subjected to in compliance with the conditions specified therein. Condition No. IV of Notification No. 120/75 required that the invoice value should be the full commercial price of the article. According to the decision of the Supreme Court (Supra) the value of the article is the intrinsic value and not restricted to consideration received by the appellants as urged by the appellants' counsel. In the view we have taken, the appellants are not entitled to concession under Notification No. 120/75 dated 30-4-1975.
8. As regards issue No. 3, on applicability of Notification No.119/75-CE., dated 30-4-1975, Shri Bagaria submitted that the appellants have done job work on behalf of Railways as per the expression 'Job Work' explained in the explanation to this Notification and, accordingly, duty was payable only on job charges and no further duty was payable as it was exempted. Smt. Baliga, S.D.R. drew our attention to the decision of this Tribunal in the case of National Organic Chemicals Industries v. Collector of Central Excise -1985 (21) ELT' 252 wherein it was held that Notification No. 119/75-CE cannot be applied if there is a manufacture in the primary sense of the term and that the said notification can only apply if the manufacturing activities in question are of incidental or ancillary type. While rejecting this plea Shri Bagaria said that it is no longer a good law in view of the fact that Supreme Court has taken consistent view that if a person only undertakes the incidental or ancillary activities, he would not be liable topay central excise duty and in support of this contention he cited the following decisions :-Siddheshwari Cotton Mills (P) Ltd. v. Union of India -1989 (39) ELT 498.Collector of Central Excise v. Kiran Spinning Mills -1988 (34) ELT 5.Collector of Central Excise, Madras v. Kuttty Flush Doors & Furniture Co. (P) Ltd. 9. He said that the above decisions have been recently delivered by the Supreme Court particularly in the year 1989 and 1990 and accordingly the processes of calander- , ing, cutting, sawing, galvanisation etc.
were incidental process which do not amount to manufacture and consequently no duty is payable. Obviously, if there is no duty liability the question of granting any exemption does not arise. It was contended by him that in view of these recent Supreme Court decisions, the scope of Notification cannot be restricted to manufacturing activities which are of mere incidental or ancillary. He said that same view was taken by the different High Courts after the decision of the Tribunal in the case of National Organic Chemicals Limited, and he cited the following decisions :- (i) KEC International Limited v. Union of India - 1988 (36) ELT 31 - Bombay High Court.
(ii) Indian Hume Pipe Co. Ltd. v. Union of India -1986 (26) ELT 685 - Bombay High Court.Precision Telecon v. Superintendent of Central Excise -1986 (24) ELT 235 -Karnataka High Court.
10. On going through the facts relating to this issue we find that this is not the case where everything was supplied by the Railways and mere fabrication of wagon with the wheel was done by the appellants as 'Job Work' for job charges. They are the manufacturer of wagon body and supplied the wagons to Railways after having done fabrication of wagon with the wheel sets supplied by the Railways and other materials manufactured by the appellants. In view of this fact, the activity of manufacturing process done by the appellants cannot be considered to be a 'Job Work' as per explanation to the Notification No. 119/75 dated 30-4-1975. The relevant Notification is reproduced as under : "In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) manufactured in a Factory as a job work, from so much of the duty of excise leviable thereon as is in excess of the duty calculated on the basis of the amount charged for the job work.
Explanation. - For the purposes of this notification, the expression 'job work' shall mean such items of work where an article intended to undergo manufacturing process is supplied to the job worker and the article is returned by the job worker to the supplier, after the article has undergone the intended manufacturing process, on charging only for the job work done by him." 11. After going through the decisions cited by the learned counsel for the appellants, an inference can be drawn that this exemption notification is no longer applicable to the cases of manufacturing activities if they are mere incidental or ancillary, as the duty itself is exempted on such activity. But such an inference will not empower us to extend the benefit of the said notification to cases of this type invoking manufacturing activity other than mere manufacturing process of incidental or ancillary, in the absence of direct decision of the Supreme Court on this issue. The Tribunal being a creature under the statute cannot go beyond its jurisdiction either in expending the benefit of said notification or curing defect if any, in the provisions of the relevant statute. Furthermore, the said notification is applicable to a 'Job Worker' and in the present case in view of the findings given by the lower authorities the appellants are not Job Worker for entitlement of concession under the said notification. But the Appellate Collector has rejected the benefit of this notification on the ground that articles which were received were not returned after processing, but something entirely different were returned. This does not seem to be sound proposition for rejection and on this ground the benefit cannot be denied to a 'Job Worker' in view of development of law in this regard. With these observations, we hold that appellants are not entitled to the benefit of exemption Notification No. 119/75, dated 30-4-1975.
12. Issue No. 4 relates to Appeal No. 586/86-A only. It was contended by the learned counsel for the appellants that originally show cause notice was issued under Rule 10 of the Central Excise Rules, 1944 but subsequently it was changed to Rule 10-A by the Appellate Collector at appeal stage which is without jurisdiction. Further he submitted that the said Rule 10-A was not in force either at the time of passing the original order by the Appellate Collector on 3-11-1977 or at the time of passing the Appeal Order on 26-10-1978.
13. It is evident from the records that in Appeal No. 586/86, the show cause notice was issued on 22-11-1976 under Rule 10 of the Central Excise Rules, 1944. It related to the period from March, 1975 and May, 1975 to May, 1976. The Appellate Collector during the appeal proceedings invoked Rule 10-A on the ground that Rule 10-A was appropriate rule and not Rule 10 as there was wilful action on the part of the appellants which resulted in the short levy. As on the date of issue of show cause notice there were two Rules which provided for the recovery of the short duty levied. Rule 10 applied when duties or charges have been short levied through inadvertance, error, collusion or misconstruction on the part of an officer, or through mis-statements as to the quality, description or value of such goods on the part of the owner. Under this Rule read with Rule 173 there was time limit of one year for making demands for duties short levied. There was no time limit under Rule 10-A. In a way it was a residuary section. But once it was initiated under Rule 10 of the Central Excise Rules, it was not open to the appellate authority to invoke the larger period under Rule 10-A on some other ground. It is in excess of his jurisdiction. In the view, we have taken, we hold that Appellate Collector was not justified in invoking under Rule 10-A of the Central Excise Rules, 1944.
Accordingly the department fails on this issue.
14. Issue No. 5 relates to Appeal No. 586 and 587/81-A. The contention of the appellants relating to this issue is that proceeding initiated either under Rule 10 or Rule 10-A cannot survive, as the said rules have been deleted with effect from 6-8-1977 and such deletion has been made without saving clause.
15. This issue is covered by the earlier decision of this Tribunal, in the case of Atma Steels Pvt. Ltd. v. Collector of Central Excise, Chandigarh and Ors. reported in 1984 (17) ELT 331, it was held that the proceedings initiated with reference to a rule or provision validly subsisting at the time of initiation proceedings can continue in spite of repeal or substitution of original proceedings. This was further followed in the case of Jaipur Udyog Ltd. Sawaimadhopur v. Collector of Central Excise, Jaipur - 1987 (27) ELT 177 and in other subsequent cases. We feel this issue was well considered in these cases and we fully concur with this view. Accordingly, the appellants fail on this issue.