Vijlal Vithaldas and Sons Vs. Commissioner of C. Ex., - Court Judgment

Excerpt:
1. application by vijlal vithaldas & sons is for waiver of deposit "of duty of rs. 42.89 crores and equal amount of penalty imposed on it.application by yogesh k. shah, the partner of the applicant is for waiver of deposit of penalty of rs. 5 crores imposed on him. the duty has been demanded and penalty imposed of the finding of the commissioner that the activity carried out by vijlal vithaldas & sons (whom we refer to for convenience as the assessee) slit steel to narrow the sheets in coil form received by it, amounts to manufacture. the notice dated 20-1-2000 issued to the applicant demanded duty on clearance between april, 1995 and november, 1999 and invoked the extended period contained in sub-section (1) of section 11a of the act, alleging suppression of the fact of the activity of the appellant.2. on the merits of the issue, common counsel for the applicant relies upon the stay order of the tribunal in application e/stay-51/01 [in appeal e/66/01 in balmer lawrie & co. v. cce - 2002 (139) e.l.t. 645 (tribunal)]. in the order, the tribunal had noted that the conference of the chief commissioners held in august, 2000 to consider whether this activity amounted to manufacture was uncertain and recommended amendment to the tariff to incorporate the view that it is. we had also taken note of the trade notice no. 62/99 issued in october, 1999 of the commissioner for which it permitted to cut the coils into sheets.counsel for the applicant relies upon the judgment of the tribunal in moti laminates pvt. ltd. v. cce -1995 (76) e.l.t. 241, which according to him, lays down that the mere fact that the activity to which goods are subjected as an effect of the resultant goods falling under a different tariff heading by itself does not amount to manufacture.3. the departmental representative contends that the supreme court judgment later in lal woolen & silk mills p. ltd. v. cce - 1999 (108) e.l.t. 7 has taken a different view, holding that dyeing of grey yarn amounts to manufacture as grey yarn and dyed yarn fall in two different headings of the tariff. he further relies upon the circular of the board, following the law ministry's opinion that this process amounts to manufacture, which in turn relies upon this judgment. it points out that the permission contained in the trade notice in 1999 contained the condition that cutting of the coils should not result in the cut and decoil product falling under different tariff headings.4. on the merits of the case, we agree that the matter is not entirely free from doubt. the supreme court judgment in lal woolen & silk mills p. ltd. was brought to our notice when we passed the former order. it appears to divergent view expressed by the supreme court in moti laminates and lal woolen and silk mills. the earlier three member judgment appears to us to say that the mere fact of the resultant product being classifiable under different tariff headings does not result in the process being one of manufacture; the court specifically said that it was open to the assessee to prove that the process was not manufacture or the goods were not marketable. we have also considered the tribunal's decision in cce v. bamcee-2001 (128) e.l.t. 126. that decision does not appear to us to have come to a final conclusion in this matter leaving the matter to be adjudicated afresh before the asstt. collector.5. however on one other aspect, the applicant has a strong prima facie case. assuming that the process would amount to manufacture, the applicant would be entitled to use his modvat credit towards payment of duty on the final product, the duty paid on the coils that it received.the departmental representative's stand accepting this in principle but insisting that the procedure relating to modvat must be shown to have been followed does not appear to us to be sustainable at this stage.there is a series of decisions of the tribunal e.g. vivek re-rolling mills v. cce -1994 (73) e.l.t. 660 holding that where the assessee did not follow the modvat procedure in its belief that the final product was not liable to duty, failure to follow the procedure cannot be held against it, if later the final product is held to be liable to duty.6. the third aspect is of limitation. the applicant had indicated in the various declarations filed from 1988 onwards that it cut and slit coils and therefore contended before the commissioner that the extended period of limitation would not be available. the commissioner has dismissed this claim by finding that the departmental enquiries have shown that the applicant's declaration was not traceable and probably not genuine. we drew the departmental representative's attention to the copies of the declarations annexed to the show cause notice containing the signature of officials claiming to be on the photocopies. he thereupon feebly reiterates the commissioner's view. he also contends that the applicant did not specifically intimate to the department that the decoiling resulted in the decoiled product falling under a different sub-heading, but is not able to explain why, when the fact of de-coiling was intimated to the departmental representative, they did nothing to interfere. on these facts, we do not think that any deposit of duty is required to be made by the applicant. considering the amount of duty involved, we accept the prayer made by the applicant for out of turn hearing. this appeal and appeal e/66/01 [2002 (139) e.l.t. 645 (tribunal)] of balmer lawrie to be listed for hearing on 21-1-2002.

Judgment:
1. Application by Vijlal Vithaldas & Sons is for waiver of deposit "of duty of Rs. 42.89 crores and equal amount of penalty imposed on it.

Application by Yogesh K. Shah, the partner of the applicant is for waiver of deposit of penalty of Rs. 5 crores imposed on him. The duty has been demanded and penalty imposed of the finding of the Commissioner that the activity carried out by Vijlal Vithaldas & Sons (whom we refer to for convenience as the assessee) slit steel to narrow the sheets in coil form received by it, amounts to manufacture. The notice dated 20-1-2000 issued to the applicant demanded duty on clearance between April, 1995 and November, 1999 and invoked the extended period contained in sub-section (1) of Section 11A of the Act, alleging suppression of the fact of the activity of the appellant.

2. On the merits of the issue, common counsel for the applicant relies upon the stay order of the Tribunal in application E/Stay-51/01 [in Appeal E/66/01 in Balmer Lawrie & Co. v. CCE - 2002 (139) E.L.T. 645 (Tribunal)]. In the order, the Tribunal had noted that the conference of the Chief Commissioners held in August, 2000 to consider whether this activity amounted to manufacture was uncertain and recommended amendment to the tariff to incorporate the view that it is. We had also taken note of the Trade Notice No. 62/99 issued in October, 1999 of the Commissioner for which it permitted to cut the coils into sheets.

Counsel for the applicant relies upon the judgment of the Tribunal in Moti Laminates Pvt. Ltd. v. CCE -1995 (76) E.L.T. 241, which according to him, lays down that the mere fact that the activity to which goods are subjected as an effect of the resultant goods falling under a different tariff heading by itself does not amount to manufacture.

3. The departmental representative contends that the Supreme Court judgment later in Lal Woolen & Silk Mills P. Ltd. v. CCE - 1999 (108) E.L.T. 7 has taken a different view, holding that dyeing of grey yarn amounts to manufacture as grey yarn and dyed yarn fall in two different headings of the tariff. He further relies upon the circular of the Board, following the Law Ministry's opinion that this process amounts to manufacture, which in turn relies upon this judgment. It points out that the permission contained in the trade notice in 1999 contained the condition that cutting of the coils should not result in the cut and decoil product falling under different tariff headings.

4. On the merits of the case, we agree that the matter is not entirely free from doubt. The Supreme Court judgment in Lal Woolen & Silk Mills P. Ltd. was brought to our notice when we passed the former order. It appears to divergent view expressed by the Supreme Court in Moti Laminates and Lal Woolen and Silk Mills. The earlier three member judgment appears to us to say that the mere fact of the resultant product being classifiable under different tariff headings does not result in the process being one of manufacture; the Court specifically said that it was open to the assessee to prove that the process was not manufacture or the goods were not marketable. We have also considered the Tribunal's decision in CCE v. Bamcee-2001 (128) E.L.T. 126. That decision does not appear to us to have come to a final conclusion in this matter leaving the matter to be adjudicated afresh before the Asstt. Collector.

5. However on one other aspect, the applicant has a strong prima facie case. Assuming that the process would amount to manufacture, the applicant would be entitled to use his Modvat credit towards payment of duty on the final product, the duty paid on the coils that it received.

The departmental representative's stand accepting this in principle but insisting that the procedure relating to Modvat must be shown to have been followed does not appear to us to be sustainable at this stage.

There is a series of decisions of the Tribunal e.g. Vivek Re-Rolling Mills v. CCE -1994 (73) E.L.T. 660 holding that where the assessee did not follow the Modvat procedure in its belief that the final product was not liable to duty, failure to follow the procedure cannot be held against it, if later the final product is held to be liable to duty.

6. The third aspect is of limitation. The applicant had indicated in the various declarations filed from 1988 onwards that it cut and slit coils and therefore contended before the Commissioner that the extended period of limitation would not be available. The Commissioner has dismissed this claim by finding that the departmental enquiries have shown that the applicant's declaration was not traceable and probably not genuine. We drew the departmental representative's attention to the copies of the declarations annexed to the show cause notice containing the signature of officials claiming to be on the photocopies. He thereupon feebly reiterates the Commissioner's view. He also contends that the applicant did not specifically intimate to the department that the decoiling resulted in the decoiled product falling under a different sub-heading, but is not able to explain why, when the fact of de-coiling was intimated to the departmental representative, they did nothing to interfere. On these facts, we do not think that any deposit of duty is required to be made by the applicant. Considering the amount of duty involved, we accept the prayer made by the applicant for out of turn hearing. This appeal and appeal E/66/01 [2002 (139) E.L.T. 645 (Tribunal)] of Balmer Lawrie to be listed for hearing on 21-1-2002.