Pawan Engg. Works Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. appellants filed this appeal against the adjudication order passed by the commissioner of central excise. the commissioner of central excise confirmed the demand of rs. 6,18,77,325/- on flat rolled products of alloy steel and demand of rs. 64,36,765/- on the steel scrap. a penalty of rs. 6,18,77,325/- was also imposed under rule 173q of the central excise rules.2. brief facts of the case are that the appellants are engaged in the manufacture of agricultural discs for agricultural harrows and clearing the same under exemption notification without payment of duty. a show cause notice was issued to the appellants for demand of duty on flat rolled product of alloy steel, which is an intermediate product on the ground that as the final product is exempt from duty, the appellants are liable to pay duty at this stage. the benefit of notification no.89/95-c.e., dated 18-5-95 was also denied in respect of scrap on the ground that the appellants were clearing the scrap arising out of excisable as well as non-excisable products.3. the contention of the appellants is that flat rolled products are manufactured out of the duty paid steel ingots. the ingots and billets were cut into pieces and after heating the same in a furnace these are rolled in a cross-section in a rolling mill. these products are non-rectangular cross section of irregular shape and are not marketable as such. the contention of the appellants is also that the onus is on the revenue to show that these intermediate products are marketable as such.4. appellants also submitted that the demand is time-barred. show cause notice was issued on 3-5-99 demanding duty for the period from 1-4-94 to 31-12-98 and the appellants were regularly filing the declarations where the process of manufacture was explained. these declarations were duly received by the revenue, therefore, no suppression can be alleged against the appellants. appellants also argued on valuation of intermediate products. the contention of the appellants is that while calculating the value of the goods, the price of final product was taken into consideration. he relied upon annexure 'a' to the show cause notice to show that the value is of their final product and duty was calculated at average rate of previous year.5. in respect of scrap, the contention of the appellants is that scrap is only generated during the manufacture of disc from flat rolled products. if the revenue is demanding duty on this intermediate product, then the scrap is arising during manufacture of final product, hence is entitled for the benefit of notification no. 89/95-c.e. the contention of the appellants is that in case the demand is confirmed, the appellants are entitled for the benefit of modvat-credit in respect of inputs used in the manufacture of their excisable product.appellants also submitted that they are entitled for abatement of duty for arriving at assessable value as provided under section 4(4)(d)(ii) of central excise act. appellants relied upon the decision of the tribunal in the case of maruti udyog ltd. v. c.c.e. reported in 2002 (141) e.l.t. 3.6. the contention of the revenue is that the appellants never declared the manufacturing process of their intermediate product to the revenue and these goods are traded and marketed by other manufacturers, therefore, these are marketable as such.8. the demand is confirmed in respect of the intermediate product.appellants were purchasing duty-paid ingots, which were cut into pieces and were fitted to furnace for heating and thereafter were re-rolled in rolling mill. the contention of the appellants is that these are not marketable. revenue produced evidence that other manufacturers i.e.m/s. universal steel discs (pvt) ltd. karnal and m/s. subhash steels, karnal were trading in the same goods, therefore, we find no merit in the contention of the appellants that the goods, in question, are not marketable. as the goods are marketable, the appellants are liable to pay duty on these flat rolled products.9. on limitation, we find that the appellants filed necessary declarations claiming the benefit of exemption notification in respect of final product and mentioned their process of manufacture in the declarations. revenue is not disputing in respect of these declarations. the commissioner (appeals), in the impugned order, held that the process of manufacture was not mentioned in the declarations.we have perused the declarations and found that in column 9 of the declarations, the process of manufacture is mentioned. therefore, no suppression can be alleged against the appellants, hence the demand prior to six months from the date of issue of notice, is time barred and is not sustainable.10. as we hold that the intermediate product is excisable, therefore, the appellants are entitled for the benefit of modvat credit in respect of inputs used in the manufacture of intermediate product on production of duty-paying documents. the appellants pleaded that the value of final product is taken into consideration for demanding duty on intermediate product. this also requires re-consideration by the adjudicating authority. further, we find that to arrive at assessable value, the assessable value is to be re-calculated after giving necessary abatement of excise duty as held by the hon'ble supreme court in the case of maruti udyog ltd. (supra).11. in respect of scrap, there is no evidence on record to show that the scrap cleared by the appellants also contained the scrap arisen out of manufacturing of intermediate products. the scrap is arisen when the final products i.e. discs were manufactured from flat rolled products which are exempt from payment of duty. therefore, the appellants are entitled for exemption in respect of clearance of scrap. keeping in view the facts and circumstances of the case regarding imposition of penalty, the matter is remanded to the adjudicating authority for deciding afresh after re-calculating the demand of duty. the appeal is disposed of as indicated above.

Judgment:
1. Appellants filed this appeal against the adjudication order passed by the Commissioner of Central Excise. The Commissioner of Central Excise confirmed the demand of Rs. 6,18,77,325/- on flat rolled products of alloy steel and demand of Rs. 64,36,765/- on the steel scrap. A penalty of Rs. 6,18,77,325/- was also imposed under Rule 173Q of the Central Excise Rules.

2. Brief facts of the case are that the appellants are engaged in the manufacture of agricultural discs for agricultural harrows and clearing the same under exemption notification without payment of duty. A show cause notice was issued to the appellants for demand of duty on flat rolled product of alloy steel, which is an intermediate product on the ground that as the final product is exempt from duty, the appellants are liable to pay duty at this stage. The benefit of Notification No.89/95-C.E., dated 18-5-95 was also denied in respect of scrap on the ground that the appellants were clearing the scrap arising out of excisable as well as non-excisable products.

3. The contention of the appellants is that flat rolled products are manufactured out of the duty paid steel ingots. The ingots and billets were cut into pieces and after heating the same in a furnace these are rolled in a cross-section in a rolling mill. These products are non-rectangular cross section of irregular shape and are not marketable as such. The contention of the appellants is also that the onus is on the revenue to show that these intermediate products are marketable as such.

4. Appellants also submitted that the demand is time-barred. Show cause notice was issued on 3-5-99 demanding duty for the period from 1-4-94 to 31-12-98 and the appellants were regularly filing the declarations where the process of manufacture was explained. These declarations were duly received by the revenue, therefore, no suppression can be alleged against the appellants. Appellants also argued on valuation of intermediate products. The contention of the appellants is that while calculating the value of the goods, the price of final product was taken into consideration. He relied upon Annexure 'A' to the show cause notice to show that the value is of their final product and duty was calculated at average rate of previous year.

5. In respect of scrap, the contention of the appellants is that scrap is only generated during the manufacture of disc from flat rolled products. If the revenue is demanding duty on this intermediate product, then the scrap is arising during manufacture of final product, hence is entitled for the benefit of Notification No. 89/95-C.E. The contention of the appellants is that in case the demand is confirmed, the appellants are entitled for the benefit of Modvat-Credit in respect of inputs used in the manufacture of their excisable product.

Appellants also submitted that they are entitled for abatement of duty for arriving at assessable value as provided under Section 4(4)(d)(ii) of Central Excise Act. Appellants relied upon the decision of the Tribunal in the case of Maruti Udyog Ltd. v. C.C.E. reported in 2002 (141) E.L.T. 3.

6. The contention of the revenue is that the appellants never declared the manufacturing process of their intermediate product to the revenue and these goods are traded and marketed by other manufacturers, therefore, these are marketable as such.

8. The demand is confirmed in respect of the intermediate product.

Appellants were purchasing duty-paid ingots, which were cut into pieces and were fitted to furnace for heating and thereafter were re-rolled in rolling mill. The contention of the appellants is that these are not marketable. Revenue produced evidence that other manufacturers i.e.

M/s. Universal Steel Discs (Pvt) Ltd. Karnal and M/s. Subhash Steels, Karnal were trading in the same goods, therefore, we find no merit in the contention of the appellants that the goods, in question, are not marketable. As the goods are marketable, the appellants are liable to pay duty on these flat rolled products.

9. On limitation, we find that the appellants filed necessary declarations claiming the benefit of exemption notification in respect of final product and mentioned their process of manufacture in the declarations. Revenue is not disputing in respect of these declarations. The Commissioner (Appeals), in the impugned order, held that the process of manufacture was not mentioned in the declarations.

We have perused the declarations and found that in Column 9 of the declarations, the process of manufacture is mentioned. Therefore, no suppression can be alleged against the appellants, hence the demand prior to six months from the date of issue of notice, is time barred and is not sustainable.

10. As we hold that the intermediate product is excisable, therefore, the appellants are entitled for the benefit of Modvat credit in respect of inputs used in the manufacture of intermediate product on production of duty-paying documents. The appellants pleaded that the value of final product is taken into consideration for demanding duty on intermediate product. This also requires re-consideration by the adjudicating authority. Further, we find that to arrive at assessable value, the assessable value is to be re-calculated after giving necessary abatement of excise duty as held by the hon'ble Supreme Court in the case of Maruti Udyog Ltd. (supra).

11. In respect of scrap, there is no evidence on record to show that the scrap cleared by the appellants also contained the scrap arisen out of manufacturing of intermediate products. The scrap is arisen when the final products i.e. discs were manufactured from flat rolled products which are exempt from payment of duty. Therefore, the appellants are entitled for exemption in respect of clearance of scrap. Keeping in view the facts and circumstances of the case regarding imposition of penalty, the matter is remanded to the adjudicating authority for deciding afresh after re-calculating the demand of duty. The appeal is disposed of as indicated above.