| SooperKanoon Citation | sooperkanoon.com/3629 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi |
| Decided On | Jul-06-1987 |
| Reported in | (1989)(43)ELT152TriDel |
| Appellant | Collector of C. Ex. |
| Respondent | Union Carbide (i) Ltd. |
2. The respondents are manufacturing Zinc Calots falling under T.I.26(b) of the Schedule and have paid duty on conversion charges under T.I. 68, after availing the exemption of duty under Notification 119/75-CE dt. 30.4.75. In respect of one of the customers namely M/s J.K. Batteries, the respondents used cadmium in the manufacture of zinc calots. The calots contained 99.6% of zinc, 0.35% of lead and 0.05% of cadmium. The zinc and lead were supplied by M/s J.K. Batteries. The period in issue is from 26.12.75 to 25.12.76. The respondents paid duty under Notification 120/75-CE on the invoice value which took into a/c the cost of cadmium besides the conversion charges. A show cause notice was issued on 27.4.79 alleging that the product cleared was different from the goods given for job work and that the respondent have suppressed the materials. In their reply, the respondents urged that they undertook the work purely as job work and that the zinc calots were punched from rough rolled zinc. There was no change in the identity of the articles supplied by the customers for intended manufacturing process under the job contract and the article that was supplied back to the customers by the job workers after the intended manufacture. The Asstt. Collector confirmed the demand for Rs. 14,348.41.
3. On appeal, the Appellate Collector was of the view that the use of negligible amount of the job workers raw material was of an incidental nature and held that the respondents would be entitled to the benefit of the notification. He allowed the appeal.
4. In the grounds of appeal, it is mainly urged that the zinc calots manufactured by the respondents were entirely different articles produced by conversion out of the raw materials (zinc spelters) supplied by the customers. The company had not declared that they were paying duty not only on the conversion charges but also on the cost of cadmium.
5. Mrs. V. Zutshi, SDR submitted that the benefit of the Notification 119/75-CE dt. 30.4.75 (cited supra) would be available to the respondents only if the identity of the materials was established. She argued that the material supplied to the respondents was different from the materials returned by the respondents to their customers after job work. The identity and the character of the raw-material had completely changed. She submitted that the order of the Appellate Collector was not justified.
6. Sh. V. Lakshmi Kumaran, Ld. counsel for the appellants urged that the respondents received raw-materials namely, zinc and lead from their customers M/s J.K. Batteries and that they added cadmium 0.05% for the purpose of manufacturing zinc calots. He stated that the indentity of the article supplied by the customers did not undergo any change. The intended process of manufacture was to make an alloy of zinc cadmium and lead as per the customers specification and convert them to calots.
The respondents have opted for payment of duty on the invoice value under Notification 120/75-CE which had included the cost of cadmium. He further urged that, in any event, the show cause notice was issued on 27.4,79 raising a demand for the period from 26.12.75 to 25.12.76 and was time barred. Though, in the show cause notice, there was allegation of suppression of facts, the Asstt. Collector has not given any such finding and no penalty was imposed. Shri Lakshmi Kumaran also drew our attention to a letter written by the respondents to the Supdt., on 15.11.75 informing them about the manufacture of calots on conversion basis.
7. The first question to be considered in this appeal is about the eligibility to the benefits of Notification 119/75-CE. It was urged on behalf of the Revenue that the identity of the product had changed. But whether in a particular case, the benefit of Notification 119/75-CE would be available should be assessed on the facts and circumstances of the case. From the present facts, it is seen that the respondents were given the job work of manufacturing the zinc calots on conversion basis. They have also submitted the classification list to the deptt.
It is argued that the normally the respondents used their own materials for the manufacture of zinc calots and used the finished products in the manufacture of battery cells. However, in respect of one customer M/s J.K. Batteries, they appear to have manufactured these calots. But even in this case, the requirement of zinc as also the lead which formed the substantial part of the manufacturing product have been supplied by the customers. A very insignificant and negligible percentage of cadmium has been used for the purpose of manufacture of zinc sheets from which the calots were punched out. The Asstt.
Collector has stated that there was no connection between the raw material supplied for the job and the processed articles. The Tribunal in 1985 ECR 2188 (Bombay Foods (P) Ltd. v. C.C.E., Bombay) had an occasion to consider the identical issue. After referring to number of judgments on the issue, the Tribunal referred to Anup Engg. (1978 (2) E.L.T. J533) wherein it is stated that the Notification itself contemplated "manufacturing process" and observing that the manufacture does result in some change in the material; otherwise, it would not be manufacture within the meaning of Section 2(f) of the Central Excise Act and held, that the view of the excise authority to the effect that in ease of their doing a change in the original article, the Notification would not apply, was untenable. In the case of M/s Madura Coats (1980 (6) E.L.T. 582), the Calcutta High Court has observed that the explanation did not forbid supply of any material for doing the job work and granted relief for the job work. The use of negligible percentage of job workers own material was held to be of an incidental nature. Following these rulings, the Appellate Collector was right in holding that merely on the use of a negligible qty. of cadmium, the benefit of the notification should not be denied, to the respondents.
The requirements of Notification 119/75-CE have been made out and the grounds on which the Revenue seek to set aside the order have not been substantiated.
8. Even otherwise, we find that the show cause notice has alleged suppression of facts. There is no finding to that effect and the letter dt. 15.11.75 to the department by the respondents informing them about the nature of the manufacture shows that the plea of the suppression has not been made out. Even the Asstt. Collector appears to have been satisfied about it and that is the reason why he has not given any specific finding on that aspect nor has he imposed any penalty.
9. Viewed in any aspect, we find that there are no grounds to set aside the impugned order. The appeal is, therefore, dismissed.
10. I have several reservations about the learned brother's conclusions on job work under Notification No. 119/75-CE and their relation to these calots made by Union Carbide. But, the merits of this dispute cannot be investigated since the demand is a afflicted by a serious malady-a malady that destroys it.
11. The department appeal said there was suppression of facts by the company to avoid payment of duty. But the Assistant Collector does not say so and he arrives at no findings that suppression caused the loss of duty. And the testimony of this is the absence of any chastisement in the shape of a penalty as I expect to be meted out whenever any person deceives the custodians of the law to make wrongful gain for himself. I am not able to accept a report of suppression or deception if the adjudicator under Central Excise Law does not administer the law's corrective to warn the trespasser for the future; unless, the course, there are good reasons for not doing so. There is no reason here, leave alone a good one. Therefore, it is clear there was no suppression. The demand is time barred and I pronounce it unenforceable.