Apsara Metallica Industries Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. m/s. apsara metallica industries, along with its marketing executive, are the appellants herein aggrieved by the order by which the activity indulged by the appellant unit in lacquering metallised polyester film obtained on payment of duty is being considered as manufacture and charge of no discharge of duty on the removals of such films as well as on the valuation of certain 'covered yarn' being manufactured by them and cleared on valuation which were required to be reopened for assessment at value higher. the duty demands and penalties have been arrived on the appellants along with certain other charges made on various issues of modvat eligibility and procedural nature and allegations of clandestine removal under the central excise law and the procedures.2. (a) bombay high court in.....

Judgment:
1. M/s. Apsara Metallica Industries, along with its Marketing Executive, are the appellants herein aggrieved by the order by which the activity indulged by the appellant unit in lacquering metallised polyester film obtained on payment of duty is being considered as manufacture and charge of no discharge of duty on the removals of such films as well as on the valuation of certain 'covered yarn' being manufactured by them and cleared on valuation which were required to be reopened for assessment at value higher. The duty demands and penalties have been arrived on the appellants along with certain other charges made on various issues of Modvat eligibility and procedural nature and allegations of clandestine removal under the Central Excise Law and the Procedures.

2. (a) Bombay High Court in M/s. Garware Plastics & Polyester Ltd., , after considering the specific entry under the erstwhile Tariff Heading 15A(2) which refers to 'lacquer or metallised film' separately held that the activity of lacquering would not amount to manufacture under the Central Excise Act, 1944.

(b) This decision of the Bombay High Court is supported by the decisions (i) Chemicoat Ltd. by the Supreme Court in Collector v. Chemicoat Ltd. 1997 (94) E.L.T. A155 (S.C.) and (ii) Rexor India Ltd. by the Supreme Court on 17-8-1996. Since Section 3 of the Central Excise Act, 1944 which brings the levy of duty did not undergo any change before or after 28-2-1986, the introduction of CETA, 1985, the decision arrived in the case of Gar-ware Plastic & Polyester Ltd., being under the erstwhile Tariff will not alter the position, as regards manufacture arrived on the issue of lacquering of plastic films, metallised or otherwise. The absence of a Chapter Note or Section Note under Chapter 39 or Chapter IV of the CETA, 1985 bringing in a specific activity of lacquering as manufacture would support this interpretation to arrive at a conclusion that lacquering would not amount to manufacture.

(c) The decision in the case of Lal Woollen & Silk Mills is relied by ld.D.R., which is holding that conversion of grey woolen yarn into dyed woollen yarn would amount to manufacture, since there are two entries, one for grey and one for dyed yarn will not be good law to arrive at levy of manufacture envisaged under Section 3 merely on the ground that the Tariff Entry description is being made. The other tests stipulated by the Apex Court, as regards manufacture, have to be applied that is now well settled [see (i) - Moti Laminates paras 6, 7 & 11; (ii) Hyderabad Industries Ltd. 2001 (130) E.L.T. 401 (S.C), paras 5 and 8; Constitutional Bench in the case of Man Structural affirmed the decision in the case of Moti Laminates].

Since Lai Woollen & Silk Mills did not refer to these decisions at (i) and (ii) above, the same would not be good law to apply to the facts herein. More so, when we see force in the following plea of the Id. Advocate for the appellants: The enumeration of lacquering in separate sub-heading can only indicate that in an integrated factory where after polyester film is manufactured, lacquering is also undertaken, the taxable event in such cases would arise after the lacquered film is obtained. This is in view of the definition in Section 2(f) which mandates that manufacture shall be treated as complete only when all process incidental or ancillary to the completion of the manufactured product have been undertaken.

(d) Thus, in an integrated factory which manufactures, say, bare polyester film and thereafter metallises and lacquers it, the lacquering and metallising are incidental processes. In such cases, the duty would be attracted only at the final stage. This is the true manner of reading of the sub-headings of Heading 39.20. The sub-headings cannot be used to construe what really is processing as a full fledged manufacture.

In support of the above submissions, the following decisions were relied upon:(Tri.) Garware Polyester Ltd. v. CCE (iv) Rexor India Ltd. v. CCE Affirmed by Supreme Court on 17-8-95 (e)In this view of the matter, the order on duty demands and penal liability, arrived on the activity of lacquering of duty paid polyester plastic films and allegations for non-maintenance of records and procedural requirements under the Excise Law are required to be set aside and the matter remitted back for redetermination of penalties, if any, on other issues, if any.

On the other issue, as regards classification of the special type of yarn being manufactured by the appellants, from the test report given and the description of the yarn, we find that the depute of classification of the yarn cannot be limited to Heading 5605.10 or 5605.90 and the classification of the yarn will have to be reconsidered, also, under Heading 5605.00 and the relevant HSN Notes. Since the duty demands on the said yarn have been reopened for reassessment by these proceedings, and classification is an important aspect for redetermination of duty, we find that in the facts and circumstances of this case, the matter is required to be remitted back to the original authority to reconsider the classification under Heading 5605.00 also, after placing the appellants on appropriate notice and hearing them along with their claim of classification and Revenue's claim of classification as disputed in this case.

(f) In coming to this conclusion, we also rely upon the Apex Court's decision in the case of Voltas Ltd. v. CCE 1997 (91) E.L.T. 261 (S.C).

(g) We are, therefore, remitting the matter to the Commissioner for redertermination of duty demands, if any, only on yarn and on all other issues and penalties thereafter & no cause for any action on lacquering.