TMI Blog2023 (12) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... ke the outer diameter of appropriate size, threading and slotting. The product namely, Connector, is thus manufactured. In Drill Pipe Section, Seamless pipes of different diameters which are another major raw material for Drill Rods were stored. In the said section, on Lathe Machines the seamless pipes are cut into required size and then boring and beveling operations to make the pipe suitable for further welding with connectors are carried out at both the ends of the said pipes so that the connectors (Male and Female) can be fitted at both ends of the seamless pipes and thereafter are welded together. The welding of the connector with the seamless is carried out manually. The seamless pipe so fitted and welded with the male and female connectors at the end is final product called the Drill Rods . Then the painting was carried out by the workers on the said Drill Rods . The process undertaken by the appellant satisfies the test manufacture as above and consequently it is concluded that the resultant products of the appellant are liable to payment of Excise duty. Demand confirmed by the Ld. Commissioner for Spindle Subs/Bits Subs/Connectors - HELD THAT:- Appellant argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd omissions of person concerned. The finding given by the Learned Commissioner clearly held that Shri Sanjay Jayantilal Gandhi knows and had reason to believe that goods were liable to confiscation therefore he was liable for penalty under Rule 26. Appeal disposed off. - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. C L MAHAR, MEMBER (TECHNICAL) Shri S Bissa Shri Amal Dave, Advocate for the Appellant - Assessee Shri Rajesh Nathan, Assistant Commissioner (AR) for the Respondent - Revenue ORDER These appeals are filed against the Order-In-Original No. VAD-EXCUS-001-COM-06-07-13-14 dated 18.09.2013 passed by the Commissioner of Central Excise Service tax, Vadodara by the Appellants and also by Revenue. 1.1 The brief fact of the case is that intelligence gathered by the officers of DGCEI that M/s. Vulcan Industrial Engineering Co. Ltd. (Appellant) engaged in manufacture of Transmission Spares, Shovel spares/ drill accessories falling under Chapter sub-heading 84839000 and 84314100 respectively of the first schedule to CETA, 1985. They were also involved in the manufacture of excisable goods Drill Rods/Pipes falling under chapter sub-heading 73042200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 63,64,531/- alongwith interest and penalty. Further demand of central excise duty of Rs. 9,89,159/- for the subsequent period covered in the SCN dtd. 07.10.2011 and 1.11.2011 is also confirmed with penalties. He also orders for confiscation of the goods. Personal penalties were also imposed on Shri Sanjay Jayantilal Gandhi under Rule 26 of the Central Excise Rules. Hence, the present appeals. 2. Shri S. Bissa with Shri Amal Dave Learned Advocates Appearing on behalf of the Appellants submits that the controversy raised by the revenue in this case is an action without jurisdiction because it is a settled legal position that cutting, boring, beveling, threading and such other processes undertakes on seamless pipes of steel does not constitute manufacture and no excisable goods were manufactured as a result of such operation on seamless pipes. He placed reliance on the decision in the case of Collector, Pune Vs. Vulcan Leval Ltd., Pune 1985 (22) ELT 123. 2.1. He also submits that Learned Commissioner has held that drill rods/pipes were a distinct product known in the market having specific character and technical use, but mere marketability or sale ability of product is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not constitute manufacture by any stretch of imagination. 2.4. He also argued that the Order of the Commissioner is against the the evidence brought on record by the appellant company, and this order is also discriminatory in nature inasmuch the fact that other similarly situated persons have not been subjected to any rigors of Central Excise levy. There is no manufacture undertaken by the appellant and operations undertaken by the appellant company on seamless pipes/ tubes of steel did not constitute manufacture and consequently liability of excise duty, interest and penalty are wholly illegal and liable to be set aside. 2.5. He further submits that there is a further grave error committed by the Commissioner in classifying the product in question under CETH 73042390 because this classification is apparently for casing and tubing, and not for pipes/tubes. The Commissioner has held that drill rods/pipes are excisable goods falling under specific classification of Tariff heading 73042390 which covers other drill pipes of materials other than Iron and Steel, but there is a clear error in this regard inasmuch as sub-heading 73042390 covers casing and tubing, and not drill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow passed for confiscation of these goods are unjustified and invalid in the facts of the present case. There being a genuinely bonafide impression on part of the appellant that the materials in question were not excisable goods and this impression having been based on the decisions of Tribunal in case of Vulcan Level Ltd. (Supra), the goods seized at the appellant s factory were not in the nature of any offending goods. When these goods were very much lying in the factory, they were not liable for any seizure or confiscation in view of the settled legal position that goods lying in a manufacturer s factory were not offending and hence not liable for seizure. In the facts of this case, penalty of Rs. 3,00,000/- in lieu of confiscation of these goods is also unreasonable, harsh and disproportionate to the lapse, if any, on parts of the appellants . The order about confiscation of the goods and fixation of substantial amount of Rs, 3,00,000/- in lieu of confiscation are therefore liable to be set aside. He placed reliance on the following judgments: Commissioner Vs. Moon Beverages 1999 (33) RLT 153 (CEGAT) M/s 3-F-Intenrantional -1997 (93) ELT 509 (Tri.) M/s Kanthal Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Commr. Of C.Ex. Kolkata-IV Vs. Himadri Speciality Chemical Ltd. -2022 (66) GSTL 264 (Cal) Super Shiv Shakti Chemical Pvt. Ltd. Vs. Commission of C.Ex. Udaipur -2019 (369) ELT 1279 (Tri. Del) 2.11. He also submits that revenue has not disputed certain facts which were recorded by the adjudicating authority in the order dated 18.09.2013 which clearly shows that there was no suppression of facts on the part of the respondent with intention to evade the payment of duty. 2.12. He further submits that the adjudicating authority has rightly held that the respondent was also under bonafide belief that the process undertaken by the respondent on the seamless steel pipes were not amounting to manufacture. The Ld. Commissioner has rightly held that no malafide intention can be attributed to the respondent because there was hardly any value addition in the process which is carried out by the respondent on the seamless pipes and round bars which are the major raw material for making drill rods/ pipes. Seamless pipes and round bars are both duty paid inputs and raw materials. The Ld. Commissioner has rightly held that if had the department raised the objection earlier, the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being paid by the assessee on drill rods/ pipes. Thus, such declaration made by the assessee was for obtaining export permission to manufacture duty-paid goods and later not adhering to the same while actually manufacturing and clearing the goods for sale. In other words, it was a case where under the garb of permission to export obtained by Assessee by making false statement to the effect of welding connectors with duty-paid threaded and champhered pipes . In other words, drill rods/pipes they were selling the dutiable/excisable products without payment of duty. 3.3. He also argued that Learned Adjudicating authority has also erred in placing reliance on the ER-1 filed during material time, wherein the assesee had admittedly shown clearance and also exports details of showel spares/drill accessories (tail joint) . However, it is clear from such findings of the adjudicating authority recorded in para 80 of the OIO that, nowhere in the ER-1 the assessee had mentioned anything regarding manufacture and clearance of Drill Rods/Pipes which is the subject matter of dispute. The adjudicating authority has also erred in holding that the assessee were under bonafide belief on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held illicit or that there was any other irregularity which would entitle the authorities to confiscate the said goods. 3.5. He further argued that the adjudicating authority has also erred in reducing the penalty under Rule 26 of the Central Excise Rules, 2002 imposed on Shri Sanjay Jayantilal Gndhi, Director (Commercial) of the unit, in as much as, in the earlier adjudication order passed vide OIO dated 31.01.2013, the adjudicating authority had imposed a personal penalty of Rs. 50 Lacs on Shir Sanjay J. Gandhi. However, in the present OIO the penalty imposed on him stands reduced to Rs. 5 Lacs without assigning any specific findings as to the reasons for such reduction. 4. We have heard both the sides and perused the appeal records and considered the submission of both the parties. The first point for decision is whether the appellant have undertaken processes amounting to manufacture, in respect of Drill Pipes/ Drill Rods as per Section 2(f) of the Central Excise Act, 1944 and leviable to central excise duty. We observed from the records that entire process of manufacturing of Drill Rods/ Drill Pipes from raw material stage to the finished goods stage has been very well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is hazardous to apply the ratio of any judgment pertaining to the old tariff when the entire system of nomenclature has undergone a sea change and when new Central Excise Tariff came into the force from 1985. 4.3. We also noticed that during investigation the revenue also recorded the statements of Shri Sanjay Gandhi, Director, Shri Pankaj Patel, Manager (Production), Shri Rajesh Mehta, General Manager (Engineering), Shri Bhavik Patel, Shri Batuk Dave, Shri Nitin Dinkarbhai Shah (GM Marketing) and revenue also conducted the enquiries related to the disputed products at the end of customers of Drill Rods/Drill Pipes supplied by Appellant. However the said statements nowhere disputed by the appellant in the present matter. The result of the said investigation also clearly reveal that the raw material used for making Drill Pipes / drill rods cannot be used as such in place of Drill Pipes/ Drill Rods. The process performed by appellant to make Drill Rods/ Drill Pipes are incidental and ancillary to completion of a manufactured product having distinct name, character and used and hence it amounts to manufacture within the ambit of definition as provided under Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppression of facts. We find, in the present case, Learned Commissioner has not examined the documents and applications of the appellant properly. Revenue in this matter strongly argued that the appellant during the filing of their application and declaration mis-declared the facts related to the disputed goods. As per the revenue, appellant has obtained illegal benefits on the strength of solemn declaration. We also noticed that the purpose of this declaration is not to examine the classification or dutiability but to examine the rebate claim of the goods used in export goods. Further the Annexure -24 filed by the appellant was to seek permission to export material used in the processing and packing of finished goods. The mis-declaration of goods by the appellant itself clear from the finding of the Learned Commissioner in impugned order. In para 80 Ld. Commissioner lastly held that I have also seen the copies of ER-1 returns field by them during the material time wherein they were showing showel spares/drill accessories(tail joint) clearance and also export details. This fact clearly established that nowhere in ER-1 returns appellant had mentioned anything regarding manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas the show cause notice was issued on 18th February, 1998, well beyond the period of limitation. It was admitted by him that no classification list was filed by the appellant. He has drawn our attention to a letter dated 8th March, 1994 written by the appellant to the Assistant Collector of Central Excise, Calcutta disclosing the activity undertaken by the appellant and requesting the Revenue to let the appellant know about the Central Excise formalities required to be observed. That the writing of the letter well in advance shows the bona fides of the appellant and that there was no suppression, misstatement, etc., on the part of the appellant with an intent to evade payment of duty and the authorities below erred in holding to the contrary. 14. As against this, learned Counsel for the Revenue, Shri M.M. Paikadey, supported the Commissioner s findings recorded in the order-in-original. It was submitted by him that the process undertaken by the appellant was not as simple as has been projected by him. That the items in question have been given specific names and the same were used for specific purpose for which the raw material cannot be used. The impugned goods were spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondences made by Shri Arun Kanti Paul (who is the common partner of M/s. T. Paul Sons and the appellant) on 23rd August, 1995 with M/s. Philips India Ltd. Shri Arun Kanti Paul, in his letter has stated that they could avoid Central Excise liability by printing thinner instead of solvent , on the packs of bottles. M/s. Philips India Ltd., by its Letter No. HD/CE/ACCY, dated 6th September, 1995, endorsed the same and permitted M/s. Paul Sons to print thinner instead of solvent on the outer pack. The direction of M/s. Philips India Ltd. was actually executed by the appellant by printing thinner instead of solvent on the cartons. Shri Arun Kanti Paul during examination, when asked to throw some light on the correspondence with M/s. Philips India Ltd. stated that he had some doubt about the excise liability of these products and accordingly he obtained legal opinion regarding the same and persuaded M/s. Philips India Ltd. to allow them to print thinner against solvent on the cartons. It clearly shows that the appellant although was conscious of the fact that the products manufactured by them could attract the Excise Duty, made a deliberate attempt to evade the same by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the message sent by Shri S. Ramamurthy, DM (Excise) TPL Site to Shri S. Karthikeyan, DM (Mktg., Devt.) TPL HQ a copy of which is filed on page 116 of the paper book is reproduced below : - URGENT Dated 16-11-1995 FAX = MESSAGE S. RAMAMOORTHI, DM FROM : (EXCISE) TPL-SITE. MR. S. KARTHIKEYAN, TO : DM (MKTG. DEVT.) TPL-H.O. PLEASE REF. YOUR FAX MSG. DATED 15-11-1995. IN THIS REGARD WE HAVE ALREADY EXPLAINED OUR DIFFICULTY IN REGISTERING TOBS UNDER TARIFF 2710. THIS IS MAINLY DUE TO THE REASON THAT OUR MFG. PROCESS OF TOBS IS ENTIRELY DIFFERING FROM THE OTHER TOBS AVAILABLE IN THE MARKET. HOWEVER, WE CAN GO AHEAD WITH THE PROPOSAL AS YOU HAVE SUGGESTED VIDE PARA 4, AS THERE IS NO MUCH DIFFERENCE BETWEEN TRANFORMER OIL SPINDLE OIL. ALSO, WE ARE ALREADY HOLDING THE REGN. CERT. FOR MFG. SPINDLE OIL. AND ALSO, PLEASE ARRANGE TO GET A REVISED P.O. MENTIONING THE PRODUCT NAME AS SPINDLE OIL FROM THE BUYER. REGARDS. Sd/- (S. RAMAMOORTHI) Thus the Records clearly show that M/s. TPL have been clearing the goods under 38.17 and they were prompted by the need of the customers to change the nomenclature of the item as Spindle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these submissions. Having agreed, on the merits of the case, with the findings recorded by learned Member (Technical), I have got to endorse his decision in regard to penalty as well. 9.8 The Hon ble Supreme Court in the case of DCL Polyester Ltd. (supra), in paras 25 and 26, has observed as under : - 25. Now coming to the question of limitation, it is urged on behalf of the assessee that show cause notice dated 1-9-1994 invoking the extended period of limitation under the proviso to Section 11A(1) was erroneous as the assessee had filed their classification list and price-list on 20-11-1991 [including the purchase orders of the buyers]; that no inspection, audit or investigation was carried out before approving the classification list and the price-list and, therefore, the department was not entitled to invoke the extended period of limitation. 26. We do not find any merit in these arguments. Firstly, no such arguments were advanced before the Tribunal. The only argument advanced before the Tribunal was on excisability and nil rate of duty vide notification dated 1-3-1992. Secondly, in the reply to the show cause notice, the assessee submitted that wastes had emer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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