TMI Blog2004 (3) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... All the units are interrelated in the sense that they are owned by persons who are related to each other. It is like a family affair. After collecting job work charges, they returned the goods under delivery slips. M/s. I.S. have not got themselves registered under Central Excise Law nor filed any declaration as per the provisions of Central Excise Law. It is an admitted fact that the mills in the premises of M/s. I.S. were working with the aid of power. Certain records were seized from the premises. The allegation was that M/s. I.S. manufactured stainless steel pattas classifiable under Chapter 72 of the schedule to the Central Excise Tariff Act, 1985; that such manufacture was done with cold rolled machines; that the said goods were excluded from the scope of exemption for small scale industries vide Notification 8/95-C.E.; that in respect of this, they failed to obtain a registration and M/s. I.S. contravened the provisions of the Central Excise Act and Rules. The officers seized the two rolling mills, fully manufactured S.S. pattas and handed over the same for safe custody to M/s. I.S. 2. Shri Jignesh Shah, the authorised signatory, in his statement before the officers, stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork rolls and that gauge of excess patta was reduced by passing the hot rolled pattas through the work rolls and that the second rolling mill was on work drive mill. The work roll function was carried out by the said mill and the gauge of excess pattas was being reduced on the same. He further stated that the two rolling mills situated in M/s. I.S. were gauge reduction mills. The said mills were without any furnace. 4. Shri Jignesh Shah in his further statement stated that except gauge reduction, no other process was being carried out in the premises of M/s. I.S. He thereupon gave details as to the quantity produced in the factory of M/s. I.S. for three years commencing from 1996 to 1999. 5. The conclusions drawn from the above facts are that hot rolled patta/patties are pickled in dilute hydrochloric acid for removal of rust and scales and then they were cold rolled between plain rolls to obtain a bright surface, closely controlled gauge, thinner gauge and a variety of tempers by passing previously hot rolled patties through the set of rolls often many times until the final size is obtained. The department's contention is that cold rolling is a generic term applied to the oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Heading 7220.20 of CETA during the year 1996-97, 1997-98 and 1998-99. Central Excise duty is leviable under this heading at the rate of 15% ad valorem. The department's further contention is that the process of reduction of gauge on cold rolling mills carried out by the said factory is also covered under cold rolling process. 8. The Commissioner while adjudicating the case held that the process of gauge reduction comes within the purview of cold rolling a product and therefore duty has to be discharged on a cold rolled product. He discussed the process of manufacture, cited the various authoritative books on the subject and came to this conclusion. He demanded duty on the cold rolled products manufactured by M/s. I.S., confiscated the finished cold rolled patties which have been manufactured without the factory having been registered, imposed penalties on M/s. I.S., confiscated the cold rolling mills and imposed penalties under Section 209A on Shri Jignesh Shah, Shri Sheshmal Shah, director of M/s. Bhoomika Strips Pvt. Ltd. M/s. Bhoomika Strips Pvt. Ltd., M/s. Dhanlaxmi Metals Pvt. Ltd., M/s. Navkar Metals Pvt. Ltd. and M/s. Bhagyodaya Metals Pvt. Ltd. and also demanded i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oneous. The evidence tendered by a chartered engineer, K.J. Patel, has also not been considered, wherein he stated that the process being undertaken by the appellants was not cold rolling process. No process resulting in hardening pattas took place during the process of reduction of gauge. It is contended that the appellants did not undertake any activity which amounted to process of manufacture and therefore the product emerging out of reducing the gauge is not a new product. In various judgments, it was held that for the purpose of levying excise duty a process or an activity must amount to manufacture. In the case of CCE, Meerut v. Rishabh Velveleen Pvt. Ltd. reported in 1999 (114) E.L.T. 839, it was held that unless a process of manufacture takes place, duty cannot be levied on the goods. The reliance on chapter note 4 of Chapter 72 is totally erroneous. The appellants relied upon the following case law. Venkat Durga Aluminising Works v. CCE - 1990 (50) E.L.T. 294, Jyoti Engineering Works v. CCE - 1989 (42) E.L.T. 100, Trade Notice No. 80/91 dated 26-8-1991 issued by Indore Collectorate reported in 1991 (55) E.L.T. T63. It was also further contended that the goods as produced b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Requirement of evidence cannot be substituted by reference to authoritative publications. Assessee to be put to notice by department about technical literature to be relied upon by it. The court particularly observed that lack of evidence leads to failure of cases of Excise department, resulting in loss of revenue. The court, thus dismissed the department's appeal not because it held that the process of cold rolling does not amount to manufacture but because the department failed to establish in the case before it that the process amounted to manufacture by leading evidence. 13. The latest pronouncement on the issue is again by the Supreme Court in the case of CCE, Chandigarh-II v. Steel Strips - 2003 (154) E.L.T. 336 (S.C.) where the Hon'ble Court considered its decision cited supra [1995 (77) E.L.T. 248] and remanded the case directing that the issue whether cold rolling a hot rolled product amounts to manufacture be examined on the following lines : "Whether the excise authorities have led any evidence before the first adjudicating authority on the question as to whether cold rolled strips are the result of a process of manufacture undertaken by the assessee or whether the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the process undertaken by him amounted to manufacture of cold rolled strips. He replied that what all he did was to reduce the gauge. 17. From the evidence, the department alleged : "It appeared to the officers that the hot rolled patta-patties are pickled in dilute hydrochloric acid for removal of rust and scale the cold rolled steel strip is produced by cold rolling descaled hot rolled strips between plain rolls to obtain a bright surface closely controlled gauge, thinner gauge, and a variety of tempers, cold working by cold rolling by passing unheated, previously hot rolled patta-patties (cleaned of scale) through a set of rolls often many times until the final size is obtained. It further appeared that cold rolling is a generic term applied to the operation of passing unheated metal through rolls for the purpose of reducing its thickness, producing a smooth, dense surface and with or without subsequent heat treatment, developing controlled mechanical properties. Any single one or combination of these three effects are the reason for the cold rolling of a particular product. Actually, in terms of modern nomenclature of the steel industry, cold rolling implies a rolling op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o produce household appliances. Shri Jignesh Shah has been specifically asked whether the process undertaken by M/s. I.S. amounts to manufacture. While he confirmed that M/s. I.S. reduces the gauge of S.S. pattas which had been hot rolled by passing them rolling mills in their factory, he refused to confirm that such a gauge reduction amounts to manufacture. Before the Commissioner, the stand taken was that M/s. I.S. only does 'roughing' of hot rolled products and that does not amount to manufacture. While the appellants are entitled to have their opinion on whether a process of manufacture takes place or not, the department has to establish that indeed a process takes place in the appellants' matter. 23. It is under these circumstances the principle enunciated by the Supreme Court in the case of CCE, Chandigarh v. Steel Strips Ltd. cited supra has to be examined. (a) Whether excise authorities led evidence before the adjudicating authority on the question as to whether cold rolled strips are the result of a process of the manufacture undertaken by the assessee? The answer is yes. (b) Whether the material Referred to in the order is based on his own (Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture goods in contravention of the Central Excise Rules and Act is thus established. The Commissioner has brought out clearly at page 15 of his order as to how the appellant was aware that the activity carried out at M/s. I.S. resulted in the manufacture of excisable goods liable to duty. They chose not to get themselves registered with an intent to evade duty. Larger period of limitation is therefore invokable. 25. Another contention of the appellants is that during the period in dispute for which the notice is issued, the S.S. strips fell under chapter subheading 7220.90 in 1996-97, 7220.30 in 1997-98 and 7220.30 in 1998-99. 26. The department's case is that during the period in dispute, the appellants manufactured goods 'not further worked than cold rolled (cold reduced') falling under chapter sub-heading 7220.20 in 1996-97, 7220.30 in 1997-98 and 7220.30 in 1998-99 — chargeable to duty at the rates specified against these headings. The appellants' contention that their product falls under chapter sub-heading meant for 'others' attracting nil rate of duty during the relevant period is not understandable. Products not further worked than cold rolled do fall under the chapt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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