2001(08)LCX0448

IN THE CEGAT, COURT NO. I, NEW DELHI

Smt. Jyoti Balasundaram, Member (J) and Shri G.R. Sharma, Member (T)

Zenith Rubber Ltd.

Versus

Commissioner of Central Excise, Delhi

Final Order Nos. 345-347/2001-A, dated 14-8-2001 in Appeal Nos. E/609-611/2001-A

Cases Quoted -

Collector v. Hindustan Tyres Pvt. Ltd. — 1987(12)LCX0040 Eq 1988 (035) ELT 0409 (Tribunal) — Referred........ [Para 5]

Commissioner v. Mathchwell Engineers — Final Order No. 1119/98-C — Referred............. [Para 5]

Commissioner v. Saran Engg. Co. Ltd. — Referred................................................................. [Para 4]

Commissioner v. Special Prints Ltd — 1999(04)LCX0123 Eq 2000 (121) ELT A142 (S.C.) — Referred............... [Para 5]

Gurjar Graves Ltd. — 1979(12)LCX0017 Eq 1980 (006) ELT 0357 (GOI) — Referred................................................ [Para 5]

J.S.S. Printing Industries Pvt. Ltd. v. Commissioner — 2000(10)LCX0341 Eq 2000 (122) ELT 0309 (Tribunal-LB) — Referred [Para 5]

Jupiter Engraver v. U.O.I. — 1993(08)LCX0045 Eq 1993 (068) ELT 0060 (Bom.) — Referred................................... [Para 5]

Lathia Industrial Supplies Co. Pvt. Ltd. v. Collector — 1987(01)LCX0085 Eq 1987 (029) ELT 0751 (S.C.) — Relied on [Paras 5, 10]

P.C. Cherian v. Burfi Devi — 1979 (004) ELT J 593 (S.C.) — Referred.................................. [Para 4]

Special Prints Ltd. v. Commissioner — 1998(10)LCX0083 Eq 2000 (117) ELT 0759 (Tribunal) — Referred.......... [Para 5]

Departmental Clarification Quoted-

Circular No. 3/86-CX, dated 14-3-1986..................................................................... [Paras 4, 5, 10]

Advocated By -

S/Shri A.R. Madhav Rao and Shekhar Vyas, Advocates, for the Appellant.
S/Shri M.M. Dubey, JDR and P.K. Jain, SDR, for the Respondent.

[Order per : G.R. Sharma, Member (T)]. -

These three appeals have been filed by the appellants against confirmation of demand of duty and imposition of penalty. As the three appeals arise out of the same order, they were heard together and are being disposed of by this common order.

2. The facts of the case in brief are that the appellants were noticed manufacturing ‘Rubberised Printing Rollers’. Shri V.K. Kaushik, Accounts Officer and authorised signatory of the appellants on enquiries stated that the unit was doing re-rubberisation of old rollers in addition to the manufacture of new Rubberised Printing Rollers. Shri Kaushik also stated that the firm was not maintaining any Central Excise Statutory records for re-rubberised old printing rollers. It was intimated by him that they were receiving old rubber printing rollers and after re-rubberisation, they were sending back the said rollers to their customers and charging the cost of re-rubberisation and repairing charges on the old spindles for grooving, threading, lining, drilling, welding, increasing/decreasing the size as per customers requirement. Shri Varghese Chawko, General Manager in his statement recorded on 4-8-1999 stated that he was looking after the sales of the firm; that the firm was engaged in the manufacture and selling of rubber printing rollers; that the said rollers were used in the printing machine. Shri Gurpreet Singh, Production Incharge in his statement stated that the basic activities carried out by the firm are the manufacturing of new rubberised spindles and rollers and re-rubberisation of old rollers and spindles sent by different printers/Textile Industries; that in respect of old rollers, first of all, old rubber is removed with the help of different machines; that then on spindles machining - threading, turning/alignment etc. is done to achieve required size and specifications. He stated that the processes in respect of old and new rollers involves wrapping of rubber sheets around the spindle; that a nylon/cotton tape is wrapped over the rubberised spindles; that these spindles are then put in the closed vulcaniser for curing; that after curing the grinding is done by cylindrical grinder to attain specified Dimensions; that after the process rollers/spindles are inspected, wrapped with paper.

Shri Gurpreet Singh further stated that in case of re-rubberisation, the old rollers come to their factory from various printers; that from the rollers, old rubber is cut and removed; that sometimes, the rubber was already cut by the sender and the spindle so sent or the spindle bought from the market undergo the same process as in the case of new rollers. The Department, therefore, issued a SCN stating that the process undertaken to convert the old rollers into re-rubberised rollers amounts to manufacture and therefore, the appellants were asked to explain as to why duty should not be demanded from them and why penalty should not be imposed.

3. In reply to the SCN, the appellants submitted that they were receiving old and used rollers from various customers for re-rubberisation; that the process of re-rubberisation of the old and used rollers comprises removal of old rubber from the roller and application of bonded solution on the surface of the roller; that by the process of re-rubberising the old and used rubber rollers are only repaired; that rubberised rollers are in existence prior to and after the process of re-rubberising; that no process as to change the identity of the original rubberised roller to a new and distinct article is carried out by the appellant; that in both the cases i.e. before re-rubberising and after re-rubberising the rollers remain as rollers only; that inspite of the process of re-rubberising the name use and character of the rollers continued to be the same; that the process of re-rubberising has not brought in complete transformation of the rubber rollers, sent by the customers into a different distinct article having new name, character and used. In support of their contention they cited a lot of case law. Ld. Commissioner after examining their contentions, submissions and the case law on the subject cited and relied upon by the appellant, confirmed a demand of Rs. 2,84,88,381/- and imposed a penalty of an equal amount of duty on the assessee and imposed personal penalty of Rs. 10,00,000/- on Shri H.S. Paintal, Managing Director and 50,000/- on Shri V.K. Kaushik.

4. Arguing the case for the appellants Shri A.R. Madhav Rao, and Shri Shekhar Vyas, ld. Counsels submit that the process of re-rubberising on the used and old rubber rollers does not amount to manufacture; that the appellants undertook the work of old used layer and replacing or bonding a fresh layer on the old and used spindle.

Ld. Counsels for the appellant submitted that the question whether the process of re-rubberising the old and used rubber rollers amounts to manufacture came up for consideration of the Department as early as 1986; that the Department under its Circular No. 3/86-CX, dated 14-3-1986 clarified that re-rubberising of rollers does not amount to manufacture, in view of the law laid down in the case of CCE v. Saran Engineering Co. Ltd. wherein the Tribunal held that re-shelling of sugar mill roller shaft does not amount to manufacture since a new and different article does not emerge in such process and the sugar mill roller shaft remained as such, prior to as well as after treatment. Ld. Counsels further submitted that the Hon’ble Supreme Court in the case of P.C. Cheriyan v. Burfi Devi reported in 1979 (004) ELT J-593 held that repairing of old tyre does not amount to manufacture since such activity does not result in the tyre becoming a different commodity, acquiring a new identity.

5. Ld. Counsels for the appellant submitted that issue of re-rubberising of old and used rollers was considered by the Hon’ble Supreme Court in the case of Lathia Industrial Supplies Co. Pvt. Ltd. reported in 1987 (029) ELT 751 holding that such activity does not amount to manufacture in view of the clarification by the Department in its circular cited supra. They submitted that this judgment has been consistantly followed in a catena of cases holding that different processes of re-coating, reconditioning, re-rubberising or re-lining on various different used commodities did not amount to manufacture.

Ld. Counsels submitted that this Tribunal in the case of CCE v. Mathchwell Engineers vide Final Order No. 1119/98-C held that re-rubberising of old rollers cannot be considered as manufacture. On the finding that re-rubberising involves removal of the old rubber and application of new rubber. Ld. Counsels for the appellant submitted that in the case of CCE v. Hindustan Tyres Pvt. Ltd. reported in 1988 (035) ELT 409, applying the law laid down by the Apex Court. This Tribunal held that the process of re-rubberising of worn out rubberised M.S. Rims would not amount to manufacture. Ld. Counsels pleaded that impugned order has been passed relying on the decisions rendered in the case of Jupiter Engraver v. UOI reported in 1993(08)LCX0045 Eq 1993 (068) ELT 0060 (Bom.), Gurjar Graves Ltd. reported in 1980 (006) ELT 357, wherein it was considered whether the activity of engraving amounts to manufacture. It was pleaded that the Larger Bench of this Tribunal in the case of J.S.S. Printing Industries Pvt. Ltd. v. CCE reported in 2000 (122) ELT 309 held that the activity of engraving for the 2nd and 3rd time and so on, does not amount to manufacture. It was submitted by the Counsels that the Tribunal had relied on its decision but fixing of new design on the cylinder does not involve manufacture in the case of Special Prints Ltd. v. CCE reported at 2000 (117) ELT 759; that this decision of the Tribunal have been affirmed by Supreme Court as reported in 2000 (121) ELT A.142.

6. Ld. Counsels also submitted that the demand has been computed incorrectly; that abatment under Section 4(4)(d)(ii) has not been given; that benefit of Notification No. 1/93 has been disallowed.

Ld. Counsels also submitted that the demand is time barred; that there was no suppression; that in the classification list filed from time to time it has been consistantly declared that the clearances of re-rubberised rollers are not excisable in view of the law laid down by the Apex Court in the case of Lathia Industrial Supplies Co. Ltd.; that there was no intention to evade payment of duty and thus the entire demand is hit by limitation. Ld. Counsels also pleaded that in the peculiar circumstances of the case, imposition of penalty was also not warranted.

7. Ld. Counsels also pointed out that imposition of penalty on the Managing Director was incorrect in view of the facts and submissions made above.

8. Shri M.M. Dube and Shri P.K. Jain, ld. DRs appearing for Revenue submitted that a lot of case law has been cited by the appellants in support of their contentions. However, the facts in this case are specific and different and therefore, the ratio of each decision shall have to be applied with utmost care after looking into the facts of each case. They submitted that no statutory records were being maintained in respect of re-rubberisation of old and used rollers. Ld. DRs submitted that the appellant company was not only repairing re-rubberised rollers but also were exchanging re-rubberised rollers and some times purchasing old and used rollers, re-rubberising them and selling them. The emphasis of the ld. DRs was that the process of rubberisation and re-rubberisation was the same both in the case of used rollers or new rollers. Ld. DRs submitted that the case law cited and relied by the appellants is distinguishable as the specifications were different in different cases; that in the instant case re-rubberized rollers were not only being prepared as repairs, reconditioning, re-making as provided for under Rule 173H but were being generally prepared also for sale and exchange. It was submitted that since there was a change in specifications, the process of re-rubberisation amounts to manufacture. Reiterating the findings of the ld. Commissioner, the Departmental Representatives submitted that the process undertaken by the appellants was a process of manufacture and therefore, duty has rightly be demanded.

9. On limitation ld. DRs submitted that detailed activity in regard to re-rubberisation and the process undertaken thereof was not specifically indicated in the classification list; that only citing the case of Lathia Industrial Supplies Co. was not sufficient and therefore, there was suppression and the longer period of demand has rightly been invoked.

On computing the demand, they reiterated the findings of the ld. Commissioner.

10. We have heard the detailed and extensive arguments of both the sides on the issues. The main issue is whether the activity undertaken by the appellants on used rollers amounted to manufacture, we find that reliance has been placed by the appellants on the decision of the Supreme Court in the case of Lathia Industrial Supplies Co. Ltd. wherein Board Circular dt. 14-3-1986 has been relied upon. We note that this is a specific decision which has been followed in a number of cases subsequently. We also note that circulars issued by the Department are binding on the Department and they cannot argue against those circulars. We further note that a lot of other case law on different aspects was cited and relied by the appellants. Each aspect has been adequately dealt with by the appellants in support of their contention that the process undertaken by them on used rollers did not amount to manufacture for purpose of levy and collection of Central Excise Duty. Having regard to the detailed arguments and the case law cited by the appellants, we have no hesitation in our mind in holding that the activity undertaken by the appellants on used rollers was not an activity of manufacture for purpose of Section 2(f) of Central Excise Act. In the circumstances, we allow the appeals with consequential relief.

Equivalent 2007 (220) ELT 0973 (Tri. - Del.)

Equivalent 2001 (047) RLT 0006