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Bombay High CourtIndian Cases

Shalimar Wires And Industries Ltd. vs Union Of India on 13 November 1991

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Bombay High Court
Shalimar Wires And Industries Ltd. vs Union Of India on 13 November, 1991
Equivalent citations: 1992(58)ELT44(BOM)
JUDGMENT

Pendse, J.

1. By this petition filed under Article 226 of the Constitution of India, the petitioners are challenging the concurrent findings recorded by the three authorities constituted under the Excise Act. Only few facts are required to be stated to appreciate the grievance of the petitioners.

2. The petitioners are Public Limited Company and runs a factory at Nasik where copper based alloy wires are manufactured. The petitioners receive from the customers copper, copper scrap, brass scrap, zinc tin, etc. and the said material is melted in suitable compositions to make specific alloys. After casting of the said alloys, the petitioners carry out a number of other processes and finally draws the wires for delivery to the customers. Initially, the processes undertaken by the petitioners were not liable to payment of excise duty after the introduction of Tariff Item No. 68 with effect from March 1, 1975, the processes undertaken by the petitioners attract payment of excise duty under residuary Item No. 68.

3. On April 30, 1975, the Central Government in exercise of powers conferred by sub-rule (1) of Rule 8 of Central Excise Rules exempted to goods falling under Tariff Item No. 68 of the First Schedule provided the same are manufactured in a factory as a job work. The exemption was to the extent of excess of the duty calculated on the basis of the amount charged for the job work. The exemption notification by explanation sets out what should be considered as a job work for the purpose of attracting the notification. The explanation provides that the ‘job work’ shall mean such items of work where the article intended to undergo manufacturing process is supplied to the job worker and that article is returned after the article has undergone the intended manufacturing process, on charging only for the job work. The Collectorate the Bombay Central Excise published trade notice dated December 5, 1975 and, inter alia, mentioned that it is not essential that for claiming exemption, the article received by the job worker and the processed article returned by him should have the same trade description.

4. On March 18, 1976, the Superintendent of Central Excise, Nasik informed the petitioners that the petitioners are not entitled to exemption contemplated by Notification dated April 29, 1975 and, therefore, should declare the value of the raw materials and pay the differential duty on all the clearances effected from April 29, 1975. The petitioners by letter dated March 27, 1976, disputed the claim of the Superintendent. There Assistant Collector, Central Excise, Nasik then by order dated July 7, 1976 held that the process undertaken by the petitions amounts to manufacture and the finished goods, i.e. the wires and the material supplied by the customers do not remain the same product. The Assistant Collector felt that as the finished product is definitely a new and different product having different name and character, the petitioners are not entitled to benefit of exemption notification. The order passed by the Assistant Collector was confirmed in appeal by the Appellate Collector of Customs and Central Excise by order dated October 21, 1978. The petitioners carried revision before the Central Government but the revision ended in dismissal by order dated October 30, 1978. The Central Government accepted the claim of the petitioners that mere fact that article after undergoing the requisite process changes shape does not necessarily deprives the job worker of the benefit of the notification. The Central Government then examined what was supplied to the petitioners and what process was undertaken to manufacture the wires. The government noted that what is supplied to the petitioners is merely scrap material and the petitioners melt the same and thereafter by process of moulding, rolling, cutting draws wires. The Government felt that the material received by the petitioners is not the raw material and the petitioners were required to undertake several processes before the raw material for manufacture of wires comes into existence. The Central Government, therefore, concurred with the view of the two authorities below. The concurrent decisions of the three authorities are under challenge.

5. Shri Cama, learned counsel appearing on behalf of the petitioners, submitted that the authorities below clearly committed an error in holding that the petitioners are not entitled to the advantage of the exemption notification. It is not possible to accede to the submission of the learned counsel. The claim made by the petitioners proceeds on the assumption that the work undertaken or carried our by the petitioners is merely that of a job worker. As mentioned hereinabove, what is supplied to the petitioners is scrap material, but the wires are not manufactured by the petitioners from that scrap. The scrap and the metal supplied to the petitioners is moulded and thereafter the petitioners make specific alloys by mixture of suitable compositions. As this juncture, the raw material comes into existence and from this raw material by the process of moulding, rolling and cutting, the wires are drawn by the petitioners. It is impossible to accede to the submission of Shri Cama that the process of manufacture undertaken by the petitioners is merely a job work. The concept of job work as set out in explanation to the exemption notification means that the article is supplied to the job worker and the article is returned by the job worker after undertaking manufacturing process. In the present case, what is supplied is only the scrap material and the petitioners do not undertake manufacturing process on such scrap material by converts the scrap material after moulding into suitable compositions of specific alloys and that specific alloy is further processed to bring into existence the wires. It is impossible on the facts and circumstances of the case to hold that the work undertaken by the petitioners is merely job work as contemplated by explanation to the notification. Shri Cama referred to two decisions of the Single Judge of this Court in the case of Noble Paints & Varnish Company Pvt. Ltd. v. Union of India and Another, reported in 1985 (19) ELT 80 and in the case of I.E.C. International Limited v. Union of India and Another, reported in 1988 (36) ELT 31, and a decision of the Division Bench of Gujarat High Court in the case of Anup Engineering Ltd., Ahmedabad and Others v. Union of India and Others reported in 1978 (2) ELT 533. In our judgment all the three decisions have no application whatsoever to the facts of the present case. The three authorities while interpreting the notification observed that merely because while undergoing the process in the factory of the job worker, the material supplied changes shape cannot lead to the conclusion that the job worker is not entitled to the benefit of exemption notification. There cannot be any debate on the ratio laid down by these authorities that merely because an article which undergoes manufacture in the factory of the job worker is known by different name in the market that would not deprive the job worker, of benefit of notification. For example, of a plain cloth is supplied to the job worker for printing or dyeing to convert the cloth into a saree, the mere fact that the cloth originally supplied is known by different names in the market cannot deprive the job worker of the benefit of the exemption notification. A person can claim to undertake process of job worker when the work does is such which does not totally alter the character of the original material supplied. In the present case, the material supplied was a scrap material and was moulded and specific alloys were manufactured. It is impossible to accept the submission that the process undertaken by melting and thereafter moulding, rolling, and cutting is that of merely job worker. Once, the conclusion is reached that the process undertaken by the petitioners is not of a job worker, then obviously, the petitioners are not entitled to advantage of the notification and the orders under challenge need not be disturbed.

6. Shri Cama then submitted that for determining the excise duty, the value to be taken into consideration should only be that amount which is paid by the customers to the petitioners for the work undertaken. In support of the submission, reliance is placed on the unreported decision of the Division Bench of this Court in Writ Petition No. 3075 of 1979 decided on November 6, 1981. The contention of the learned counsel and the reliance upon the decision is entirely inappropriate. In the first instance, the Division Bench proceeded on the footing that the petitioners were merely job workers and incurred no expenses in acquiring raw materials and what was supplied to the petitioners was only raw material. On this undisputed position, the Division Bench held that for determining the real value of the rods processed on job work is the manufacturing cost and the manufacturing profit and the cost of the raw material cannot be included for determining the duty to be paid under the Excise Act. The facts of the present case are distinct and different. As mentioned hereinabove, what is supplied to the petitioners is not raw material but merely the scrap material and the petitioners bring into existence the raw material by melting the said scrap and thereafter manufacturing specific alloys required for the purpose of manufacture of wires. The decision of the Division Bench, therefore, has no application to the facts of the present case because what is supplied by the customers to the petitioners is not raw material and the raw material comes into existence because of process undertaken by the petitioners. Once, it is found that what is received by the petitioners is not raw material, then it is futile to suggest that the value of the materials manufactured by the petitioners should be determined only with reference to the value of the work undertaken by the petitioners. The three authorities below were perfectly justified in determining the value of the wires by taking into consideration the value of the raw materials. It is also required to be stated that this contention was not raised before any of the three authorities below and is raised for the first time in the petition. In our judgment, the contention has no merit and is required to be repelled.

7. Accordingly, petition fails and rule is discharged with costs. Shri Cama requests for continuation of interim order. Prayer refused.