Manufacture by cold rolling of stainless steel strips upheld, with duty demand sustained and Rule 57CC credit allowed.

Cold rolling of hot-rolled stainless steel strips was treated as manufacture because it produced distinct marketable goods, so the resulting pattas/patties were dutiable and not covered by Notification No. 67/95-C.E. for captive use in making utensil circles, subject to verification of any duty-paid scrap clearance. The amount earlier paid under Rule 57CC at 8% of the sale price of exempted utensils was held adjustable against the duty demand on the pattas/patties, because duty was levied at the intermediate manufacturing stage and no further amount was payable for the same chain of manufacture. The matter was remanded for re-quantification with such credit.

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Issues: (i) Whether cold rolling of hot-rolled stainless steel strips amounts to manufacture and whether the resulting pattas/patties are liable to duty and outside the scope of Notification No. 67/95-C.E. when used captively for making circles for utensils; (ii) whether the amount equal to 8% of the sale price of exempted utensils paid under Rule 57CC could be adjusted against the duty demand on the cold rolled pattas/patties.

Issue (i): Whether cold rolling of hot-rolled stainless steel strips amounts to manufacture and whether the resulting pattas/patties are liable to duty and outside the scope of Notification No. 67/95-C.E. when used captively for making circles for utensils.

Analysis: Cold rolling of hot-rolled stainless steel strips brings into existence distinct marketable goods different from the hot-rolled inputs, and therefore amounts to manufacture under Section 2(f) of the Central Excise Act, 1944. Once the cold rolled pattas/patties are treated as excisable goods, their captively cleared use in manufacture of circles for utensils chargeable to nil rate of duty does not attract the captive consumption exemption under Notification No. 67/95-C.E., except where the notification itself carves out an applicable exception. The separate plea relating to scrap was left to be verified by the original authority on evidence of duty-paid clearance of scrap.

Conclusion: The duty demand on cold rolled pattas/patties was upheld, and the assessee was held not entitled to exemption under Notification No. 67/95-C.E. for such clearances, subject to re-examination of the scrap-related quantum.

Issue (ii): Whether the amount equal to 8% of the sale price of exempted utensils paid under Rule 57CC could be adjusted against the duty demand on the cold rolled pattas/patties.

Analysis: Since duty is levied at the stage of cold rolled pattas/patties, no further amount would be payable under Rule 57CC in relation to the exempted utensils for the same chain of manufacture. The amount earlier paid at 8% on the sale price of utensils was therefore required to be given credit against the duty demand, and the order disallowing such adjustment was incorrect.

Conclusion: The adjustment of the amount paid under Rule 57CC was allowed to be set off against the duty demand.

Final Conclusion: The demand of duty on cold rolled pattas/patties was sustained, but the matter was sent back for re-quantification after giving credit for the amount paid under Rule 57CC and after determining any further exemption attributable to duty-paid scrap clearance.

Ratio Decidendi: Cold rolling of hot-rolled stainless steel strips is manufacture when it results in distinct marketable goods, but amounts earlier paid under the captive-clearance mechanism must be adjusted against the duty demand arising from the same manufacturing chain.

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