1994 (10) TMI 193 - AT - Central Excise

Tribunal rules no duty on intermediate goods in manufacturing process

The Tribunal ruled in favor of the respondent, holding that duty is only levied when a new item is manufactured, and as the wires at intermediate stages ... Manufacture Issues:1. Central Excise duty on the manufacture and consumption of wires thicker than 14 SWG.2. Interpretation of Central Excise law regarding the liability of duty on intermediate goods.3. Application of Rules 9 and 49 of Central Excise Rules, 1944.4. Time limitation for the recovery of Central Excise duty.5. Distinction between intermediate goods and finished products for the purpose of duty levy.Analysis:Issue 1:The Collector of Central Excise filed an appeal against the order of the Additional Collector regarding the manufacture and consumption of wires thicker than 14 SWG without payment of duty. The appellant, engaged in manufacturing electric wires and cables, used bare Copper Wire captively in their factory without paying duty, leading to a demand for duty amounting to Rs. 77,294.70. The question arose whether the charge against the firm for using intermediate goods without payment of duty was sustainable.Issue 2:The appellant argued that intermediate goods, even if used captively, are liable to duty under Central Excise law. The respondent's contention was that since the final product exempted from duty was wire finer than 14 SWG, no duty was payable on wires at intermediate stages. The Tribunal analyzed the process of wire drawing and the emergence of wires of different cross-sections at various stages, concluding that duty should only be levied when a new commodity distinct from the final product comes into existence.Issue 3:The Tribunal examined the application of Rules 9 and 49 of the Central Excise Rules, 1944. Rule 9 deals with goods captively consumed becoming liable to duty, but in this case, the wires at intermediate stages were not consumed or utilized as such or after any process. The Tribunal referred to the relevant Tariff Entry for Electric Wires and Cables to determine the dutiability of the intermediate goods in question.Issue 4:Regarding the time limitation for the recovery of duty, the Tribunal found that the allegation of wilful contravention and suppression of facts leading to the demand for duty beyond 6 months was not substantiated. The appellant's argument that details were furnished earlier without any objection was considered, and the demand for duty beyond the limitation period was deemed not maintainable.Issue 5:The Tribunal emphasized that duty is levied only when a new item is manufactured, and since the wires at intermediate stages were part of the continuous process of manufacturing electrical wires, no duty was leviable on them. As the finished product was exempted from duty, the demand for duty on intermediate stages was held to be unsustainable in law. Consequently, the impugned order was upheld, and the appeal was rejected based on the findings in favor of the respondents.