AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1983 (9) TMI 312
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....ts, was that the "outer races" could not be considered as having been manufactured, that the processes carried out on them were on behalf of M/s. Metal Box India Ltd., who supplied the appellants with the raw material for the outer races, and to whom the latter were returned, that these outer races were made specifically for incorporation in the bearings manufactured by M/s. Metal Box India Ltd., and patented by them and could not be sold in the market, that they had to undergo further processes in the factory of M/s. Metal Box India Ltd., and that in view of all this they could not be considered as having undergone a process of manufacture or having become excisable goods. 3. In support of his arguments Shri Habbu relied on the correspondence enclosed by the appellants as "exhibits" along with their appeal. These have been referred to also in the Additional Collector's order. One is a letter dated 6-7-1981 addressed by M/s. Metal Box India Ltd., to the appellants, in which they stated that they would be sending raw material for the manufacture of races at the appellants' end, which would subsequently come back to them for manufacture of rolling bearings under T.I. 49. They s....
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....me of a "dummy" M/s. Ashok Auto Enterprises, which was managed by P.C. Bahirwani, who was also the Director of the Company, obviously to avoid detection. The removal of the goods was also done on a holiday and it was done not through the main gate nor were any entries of the removal made at the gate. After setting out these and other circumstances brought out during investigation, the Additional Collector had observed that these circumstances fully ruled out the defence that there was no intention to evade duty. 6. Shri Habbu submitted that the Additional Collector had been so preoccupied with the question of mala fides that he had not applied his mind to the basic question whether at all the outer races were excisable and liable to duty. He submitted that if they were not dutiable, the mere belief of the appellants or the pattern of their behaviour could not make the articles as dutiable. He contended that the appellants had taken the ground that the articles were not goods and were not excisable. (In the appeal there is a reference to the appellants' reply to the show cause notice, which is stated to have been annexed to the appeal as exhibit "F". However, it was in fact no....
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....nts, since he was relying on his main argument that the articles were not dutiable at all. If they were not dutiable then no offence had committed and there was no question of the penalty. 10. Replying to Shri Habbu, Shri Tayal referred to the correspondence exchanged between the appellants and M/s. Metal Box India Ltd. He stressed that there was no doubt that in the minds of both of them that the articles were excisable. The appellants had not filed any classification list. The appellants were manufacturing other excisable goods. They could have filed a classification list showing these articles as non-excisable, so that the Department could have given a finding. Alternatively they could have written to the Department, asking for clarification. By failing to do either of these things, they had denied the Department an opportunity to decide in advance whether the goods were excisable, and had also demonstrated their mala fides. 11. As regards the submission that the articles had not undergone a process of manufacture, Shri Tayal submitted that they had in fact undergone a substantial change in comparison with the raw material supplied by M/s. Metal Box India Ltd., which....
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....company and it could not get away from it simply on the ground that duty would have been paid by M/s. Metal Box India Ltd. 13. Shri Tayal therefore submitted that the "outer races" had clearly undergone a process of manufacture and that they were "excisable goods" liable to duty under Item 68. 14. On the question of penalty, Shri Tayal stated that since no specific submissions had been made by Shri Habbu, he had nothing controvert. 15. Replying to Shri Tayal, Shri Habbu reiterated that the appellants had taken legal advice and it was not incumbent on them to get a clarification from the Central Excise authorities. 16. We have carefully considered the matter. The basic question is whether the articles known as "outer races" were excisable goods Shri Habbu has advanced a number of arguments to show that they were not. One of these is that these were semi-finished goods which had to undergo several further processes in the factory of M/s. Metal Box India Ltd. We observe in this connection that what are the end products of one manufacturer may well be raw material or semi-finished goods for another. This would apply to a large variety of chemicals, metals, mater....
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....ial transformation and the emergence of a new article having distinctive name, character and use. 20. We are not able to accept Shri Habbu's contention that because the bearings in which these races were to be incorporated were patented By M/s. Metal Box India Ltd., the races would fall outside the definition of "goods" as "articles which can come to the market to be bought and sold". It is normal practice for a large scale unit, particularly one manufacturing goods which require a number of parts, to purchase their requirements from ancillary units. Since these parts have to fit into a specific product made by the large unit, their dimensions, specifications etc., would have to be as laid down by the large unit. It may very well happen that such articles could not be used by any other manufacturer. This however would not mean that such articles ceased to be excisable. In this connection it would be relevant to refer to a judgment of the Allahabad High Court in the case of Union India and Others v. Union Carbide India Ltd., reported in 1978 E.L.T. (J 1). The question in that case was whether aluminium cans or torch bodies manufactured by Union Carbide India Ltd., in the cours....