TaxTMI 
TaxTMI 
2023 (12) TMI 245
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in the manufacture of excisable goods 'Drill Rods/Pipes' falling under chapter sub-heading 73042200 of CETA, but were not paying the Central Excise duties leviable on the said product. Accordingly investigation was initiated against the Appellants. It appeared from the evidences collected during the investigation that Drill rods and Drill Pipes are the term used interchangeably for the same commodity in the common parlance of trade; that 'Drill Rods/Drill Pipes' are used for the purpose of drilling by way of fitting it to the various Drilling machineries and drill bits. The said product known to the market having specific character and technical use; the products had specific demand in the market. The products were manufactured by a series of processes performed on the various raw material viz. Round Bars and Seamless Steel Tube/ Pipes. The process performed by the Appellant to make 'Drill Rods/Drill Pipes were incidental and ancillary to completion of a manufactured product having distinct name, character and use and hence appeared as amounting to 'manufacture' within the ambit of definition as provided under Section 2(f) of the Central Excise Act, 1944. The Products 'Drill Pipe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....et having specific character and technical use, but mere marketability or sale ability of product is not enough for fastening Central Excise Duty liability inasmuch as the process undertaken must first amount to manufacture and only then central excise duty could be recovered by the revenue. He placed reliance on the following decisions: • Collector Vs. Technoweld Industries 2003 (155) ELT 209 • (ii)Indian Aluminium Company Ltd. - 1995 (77) ELT 268 (SC) 2.2 He further submits that the fact that Range, Divisional and audit officers have accepted for a long time that the processes undertaken by the appellant company had not been manufacturing excisable goods in the nature of drill pipes/rods/tube is established on record of this case, and therefore the order of the Commissioner taking a different view in the present matter is wholly illegal and without jurisdiction. The Commissioner's order holding that the appellant company had manufactured drill pipes/ rods/tube and that the process undertaken by the appellant company on seamless pipes/tubes of steel amount to manufacture is therefore ex-facie illegal and liable to be set aside. 2.3. He also submits ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....teel, but there is a clear error in this regard inasmuch as sub-heading 73042390 covers casing and tubing, and not drill pipes. The confirmation of demand under a tariff classification not having different products like casing and tubing is also a clear error of jurisdiction, and the impugned order fastening liabilities on the appellant company under an apparently inapplicable classification is incorrect and without jurisdiction. 2.6. He also submits that the Commissioner has committed a further grave error in holding that seamless pipes received by the appellant company were converted into drill pipes and that these were two different products though Note No.1 (p) of Chapter 72 of the Tariff makes it very clear that any hollow drill bars and rods suitable for drills were to be classified in Heading No. 7304 and therefore the goods procured by the appellant company were drill pipes which remained pipes even after cutting/threading operations. In adjudication, the appellant has referred to this statutory note and also to purchase orders issued by the customer thereby establishing that it was an established trade practice of supplying drill rods by manufacturers of accessories aft....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Commissioner Vs. Moon Beverages - 1999 (33) RLT 153 (CEGAT) • M/s 3-F-Intenrantional -1997 (93) ELT 509 (Tri.) • M/s Kanthal India Ltd. - 1999 (31) RLT 547 (Tri.) • M/s Kartar Steels Pvt. Ltd. - 1997 (93) ELT 443 (Tri.) 2.9. He further submits that the imposition of penalty on the appellant company as well as its director is also illegal and without any jurisdiction because there has not been any reason whatsoever for which even a taoken penalty could have been imposed on the appellants herein. While holding that there was no suppression of facts on part of the appellant company, the Commissioner has referred to various documents like audit reports, orders granting rebate, declarations in Annexure -24, verification reports of Range and Division Assistant Commissioner and also to the bonafide belief held by the appellants that the goods were not excisable. Shri Sanjay Jayantibhai Gandhi was working as a Director and had not dealt with any excisable goods in his capacity as a Director of the said Company. Under these circumstance Rule 26 of Central Excise Rule, 2002 does not attract against him. Hence penalty imposed on him under Rule 26 of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ods/ pipes. Seamless pipes and round bars are both duty paid inputs and raw materials. The Ld. Commissioner has rightly held that if had the department raised the objection earlier, the respondent would have paid duty on the finished goods and taken Cenvat credit on the central excise duty paid inputs and raw materials. Thus, the situation would be revenue neutral as the Cenvat Credit would have been admissible to the respondent itself. He placed reliance on the following judgments: • CCE -Ahmedabad-II Vs. Quippo Energy Pvt. Ltd. - 2023 (5) TMI 135 -CESTAT AHEMDABAD. • M/s Nabros Pharma Pvt. Ltd. Vs. CCE & ST -Ahmedabad -III- 2022 (9) TMI 272-CESTAT Ahmedabad. • M/s. John Energy Ltd. Vs. CCE & ST - Ahmedabad-III 2018 (11) TMI 1389 -CESTAT Ahmedabad. • M/s Jay Yusin Ltd. - 2000 (119) ELT 718 (T-LB) 3. Shri Rajesh Nathan, Learned Assistant Commissioner (AR) appearing on behalf of the Revenue, as regard the assesee's appeal are concerned reiterates the findings of the impugned order. 3.1. As regard the Revenue's appeal he submits that Learned Commissioner has erred in passing the impugned order to the extent of dropping demand ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1 the assessee had mentioned anything regarding manufacture and clearance of 'Drill Rods/Pipes" which is the subject matter of dispute. The adjudicating authority has also erred in holding that the assessee were under bonafide belief on account of M/s Vulcan Lavals Ltd. decisions reported at 1985(22) ELT 123, that the processes carried out by them were not a process of 'manufacture' under Section 2(f) of the Act attracting levy of Central Excise Duty. The assessee is duty paying unit and have been paying central excise duty on "Connectors", and therefore being a Central Excise assessee for so long, they were very much aware that the Central Excise Tariff has undergone change in 1985, and also further amendments from time to time. Thus it cannot be held that the assessee were under bonafide belief on account of the decision in the case of M/s Vulcan Levals Ltd., Pune rendered in the context of earlier tariff classification. The adjudicating authority has also erred in holding that there is hardly any value addition in the process being carried out by them; and that the assessee could have taken CENVAT Credit on the raw materials, in which case, it would have been a revenue neutral s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2(f) of the Central Excise Act, 1944 and leviable to central excise duty. We observed from the records that entire process of manufacturing of 'Drill Rods/ Drill Pipes from raw material stage to the finished goods stage has been very well described under Panchanam dated 15.04.2011. We find that the process of manufacturing of drill rods/ drill pipes from raw material stage to final product stage is that the Round Bars and Semaless pipe are their main raw materials. The Round Bar are used to manufacture connectors (Male and Female). The Round bar is cut into required size on the bandsaw machine before subjecting it to machining operations (on the lathe machine) that is, drilling to make solid round bars into hollow state, turning to make the outer diameter of appropriate size, threading and slotting. The product namely, Connector, is thus manufactured. In Drill Pipe Section, Seamless pipes of different diameters which are another major raw material for Drill Rods were stored. In the said section, on Lathe Machines the seamless pipes are cut into required size and then boring and beveling operations to make the pipe suitable for further welding with connectors are carried out at both....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to make 'Drill Rods/ Drill Pipes are incidental and ancillary to completion of a manufactured product having distinct name, character and used and hence it amounts to manufacture within the ambit of definition as provided under Section 2(f) of the Central Excise Act, 1944. We also find the raw materials used for manufacture of 'Drill Pipes /Drill Rods are distinct product specified in the First Schedule to Central Excise Tariff Act, 1985. 4.4. As discussed above the process undertaken by the appellant satisfies the test 'manufacture' as above and consequently we conclude that the resultant products of the appellant are liable to payment of Excise duty. 4.5. As regard the demand of duty of Rs. 9,89,159/- confirmed by the Ld. Commissioner for Spindle Subs/Bits Subs/Connectors, we find that the same is confirmed on the ground that the said goods had been cleared by the appellant for home consumption on the commercial invoices were over and above of those mentioned in the ER-1 returns of the corresponding months and therefore no Central Excise duty has been paid on such goods. Whereas Appellant argued that goods for which this demand of duty is confirmed were duly accounted for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the material time wherein they were showing showel spares/drill accessories(tail joint) clearance and also export details." This fact clearly established that nowhere in ER-1 returns appellant had mentioned anything regarding manufacture and clearances of the disputed goods i.e 'Drill Rods/Pipes'. Further, on perusal of the statements recorded by the investigating officers we find that the appellant was having full knowledge as to what is to meant by 'manufacture' but still they mis-stated that the processes under taken by them do not amount to manufacture. Further intention to evade payment of duty on disputed goods is further established by the revenue that Appellant not maintaining any 'Daily Stock Accounts as prescribed under Rule 10 of the Central Excise Rules 2002. 4.8. We also note that the appellants have not taken registration or filed any returns related to the disputed goods. From the show cause notice, it is clear that the DGCEI started investigation only due to a receipt of information that Appellant are manufacturing disputed goods but they are not paying duty. Keeping in view these facts, we are of the considered view that this is a case of fraud, mis-statement an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ss undertaken by the appellant was not as simple as has been projected by him. That the items in question have been given specific names and the same were used for specific purpose for which the raw material cannot be used. The impugned goods were specially packed in the cardboard packages and are known differently in the commercial as well as common circles. That the appellant's products are cleansing products and deserved to be classified under Chapter 34 and the adjudicating authority has rightly classified them under Heading 3402.90. 15. As regards limitation, it was submitted on behalf of the Revenue that the letter dated 8th March, 1994 written by the appellant did not state the entire facts. The same was vague and lacking in particulars. In the letter, it was not disclosed by the appellant that the products were being marketed as "cleanser" and gave the impression as if they are only re-packing the raw material into smaller packs. It was not disclosed that a new name has been given to the products. That the appellant did not disclose the applicability and functions of the products. The correspondence between T. Paul & Sons and M/s. Philips India Ltd. clearly indicat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ia Ltd. to allow them to print 'thinner' against 'solvent' on the cartons. It clearly shows that the appellant although was conscious of the fact that the products manufactured by them could attract the Excise Duty, made a deliberate attempt to evade the same by printing 'thinner' instead of 'solvent' on the cartons." 4.9. The appellants have also pleaded that they had a bona fide belief that their goods are not chargeable to duty. We fail to understand this plea. Evidences on record clearly indicate that they were aware that the goods are chargeable to duty and their process is amount to manufacture. Statement recorded during the investigation indicates that they were fully aware about their duty liability and manufacture of the disputed goods. We also note that in somewhat similar situation in the case of Tamilnadu Petroproducts Ltd. v. CCE, Chennai reported in 2004 (176) E.L.T. 116, the Tribunal has observed as under : - "28. As regards the invocation of the proviso to Section 11A of the C.E. Act, 1944, I find that suppression of facts from the department is very clear from the evidence available on record as the appellants, to suit the requirement of their customers....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A REVISED P.O. MENTIONING THE PRODUCT NAME AS SPINDLE OIL FROM THE BUYER. REGARDS. Sd/- (S. RAMAMOORTHI) Thus the Records clearly show that M/s. TPL have been clearing the goods under 38.17 and they were prompted by the need of the customers to change the nomenclature of the item as "Spindle Oil" and they did so clearly with a view to evade payment of duty. They have intentionally changed the nomenclature of the goods and the tariff heading thereto, is established by the above correspondence exchanged between the Senior Officers of the appellants Company. Therefore, mens rea on their part is established by evidence on record. In the background of the evidence as discussed above, the charge against the appellants that they have suppressed the fact from the department is brought home by evidence on record. Therefore, the proviso to Section 11A has been correctly invoked. So far as penalty under Section 11AC is concerned, I find that the Commissioner has taken into consideration the date of introduction of the provisions of Section 11AC and has proportionately imposed the mandatory penalty and it cannot be considered to be excessive warranting any r....