Commissioner
of Central Excise, Jaipur Vs. M/S. Hindustan Zinc Ltd [2004] Insc 196 (24 March 2004)
S.
N. Variava & H. K. Sema
(WITH
C.A.No.2305/2000 and C.A.No.5632/2000) S. N. VARIAVA, J.
All
these Appeals can be disposed by this common Judgment as the point involved is
the same.
Briefly
stated the facts are as follows:
The
Respondents are engaged in the manufacturing of zinc, lead and products
thereof. Zinc is manufactured by a process known as electrolysis. In this
process zinc sulphate solution is electrolyzed with the help of an electric
current which is passed through it. The current is introduced into the solution
by means of electrodes. A lead sheet fixed with a header acts as positive
electrode (anode) and an aluminium sheet fixed with a header acts as negative
electrode (cathode). For the purposes of electrolysis the Respondents
manufacture the cathodes and anodes. The cathodes are manufactured in the
following manner. Aluminium Header of the size of 1030 x45 x 25 mm is welded
with an Aluminium Sheet of the size 1105 x 610 x 5 mm. Thereafter, Copper Tips
are welded on the Header for better conductivity. The last process is to weld Aluminium
Hooks on Header for facilitating the lifting of Cathodes as and when desired.
The Cathode is of specific size which consists of various parts namely, sheet,
Header, Copper tips and Hooks and not merely of aluminium Sheet and Header.
The
anodes are manufactured by procuring lead ingots containing 1-02% silver. These
ingots are melted and the molten is cast in the required size. The size of the
cast/rolled product is 1070 x 1575 x 8 mm. A header is welded with the cast
rolled plate. The header is manufactured by casting the copper bed in lead. In
the lead cast/rolled product three holes are provided in which anode spacers
are put for avoiding contact between anodes and cathodes.
At
this stage, it must be mentioned that the Respondents have a unit at Visakhapatnam. They also have a unit at Debari, Udaipur, Rajasthan. It is an admitted
position that in respect of Debari unit the Respondents filed a Classification
list showing the anodes and cathodes having headers. The Debari unit paid duty
on the cathodes.
However,
in respect of Visakhapatnam unit the Respondents filed a
Classification list merely showing anodes and cathodes without showing that
they had put headers on them.
Show-cause-notices
were issued to the Respondents as to why they should not pay duty on cathodes
and anodes manufactured by them. The Commissioner of Customs and Central Excise
held that there was a manufacture and directed payment of duty and also imposed
a penalty. The Customs, Excise and Gold [Control] Appellate Tribunal (for short
Tribunal), however, allowed the Appeal of the Respondents on the ground that
there was no manufacture. It was held that the headers were attached only to
facilitate the use of aluminium or lead sheet in the process of electrolysis.
It was held that no new product with a distinct name, character and use has
emerged.
The
Tribunal further held that these headers were not marketable.
The
Tribunal did not go into the contention, raised on behalf of the Respondents,
that the manufacture, if any, was done by the job workers and that if duty was
to be paid it would have to be paid by the job workers.
We
have already noted the manufacturing process. The lead and aluminium sheets by
themselves cannot and do not act as electrodes.
They
become electrodes only after the process mentioned above is undertaken. Thus
the lead and aluminium sheets are converted into electrodes which is a new
product known in the market with a distinct name, character and use. The
Respondents pay duty on that product at the Debari unit as they accept that
there has been manufacture.
The
Commissioner in his Order dated 31st March, 1997 has also noted that the product is bought in the market by
one M/s. Cominico Binani Zinc Limited. This shows that the product is
marketable. The Tribunal has failed to notice this. Even otherwise, it is
settled law that for a product to be marketable there need not be actual
purchase or sale.
So
long as a new and distinct commodity known in the market has come into
existence there is manufacture. We are unable to accept the submission that the
headers are attached merely to keep the lead and aluminium sheets emerged in
the cell. From the process set out above it is clear that the headers are
attached in order to see that the lead and aluminium sheets become positive and
negative electrodes so that the current can pass through them. Without the
headers it would not be possible to pass the current through the sheets.
On
behalf of Respondents it was submitted that in two of these matters the
Department had invoked the extended period of limitation when they were not
entitled to do so. In dealing with this aspect the Commissioner has set out as
follows:
"During
the relevant period, i.e. June, 89- February ,94, the assessee, interalia,
furnished the following description in their classification List submitted for
approval.
"S.
Effective Classification S.No. of Description No. Date List No. the item of the
goods ------------------------------------------------------------
1.
1.3.1989 7/88-89 7 Lead Anodes Cast Anode Sheets
2.
20.3.1990 2/89-90 7 -do-
3.
24.7.1991 1/91-92 7 Lead Anodes Cast Anodes
4.
1.3.1992 2/91-92 7 -do-
5.
1.3.1993 -- - Not Shown
---------------------------------------------------------------- In letter
C.No.V/L/CL-1/91-92/HZL/VAL, dated 20.9.1991 a specific query had been raised
by the concerned Assistant Commissioner, regarding classification of the
product, relevant extracts of which are reproduced as under:
"In
respect of the products mentioned at S.No.7, viz., Lead Anodes, Cast Anode
Sheets, such description of the goods does not appear in Central Excise Tariff.
So you must write the exact description of the goods [emphasis supplied] as
mentioned in Central Excise Tariff to avoid any type of confusion and
possibility of mis-classification".
The assessee
in the letter reference No. VZS/S&D/CE/CL/91-92/16949, dated 30.9.1991, interalia,
stated that "We have written the full description of the goods [emphasis
supplied] being manufactured by us mentioning Heading number as we felt correct
these sheets are not rolled products, but are only cast" [emphasis
supplied].
6.2.
From the above classification furnished by the assessee, it is evident that the
Lead Anodes/Cast Anode Sheets mentioned in the classification List referred to
mere Cast Lead Sheets. It did not include the impugned product, viz. "Lead
Anodes" which comprised 2 distinct excisable goods, 1. Cast Lead [Anode]
Header 2. Cast Lead [Anode] Sheets. In none of their classification Lists, the assessee
had shown the product, Cast Lead Header/Anode Header, an integral part of Lead
Abode, for approval. The material information regarding manufacture of
"lead Anodes" [Cast Lead Sheet + Cast Lead Header] and their captive
use in the electrolysis process was never disclosed in the classification Lists
which were approved by the Department not the fact intimated to the Department
at any stage. The assessee's contention that they had exhibited the product,
"Lead Anodes", in their classification List is not borne out by the
evidences on the record. The description "lead Anodes mentioned with Cast
Anode Sheets", in the Classification List referred to only the Cast Lead
[anode] Sheets. This fact is amply clear from the clarification given by the assessee
in their letter quoted above. It is emphasized that the fact of manufacture of
Lead Anode out or assemblage of Cast Lead Sheet and Cast Lead Header was not
disclosed/mentioned in any of their Classification Lists nor in any
correspondence on the subject. This is in stark contrast to their disclosure of
all material particulars pertaining to manufacture and captive use of Lead
Anodes in the Classification List filed in respect of their other manufacturing
unit at Debari [Udaipur, Rajasthan]. The description
furnished by their unit at Debari is mentioned as below:
-----------------------------------------------------------------
S.No. Effective Classification S.No. of Description Date List No. the item of
the goods -----------------------------------------------------------------
1.
1.3.1989 - 5 Lead Anodes [Complete with Headers] used in the electrolysis plant
for recovery of Zinc and / or Cadmium
2.
1.9.1989 - 7 Lead Headers [i.e. Copper Strip around which casting of Lead is
done]. This is finally fixed with Lead Anode Sheet which is ultimately used in
the manufacture of Zinc and / or Cadmium.
------------------------------------------------------------------
6.3. The same description had been repeated in their subsequent approved
classification List, with effect from 20.3.1990, 25.7.1991, 1.3.1992 and
1.3.1993. The point to be stressed is that while the assessee furnished the
complete description of the product, viz., Lead Anodes manufacturer in their Debari
Unit, they had willfully suppressed the fact of manufacture and captive use of
Lead Anodes in respect of Visakhapatnam Unit. They did not make any mention of
the manufacture of Lead Anode in the Classification Lists submitted during the
relevant period. This was a clear case of willful suppression of facts and/or
deliberate concealment of facts. If the intention of the assessee were bonafide,
they would have certainly furnished the complete particulars of manufacture in
their Classification List relating to Visakhapatnam Unit as they did in respect
of their other Unit at Debari. The assessee knew fully that the goods were
excisable and liable to duty as their other unit paid duty on those goods.
Hence, they cannot plead ignorance/doubts etc. Conscious or deliberate
withholding of information and/or suppression of facts is fully established in
this case." On these facts we are in full agreement with the Commissioner
that there was conscious withholding of information and thus the extended
period of limitation had been rightly invoked.
In
this view of the matter, the Order of the Tribunal cannot be sustained. It is
accordingly set aside.
That
brings us to the question as to whether the Respondents are liable to pay duty
or the job workers are liable to pay duty. This would require looking into the
facts and material. We therefore remit the matters back to the Tribunal who
shall, after going into the facts and materials, decide the same.
For
the above-mentioned reasons the impugned Orders are set aside. The Appeals are
allowed to the extent set out above. There will be no order as to costs.
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