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2007 Supreme(SC) 708
2007(5) Supreme 48
Supreme Court of India
Ashok Bhan & C.K. Thakker, JJ.
Commissioner of Central Excise, Jaipur— Appellant
versus
M/s Mahavir Aluminium Ltd. — Respondent
Appeal (civil) 6197 of 2001
Decided on : 11-05-2007
Counsels for the Parties :
For the Appellant : V. Shekhar, Sr. Adv., Sudhir Kr. Sajwan, G. Prakash and P. Parmeswaran, Advocates.
For the Respondent : A.R. Madhav Rao, Monish Panda (for M.P. Devanath) Advocates.
Important point
Production of Aluminum billets from Aluminum ingots\ Scraps and other alloying materials amounts to manufacture within meaning of section 2(f) of Central Excise Act, 1944 and is chargeable to Central Excise under sub-heading
7601.10 of Chapter 76 of Central Excise Tariff Act, 1985.
Headnote:Central Excise Act, 1944 – Section 2(f) – Central Excise Tariff Act, 1985 - Chapter 76 - Process of conversion of Aluminium ingots into Aluminum Billets during intermediate stage by process of remelting and adding other alloys – Whether amounted to a “manufacture” within meaning of section 2 (f)? so as to be chargeable to excise duty? (Held) Yes - Assessee’ engaged in manufacture of Aluminium Products was manufacturing Aluminium Billets and was consuming it captively for manufacture of Aluminium Irrigation Pipes exempted from payment of duty - Assessee was also selling said commodity in market by paying Excise Duty – Evidence to show that Assessee was not only captively consuming Aluminium Billets for production of Irrigation Pipes but was also selling such commodity in open market - Process of ‘manufacture’ hence resulted in emergence of new commercial commodity, namely, ‘Billets’ - Said commodity had an independent marketability and assessee itself had sold Billets in open market by paying Excise Duty - Ingots and Billets were two different commercial commodities - They had separate, distinct and identifiable marketability and saleability – Finding of Commissioner that assessee was liable to pay Excise Duty held proper - Order of CEGAT, being unsustainable held liable to be set aside and Order passed by Commissioner restored - Appeal allowed. (Paras 19 to 24)
Facts of the case :
Assessee’ herein in the instant case was engaged in manufacture of Aluminium Products was manufacturing Aluminium Billets and was consuming it captively for manufacture of Aluminium Irrigation Pipes exempted from payment of duty. Assessee was also selling said commodity in market by paying Excise Duty. Commissioner held that production of Aluminium Billets from Aluminium Ingots/Scraps and other alloying materials amounted to ‘manufacture’ u\s 2(f) of Act and was chargeable to Central Excise Duty. CEGAT on Appeal held that process carried out by assessee of Melting Ingots into Round Ingots for purpose of extrusion not amounted to ‘manufacture’ and taxable commodity remained same although in different form.
Present appeal has been filed against said order of CEGAT.
Findings of the Court :
The Court held that there was evidence to show that Assessee was not only captively consuming Aluminium Billets for production of Irrigation Pipes but was also selling such commodity in open market. Process of ‘manufacture’ hence resulted in emergence of new commercial commodity, namely, ‘Billets’. Said commodity had an independent marketability and assessee itself had sold Billets in open market by paying Excise Duty. Ingots and Billets were two different commercial commodities. They had separate, distinct and identifiable marketability and saleability. Finding of Commissioner that assessee was liable to pay Excise Duty held proper. Order of CEGAT, being unsustainable held liable to be set aside and Order passed by Commissioner restored.
JUDGMENT
C.K. THAKKER, J.—
1.A short question which arises for our consideration in the present appeal is whether the process of conversion of Aluminium Ingots into Aluminium Billets during the intermediate stage by the process of re-melting and adding other alloys amounts to ‘manufacture’ within the meaning of Section 2(f) of the Central Excise Act, 1944 (hereinafter referred to as ‘the Act’) and Central Excise Duty is chargeable thereon?
2.The facts of the case are that M/s Mahavir Aluminium Ltd., Bhiwadi (hereinafter referred to as ‘the Assessee’) was engaged in the manufacture of Aluminium Products falling under Chapter 76 of the Central Excise Tariff Act, 1985. The assessee was manufacturing Aluminium Billets and was consuming it captively for the manufacture of Aluminium Irrigation Pipes exempted from payment of duty. The assessee was also selling the said commodity in the market by paying Excise Duty.
3.It was the case of the Commissioner of Central Excise, Jaipur (hereinafter referred to as ‘the Revenue’) that the assessee did not mention the facts in classification lists/declarations filed under Rule 173 B of the Central Excise Rules, 1944 nor produced record relating to production of Aluminium Billets used for captive consumption and production of Aluminium Irrigation Pipes. A notice was, therefore, issued to the assessee on January 2, 1996 to show cause why an amount of Rs.1,16,56,476/- towards clearance of Aluminium Billets for captive consumption by suppressing the fact that such consumption was for manufacture of fully exempt products should not be recovered as duty and why penalty should not be imposed along with penalty.
4.By an order-in-original dated August 8, 1997, demand of Rs.44,35,637/- was confirmed for the period between June, 1995 and December, 1995. The demand beyond the period of six months was held to be barred by time. Penalty of Rs.10,00,000/- was also imposed.
5.An appeal filed by the assessee against the order-in-original was allowed by the Custom, Excise and Gold (Control) Appellate Tribunal (‘CEGAT’ for short) on February 16, 2000, setting aside the order-in-original passed by the Commissioner and remanding the matter for fresh disposal in accordance with law.
6.Hearing was afforded to the assessee thereafter by the Commissioner and considering the rival submissions of the parties, the Commissioner held that Aluminium Billets had come into existence as a result of conversion of Aluminium Scraps, Ingots and other alloying materials by process of melting. Billets are thus a commodity distinct from Ingots. The Commissioner also recorded a finding that “Aluminium Billets, besides being used captively, were also sold in the marked by the assessee on payment of duty @ 15% adv.”
7.The Commissioner concluded :
“Regarding whether aluminum billets produced at the intermediate stage by the assessee as per the process discussed in para A supra amounts to manufacture. I find that a billet as different article emerged as a result of melting of ingots/scrap of aluminium and other alloying metals and is having distinct name, character or use and as per Section 3 of Central Excise Act, 1944 these are goods which can ordinarily be bought and sold in the market. The assessee is also selling the same in the market apart from captive consumption for manufacture of irrigation aluminium pipes. Thus, billet is altogether a different product than an ingot of aluminium know to the market and has different use and character. In the assessee’s case also they could not have manufactured extruded pipes form aluminium ingots. Accordingly aluminium ingots and billets are altogether different goods”.
(Emphasis Supplied)
8.He, therefore, held that the production of Aluminium Billets from Aluminium Ingots/Scraps and other alloying materials amounted to ‘manufacture’ within the meaning of Section 2(f) of the Act and was chargeable to Central Excise Duty under sub-heading 7601.10 of Chapter 76 of the Central Excise Tariff Act, 1985.
9.The as
