ADWAIATH STEELS LTD. Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THIS is an application for waiver of pre -deposit of duty of Rs. 31,48,359/ - confirmed in terms of Rule 9(2) read with proviso to Section 11A of the Central Excise Act, 1944, besides mandatory penalty of equal amount confirmed under Section 11AC under the order in original No. 7/2002(Commr.), dated 12 -2 -2002. The Commissioner under the order impugned has also demanded interest amount on the duty demanded, in terms of Section 11AB of the Central Excise Act, 1944. Applicants/Appellants are manufacturers of bright bars, nose bars and spares for textile machinery falling under chapter sub -headings 7214.90, 8448.00 of the CETA, 1985. They were doing job work to their customer viz. M/s. Lakshmi Machine Works, Unit I and Unit II on the materials supplied by them. Appellants were receiving black bars under delivery challans issued under Rules 52A and 173G of the erstwhile Central Excise Rules, 1944 from their customer and were availing Modvat credit. They were also doing job work for M/s. Mukund Ltd., Chennai, based on the black bars supplied by the said company on stock transfer basis under Rules 52A and 173G. The finished goods viz. bright bars were being cleared to M/s. Lakshmi Machine Works as per instructions of M/s. Mukund Ltd. on the basis of the value determined by the appellants. The job charges were not declared to the department. According to the department the method adopted for the purpose of determining the value of bright bars converted from black bars were incorrect. The other allegation is that the scrap had not been accounted for correctly and sale proceeds of the same were retained by them which affected the value of the final products cleared by them. Proceedings were therefore, initiated against the appellants by issue of show cause notice dated 19 -9 -2001 proposing to demand differential duty amount of Rs. 31,48,359/ - as the appellants have contravened various provisions of the Central Excise law and the proceedings culminated in the impugned order as noted above. The period involved in this case is from 11/96 to 9/98.

(2.) SHRI R. Raghavan, learned Counsel for the appellants submitted that the appellants are only job workers. He submitted that in the present case, the Commissioner has proceeded on the basis that conversion of black, bars into bright bars amounted to manufacture. He submitted that the decision of the Tribunal in the matter of Vishvaman Industries v. CCE reported in 2001 (127) E.L.T. 155 applies to their case. However, the Commissioner held that this case law is not relevant for the period, which finding is not correct, according to the appellants. He also submitted that there was no suppression on the part of the appellants. He further submitted that the appellants will not be able to get the duty reimbursed by their customers as the duty was payable only on the value as indicated in the invoice. He has also cited the ruling of the Tribunal in the case of Lili Foam Industries (P) Ltd. v. CC, reported in 1990 (46) E.L.T. 462, para 24, which deals with re -opening of assessment. It was held therein that the demand of differential duty can only arise when the department correctly determines the duty payable by the assessee and the duty already paid by the assessee. He has also relied upon the decision of the Tribunal in the case of Bakeman's Home Products Pvt. Ltd, v. CC, Bombay reported in 1997 (95) E.L.T. 278, wherein in para 18 it was held that when allegation is made of mis -declaration of value by adjusting the value of one item under one sub -heading with the value of another item falling under another sub -heading to take legal advantage of lower rate of duty available for an item, the same can be sought to be resisted by pleading that on correct classification there would be no duty advantage for the importer and the alleged mis -declaration of value would not really result in duty evasion. He has also pleaded financial hardship and submitted that due to recession in the industry the appellants are faced with severe financial problem and they were not able to mobilize funds from Bank also and if total waiver is not granted they will be put to undue hardship and injury. He submitted that prima facie appellants have a good chance of succeeding in the appeal and he therefore prayed for full waiver of pre -deposit of duty and penalty.

(3.) SHRI C. Mani, learned DR opposed the prayer for total grant of waiver and submitted that there was suppression of fact on the part of the appellants as the appellants have not determined the duty correctly and they retained the sale proceeds of the scrap without bringing it to the notice of the department. In this connection he referred to the finding portion of the order -in -original wherein the Commissioner has dealt with the aspect of suppression. He has also referred to the comments received from the Joint Commissioner of Central Excise, Coimbatore wherein it is stated that the allegation in the show cause notice relates to revision of assessable value of bright rods by forming the basis of calculation of Landed cost of materials rather than the invoice value of inputs. It is also stated therein that there was not even a whisper about the concept of manufacture in the show cause notice and in such a situation the appellants are not justified in advancing a fresh plea before the original authority or before the Tribunal in regard to manufacture. It is further stated in the comments that appellants have not discussed about the filing of classification and declaration under Rule 57A. He has also submitted that imposition of penalty in the facts and circumstances of the case under the provisions of Section 11AC is correct. In the circumstances, he has prayed that the appellants should be directed to pre -deposit the entire amount involved.