JUPITER ENGRAVERS Vs. UNION OF INDIA

JUDGEMENT

(1.) THE petitioner is a proprietary firm and a Small-scale Unit having installed plant and machinery of value of less than Rs. 10 lakhs. The petitioners carry on business of doing job work of engraving designs on the rollers supplied by their clients which are textile mills and process houses. The rollers are supplied to the petitioners under "returnable gate pass" and after completing the job work are returned back to the owners. The rollers are made wholly of copper or of steel with the surface of copper-layer and it is not in dispute that the rollers are not manufactured by the petitioners. After the rollers are received by the petitioners, the job work is undertaken for impressing designs on the rollers. The petitioners carry out the work of brushing, sharpening the impressions, and enlivening the design for use. The designs engrave on copper rollers fade out after some use and the rollers are returned back to the petitioners for re-engraving. The work of engraving or re- engraving is carried out by assistance of lathe machines but mainly by manual exercise. The petitioners claimed that process carried out by the petitioners does not amount to `manufacture' within the meaning of Section 2 (f) of the Central excises and Salt Act and the petitioners were not liable to pay any duty but the respondents charged and collected excise duty under Tariff Item No. 68.

(2.) ON April 30, 1975, the Government of India, in exercise of powers conferred by sub-rule (1)of Rule 8 of the Central Excise Rules, 1944 published Notification No. 119/75 exempting goods falling under Tariff Item No. 68 of the First Schedule to the Central Excise and Salt Act and manufactured in a factory as a job work, from so much of the duty of excise leviable thereon as is in excess of the duty calculated on the basis of the amount charged for the job work. The explanation to the Notification defines the expression "job work"and reads as follows : "explanation :-For the purpose of this notification, the expression `job work' shall mean such items of work where an article intended to undergo manufacturing process is supplied to the job worker and that article is returned by the job worker to the supplier, after the article has undergone the intended manufacturing process, on charging only for the job work done by him. "

(3.) THE petitioners applied for licence for manufacture of copper engraved/re-engraved rollers on may 4, 1978 under Tariff Item 68. Accordingly, licence was issued by the Superintendent, central Excise and the petitioners filed classification list under Rule 173b for the product under tariff Item 68 and duty payable at the rate of 5% ad valorem. The classification list was approved on May, 7, 1979 by Assistant Collector of Central Excise holding that the duty is payable on the entire value of engraved rollers. The Superintendent, Central Excise, served show cause notice dated June 18, 1979 upon the petitioners to show cause why excise duty of Rs. 9,72,629. 60 should not be recovered under Rule 9 (2) and Rule 10 (1) of Central Excise Rules and why penalty should not be imposed. The show cause notice, inter alia, claimed that the petitioners were manufacturers and cleared 7055 copper engraved/re-engraved rollers valued at rs. 1,84,69,480. 00 without obtaining Central Excise licence. The show cause notice further claimed that during the period commencing from May 5, 1978 and November 28, 1978, the petitioners had removed 3890 engraved/re-engraved copper rollers paying duty at 5% ad valorem and job charges only and thereby the duty required to be paid on the basis of value of the copper rollers had escaped payment. The petitioners appeared before the Assistant Collector in answer to the show cause notice and claimed that the process undertaken by the petitioners does not amount to manufacture. The petitioners claimed that even if the duty is payable, it will have to be on the value of the job work carried out. The Assistant Collector by order dated July 7, 1979 rejected the claim and confirmed the demand of Rs. 4,86,379. 60 and differential duty of Rs. 4,86,250/-for the period commencing from May 18, 1977 to May 4, 1978 and from May 5, 1978 to November 29, 1978 respectively, and penalty of Rs. 100/-was imposed on the petitioners. The petitioners carried appeal before the Collector of Central Excise (Appeals) but the appeal ended in dismissal by order dated April 6, 1985. The appellate authority held that the plain copper roller is of no use and the engraving/re-engraving activity amounts to manufacturing process as defined under Section 2 (f) of the Central Excises and Salt Act. The appellate authority was conscious that earlier view taken was different but proceeded to hold against the petitioners on the basis of the decision of Tribunal reported in 1984 (18) Excise Law Times 671 (Mysore acetate and Chemicals Co. Ltd. Mandya v. Collector of Central Excise, Bangalore ). The appellate authority felt that the Tribunal being a higher authority, the decision is binding on the collector Appeals. The orders by the two authorities below are under challenge in this petition filed under Article 226 of the Constitution of India.