ELECTRONICS MECHANICALS Vs. COLLECTOR OF C.E.

JUDGEMENT

(1.) THIS is an appeal against the order dated 25 -11 -1985 passed by the Additional Collector of Central Excise, New Delhi. Briefly stated the facts of the case are that on a visit to the appellants' factory on 12 -11 -1984 the Central Excise Officers found that they were engaged in the slitting of Jumbo Audio Magnetic Tape received from other parties on job work basis. They seized 606 spools of such slit Audio Magnetic Tapes of width not exceeding 6.5 mm valued at Rs. 12,020/ -. After further investigation the appellants were served with a show cause notice dated 18 -2 -1985 requiring them to show cause why Central Excise duty amounting to Rs. 39,375/ - should not be recovered from them on Slit Audio Magnetic Tapes valued at Rs. 1,50,000/ - falling under Item 59(1) of Central Excise Tariff and why penalty should not be imposed on them. The appellants were also asked to show cause why 606 spools of Audio Magnetic Tapes of width not exceeding 6.5 mm seized from their factory should not be confiscated. Thereafter, by the impugned order the Additional Collector held that by Slitting Jumbo Audio Magnetic Tapes rolls falling under Tariff Item 59(5) into Magnetic Tapes not exceeding 6.5 mm in width, the appellants had brought into existence a new product falling under T.I. 59(1). He, therefore, confirmed the demand of duty amounting to Rs. 39,375/ - and ordered the confiscation of 606 seized spools of Audio Magnetic Tapes of width not exceeding 6.5 mm valued at Rs. 12,120/ -. He, however, gave an option to the appellants for redemption of the confiscated spools on payment of a fine of Rs. 4000/ -. He also imposed a penalty of Rs. 20,000/ - on the appellants under Rule 173Q, Rule 9(2) and Rule 52A(5) of the Central Excise Rules, 1944.

(2.) APPEARING on behalf of the appellants Shri Harbans Singh, Ld. Advocate stated that liability to Central Excise duty under the Schedule to the Central Excise Tariff Act, 1985 on any product can arise only if it is established that the process giving rise to that product constitutes manufacture within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944. He contended that there could be no duty liability on Magnetic Tapes of width not exceeding 6.5 mm produced by the appellants by Slitting Jumbo rolls of Magnetic Tapes of larger width received from customers since slitting of jumbo rolls into tapes of smaller width does not amount to manufacture. He stated that the Additional Collector's finding that slitting of Jumbo rolls of Audio Tapes into tapes of width not exceeding 6.5 mm amounted to manufacture on the grounds that Jumbo rolls of Audio Tapes were classifiable under Tariff Item 59(5) and after slitting into tapes of width of not exceeding 6.5 mm they fell under Tariff Item 59(1) was erroneous since Jumbo rolls of Audio Tapes were not covered by Tariff Item 59(5) which covered prepared media meant only for video or image or sound recording. In support of his contention that slitting of Jumbo rolls of Audio Tapes into tapes of width not exceeding 6.5 mm did not amount to manufacture he cited the following decisions : -

(3.) ON behalf of the respondents Shri R.K. Kapoor, Ld. S.D.R. submitted that the activity of slitting of jumbo rolls of audio tapes of width not exceeding 6.5 mm has to be deemed as 'manufacture' within the meaning of Section 2(f) since such slitting results in a product having different name, character and use. He added that the appellants' claim that Tariff Item 59(5) covered only video tapes was not correct since prepared media both for video and audio signals was covered by the said item. He stated that as held by the Supreme Court in the case of Laminated Packing (P) Ltd. v. Collector of Central Excise, reported in 1990 (49) E.L.T. 326 as long as the process carried out results in different identifiable goods, it would amount to manufacture even though the initial and final product may fall under the said tariff entry. He submitted that the question whether slitting of jumbo rolls of magnetic tapes into tapes of smaller width amounts to manufacture has been settled by the Tribunal's decision in the case of Dipen Textiles (P) Ltd. v. Collector of Central Excise (supra). He added that in the case of Inarco Limited Bombay v. Collector of Central Excise, Bombay, reported in 1987 (31) E.L.T. 469 the Tribunal has held that even a simple process may constitute manufacture if it brings into existence a new and different commodity. He stated that in the case of Empire Industries v. Union of India, reported in 1985 (20) E.L.T. 179 the Supreme Court has held that transformation of an object into a different commercial commodity would be sufficient to constitute manufacture under Section 2(f) of the Act. He contended that the penalty imposed on the appellants was sustainable since they had contravened the relevant Central Excise rules and cleared the goods in question without payment of duty. In support of his contention he cited the Tribunal's decision in the case of Mahindra Radio and T.V. (P) Ltd. v. Collector of Central Excise, Meerut, reported in 1988 (35) E.L.T. 668.