ORDER
H.R. Syiem, Member (T)
1. This appeal dated 21st October, 1982 filed by M/s. Atma Steel Limited, Derabassi, is against the imposition of penalty, confiscation of goods and demand of duty by the Collector of Central Excise, Chandigarh in his order No. 11/82, dated 24-7- (no year is given). These actions of the Collector were taken because he held that Atma Steel had removed cold rolled steel strips without payment of duty and had failed to enter quantities of cold-rolled steel strips in Central Excise records.
2. M/s. Atma Steel received hot-rolled strips and subjected them to cold rolling. The Central Excise said that this cold-rolled steel strips obtained from the hot-rolled steel strips the leviable to central excise duty under Central Excise Tariff Item 26AA(iii). This took place in 1981 then sub-item (iii)of Central Excise Tariff Item 26AA for Iron or steel products read steel strips was leviable to central excise duty under Central Excise Tariff Item 26AA(iii). This took place in 1981 when sub-item (iii) of Central Excise Tariff Item 26AA for iron or steel products read : Flats, Skelp and Strips. The cold-rolled strips were produced by Atma Steel from hot-roiled strip on which duty under the same item and sub-item had been paid. This payment of “strip” duty on the hot-rolled strip is corroborated by para 22 of the Collector’s order. The manufacturer’s argument mainly was that having paid “strip” duty, the strip cannot be charged the same duty again, even when it came out as a cold-rolled strip from Atma Steel Rolling Mill. This is a correct reasoning and the Collector was wrong to hold the cold-rolled strip liable to duty under Item 26AA(iii).
3. His reasons for doing so were :
(I) Iron or steel products flats, skelp and strips fall under sub-item (iii) of Tariff Item No. 26AA and the statutory rate of basic duty therefore laid down in the First Schedule to the Central Excises and Salt Act, 1944 is Rs. 1350/- per metric tonne. In addition these are liable to special excise duty @ 10% of the basic effective excise duty leviable thereon.
(II) By issue of a Notification No. 55/80, dated 13-5-1980 (as amended & in force during the material period) issued under Rule 8 of the Central Excise Rules, 1944 the Central Government had granted partial exemption of duty on steel strips from so much of the basic excise duty leviable thereon as was in excess of the following :-
(i) Galvanised strips Rs. 850/- per M.T.
(ii) Other than galvanised strips :-
(a) Strips of Iron & Steel not below
5 mm but not exceeding 10 mm
in thickness and of not less than
600 mm in width. Rs. 350/- per M.T.
(b) Other cold-rolled strips Rs. 650/- per M.T.
(c) Other hot-rolled strips Rs. 450/- per M.T.
The said notification also granted certain further reduction in duty depending upon nature of raw material used, method of manufacture etc. in the situations mentioned in various provisos thereof.
(III) Hot-rolled strips and cold-rolled strips are two different commodities known to the market in their use and value.
(IV) It is the well-established practice to collect differential duty when “Other cold-rolled strips” are produced out of ‘Other hot-rolled strips’ on which basic duty at the appropriate effective rate has already been paid. This practice is in line with the thinking that any transformation which results in bringing into existence a new and different article or goods known to the market as different amounts to ‘manufacture’, attracting levy of central excise duty under Section 3 of the Central Excises & Salt Act, 1944 and what makes distinction for the purpose of excise tax is the nature of commodity” and hot the item or sub-item which are just like species and genre.
4. It is impossible to see the televance of reason I as a premise to the conclusion the “strip” duty is leviable on the cold-rolled strip rolled from hot-rolled strip. That flats, skelps and strips fell under sub-item (iii) of Item 26AA, that they were subject to basic duty of- Rs. 13501-per tonne, and that in addition, they were liable to special excise duty at 10% of the basic duty have nothing whatsoever to do with the liability of the cold-rolled strip to duty.
5. Reason II is equally misleading. Notification No. 55/80-C.E. merely exempts a number of goods and in the exemptions hot-rolled strip pay a lower duty (Rs. 450/- per tonne) than cold-rolled strip (Rs. 650/-per tonne). It means nothing more than this. The certain further reduction ; on duty stipulated in the various provisos of the notification that the ! Collector speaks about has no effect on duty of the cold-rolled strip produced by Atma Steel, nor does the Collector provide the smallest clue as to how the provisos qualify or regulate that duty. He does not seem to have noticed that the notification lists four kinds of strips under the head “Strips” (a) Galvanised strips (b) strips not below 5 mm but not above 10 mm thick and not less than 600 mm wide (c) other cold-rolled strip and finally (d) other hot-rolled strips. It escapes his notice that the notification categorises hot-rolled strip and cold-rolled strip under “6 Strips”, meaning thereby that both are strips. This reason supports the factory more than it does the department’s case; but whatever it does it is no basis for levying duty on this cold-rolled strip.
6. As for reason III, to be sure, hot-rolled strips is a different commodity from cold-rolled strip. But different though they are only the law decides dutiability, not the market. The law places all strips hot-roiled, cold-rolled, galvanised, painted etc. under the head strips, and requires one duty to be paid. Therefore whether the market regards the two kinds of strips as different commodities or as similar commodities will make no difference if the law, requires that they should pay separate duties under separate heads of the tariff. Supposing we found that the market regarded hot-rolled strip as being the same as cold-rolled strip, but the tariff provided different heads/sub-heads and duties for them we will have no choice but to charge duty on each separately, ignoring what the market thinks. Hence the fact that the market knows the two strips as different commodities will not make the cold-rolled strip liable to the same duty it had paid as a hot-rolled strip, a second time.
7. Reason IV says it is a well established practice- to collect duty on “other cold-rolled strips” produced out of “other hot-rolled strips”. The reason is ostensibly based on the theory of “transformation” and “what makes distinction for the purpose of excise tax is the nature of commodity and not the item or sub-item which are just like species and genre” (Sic) [The word they want is genus; genre is out of place]. Is there a threat here that the Collectorate will not yield to the law of items and sub-items, but will decide according to their own subjective “nature of commodity” that they will deploy in assessment? And the “well established practice” is without doubt a wrong practice and is clearly based on the “nature of commodity” doctrine, because it does not accord with the law; indeed it conflicts with it. There is recognition of this in today’s central excise tariff – galvanised strips hot-rolled strips and cold-rolled strips are in separate and distinct items or sub-items and so can be taxed separately; one duty, after another had been paid. What would the central excise do now when a duty paid strips is galvanised? A galvanised strip is not known as a different commodity for an ungalvanised strip, and galvanization does not change the strip into a new product. But the tariff lay down a duty separately for galvanised strip which means the law requires duty to be paid on the galvanized strip even if the strip from which it is produced had paid duty as a cold-rolled strip. The market practice will not save the galvanized article – the law might.
8. The Collector observed that the assessees had “on their own free volition chosen to take proforma credit under Rule 56A of Central Excise Rules thus “such strips stood denuded of their duty paid character and could no longer be treated as duty paid”. This is a half-truth if that, -the assessees had to take 56A credit only because the central excise demanded duty on the cold-rolled strip. The “volition” was not their own, nor was it free – it was forced on them by the department and so cannot even qualify as a volition; it was merely a reaction. However that may be, the department catches the assessee in a vice – he has taken 56A credit so his hot-rolled strip is not duty paid anymore, and so his claim that the cold-rolled strip should not be subjected to strip duty again has been confounded. There is an admission here, though as unconscious one, that but for the hot-rolled strip becoming non-duty paid by reason of 56A credit, the cold-rolled strip would have been not chargeable under Item 26AA(iii) to strip duty. The last sentence in paragraph 18 supports this. It says :-
“As such the assessee was liable to pay Central Excise duty on cold rolled steel strips produced out of hot rolled steel strips, which cannot be treated as duty-paid after proforma credit of duty has been taken in RG 23 register”.
9. The tariff classes all strips in one category. Therefore, all strips whether hot-roiled or cold-roHed are, for purposes of law, one commodity subject to duty under one head or sub-head. Exemptions providing one concession to hot-rolled strips and another to cold-rolled strips do not alter this fundamental basis. Once a strips has paid the “strip” duty under sub-item (iii) of Item 26AA it will never have to pay that duty agair whatever shape or form it is changed into, as long as it remains in the same “strip” category of the tariff and no process and no alteration in its nature or name or any other thing can attract to it the duty of a strip. That was the law at the relevant time; (it is no longer the law now). The action of the Collectorate to levy on the cold-rolled strip the duty under sub-item (iii) of Item 26AA which it had once paid (as a hot-rolled strip) is not sanctioned by the law and is void. The Collector’s order is quashed.
10. All confiscations are vacated and all moneys paid as a result of such confiscations shall be returned immediately. All moneys paid as penalties and as duty as a result of the Collector’s order shall be returned to M/s. Atma Steel without any delay.
11. Needless to say, the two parties shall take and complete all actions that are natural consequencies of this order with all speed and due despatch.
12. I agree. I would only like to add that in his arguments, Shri M. Chandersekharan, Advocate relied on a decision of the Tribunal in Swastik Packaging, Bombay v. Collector of Central Excise, Bombay Order No. 73/85-B1 dated 30th September, 1985. In this case, it was held that printing of duty paid foil did not call for duty liability again. Besides, he also relied on the Supreme Court decision in K.K. Steel Limited v. Union of India – 1978 ELT 3-355. Smt. V. Zutshi, the learned Sr. Departmental Representative strongly relied on an observation in a decision of the Supreme Court in Empire Industries Ltd. and Ors. v. Union of India and Ors. – 1985 (20) ELT 179 (S.C.) to the following effect :
“The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having? its own character, use and name, whether be it the result of one process or several processes ‘manufacture’ takes place and liability to duty is attracted”.
13. The Tribunal decision on which Smt. Zutshi relied is Veekeyam Industries v. Collector of Central Excise, Chandigarh – 1985 (21) ELT 596 Tribunal. In this decision, it was held that conversion of round bars into bright bars which as distincts name, character and use constituted manufacture. As far Smt. Zutshi’s reliance on the two decisions of S.C., it is sufficient to say that after the process of cold rolling, steel strips have remained only steel strips, though hot rolled. There has thus been no change in use even though character and use may have changed. In view of this, the two decisions would not apply to the present case. The precise effect of the Supreme Court decision in Empire Industries case would be examined later on some other case. In this connection, it may also be observed that the Supreme Court in Indian Aluminium Cables Ltd. v. Union of India and Others – 1985 (21) ELT (3) (S.C.). held that the process of manufacture of product and the end use to which it is put, cannot necessarily be determinative of the classification of that product under a fiscal schedule like the Central Excise Tariff, what is more important is whether the broad descrition of the articles fix in with the expression used in the tariff. In the present case so already succinctly pointed out by Brother Syiem, the goods were steel strips before being subjected to process of cold rolling and were steel strips after the process of cold rolling and had discharged duty liability as strips before being subjected to the process. There could, therefore, arises no occasion for demanding duty again on the same product.
14. I agree with the order proposed by brother Syiem.