ORDER
K.S. Venkataramani, Member (T)
1. These appeals have been filed against the various orders of the Collector of Central Excise (Appeals), Bombay. Appeal Nos. E/1427/88-D and E/1428/88-D arise out of the common order dated AMP-52-53/PN.-20-21/88, dated 26-2-1988. The other Appeal No. E/12/89-D arises out of another Order No. AMP- 671 /PN-356/88, dated 3-10-1988 passed by the same Collector (Appeals) following the order of 26-2-1988. The fourth Appeal No. E/4098/89-D arises out of another order of Collector (Appeals) No. R-636/PN/89, dated 23-8-1989 in which the Collector (Appeals) followed the order of 26-2-1988 of his predecessor. All these appeals involve common issue relating to the classification of a Scooter parts called studs manufactured by the appellants herein. They are the manufacturers of two and three wheeled motor vehicle in the manufacture of which studs are made according to the specification to the appellants. They got the studs manufactured on job work basis to whom they supplied the raw-material consisting of steel bars. The job workers processed the raw-material and returned it to the appellants. The material received from the job workers are subjected to certain process by the appellants in their own factory before using them captively in the manufacture of scooters. These processes are heat treatment or annealing to ensure hardness and to increase the tensile strength, phosphatizing to make the special studs rust resistant and chrome or other plating to give the special studs a brighter finished appearance. The appellants were issued various show cause notices from time to time demanding duty on the studs manufactured treating the appellants as the manufacturer and these demands were confirmed by the jurisdictional Assistant. Collector of Central Excise, Pune-I in his order dated 17-10-1985. In these orders the Assistant Collector held that the appellants were the manufacturer of studs because the terms manufacturer includes not only a person who employed hired labour in the production of excisable goods, but also any person who engages in their production on his own account and since in this case the goods have been manufactured to their specification out of materials supplied by them to the job workers. The further processes undertaken by the appellants like heat treatment were very necessary for the completion of the manufacture of the final product and, therefore, these processes were incidental/ancillary to the manufacture of the studs and amounted to manufacture as defined under Section 2(f) of the Central Excises and Salt Act, 1944. The Assistant Collector further classified the goods as bolts and nuts specifically covered by the Item 52 of the CET. Against the Assistant Collector’s order the appellants filed appeal to the Collector (Appeals) which were rejected by the Collector (Appeals) by his order dated 26-2-1988. The Collector (Appeals) in his order dated 26-2-1988 rejected the appeal holding that the appellants were the manufacturer of the studs which were correctly classifiable under Tariff Item 52 and not Item 68 CET and that the processing operation of the heat treatment, phosphatising and chrome plating carried out by the appellants constituted manufacturer. Against these orders of the Collector (Appeals), the appellants preferred appeals to the Tribunal, being Appeal Nos. E/1427/88-D and E/1428/88-D. Pursuant to the order-in-appeal dated 26-2-1988 of the Collector (Appeals), the jurisdictional Collector confirmed subsequent show cause notices issued by the jurisdictional Supdt. and confirmed a further demand of duty by the Assistant Collector’s order dated 11/12-4-1988. This order was also challenged by the appellants before Collector (Appeals) who rejected it by his order dated 3-10-1988 following his own previous Order-in-Appeal dated 26-2-1988. The appellants persued this matter again before the Tribunal in appeal which is numbered as E/12/89-D. Meanwhile, the jurisdictional Superintendent of Central Excise issued further show cause notices for subsequent periods from 1-3-1986 to 1-4-1986 by his communication dated 4-10-1986 for a further amount of Rs. 3,40,746.18 which was confirmed by the Assistant Collector by his order dated 11/12-4-1988. The appeal against this order of the Assistant Collector was also rejected by the Collector (Appeals) who again followed the order dated 26-2-1988 passed by his predecessor and the appeal against this order of the Collector (Appeals) before the Tribunal, is dealt with in Appeal No. E/4098/89-D.
2. Shri E.P. Bharucha, Senior Counsel with Shri M.P. Bharucha, learned Counsel appeared for the appellants. It was contended that the process of heat treatment phosphatising and chrome plating carried out by the appellants on the cut and grooved rods received from their job workers cannot amount to manufacturing. It was submitted that the processes of phosphatising and chrome plating is done only to make the studs rust proof and give them a final finish and heat treatment is to improve the tensile strength. The job workers to whom the material are sent are independent manufacturers and it is not the case of Department that they are the dummies of the appellants. The job workers are not under appellants control or supervision. The learned Counsel, thereafter, referred to a series of case laws on this subject -1987 (27) E.L.T. 460 (Tribunal), in the case of Techma Engineering Enterprise, Calcutta v. Collector of Central Excise, Calcutta to say that independent contractor or manufacturer cannot be called hired labour, 1987 (28) E.L.T. 85 (Tribunal) in the case of Mahavir Metal Industries, Bombay \. Collector of Central Excise, Bombay to say that for the unit to be called a dummy it should be shown that it is set up by another who actually hold control of all operation which is not the case here, 1984 (16) E.L.T. 415 (Tribunal), in the case of Lucas Indian Service Ltd., Madras v. Collector of Central Excise, Madras to say that customer supplying raw materials to another for manufacture of goods in accordance with his drawings and specifications is not a manufacturer. 1985 (21) E.L.T. 187 (Tribunal) in the case of Collector of Central Excise, Madras v. Modoplat (P) Ltd., Coimbatore for the same proposition, the learned Counsel cited the Allahabad High Court judgment 1979 (4) E.L.T. Q 597) in the case of Ganga Dhar Ram Chandra, Belanganj, Agra v. Collector, Central Excise, U.P., Allahabad and Ors. also to say mere supplying of raw material does not make the customer manufacturer, also 1986 (23) E.L.T. 187 (Tribunal) in the case of Metal Box India Limited, Calcutta v. Collector of Central Excise, Calcutta. The learned Counsel argued that heat treatment of component parts does not amount to manufacture relying upon the Tribunal decision in the case of Heatreaters & Engineers v. Collector of Customs, reported in 1990 (47) E.L.T. 281 (Tribunal), so also the learned Counsel relied upon the case law reported in 1993 (66) E.L.T. 212 (Tribunal) in the case of Collector of Central Excise v. SAE (India) Ltd. wherein the Tribunal held that the process of punching/drilling and galvanising of duty paid M.S. angles and flats of specified sizes not being highly intricate, specialised or technical in nature not amounts to manufacture under Section 2(f) of the Central Excises and Salt Act, 1944. Similarly the Andhra Pradesh High Court decision in the case of State of Andhra Pradesh, reported in 1973 (32) STC 322 (pg. 331) wherein the High Court held that Galvanisation is nothing but coating the iron sheet with zinc by an electrical process, or some other processes, to prevent it from oxidation which only improves the utility of the raw material of iron by the process of galvanisation and corrugation the iron and steel do not lose their essential character as iron and steel. This decision of the Andhra Pradesh High Court has been followed by the Allahabad High Court in the case of Commissioner of Sales Tax, Uttar Pradesh, Lucknow v. Tata Iron and Steel Company Ltd., reported in 1976 (38) STC 10. The learned Counsel further referred to the decision of the Tribunal in the case of Collector of Central Excise, Aurangabad v. Anil Chemicals (P) Ltd., Aurangabad, reported in 1985 (21) E.L.T. 889 (Tribunal) to say that mere improving the quality or purity of a material does not amount to manufacture creation of new and different goods. Further reliance was placed on the Supreme Court decision in the case of Atul Glass Industries Ltd. and Ors. v. Collector of Central Excise and Ors., reported in 1986 (25) E.L.T. 473 (S.C.) wherein the Supreme Court held that wind screens, rear screens and door screens of Motor vehicle would fall for classification under Item No. 68 GET as goods not elsewhere specified and these are not to be classified as glass and glassware under Item 23A(4) or under 34A of Central Excise Tariff as specified Motor Vehicle parts. Therefore, it was argued that in this case the studs cannot be classified under Item 52 of GET but would fall for classification under Item No. 68 GET being also excluded from Item 34(A) as specified Motor vehicle parts. The learned Counsel also submitted that the fact that the ratio of the Supreme Court decision in the case of Plasmac Machine Mfg. Co. Pvt. Ltd. v. Collector of Central Excise, reported in 1991 (51) E.L.T. 161 (S.C.) and in the case of Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise, reported in 1989 (40) E.L.T. 214 dealing with classification of goods under Item 52 GET will not be applicable to the factual background of the appellants’ case.
3. Smt. J.M.S. Sundaram, the learned Senior Departmental Representative appearing for the Revenue contended that the processes undertaken by the appellants herein are incidental/ancillary to the completion of the fully manufactured studs and as such satisfy the definition ‘manufacture’ under Section 2(f) of Central Excises and Salt Act, 1944. The learned Senior Departmental Representative submitted that the detail of the process is given in the records which make it clear that the studs get fully finish for its use as such and it is marketed only after these process are completed even for using it captively. The appellants do not use them before subjecting them to these processes. Both the Assistant Collector and the Collector (Appeals) have clearly found that these processes are ancillary and incidental to the completion of the manufacture of fully finished studs. It is this aspect which according to the learned Senior Departmental Representative would distinguish the appellants case from those in the case law cited by them wherein no further process at the hands of the raw materials supplier takes place after receipt of the material from the job workers. The learned Senior Departmental Representative further cited the Supreme Court decision in the case of Bhor Industries Ltd. v. Collector of C. Excise, reported in 1989 (40) E.L.T. 280 (S.C.) to say that unless the goods become marketable they cannot be considered excisable goods. Admittedly, the studs are not sold outside or even captively consumed without undergoing the process of heat treatment phosphatising and chrome plating of the appellants. This would clearly make appellants the manufacturer of fully finished studs. The learned Senior Departmental Representative further relied upon the Madras High Court decision in the case of Brakes India Ltd., Madras v. Superintendent of C. Excise, Madras and Ors., reported in 1986 (26) E.L.T. 211 (Mad.) wherein the High Court held trimming or chamferring of brake lining is manufacture. The learned Senior Departmental Representative further cited the case law reported in 1986 (25) E.L.T. 54 (Tri.) in the case of Mohanlal Roopchand Parmar v. Collector of C. Excise, Bombay-II to say that further process of heat treatment of printed saries necessary for making them marketable is hence to be considered as a process of manufacture. Citing the Tribunal decision in the case of Addisons 6- Co. Ltd. v. Collector of C. Excise, reported in 1990 (48) E.L.T. 281 (Tribunal), the learned Senior Departmental Representative argued that the Tribunal held in that case that applying anti-rust and anti-corrosion oil to tools is incidental or ancillary to the completion of manufacturer to finished tools. The Tribunal was considering in that case an issue under the Modvat credit scheme. As regards the classification of the studs the learned Senior Departmental Representative contended that in the Atul Glass Industries Ltd. and Ors. case decided by the Supreme Court, the Court found wind screens to a motor vehicle part as falling under Item 68 Central Excise Tariff because it was not one of the specified motor vehicle parts under Item 34 (A) Central Excise Tariff but in the present case there is specific entry in the tariff for bolts, nuts and screens under Item 52 Central Excise Tariff and the learned Senior Departmental Representative referred to the detailed reasoning by the Collector (Appeals) in this context to say that when such specific tariff entry is available for the goods its classification under the residuary Item 68 Central Excise Tariff is ruled out. Further the learned Senior Departmental Representative urged that the issue of the classification of bolts and nuts stands settled in the two decisions of the Supreme Court in the case of Plasmac Machine Mfg. Co. Pvt. Ltd. v. Collector of Central Excise and Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise, (supra). The Supreme Court had clearly held that even if the nuts have other specific function, they still fall under Item 52 Central Excise Tariff so long as they have predominantly fastening function. The decision of the Supreme Court had been followed by the Tribunal in the case of Hindustan Motors Limited v. Collector of Central Excise, Madras in Order No. E/456/91-D, dated 15-11-1991. The learned Senior Departmental Representative pointed out that the appellants themselves referred to the Item as studs and the show cause notice issued clearly brings out that the goods have primarily fastening function.
4. The submissions made by both the parties have been carefully considered. The dispute relates to the classification of a scooter part called studs. The appellants purchased basic raw material steel rods from the market and send it to job workers for threading and groove cutting of both sides. Their job workers are paid their charges for the work done. On receipt of the threaded parts these are subjected to phosphatizing chrome plating by the appellants. Annealing imparts added tensile strength to the studs and phosphatizing makes it rust proof chrome plating is for a fine finish. It is noted that the appellants have stated before the Collector (Appeals) that the studs after they carry out these above processes in their factory are then fitted into the two and three wheeler vehicles manufactured by them or are sold as replacement spares vide their letter dated 27-8-1987 to the Collector (Appeals). This is a clear indication that the studs are not marketed as spare parts or used as a component parts without the above process at the hands of the appellants. This would, therefore, make these process carried by the appellants on the threaded material as essential processes which makes the studs usable and marketable. Although these processes do not bring any change of shape in the part yet it is apparent that without these processes, the part would be sub-standard lacking in rust proof quality and tensile strength. This would go to support the conclusion drawn by lower authorities that these processes carried by the appellants on the studs are those which are incidental and ancillary to the completion of the manufacture of fully finished studs to be used as component parts in two/three wheeler scooters, satisfying the terms of definition of “manufacture” in Section 2(f) of the Central Excises and Salt Act, 1944. In such a view of the matter, the case law cited to show that heat treatment rust proofing by themselves are not processes of manufacture will not be material to the facts of this case. As regards the position of the job workers, it is seen that the job workers are in the nature of hired labourer employed by the appellants and the property in the goods throughout belongs to the appellants themselves and the work is done according to their specifications. When once it is seen that the job workers are only in the nature of hired labour for the appellants then it will be in order to hold the appellants as the manufacturer of the goods. In this context, Supreme Court in the case of Bajrang Gopilal Gajabi v. M.N. Balkundri and Ors., reported in 1986 (25) E.L.T. 609 (S.C.) will also be relevant. Further the Tribunal decision in the case of Mohanlal Roopchand Farmer v. Collector of Central Excise, Bombay-II, reported in 1986 (25) E.L.T. 54 (Tri.) cited by the learned Senior Departmental Representative would also be applicable wherein the Tribunal held that heat treatment process given to man-made fabrics i.e. saries screen printed on cold tables making them marketable would amount to manufacture in terms of Section 2(f)(vii) of the Central Excises & Salt Act, 1944.
5. So far as the classification of the goods under the erstwhile Central Excise Tariff is concerned, the issue stands settled by Supreme Court decision in the case of Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise, reported in 1989 (40) E.L.T. 214 (S.C.) and in the case of Plasmac Machine Mfg. Co. Pvt. Ltd. v. Collector of Central Excise, reported in 1991 (51) E.L.T. 161 (S.C.) wherein the Supreme Court had held that where the articles have fastening, function, they will be appropriately classified under Item 52. Para-8 of the Plasmac Machine Mfg. Co. Pvt. Ltd. decision is as follows :-
“Mr. Puchkanimal has emphasised that fastening has not been the function of Tie Bar Nuts manufactured by the appellants and used in their Injection Moulding Machines, and so those would not fall under Tariff Item 52.
Tariff Item 52 at the relevant time said :
“52. Bolts and nuts, threaded or tapped and screws, of base metal or alloys thereof, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power.
Explanation. – The expression ‘Bolts and nuts, threaded or tapped and screws’ used in this item shall include bolt ends, screw studs, screw studding, self-tapped screws, screw hooks and screw rings.”
It has not been denied that the Tie Bar Nuts are of base metal or alloys manufactured with the aid of power and are acme-threaded. From the language in Item 52, it would appear that fastening in the strict sense may not be the only function of nuts. Fixing may also be a kind of fastening. In Simmonds Marshal Ltd. v. M.R. Baralikar, Assistant Collector of Central Excise, Pune -1985 (22) E.L.T. 378 the Bombay High Court held that ‘nylocself looking nut’, is a kind of nut and is classifiable under Item 52.
The principles to be adopted for classification for goods under Item 52 Central Excise Tariff is further brought out if the Jaishri Engineering Co. (P) Ltd. decision (supra) wherein the Supreme Court observed “The question is, however, not as to what is the process facilitated as a result of the nuts, but the question is, which the Tribunal itself posed is – whether the nuts are fasteners or do they have any other independent function”. In the present case the goods are described as studs by the appellants and also understood in the market as studs designed for use in two/three wheeler vehicles and these studs have admittedly a fastening function which would also include within its ambit fixing which may also be a kind of fastening as observed by the Supreme Court supra. These being so Item 52 Central Excise Tariff which is specific for bolts and nuts will be appropriate classification for the goods rather than the residuary Item 68 CET covering goods not elsewhere specified in the tariff and the reasoning given by the Collector (Appeals) in his order dated 26-2-1988 in this regard is well founded. Therefore, the studs in this case have been correctly classified by the lower authorities as falling under Item 52 Central Excise Tariff.
6. The above finding on the classification on the studs however cannot straightway be applied to the period covered by the Appeal E/4098/89-D arising out of Collector (Appeals) Order No. R. 636/PN/89, dated 23-8-1989 because the period for which this order of the Collector (Appeals) applies is from 1-3-1986 to 1-4-1986 which is a period when the new Central Excise Tariff Act, 1985 aligned to HSN with its own rules of interpretation of the tariff, Section Notes and Chapter Notes which governed the scope of the tariff heading had come into force as against the period prior to 1-3-1986 when Central Excise Tariff which did not have such Chapter Notes and Section Notes and was structured differently was in force. Therefore, the Collector (Appeals) in his order dated 23-8-1989 merely following his predecessor Order dated 26-2-1988 which related to classification under the erstwhile Central Excise Tariff is not appropriate. The appellants’ claim for classification during this period for the goods seems to be under Heading 87.14 as parts and accessories of motor cycles including scooters. There is no finding of this aspect with reference to the provision of the Tariff Heading, Section Notes and Chapter Notes of Central Excise Tariff Act, 1985 in the orders of the lower authorities. Therefore, the impugned order of the Collector (Appeals) dated 23-8-1989 in Appeal No. E/4098/89-D needs to be remanded to the Collector (Appeals) for redetermining the issue of classification of the goods afresh under the appropriate heading in Central Excise Tariff Act, 1985 in accordance with law and after giving an opportunity of hearing. It is ordered accordingly so far as this appeal is concerned.
7. The orders of the lower authorities in respect of the other appeals are correct in law and are upheld. The appeals are disposed of in the above terms.