ORDER
M. Santhanam, Member (J)
1. This is a revision application filed before the Government of India which on transfer to the Tribunal is being treated as an appeal.
2. The appellants manufacture electric power distribution transformers of various specifications and sizes. They imported Cold Rolled Grain Oriented Electrical Grade Steel Silicon Sheets. They are in coil form and width varied from 600 to 700 milimeters. The Customs duty on these sheets was collected under Tariff Heading 73.15 and for countervailing duty for purposes of classification under Central Excise Tariff Item 26AA. These sheets in coil form were sent to factories in Bombay for slitting operations. Such strips in the running length were received by the appellants in their factory at Baroda. These strips were cut into small pieces by means of a tradle machine operated manually. The cut pieces were either in the form of a trapazoil polygon or rectangular. The appellants contend that the process of cutting adopted by them will not be manufacture. The process of slitting and cutting did not bring into existence a product having distinctive name, character and use. On 1.2.1983 the Department wrote to the appellants that their request for permission under Rule 56A could not be granted because the process carried on by them was not a process of manufacture. They were advised to surrender the licence. There was a visit by the authorities and in a communication dated 3.4.1983 the appellants were informed that the cutting process did not tantamount to manufacture under Section 2(f). On 9.12.1980 the Assistant Collector wrote to the appellants. On a representation and after a visit to the factory that the Tariff description of 28A was quite exhaustive and that the laminations cut from sheets would fall within the ambit of Tariff Item 28A. The appellants paid the duty and later applied for refund of duty amounting to Rs. 22,23,290.26 on 21.1.79. The Assistant Collector after discussing the matter with the Assistant Works Manager of the appellants held on 7.6.79 that the question of refund would not arise. It was also pointed out that the appellants have not filed any appeal against the approval of the classification list.
3. An appeal was preferred to the Appellate Collector of Central Excise, Bombay, who under the impugned order dated 27.12.1980 held that both from the technical as well as commercial parlance the process of cutting adopted by the appellants was nothing but a manufacturing process. Hence the present proceedings.
4. Shri D.R. Gupta, the learned Consultant stated that mere cutting or punching would not amount to manufacture and that the cut strips were not capable of being sold. There was no punching of these strips and there was no manufacture. He placed reliance on the ruling of the Tribunal reported in 1985(19) ELT 541 (Ajit India Pvt. Ltd. Madras v. CCE, Bombay/Madras). In that case on the facts the Tribunal after taking into account the entire range of activities held that the processes by themselves did not constitute manufacture. In 1986 (25) ELT 580 (Aruna Industries Visakhapatnam and Ors. v. CCE, Guntur and Ors.), the Tribunal has in the case of structural shapes held that the cutting of steel plates, drilling of holes, rivetting or fastening them were merely processes of manufacturing structural and not operations from which one could hold that the identity of the original product was lost (paragraph 16). In 1985(19) ELT 606 (Tri) (Moulds & Dies (P) Ltd. Bombay v. CCE, Bombay) the Tribunal has pointed out that there was no evidence on the side of the Department to hold that the products, as processed by the appellants could be sold in the open market and used as an identifiable machine part without carrying out further processes. Shri Gupta relied on the above rulings in support of his case that the order of the Appellate Collector could not be sustained.
5. Shri A.K. Jain, SDR argued that the imported material could not be used except for manufacturing stampings. The appellants have admitted in their letter dated 10.6.1977 as follows – ‘In either case it goes as a lamination sheet which could be used only as lamination in transformers or as stampings in Electric Motors etc’ Having claimed that these were laminations it was not open to the appellants to urge to the contrary. The Department also relied on 1986 (61) STC (Slate v. Sahachari Udhyog Man- ‘ dir), the Rajasthan High Court has held that after cutting and stitching umbrella cloth and giving it particular shape, a different commercial commodity comes into existence and it cannot be put to any other use except that for being used as an umbrella cover. In 1987 (31) E.L.T. 469 (Tribunal) (Inarco Ltd. Bombay v. CCE Bombay), the Tribunal has found it not possible to sustain the contention that ‘Aprons’ and ‘Cots’ were nothing but tubings and pipings converted into shorter length and that they have to be treated as manufactured products. In 1986 (26) ELT 211 (Brakes India Ltd. Madras v. CCE Madras and Ors.), the Madras High Court has observed by saying ad nauseam that such processes of drilling, trimming and chemferring cannot be considered as incidental or ancillary to the completion of manufacture of brake linings, the petitioners cannot escape the implications of the Statute. In paragraph 15 it is stated that it will not always be safe solely to go by a test as to whether the commodity after the change takes in a new names, though in stated circumstances, it may be useful to resort to it. It is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be part of manufacture.
6. The SDR submitted that the item never discharged the liability under Tariff Item 28A. He also cited 1957 (8) STC 294(MP) (G.R. Kulkami v. The State), the Mad-hya Pradesh High Court has held that stones when they are broken into metal or ‘gitti’ there was some process, manual though it may be, for the purpose of shaping the stones into another marketable commodity. In 1967 (20) STC 430 (Devi Dass Gopal Krishnan and Ors. v. The State of Punjab and Ors.), the Supreme Court has stated that when oil is produced out of the seeds the process certainly transforms raw material into different article for use. In 1981 (48) STC 378, the Allahabad High Court held the view that as a result of perforation of the iron sheet, a different commercial commodity had come into existence.
7. The SDR also urged that the appellants have not filed any appeal against the approval of the classification and hence the question of refund would not arise. He relied on 1983 (14) ELT 1853 (Aditya Mills Ltd v. CCE Jaipur), 1984 (15) ELT 260 (Rishi Enterprises v. CCE Bombay) and also Order No. 141/84-A (M/s. E.S.Patanwalav. CCE Bombay).
8. It was Urged on behalf of the Revenue that the product need not be put in the market and that was not a relevant consideration for the purpose of making them liable to the payment of Excise duty [MRF Limited v. UOI and Ors. -1985 (22) ELT 5 (Bom.) (Bombay)], In Order No. 715/86-B.l dated 4.11.86 (CCE Vadodara v. Lakhanpal National Ltd, Baroda), the Tribunal has held that even if the ‘calots’ were not sold and they were only an intermediate products in the manufacture of zinc battery, they must be assessed to duty.
9. The point that arises for consideration in the appeal is whether the products in question are liable to duty under Item 28A.
10. The appellants’ Works Manager has filed an affidavit regarding the process of manufacture. Admittedly the appellants are manufacturers of transformers. They imported Cold Rolled Grain Oriented Electrical Grade Steel Silicon Sheets. It is also not denied that these sheets were imported in coil form. The sheets were slitted into strips and these strips were cut to specified designs by the appellants. After the cutting of these strips they were tied together with a tape and placed in the transformer. The appellants have also produced before us photographs of the operations carried on by them. The main contention of the appellants is that they were only cutting the strips received by them and that mere cutting would not amount to manufacture. Whether in a particular case there is a manufacturing activity under Section 2(f) of the Central Excise Act, has to be decided with reference to the facts. The general propositions stated in the various decisions cited by both the sides have to be considered in the lights of the facts in the present case. It cannot be urged that in any case cutting would not amount to manufacture. In the case of Ajit India Pvt. Ltd. and Aruna Industries, the particular facts of the case have been examined and the Tribunal held that the operations carried on in those instances fell short of manufacturing process. In the present case the appellants have furnished the design of the cuttings at page 61 of the paper book. The laminated sheets are cut into rectangular pieces in the shape of trapazoil or other specifications required for the transformers. It must be noted that these are special Silicon Steel Laminations having distinct characteristics having electrical grade. The cut laminations were tied together and placed in the said transformer. The appellants do not carry on any activity of annealing or varnishing on the strips at this stage. Nevertheless, we have to examine the transformed product and find out whether it would amount to manufacture.
11. Tariff Item 28A imposed Excise duty on ‘electrical stampings and laminations all sorts’. If these products are electrical stampings and laminations they would necessarily attract duty. The Appellate Collector has referred to Mc-Graw Dictionary and stampings has been described as “a transformer lamination that has been cut out of a strip or sheet of metal by a punch press”. The appellants urged that there was mere cutting and there was no punch operation carried on. But the definition refers to cut out of a strip intended for transformer lamination. In this case admittedly the product is a cut out of a strip and that is used as a transformer lamination. The appellants drew our attention to Audels New Mechanical Dictionary where stamping has been defined as “to cut out, bend or indent, as metallic objects, formed by means of dies in either a press or a stamping machine”. The appellants have cut out the strips to particular designs and this would amount to a stamping. We must lay emphasis that the appellants have imported the Cold Rolled Grain Oriented Electrical Grade Silicon Steel Sheets, which after the cutting in particular forms straightaway went into transformers as stampings or laminations.
12. In 1986 (61) STC (supra), the question arose whether cutting a textile fabric and preparing umbrella covers would amount to manufacture. This citation has considerable relevancy because the umbrella cloths cut into various sizes and stitched and the finished product was only used to be fastened over umbrella cover. In this case also the cut laminated strips can be used only for the purpose of placement as a cave in a transformer and not for any other purpose. It would indicate that the manufacture of these cut strips was with a view to manufacture electrical stampings. There is a considerable force in the contention of the Revenue that when the manufacture is for particular utility, namely, laminations for transformers, the manufacturing activity would be established. It is the effect of the operations that is mattering for deciding the issue.
13. We also note that since these are electrical stampings and there is a specific Tariff Entry in regard to such goods, the question whether it would amount to manufacture under Section 2(f) would not strictly arise. The specific Entry would indicate that the item is excisable whether it is as a result of a manufacturing process or not. The appellants have admittedly used these cut strips as cave or electrical stampings for the transformers. The cutting into specific designs confirms our view that these are only electrical stampings falling under Tariff Item 28A.
14. The appellants at the time of importation have classified the goods for the purpose of CVD under 26AA as sheets. So the goods have not borne duty as electrical stampings and these electrical stampings come into existence after the laminated coil has undergone various processes and ultimately being cut by the appellants into a specific design before they were placed in the transformers. This is yet another aspect of the case which shows that liability to duty cannot be avoided.
15. It was argued that these cut strips are not marketable as such and they are not foods within the meaning of the Central Excises And Salt Act. But as pointed out in 1985 (22) ELT 5 (Bom.) – (M.R.F. Ltd. v. UOI and Ors.), if there is a vast difference between the original product and the goods were not put into the market would not make any difference. In that case the product was rubberised tyre cord warp sheets. In the present case, the photographs produced and also the specimens shown before us, besides the designs set out, by the appellants establish that there it a vast difference between the original product and the present one and that there is substantial and basic change in the product in view of the processes of cutting and the designs involved.
16. It was brought to our notice that the Department had earlier communicated that the process would not amount to manufacture. But that will not operate as estoppel and the Department is entitled to come to a different conclusion based on the facts and the circumstances of the case.
17. We also note that the steel sheets or strips which are subjected to cutting would be no longer sheets but become stampings or laminations for use in the transformer. Thus, it is a new product compared with steel sheets or laminated sheets. After cutting to particular shapes, the strips left their character of strips, plain and simple and became laminations or stampings. The strips that have been formed, shaped and worked upon would never be strips again to be used as such.
18. The next point urged was that the appellants would not be entitled to claim of refund when they have not contested the approval of the classification list. According to the appellants the Department asked them to file the classification list in that manner and hence they were entitled to file the refund application. The Department relied on the decisions 1983 ELT 1853 and (supra). We are of the view that it is not necessary to go into this question as the case fails on the merits.
19. Hence, on a careful consideration of all the facts, we are of the view that the Appellate Collector was right in coming to the conclusion that the resultant product is excisable under Tariff Item 28A. The appeal is, therefore, rejected.