ORDER
Gowri Shankar, Member (T)
1. The appellant was engaged in the corrugation of plan galvanised mild steel sheets which it purchased from their manufacturers. Notice issued to it proposed to demand duty on these corrugated sheets on the ground that corrugation of the plain sheets was manufactured. In response to the notice, the appellant while contending that the process does not amount to manufacture, also claimed the benefit of the exemption contained in notification 16/97 which grants exemption to small scale manufacturers from duty on the goods manufactured by them based upon the value of clearances. In the order impugned in the appeal, the Commissioner, while holding that the process of corrugation amounts to manufacturer, has declined to extend the exemption contained in notification 16/97 on the ground that the corrugated sheets bore upon them brand name of the manufacturer of the plain sheets and therefore the mischief of paragraph 4 of the notification was attracted. He has also imposed a penalty of Rs 6 lakhs upon the appellant under rule 173Q.
2. The counsel for the appellant does not dispute that the corrugation of plain sheets does not amount to manufacture. He also does not dispute the denial of the exemption contained in notification 16/97.
3. The counsel for the appellant contends as follows. Although the process of corrugation amounts to manufacture, Note l(k) to chapter 72, which defines flat rolled products include those with patterns in relief derived directly from rolling. This requirement is not satisfied by the appellant who is not engaged in rerolling. Hence could not fall in chapter 72.10 of the tariff. The goods therefore not excisable at all, since there is no entry in the tariff which they fall for classification. He however states that the decisions of the Tribunal in Siddhartha Tubes Ltd vs CCE 2002 (49) RLT 148, Vardhman Industries Ltd v. CCE 2002 (49) RLT 275 and decision of the Punjab & Haryana High Court in Hansa Metallics Ltd v. Union of India 2001 (133) ELT 543 holding that corrugation of plain sheets amounts to manufacture, since a new commodity having a distinct name and character emerges. He further contends that in that event, the appellant would be entitled to take credit under rule 57A of the duty paid on the plain sheets which were subjected to corrugation. He states that he will be able to show evidence of payment of duty on the plain sheets which will be utilised by the appellant in the manufacture of corrugated sheets.
4. Rule l(k) of chapter 72 explains that flat rolled products included those with patterns in relief derived directly from rolling. After describing the specification of rolled products, it goes on to say following flat rolled products include those the patterns in relief derived directly from rolling for example grooves, ribs, chequers, tears, buttons etc and those which have been perforated, corrugated or polished, provided that they assume the character of articles or products for other headings. The note thus talk of two sets of items, one being product with patterns in relief derived directly from rolling and the other which have been perforated. They are two distinct and separate goods and thus perforated or polished are not required to derive these rolls. Therefore, the classification determined in heading 72.10.11 which is refers to corrugated products is not inappropriate.
5. Once it is held that the corrugation amounts to manufacture, the appellant would be entitled to take modvat credit of the duty paid on the inputs used in the manufacture of these goods (see Bharat Wagon and Engg v. CCE 2001 (44) RLT 557 and other such decisions), subject to the requirement contained in rule relating to modvat credit of evidence being produced on payment of duty on inputs which it utilised in the manufacture of the final product. These decisions are clear, that the procedural requirements such as filing of declaration would not in the way of taking credit in situation such as this where the manufacturer did not initially pay duty liability arising as a result of departmental interpretation. The matter will have to be remanded.
6. The other contention that duty has been demanded on the sale price of the corrugated sheets and that value has been recalculated by arriving at the cum duty price assessable value by deducting the duty element-also-has to be accepted. The matter has to be remanded to the Commissioner for determination of these two aspects for passing orders in accordance with law after considering the materials which the counsel for the appellants undertakes to produce within two months from the receipt of this order.
7. The liability to penalty if any may be determined keeping in mind the liability to duty if any consequently arrived at.