ORDER
Shiben K. Dhar, Member (T)
1. This appeal is directed against Order No. S/30/15/1-CE/93/3131, dated 2-9-93 of Collector of Central Excise, New Delhi.
2. The appellants are alleged to have manufactured sterile surgical sutures falling under tariff item 3005.90 and cleared the same without payment of duty after exceeding the exemption limit under Notification No. 175/86.
3. Arguing for the appellants ld. Advocate submits that what they manufacture is non-sterile sutures leviable to duty under Heading 4201.90 and the same is exempted from duty under Notification No. 279/88, dated 16-11-88. They send these pouches to B.A.R.C. and Shri Ram Institute of Industrial Research for the purpose of sterilisation as they have no equipment for sterilisation. The excise duty if at all was payable by these Institutes since it is at that stage non-sterile catguts became excisable through process of sterilisation. Admittedly they receive back these pouches after sterilisation and they re-pack them for sale but that by itself would not result into manufacture. In support of his contention he cited the cases reported in 1989 (39) E.L.T. 493 and 1988 (38) E.L.T. 535.
4. He also submits that Collector erred in not excluding from the value of goods alleged to have been removed without payment of duty, the value of goods which were exported. In fact, they produced before Collector all the evidence in support of their contention that certain quantities of these goods had been exported. By way of evidence they produced Gate pass, BARC certificate, copy of invoices, shipping bills etc. giving precise details to indicate that the goods in fact were exported.
5. Ld. Advocate also pleads limitation on the ground that they filed the declaration, though, admittedly the declaration did not bear the date. He further admits that they did not intimate to the Department the fact of having exceeded the exemption limit nor did they take up the licence. This was done because they were under the bona fide plea that the goods manufactured by them did not attract any excise duty and excise duty if at all payable was to be discharged by the two institutes to which they were sending these goods for the purpose of sterilisation since it is only the operation of sterilisation which resulted into an excisable product. The ld. DR on behalf of the respondents/Revenue submits that the goods were sent to these Institutions for sterilisation packed in certain cartons of specified size and shape. The goods were received back in the appellants factory for the purpose of further packing these goods. Labels on the small cartons in the form in which the goods were sold clearly indicates that the goods are manufactured by the appellants. These also bore on themselves the batch No. etc. The ownership of the goods throughout remains with the appellants and after receipt of goods the appellants not only re-pack the goods but are also required to carry out certain tests. All this indicates that the actual manufacturer was only the appellant and the two Institutes only carried out a certain process. After carrying out sterilisation the goods did not become marketable at the premises of these Institutes since these goods, according to letters from these Institutes themselves, had to be subjected to further tests. In this context he draws our attention to letter dated 7-9-95 from Shri Ram Institute for Industrial Research to the appellants advising them that the material cannot be sold unless prescribed tests are conducted by an approved laboratory and the copies of the test certificates are submitted to them. From this it would be clear that the appellant in fact was the manufacturer and had to discharge duty liability.
6. In regard to limitation ld. DR submits that declaration would at best indicate that they were engaged in manufacture of these goods. It was for them to have intimated when they exceeded the limit. In the absence of complete information in regard to these facts extended period was correctly invoked. In regard to exports he submits that no evidence was produced before the Collector to corelate the goods exported with the goods and, therefore, in the absence of such evidence, Collector denied them the benefit in regard to goods exported.
7. We have heard both sides.
8. In order to appreciate the point involved we extract below the process of manufacture given by the appellants :-
“They buy sheep/goat caring from the slaughter house and then slice the caring into two parts. Thereafter the caring was treated with chemicals and processed for further cleaning. Then the material was twisted and spanned under controlled conditions. The dried material was taken for centreless polishing on C.G. Machines and then the material was inspected and packed into individual pouches. These pouches were sent for sterilisation to B.A.R.C., Bombay and Shri Ram Institute for Industrial Research, Delhi. The sterilisation process took 15 to 20 days. After the material was received back, the same was repacked in final packings for dispatches. They paid Rs. 300/-per box weighing approx.14 kgs. Each”.
9. From this it is clear that they are engaged in manufacture and sale essentially of sterile surgical catguts where process of sterilisation was conducted at Shri Ram Institute for Industrial Research and B.A.R.C. In fact, the record indicates that they had also a Drug licence for the manufacture of sterile surgical catguts. The sample which was produced before us clearly indicates on the carton, “manufactured by Stericat Gutstrings P. Ltd”. It also indicates the Batch No. Through the letter dated 7-9-95 Shri Ram Institute for Industrial Research while returning them a particular consignment adviced them that goods cannot be sold unless all the prescribed tests are conducted by approved laboratory. All this indicates that goods which were not only initially manufactured, packed and repacked in their premises but these goods were also have been subjected to various tests. All this evidence would clearly establish that the real manufacturer in fact was the appellants notwithstanding the fact that the process of sterilisation was carried out at other Institutes. The cases cited by the ld. Advocate are distinguishable. In the circumstances, considering the totality of evidence, we hold that the appellant was correctly adjudged as the manufacturer in this case.
10. In regard to limitation, the declaration did not bear any date as conceded by ld. Advocate himself. Apart from this there was no material before the department to take action to issue demand. Complete non-declaration in these circumstances attracted the extended period.
11. In regard to exports we find in the Paper Book from page 89 onwards that details of shipping bills under which goods have been exported have been given. Collector has held that prescribed procedure under Rule 12 of Central Excise Rules, 1944 was not followed, holding that there is no proof on record to establish that the particulars given by the appellants related to the goods which were actually manufactured by the appellants and finally exported. We are of the view that this approach in the circumstances was not merited. The fact of export can be established through shipping bills bearing endorsement that the goods were shipped on board. Once copies of these shipping bills were produced, the technicalities should not have been allowed to come in the way to deny substantive benefits to which the appellants were otherwise eligible. We do not, have on record, copies of shipping bills except list indicating the number of shipping bills and invoices. We, therefore, hold that if shipping bills indicating the name of exporter as the appellants and giving correct description of the goods are produced to that extent the quantity should be deemed to have been exported and reduced from the total figure of the goods cleared without payment of duty. We, therefore, remand this matter to Collector on the limited ground for determining, on the basis of evidence that may be produced by the appellants, the quantity shown to have been exported. The Collector shall, therefore, decide this point de novo after giving reasonable opportunity of hearing to the appellants and thereafter pass suitable orders with regard to penalty. Subject to this modification, the appeal is otherwise rejected.