ORDER
C.N.B. Nair, Member (T)
1. Both the assessee and the Revenue are in appeal, aggrieved with the same order. Accordingly, we heard all the appeals together and are disposing them of under this common order.
2. We take up the appeals of the assessee first.
3. The impugned order has confirmed a duty demand of about Rs. 1.46 crores and imposed penalties. Out of this, demand of Rs. 18.54 lakhs has been confirmed in regard to ‘lagging sheets’ manufactured and cleared for exclusive use in servicing. It is pointed out by the learned Counsel that the assessee had been paying duty (correctly) by treating the cost of production of lagging sheets as the assessable value. The impugned order has demanded differential duty by treating the entire realisation from servicing along with 10% of such billing towards profit as assessable value. The further contention of the learned Counsel is that the Board has issued a Circular dated 13-2-2003 in regard to valuation of captively consumed goods. The circular had specifically ordered valuation according to CAS-4 valuation standard developed in consultation with Costs & Works Accountants’ Institute and all pending matters are required to be decided in terms of CAS-4. The learned Counsel has relied upon the decision in the case of Alstom Ltd. v. CCE, Kolkata-III , BMF Beltings Ltd. v. CCE, Hyderabad and Tecumesh Products India Ltd. v. CC£ . As against the contention of the Appellant, the Revenue’s objection is that valuation is required to be determined based on the instructions applicable to the particular period and CAS-4 being a Standard developed subsequently, it is not applicable. We find no merit in the objection raised by the Revenue. Admittedly, CAS-4 is a Standard which has been developed in consultation with the professional body on the subject. Being a Standard, it has application in all pending matters. The Circular is also very clear that “henceforth all valuation are to be done in terms of CAS-4”. Therefore, the appellants are right in contending that the value for lagging sheets is required to be determined in terms of CAS-4. In any view of the matter, authorities were not justified in adding cost of servicing and profit arising therefrom to the value of the goods under assessment. Assessment was of manufactured lagging sheets and not of service. This aspect is required to be reconsidered in terms of CAS-4. We remand this aspect of the matter to the original authority for a fresh decision in terms of CAS-4.
4. The next issue in dispute is with regard to liability to pay duty in respect of solution which they had imported/purchased in bulk and re-packed. The solutions in question are classifiable under Tariff heading 35 and Chapter note 3 to that Chapter makes it clear that packing and re-packing is dutiable. The only point being made in regard to this issue is that the demand is barred by limitation, inasmuch as the appellants’ processes did not attract duty in view of the clarification vide Circular No. V/28/30/3/97 CX-1, dated 20-5-97. It is being pointed out that the Circular clarified that chapter notes will not be applicable if the re-packed goods are not sealed with pilfer proof caps. On the contrary, the contention of the Revenue is that this Circular is not applicable at all to the assessee inasmuch as the Circular dealt with cases where the goods were brought in Lorry Tankers and were packed, while the appellant was getting already packed goods. There is merit in the Revenue’s case. Goods brought in a Lorry tanker are not packed goods at all inasmuch as Lorry tanker cannot be considered as packing. In the appellants’ case admittedly, the imported/locally purchased goods were brought in bulk pack i.e. in barrels and thereafter repacked. Therefore, repacking is involved. The Circular is not applicable to the case and therefore duty demand of about Rs. 29.24 lakhs confirmed by the Commissioner is required to be upheld. And we do so.
5. Bulk of the duty demand of about Rs. 98 lakhs flows from a finding in the adjudication order that the appellant is the manufacturer of the goods which had been manufactured in the name of Saroth Bonds. Revenue’s case is that Saroth Bonds is a dummy unit of the appellant. A perusal of the order itself shows that the issue whether Saroth Bonds was a separate unit was the subject matter of adjudication proceedings between the parties and the Deputy Commissioner of Central Excise vide order in Original No. 13A/2000, dated 29-2-2000 had held that Saroth Bonds are a separate unit. No appeal having been filed by the Revenue against that decision, it has become final on the issue. The Commissioner’s order has been passed over looking the order of the Deputy Commissioner. Therefore, this demand cannot be sustained. We set aside the demand.
6. The learned Counsel has submitted that penalty of Rs. 1.4 crores has been imposed on the manufacturers and penalty of Rs. 15,00,000/- each has also been imposed on the four functionaries of the appellant-manufacturer. The contention of the appellant is that penalties are not justified inasmuch as the dispute basically is legal in character and in any event the directors had no personal liability. We find that penalty on the Directors is not justified at all inasmuch as no individual personal guilt is involved. Therefore, those penalties are set aside. The position of the assessee appellant is different. We have upheld the demand in relation to repacking and it is recoverable in terms of the proviso to Section 11A(1). Imposition of penalty under Section 11AC is therefore warranted. However, in view of the fact that duty amount is about Rs. 25 lakhs only, we reduce the penalty to Rs. 5 lakhs (Rupees Five lakhs) on the appellant-assessee.
7. Now we come to the Appeal of the Revenue. Basically it is in relation to the VT Belt cleaners and Spilnil system. In regard to VT Belt cleaners, the Commissioner found that this item is manufactured in the appellants’ factory. Therefore, duty is attracted. The assessee’s submission is that it is manufacturing only rubber component for this system and duty is being paid on the same. Most of the parts are brought and assembled at site. During the hearing, the learned Counsel took us through the details about the system with the help of photographs and it was clear from the same that the VT system is installed on top of the conveyer belt for the purpose of ensuring cleaning of the conveyor at all times. This system consists of many parts and the system comes into existence only on welding at the location. Similarly, the Spilnil system is fixed beneath the conveyer to prevent spillage on account of the sagging of the conveyor. The main explanation of the learned Counsel is that the system came into existence at site on assembly and not in the appellant’s factory. As against this, the Revenue’s contention is that the evidence on record shows that the appellant had constructed one system in their own factory. The assessee has explained that this activity was carried on experimental basis and that they had brought on record that the experiment had failed. In any event, it was only part of product development and not manufacture. It is not in dispute that most of the system in question came into existence only on erection at site and there was no prior manufacture in the assessee’s factory. No duty is attracted in the erection of such system on location. In the facts of the case, the order is correct and does not call for any intervention.
8. Another point raised in the Revenue’s appeal is that the appellant buys the conveyer belting in endless length and cuts them to required size and that involves manufacture. This contention of the Revenue is not correct. The conveyor belting is the material used in the construction of conveyors. Like fabrics and other materials, belting comes in endless length and the activity of cutting etc. carried out by the appellant cannot be considered as amounting to manufacture. So, no duty is attracted.
9. Yet another grievance of the Revenue is the Commissioner’s decision treating sale price as cum-duty price for the purpose of valuation of the goods and determination of the duty payable on that basis. This contention has no merit at all in view of the decision of the Hon’ble Supreme Court in the case of Maruti Udyog Ltd. . The reason for filing this appeal is that the Revenue had filed a review petition before the Apex Court against the Maruti Udyog Ltd. judgment. That petition has since been dismissed by the Apex Court.
10. All the appeals are disposed of in terms indicated above.
(Dictated and pronounced in open Court)