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CASE NO.: Appeal (civil)  3252 of 1998

PETITIONER: Commissioner of Central Excise, Jaipur           

RESPONDENT: M/s. Hindustan Zinc Ltd.                                 

DATE OF JUDGMENT: 24/03/2004

BENCH: S. N. Variava & H. K. Sema

JUDGMENT: J U D G M E N T

(WITH C.A. No. 2305/2000 and C.A. No. 5632/2000)

S. N. VARIAVA, J.         All these Appeals can be disposed by this common Judgment as  the point involved is the same.         Briefly stated the facts are as follows: The Respondents are engaged in the manufacturing of zinc, lead and  products thereof.  Zinc is manufactured by a process known as  electrolysis.  In this process zinc sulphate solution is electrolyzed with  the help of an electric current which is passed through it.  The current  is introduced into the solution by means of electrodes.   A lead sheet  fixed with a header acts as positive electrode (anode) and an  aluminium sheet fixed with a header acts as negative electrode  (cathode).      For the purposes of electrolysis the Respondents  manufacture the cathodes and anodes.   The cathodes are  manufactured in the following manner.  Aluminium Header of the size  of 1030 x45 x 25 mm is welded with an Aluminium Sheet of the size  1105 x 610 x 5 mm.   Thereafter, Copper Tips are welded on the  Header for better conductivity.  The last process is to weld Aluminium  Hooks on Header for facilitating the lifting of Cathodes as and when  desired.  The Cathode is of specific size which consists of various parts  namely, sheet, Header, Copper tips and Hooks and not merely of  aluminium Sheet and Header. The anodes are manufactured by procuring lead ingots  containing 1-02% silver.  These ingots are melted and the molten is  cast in the required size.  The size of the cast/rolled product is 1070 x  1575 x 8 mm.  A header is welded with the cast rolled plate.  The  header is manufactured by casting the copper bed in lead.  In the lead  cast/rolled product three holes are provided in which anode spacers  are put for avoiding contact between anodes and cathodes.           At this stage, it must be mentioned that the Respondents have a  unit at Visakhapatnam.  They also have a unit at Debari, Udaipur,  Rajasthan.   It is an admitted position that in respect of Debari unit the  Respondents filed a Classification list showing the anodes and cathodes  having headers.  The Debari unit paid duty on the cathodes.    However, in respect of Visakhapatnam unit the Respondents filed a  Classification list merely showing anodes and cathodes without  showing that they had put headers on them.         Show-cause-notices were issued to the Respondents as to why  they should not pay duty on cathodes and anodes manufactured by  them.   The Commissioner of Customs and Central Excise held that  there was a manufacture and directed payment of duty and also  imposed a penalty.    The Customs, Excise and Gold [Control]  Appellate Tribunal (for short Tribunal), however, allowed the Appeal of  the Respondents on the ground that there was no manufacture.  It  was held that the headers were attached only to facilitate the use of

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aluminium or lead sheet in the process of electrolysis.  It was held that  no new product with a distinct name, character and use has emerged.   The Tribunal further held that these headers were not marketable.   The Tribunal did not go into the contention, raised on behalf of the  Respondents, that the manufacture, if any, was done by the job  workers and that if duty was to be paid it would have to be paid by the  job workers.         We have already noted the manufacturing process.  The lead and  aluminium sheets by themselves cannot and do not act as electrodes.   They become electrodes only after the process mentioned above is  undertaken.  Thus the lead and aluminium sheets are converted into  electrodes which is a new product known in the market with a distinct  name, character and use.  The Respondents pay duty on that product  at the Debari unit as they accept that there has been manufacture.   The Commissioner in his Order dated 31st March, 1997 has also noted  that the product is bought in the market by one M/s.  Cominico Binani  Zinc Limited.  This shows that the product is marketable.  The Tribunal  has failed to notice this.   Even otherwise, it is settled law that for a  product to be marketable there need not be actual purchase or sale.   So long as a new and distinct commodity known in the market has  come into existence there is manufacture.  We are unable to accept  the submission that the headers are attached merely to keep the lead  and aluminium sheets emerged in the cell.  From the process set out  above it is clear that the headers are attached in order to see that the  lead and aluminium sheets become positive and negative electrodes so  that the current can pass through them.  Without the headers it would  not be possible to pass the current through the sheets.           On behalf of Respondents it was submitted that in two of these  matters the Department had invoked the extended period of limitation  when they were not entitled to do so.  In dealing with this aspect the  Commissioner has set out as follows:         "During the relevant period, i.e. June, 89- February ,94, the assessee, interalia, furnished the  following description in their classification List  submitted for approval.

"S.    Effective        Classification S.No. of Description No.   Date              List No.           the item  of the goods ------------------------------------------------------------ 1.      1.3.1989        7/88-89         7       Lead Anodes                                                         Cast Anode                                                         Sheets

2.      20.3.1990       2/89-90         7          -do-

3.      24.7.1991       1/91-92         7       Lead Anodes                                                         Cast Anodes      

4.      1.3.1992        2/91-92         7               -do-

5.      1.3.1993          --                     -      Not Shown

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       In letter C.No.V/L/CL-1/91-92/HZL/VAL, dated  20.9.1991 a specific query had been raised by the  concerned Assistant Commissioner, regarding classification  of the product, relevant extracts of which are reproduced  as under:

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               "In respect of the products mentioned at  S.No.7, viz., Lead Anodes, Cast Anode Sheets, such  description of the goods does not appear in Central  Excise Tariff.  So you must write the exact description  of the goods [emphasis supplied] as mentioned in  Central Excise Tariff to avoid any type of confusion  and possibility of mis-classification".

       The assessee in the letter reference No.  VZS/S&D/CE/CL/91-92/16949, dated 30.9.1991, interalia,  stated that "We have written the full description of the  goods [emphasis supplied] being manufactured by us  mentioning Heading number as we felt correct these  sheets are not rolled products, but are only cast"  [emphasis supplied].

6.2.    From the above classification furnished by the  assessee, it is evident that the Lead Anodes/Cast Anode  Sheets mentioned in the classification List referred to mere  Cast Lead Sheets.  It did not include the impugned  product, viz. "Lead Anodes" which comprised 2 distinct  excisable goods, 1. Cast Lead [Anode] Header 2. Cast Lead  [Anode] Sheets.  In none of their classification Lists, the  assessee had shown the product, Cast Lead Header/Anode  Header, an integral part of Lead Abode, for approval.  The  material information regarding manufacture of "lead  Anodes" [Cast Lead Sheet + Cast Lead Header] and their  captive use in the electrolysis process was never disclosed  in the classification Lists which were approved by the  Department not the fact intimated to the Department at  any stage.   The assessee’s contention that they had  exhibited the product, "Lead Anodes", in their classification  List is not borne out by the evidences on the record.   The  description "lead Anodes mentioned with Cast Anode   Sheets", in the Classification List referred to only the Cast  Lead [anode] Sheets.  This fact is amply clear from the  clarification given by the assessee in their letter quoted  above.  It is emphasized that the fact of manufacture of  Lead Anode out or assemblage of Cast Lead Sheet and  Cast Lead Header was not disclosed/mentioned in any of  their Classification Lists nor in any correspondence on the  subject.  This is in stark contrast to their disclosure of all  material particulars pertaining to manufacture and captive  use of Lead Anodes in the Classification List filed in respect  of their other manufacturing unit at Debari [Udaipur,  Rajasthan].  The description furnished by their unit at  Debari is mentioned as below:

----------------------------------------------------------------- S.No.   Effective       Classification S.No. of Description         Date            List No.           the item  of the goods ----------------------------------------------------------------- 1.      1.3.1989           -                    5       Lead Anodes                                                         [Complete with  Headers] used in  the electrolysis  plant for recovery  of Zinc and / or  Cadmium         2.      1.9.1989           -                    7       Lead Headers [i.e. Copper Strip  around which  casting of Lead is  done]. This is

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finally fixed with  Lead Anode  Sheet which is  ultimately used in  the manufacture  of Zinc and / or  Cadmium.   ------------------------------------------------------------------

6.3.    The same description had been repeated in their  subsequent approved classification List, with effect from  20.3.1990, 25.7.1991, 1.3.1992 and 1.3.1993.  The point  to be stressed is that while the assessee furnished the  complete description of the product, viz., Lead Anodes  manufacturer in their Debari Unit, they had willfully  suppressed the fact of manufacture and captive use of  Lead Anodes in respect of Visakhapatnam Unit.  They did  not make any mention of the manufacture of Lead Anode  in the Classification Lists submitted during the relevant  period.  This was a clear case of willful suppression of facts  and/or deliberate concealment of facts.  If the intention of  the assessee were bonafide, they would have certainly  furnished the complete particulars of manufacture in their  Classification List relating to Visakhapatnam Unit as they  did in respect of their other Unit at Debari.  The assessee  knew fully that the goods were excisable and liable to duty  as their other unit paid duty on those goods.  Hence, they  cannot plead ignorance/doubts etc.    Conscious or  deliberate withholding of information and/or suppression of  facts is fully established in this case."

On these facts we are in full agreement with the Commissioner that  there was conscious withholding of information and thus the extended  period of limitation had been rightly invoked.   In this view of the matter, the Order of the Tribunal cannot be  sustained.  It is accordingly set aside.         That brings us to the question as to whether the Respondents  are liable to pay duty or the job workers are liable to pay duty.  This  would require looking into the facts and material.    We therefore remit  the matters back to the Tribunal who shall, after going into the facts  and materials, decide the same.            For the above-mentioned reasons the impugned Orders are set  aside.   The Appeals are allowed to the extent set out above.  There  will be no order as to costs.