Custom, Excise & Service Tax Tribunal
M/S. Bsnl vs C.C.E Rohtak on 15 April, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Misc Application No. E/Misc/493-494/2010
Excise Appeal No. E/2199/2006 -Ex[DB]
[Arising out of Order-In-Appeal No. 13/Commissioner/Rajinder Praksash/2006 dated 31.03.2006 passed by CCE Rohtak]
Excise Misc Application No. E/Misc/540-541/2010
Excise Misc Application No. E/Misc/50641/2015
Excise Appeal No. E/2200/2006 -Ex[DB]
[Arising out of Order-In-Appeal No. 14/Commissioner/Rajinder Praksash/2006 dated 31.03.2006 passed by CCE Rohtak]
Excise Misc Application No. E/Misc/52661/2014
Excise Misc Application No. E/Misc/50625, 50640/2015
Excise Appeal No. E/2666/2006 -Ex[DB]
[Arising out of Order-In-Appeal No. 16/Commissioner/Central Excise dated 09.05.2006 passed by CCE Rohtak]
Excise Appeal No. E/3271/2006 -Ex[DB]
[Arising out of Order-In-Appeal No. 26/Commissioner/Central Excise dated 31.08.2006 passed by CCE Rohtak]
For approval and signature:
Hon'ble Mr. Rakesh Kumar, Member (Technical)
Hon'ble Mr. S.K. Mohanty, Member (Judicial)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s. BSNL ...Appellant
Vs.
C.C.E Rohtak Respondent
Appearance:
Ms. Sameer Agarwal, Advocate for the Appellants Mr. Pramod Kumar, Jt. CDR for the Respondent CORAM:
Hon'ble Mr. Rakesh Kumar, Member (Technical) Hon'ble Mr. S.K. Mohanty, Member (Judicial) Date of Hearing.15.04.2015 FINAL ORDER NO. 51380-51383 /2015-Ex(Br) Per Rakesh Kumar (for the Bench):
The facts leading to filing of these appeals are, in brief, as under:
1.1 The appellant are a Public Sector Undertakingengaged in providing telecommunication services. During the period from 01.04.2000 to 31.10.2005, they purchased switching equipments and other essential parts of the system such as power plant required for producing 48V DC power, inverter etc., and assembled and installed the same at various places to set up telephone exchange. The Department was of the view that this activity of the appellant would amount to manufacture and accordingly, the appellant would be required to pay duty on the telephone exchanges which have come into existence. According to the Department by this activity of the appellant telephone exchanges classifiable under heading 8517 have come existence. It is on this basis that four show cause notices, the details of which are given below, were issued to the appellant for demand of the duty along with interest thereon under section 11AB and also for imposition of penalty on them under section 11AC.
a) SCN dated 01.07.2005 for demand of Central Excise Duty amounting to Rs. 2,43,87,255/- along with interest on it under section 11AB for the period from 01.04.2000 to 31.12.2004.
b) SCN dated 02.08.2005 for demand of duty amounting to Rs. 89,86,819/- for the period from 01.04.2000 to 31.12.2004 along with interest on it under section 11AB.
c) SCN dated 05.10.2006 for demand of duty amounting to Rs. 17,64,968/- from the period from 01.04.2004 to 31.10.2005 along with interest on in under section 11Ab.
d) SCN dated 09.06.2006 for demand of duty amounting to Rs. 1,26,26,440/- for the period from 25.07.2001 to 31.03.2005 along with interest on it under section 11AB.
1.2 The above SCNs were issued by invoking extended period under proviso to Section 11A(1) of Central Excise Act, 1944, alleging that the appellant have suppressed the relevant facts from the Department.
1.3 The above 4 SCNs were adjudicated by Commissioner of Central Excise - Rohtak by four separate orders and by these orders, the above mentioned duty demands were confirmed against the appellant along with interest on it under section 11AB and beside this penalty of equal amount were imposed under section 11AC. Against the above order of the Commissioner, these appeals have been filed.
2. Heard both the sides.
3. Sh. Sameer Agarwal, Advocate, the Ld. Counsel for the appellant pleaded that the appellant purchased switching equipments, power supply, inverter etc., from various suppliers, that the heart of the telephone exchange is switching system, that by installing the switching system along with power plant and inverter does not bring into existence any new commodity with distinct name, character or uses, that the goods purchased by the appellant were electrical apparatus for line telephony/ line telegraphy and the same remained as such after installation, that in any case, what has come into existence after installation is the machinery fixed to the earth and hence, the same cannot be treated as excisable, that in terms of Wikipedia, in the field of telecommunications, a telephone exchange or a telephone switch is a system of electronic components that connects the telephone calls and the Central office is the physical building used to house the telecom equipment including telecom houses, that the goods purchased by the appellant are thus telephone exchange and the appellants activity is only of installing and commissioning the same and hence, the same cannot be treated as manufacture, that in the invoices of the suppliers - Punjab Communications Ltd., the goods purchased by the appellant are described as C-Dot 1K XL RSU and the same in the technical literature are described as Rural Automatic Exchange (RAX), that even the Central Excise tariff during the period of dispute did not cover any item like telephone exchange and instead the heading 8517 covered electrical apparatus for line telephoning or line telegraphy including line telephone sets with cordless handsets and telecommunication apparatus for carrier current line system or for digital line system, video phones, that the goods purchased by the appellant are the electrical apparatus for line telephony/ line telegraphy and the same after installation have remained the same, that in any case the extended limitation period under proviso to section 11A(1) is not invokable as the appellant are a PSU and there was no incentive for them to evade the duty by deliberately suppressing any material facts from the assessing officers, that though the part of the duty demand is for the period 01.04.2000 to 31.03.2001, BSNL has come into existence w.e.f. 01.10.2000 and the duty prior to the period 01.10.2000 cannot be demanded, that the switching equipment is manufactured as per the specifications of the BSNL and can be installed only in the area for which the same has been designed, that in view of this, the switching equipment which has been installed cannot be treated as marketable, that part of the duty demand is in respect of the cases where the existing telephone exchanges had been upgraded by replacing the switching system, that mere up-gradation of a machine cannot be treated as manufacture and in this regard he relied upon the judgment of the Tribunal in the case of CCE Delhi-II vs Usha India Ltd. reported in 2000 (122) ELT 870 Trib., and that in view of the above submissions the impugned order is not sustainable.
3.1 Sh. Agarwal also cited the judgment of the Tribunal in the cases of Collector of C. Ex. Bhubaneswar vs Radiant Electronics Ltd. reported in 1996 (85) ELT 102 (Tribunal), Fujitsu Indi Telecom Ltd. vs CCE Chandigarh reported in 2003 (151) ELT 354 (Tri.-Del) and BPL Mobile Communications Ltd. vs CCE reported in 2006 (198) ELT 226 (Tri.-Mumbai). In the case of Fujitsu Indi Telecom Ltd. vs CCE(supra) it has been held by the Tribunal that when bought out items for telephone exchanges were supplied separately and directly to the sites of telephone exchanges and installed, no telephone exchange was either manufactured or assembled requiring payment of duty on the entire value of telephone exchange including the value of bought out items. In the case of CCE Bhubaneswar vs Radiant Electronics(supra), the Tribunal held that installation and erection of EPABX (Private Telephone Exchange) is not an activity amounting to manufacture of excisable goods. In case of BPL Mobile Communications Ltd. vs CCE (supra), the Tribunal held that assembly and installation at site of various equipments like towers, microwave, antenna, air-conditioners, battery back-up, which had individual functions did not result in manufacture of any new commercial goods. Sh. Agarwal, therefore, pleaded that the impugned is not sustainable.
4. Sh. Pramod Kumar., the Ld. Jt. CDR pleaded that the issue involved in this case stands decided against them in their own case by the judgment of the Tribunal reported in 2013 (292) ELT 353 Tri. Kolkata wherein the Tribunal held that assembly of various parts of digital local telephone exchange equipment (DLTEE) procured from different sources would amount to manufacture. He also relied upon the boards circular no. 154/26/99-Cx-IV dated 15.01.2002 according to which for goods manufactured at the site to be dutiable, they should have a new identity character and use, distinct from inputs/ components that have gone into their production and further, such resultant goods should be specified in the central excise tariff as excisable goods besides being marketable and the goods should not be immovable, that the goods in this case cannot be treated as immovable as various components of telephone exchange can be easily dismantled and shifted to a new place, that the telephone exchanges are specifically covered by heading 8517 of the Central Excise Tariff, that during the period of dispute, heading 8517 of the Central Excise Tariff covered electrical apparatus for line telephony/ line telegraphy, including, line telephone sets with cordless handsets and telecommunications apparatus for current carrier line system or for digital line systems, that as per the HSN explanatory notes, the term electrical apparatus for line telephone or line telegraphy means apparatus for transmission between two points of speech or other sounds by variation of electric current or of an optical waive flowing in a metallic or dialectic circuit connecting the transmitting station to the receiving station, that the goods assembled and installed at site answer to this description of heading 8517, that the appellant under their letter dated 24.09.2004 themselves had given the details of the telephone exchanges manufactured installed and commissioned during the period of dispute along with the details of the project cost, expenditure incurred etc., that Sh. HC Singla, SDE of the appellant company, in his statement dated 06.12.2004, has stated that the telephone exchanges are movable in the sense that the same after installation at a particular site can be shifted to another place and that the extended period has been correctly invoked in proviso to section 11A(1) as the appellant has not disclosed their activity to the Department, and that in view of the above submissions, there is no infirmity in the impugned order.
5. Sh. Sameer Agarwal, the Ld. Counsel for the appellant, in rejoinder, pleaded that the judgment of the Calcutta Bench in the appellant own case reported in 2013 (292) ELT 353 (Tri. Kol) has been set aside by the Honble Calcutta High Court vide its judgment dated 12.03.2014 in respect of the appeal No. 15/2013 filed by the appellant against the Tribunal judgment. He, therefore, pleaded that the judgment of Calcutta bench is of no persuasive value.
6. We have considered the submissions from both the sides and perused the records. The activity of the appellant is described in para 24 of the order in original no. 13-14/COMMR/RP/06 dated 31.03.2006 according to which the appellant have purchased the switching equipment and other integral essential parts of the system such as power plant required for producing 48V DC power on which the system is operated, inverter for power break down etc., and assembled these equipments by their own staff at site into a digital local telephone exchange. As stated by Sh. HC Singla, an officer of the appellant company, the telephone exchanges can be shifted from one place to another place, it is in view of the above facts that the Department has alleged that the assembly, installation and commissioning of the switching equipments, power supply, inverter etc., has resulted into emergence of a new goods called digital local telephone exchange. It is on this basis that the Department seeks to charge duty on the digital local telephone exchanges alleged to have been manufactured by the appellant by classifying the same under heading 8517 of the Central Excise Tariff.
6.1 During the period of dispute, heading 8517 cover electrical apparatus for line telephony or line telegraphy including line telephony sets with cordless handsets and telecommunication apparatus for current carrier line systems or for digital line systems; video phones. There is no dispute that the appellant have purchased switching systems. The point of dispute is as to whether assembly installation and commissioning of switching system along with power plant, inverter etc. would amount to manufacture. In our view the main component of a telephone exchange is switching system which is an electrical apparatus for line telephony. The power plant and inverter are only auxiliary equipments. Power plant supplies the 48V DC current for functioning the switching system and inverter is required for standby period in case of power break down. Thus, the goods which have been purchased Switching systems have remained the switching systems only even after installation and in our view no new commodity with distinct commercial identity or character or use has emerged. We find that the same view has been taken by the Tribunal in the case of Fuzitsu Indi Telecom Ltd. vs CCE Chandigarh (supra) wherein the Tribunal has held that the when bought out items of telephone exchanges were brought to the site of telephone exchange and assembled, no telephone exchange was manufactured requiring payment of duty. Same view has been taken by the Tribunal in the case of CCE Bhubaneswar vs Radiant Electronics (supra) and also in the case of BPL Mobile Telecommunications Ltd. vs CCE (Supra), though the Calcutta Bench of the Tribunal in the appellants own case reported in 2013 (292) ELT 353 (Tri.-Calcutta) has taken a contrary view, this order of the Tribunal, on appeal being filed, has been set aside and the matter has been remanded to the Commissioner for de novo adjudication and hence, this judgment of the Tribunal has no persuasive value. Moreover, from the technical literature produced by the appellant, it is clear that the switching systems are commonly called telephone exchanges and hence, on installation of a switching system, no new goods with distinct commercial identity and distinct characteristics or uses have emerged. The impugned orders, therefore, are not sustainable. The same are set aside. The appeals are allowed. The Miscellaneous applications one filed by the Department for early hearing and the other filed by the Appellant for admission for some additional grounds also stands disposed of.
(Dictated and pronounced in open court) (Rakesh Kumar) Member(Technical) (S.K. Mohanty) Member(Judicial) Neha Page | 10