Bombay High Court
Kirloskar Brothers Ltd. vs Union Of India (Uoi) And Ors. on 30 June, 1987
Equivalent citations: 2002(83)ECC497, 1988(17)ECR17(BOMBAY), 1988(34)ELT30(BOM)
JUDGMENT Sugla, J.
1. By this petition under Article 226 of the Constitution of India, the petitioners have challenged the orders dated 3rd February, 1979 and 16th November, 1979 respectively passed by the Collector of Central Excise and Customs, Pune and the Member of the Board of Central Excise and Customs, New Delhi in. terms of which 17 air-conditioners under seizure under Rule 173Q(1) of the Central Excise Rules, 1944 (for short the Rules) were confiscated, with an option to redeem the same on payment of fine of Rs. 13,000/-. The petitioners were also required to pay excise duty of Rs. 1,95,682/- under Rule 9(2) of the Rules. In addition penalty amounting Rs. 10,000/- was imposed under Rule 173Q(1).
2. The facts are in a narrow compass. The main business of the petitioners is manufacture of compressors for which purpose they have a factory at Karad in Satara District in the State of Maharashtra. The compressors are items installed in air-conditioners, water coolers, refrigerators and allied appliances and are assessable to excise duty Item 29A (3) of the Tariff to the Central Excise and Salt Act, 1944 (for short 'Act'). The petitioners admittedly have licence under the Act and the Rules for the manufacture of the compressors and pay excise duty on their manufacture. During the period prior to 1973, the petitioners were manufacturing compressors of three different capacities namely, of 1.00 ton, 1.25 tons and 1.34 tons, which were capable of being installed, inter alia, in the air-conditioners and these compressors were sold by the petitioners to different parties ail over India.
3. During the period between 1973 and 1976, the petitioners manufactured 23 compressors of a larger capacity suitable for being installed in 1.5 tons air-conditioners. During this period the petitioners acquired 23 fully furnished 'Coldin' air-conditioners cabinets complete in all respect namely, with grills, thermostats and other controls and knobs, from a concern in Ahrnedabad known as "Refrigeration Agencies". The compressors were fitted in the air-conditioner cabinets. Out of the 23 air-conditioners so manufactured/assembled, the petitioners delivered 15 air-conditioners to their various branches in different parts of the country, two were supplied to their branch office at Pune, five were kept in their Research and Development department in the - factory itself and the remaining one was sold at cost to a concern known as Delstar (Private) Limited at Oglewadi. It is common ground that the petitioners did not have any licence to manufacture the air-conditioners and had removed 18 air-conditioners out of the factory premises without declaring them as such, though excise duty was paid on the compressors used in the air-conditioners on the basis of gate-passes made out as compressors.
4. The fact that the petitioners manufactured 23 air-conditioners and removed (18?) out of them out of the factory premises without paying excise duty came to the notice of the Central Excise authorities. According to them, the petitioners had contravened a number of provisions of the Act and the Rules as indicated in the show cause notice. After allowing proper opportunity of being heard the Collector of Central Excise and Customs, Pune passed order dated 3rd February 1979 confiscating 17 air-conditioners which were seized under Rule 173Q(1) with option to redeem on payment of fine of Rs. 13,000/-, penalty of Rs. 10,000/- and excise duty of Rs. 1,95,682/-. The appeal filed thereagainst by the petitioners was dismissed by the Member of the Board of Central Excise and Customs, New Delhi vide order dated 16th November 1979.
5. The question that arose for consideration before the Central Excise authorities and which is also raised before us is whether the petitioners have contravened the relevant provisions of the Act and the Rules made thereunder. The question in other words has been whether the petitioners have engaged themselves in the manufacture of air-conditioners without a valid license and have removed 18 of them out cf the factory premises without paying excise duty payable as Item No. 29A(2) in the Central Excise Tariff. For this purpose it has become necessary to refer to the provisions of Sections 2(f), 3 and 6 of the Act in the first instance, Section 2(f) defines the word `manufacture'. The definition is inclusive and not exhaustive. The expression `manufacture' thus, continues to have its well known meaning plus what is specifically mentioned in the definition clause. There is no serious dispute that a manufacturer of air conditioners need not manufacture all its components. It can manufacture a few, purchase others and manufacture air-conditioners assembling all such components. Section 3 is a charging section providing for levy of excise duty on specified goods in the First Schedule and there is no dispute that air-conditioner is an Item No. 29A(2) in the First schedule. Relevant portion of Section 6 reads as under :
"6. The Central Government may, by notification in the Official Gazette, provide that, from such date as may be specified in the notification, no person shall, except under the authority and in accordance with the terms and conditions of a licence granted under this Act, engage in -
(a) the production of manufacture or any process of the production or manufacture of any specified goods included in the First Schedule or a salt-petre or of any specified component parts or ingredients of such goods or of specified containers of such goods, or
(b) ..."
Great emphasis was laid by Shri Setalwad, the learned Counsel for the petitioners, on the expression 'engage in'. According to him, mere manufacture of proto-type, or production as a trial or on experimental basis is not enough and a person can be said to be engaged in the manufacture of an article only when the manufacture is on a regular basis. In this context, he invited our pointed attention to the facts such as during the period between 1973 and 1976, the petitioners manufactured about 55,000 compressors and paid excise duty amounting to about Rs. 3,00,00,000/- thereon. As against this, they assembled 23 air-conditioners in which the only part manufactured by them was compressor on which duty was duly paid. Air-conditioner cabinets complete in all respect were purchased. Those carried the name of their manufacture namely, 'Coldin'. Only one out of 23 air conditioners was sold and that too to one of their constituents and at cost. In support Shri Setalwad placed reliance on the Supreme Court decision in the case of The Regional Provident Fund Commissioner, Bombay v. Shree Krishna Metal Manufacturing Co., , the relevant paragraph being 18 at page 1542 and the Delhi High Court decision in the case of National Projects Construction Corporation Ltd. v. Commissioner of Wealth-tax, Delhi, 74 I.T.R. 465 (at page 470). Though the fact that 23 air conditioners were, as a matter of fact, assembled without the license, and 18 out of them were removed from the factory without payment of excise duty payable thereon, was admitted, it was urged that the petitioners were not required to obtain license for the manufacture of air conditioners in terms of Section 6 of the Act. The petitioners, it was further contended, were precluded from manufacturing air conditioners under the collaboration agreement, with 'Tecumesh Products Company'. Moreover, if the petitioners were interested in marketting air conditioners, they would have advertised the products and would have certainly not used the cabinets bearing names of some other company. According to Shri Setalwad, the whole purpose of installing compressors of the capacity of 1.5 tons in the air conditioners was to observe the performance of the compressors.
6. Sri Desai, the learned Counsel for the revenue, on the other hand, stated that the Supreme Court decision in was in the context of provisions of the Provident Fund Act. The question involved was as regards the main or primary business of the company. Delhi High Court decision in 74 I.T.R. 465 was also stated to be distinguishable on the ground that the thrust in that case was on the manufacture of goods for the assessee's own use and not for sale. He stated that the sale of an article manufactured is not sine-qua non for the levy of excise duty. For this purpose he placed reliance on the Supreme Court decision in the case of South Bihar Sugar Mills, Ltd. v. Union of India, and the case of The Associated Industries (P) Ltd. v. The Regional Provident Fund Commissioner, Kerala, . He reiterated that the petitioners have manufactured 23 air conditioners over a period of more than 3 years. One of the air conditioners had in fact been sold. No evidence in the shape of reports from the constituents, the branches or Research and Development department was produced to support the petitioners' claim that air conditioners were really manufactured for the purpose of observing the performance of 1.5 tons capacity compressors. Inviting our attention to the fact that all the relevant facts have been considered by the Central Excise authorities in arriving at the conclusion that the petitioners were engaged in the manufacture of air conditioners and had contravened different provisions of the Act and the Rules, Sri Desai placed reliance on the Supreme Court decision in the case of Chandavarkar Sita Ratna Rao v. Ashalata S. Guram, and submitted that the Court should not interfere with the findings of fact arrived at by the Central Excise authorities in writ jurisdiction.
7. We are now called upon to consider whether the finding given by the Central Excise authorities, namely, the petitioners have manufactured air conditioners without license and removed them out of the factory premises without paying excise duty on them, is proper and whether it requires interference by us in writ jurisdiction. On carefully going through the orders of the Central Excise authorities in the light of submissions by the learned Counsel, on the two sides, we find that the Central Excise authorities have considered all relevant facts placed before them by the petitioners. Law in this behalf is well settled. It has been reiterated by the Supreme Court in its latest decision in . Relevant observations are found in paragraphs 16 and 21 of the judgment. It has been held in no uncertain terms that the jurisdiction of the High Court in the matter of findings of fact under Article 226/227 of the Constitution is limited. No interference is justified unless the findings of fact given by the lower authorities is perverse or is based on no evidence to justify it or has resulted in manifest injustice. High Court should decline to interfere where question depends upon appreciation of evidence and two views are possible. Examining the evidence in the light of the limited jurisdiction' we have, we find that the facts such as the petitioners had paid excise duty amounting to about Rs. 3 crores during the period from 1973 to 1976 on about 55,000 compressors, they were precluded from manufacturing air conditioners under the collaboration agreement, the air conditioners were practically utilized by the petitioners in their own concerns, air conditioner cabinets bear the name of their manufacturers 'Coldin', the product was not advertised as such, no doubt, support the petitioners' claim that they had no intention of manufacturing the conditioners as such. Other facts such as air conditioner manufacturing or assembling activity continued over a period of three years, 18 air conditioners were in fact removed from the factory premises without proper gate-pass and without paying excise duty payable on air conditioners, at least one air conditioner was, as a matter of fact, sold; no evidence was produced to show that the compressors were fitted in the air conditioner cabinets and supplied to the constituents were in reality for testing the performance of the compressors of the capacity of 1.5 tons, on the other hand, indicate that inference drawn by the Central Excise authorities, to say the least, is a possible inference and by no stretch of imagination can be said to be perverse. In the above view of the matter, we have no alternative but to decline to interfere in the finding of fact arrived at by the Central Excise authorities.
8. The excise duty payable was determined at Rs. 1,95,682/- by the Central Excise Authorities. We are told that the petitioners had paid excise duty on the compressors fitted in the air conditioners. This fact has not been disputed by Shri Desai. Shri Desai, however, stated that if the petitioners wanted to take credit for the excise duty paid on the compressors, they would have to follow a particular procedure prescribed under the Act and Rules which they admittedly did not follow. In our opinion, this submission of Shri Desai does not hold water. The case of the petitioners has all along been that they were not engaged in the manufacture of air conditioners and therefore, no Excise duty, fine or penalty was payable by them for the contravention of the provisions of the Act and the Rules. Moreover, it is not a case where the petitioners had voluntarily paid excise duty on the end product and having also paid duty on the intermediately product wanted to take credit therefor. In this case the Central Excise authorities have determined the excise duty payable by the petitioners. In the circumstances, it is only proper that they determine the duty which is actually payable by the petitioners. The Central Excise authorities are directed to determine the exact amount of excise duty payable by the petitioners taking into account all the relevant aspects of the matter.
9. The last limb of Sri Setalwad's argument was that in any event on the facts of the case there was no scope for attributing intention on the part of the petitioners to evade excise duty. According to him, imposition of penalty and fine was certainly not valid without establishing mens rea. Firstly, the question whether one had an intention to evade excise duty is a question of fact. Secondly, Clauses (a), (b) and (c) of Sub-rule (1) of Rule 173Q do not admittedly use the expression "with intent to evade payment of duty", which is found in clause (d) thereof. It can, therefore, be prima facie, assumed that the liability in terms of Rule 173Q(1) sub-clauses (a), (b) and (c) does not depend upon mens rea. Moreover, on merits also we would not like to interfere with the finding of fact arrived at by the Central Excise Authorities in writ jurisdiction.
10. Accordingly, Rule is partly made absolute as indicated above. There will be no order as to costs.