Custom, Excise & Service Tax Tribunal
Msrtc S Central Workshop vs Commissioner Of Central Excise, ... on 10 April, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL Nos. E/1806/04 & E/1674/06 (Arising out of Orders-in-Appeal No. BPS(124)89/2004 dated 19.3.2004 and No. PI/473/05 dated 23.12.2005 both passed by Commissioner of Central Excise (Appeals), Aurangabad and Pune-I resp.) For approval and signature: Honble Mr. S.S. Kang, Vice President and Honble Mr. Sahab Singh, Member (Technical) ======================================================
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2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== MSRTCs Central Workshop Appellant Vs. Commissioner of Central Excise, Aurangabad & Pune Respondent Appearance: Shri J.C. Patel, Advocate, with Shri A.G. Kulkarni, C.A., for appellant Shri Navneet, Additional Commissioner (AR), for respondent CORAM: Honble Mr. S.S. Kang, Vice President and Honble Mr. Sahab Singh, Member (Technical) Date of Hearing: 29.2.2012 Date of Decision: 10.4.2012 ORDER NO Per: Sahab Singh
These are two appeals, E/1806/04 and E/1674/06 filed by MSRTCs Central Workshop (hereinafter referred to as the appellants) against order-in-appeal No. BPS(124)89/2004 dated 19.3.2004 and order-in-appeal No. PI/473/05 dated 23.12.2005 passed by the Commissioner of Central Excise (Appeals), Aurangabad and Pune respectively.
2. The brief facts of the case are that the appellants are engaged in the manufacture of body building on new chassis and also component parts required for bus body building falling under Chapter 87 of the Central Excise Tariff. The appellants were also clearing some body components manufactured by them to their various divisional workshops for the purpose of repairing and maintenance of the old vehicles. The unit was visited by the officers of the department in 2001 and it was noticed that the assessee was not paying central excise duty on the components manufactured and supplied to their divisional office and also not paying any duty on the scrap generated during the course of manufacture. Accordingly, a show cause notice dated 1.3.2002 was issued to the appellant unit located at Chikalthana in Aurangabad Commissionerate, demanding duty on the components and the scrap manufactured by them. The show cause notice was confirmed by the adjudicating authority vide his order dated 11.6.2003 confirming the duty amount of the bus body components and the scrap cleared by them and also imposing penalty under Section 11AC read with Rule 173Q and Rule 25 of the Central Excise Rules. The appellants challenged the order-in-original before the Commissioner of Central Excise (Appeals), Aurangabad, who vide the impugned order rejected their appeal against which the appellants are in appeal before us.
3. A similar show cause notice was also issued to the appellant unit at Dapodi falling under Pune Commissionerate, demanding duty on 24 items manufactured by them as components and the adjudicating authority finally ordered the classification of the products at sr. no. 1 to 4 of the show cause notice under Chapter 94 and the remaining items figuring at sr.no. 5 to 24 under Chapter 87 of the Central Excise Tariff and the demand amounting to Rs.6,44,274.35 was confirmed and the classification list was also approved accordingly. The appellants went in appeal before the Commissioner of Central Excise (Appeals), Pune-I who vide order dated 30.12.1994 partially allowed their appeal in respect of items at sr.no. 9 to 24 and rejected the appeal in respect of items at sr.no. 1 to 8, namely seat frames, seat legs, windshield frames and aluminium window frame set, of the annexure to show cause notice. Accordingly, items at sr.no. 1 to 4 (seat frames and seat legs) were finally classifiable under Chapter 94 and at sr.no. 5 to 8 under Chapter 87 of the Tariff. Identical show cause notices were issued covering the period 1.6.1993 to 28.2.1994. The Assistant Collector in his order dated 15.9.1994 upheld the classification as alleged in the show cause notice and confirmed the duty of Rs.43,00,673.85 along with penalty. The appellant went in appeal before the Collector (Appeals) who vide his order dated 2.8.1996 followed his earlier orders on excisability of contested goods. The appellants filed two appeals before the Tribunal against the Commissioner (Appeals)s orders in respect of the items figuring at sr.no. 1 to 8 and the Tribunal vide its order dated 27.7.1999 remanded both cases back to the jurisdictional Commissioner (Appeals) with the direction that he would examine whether the processes undertaken on the raw materials in this case did result in creation of excisable goods and on the basis of these findings, the Commissioner (Appeals) would be free to determine the marketability aspect as also the coverage of 11C notification. The Commissioner (Appeals), Pune vide the impugned order dated 23.12.2005 had decided the appeal in pursuance of the remand direction of the Tribunal and rejected the appeal against which the appellants are before the Tribunal.
4. The learned counsel appearing for the appellants submitted that they are engaged in the activity of bus body building for their own buses which are used for running the State Road Transportation and for the purpose of building bus bodies, the appellants received metal sheets, bars, angles etc. which are subjected to the process of cutting, bending, riveting etc. according to the design of the bus bodies. Thereafter, the bus body is built piece by piece. He stated that in the year 1993, the excise officers of the Aurangabad Commissionerate had issued a show cause notice dated 5.8.1993 contending that in the process of building the bus bodies, component parts come into existence by the said process of cutting, bending and riveting of the said bars and angles and since the final products were exempt from duty, the duty was payable on such components. The said show cause was adjudicated by the original authority vide his order dated 23.12.1993 under which the demand proceedings were dropped and it was held that the said processes do not result in the emergence of parts which can be bought and sold in the market since the same are specifically designed for and according to the requirement of the appellants own buses and the said order-in-original was not challenged by the department and, therefore, became final and in fact after the said order, the appellants surrendered their central excise registration. Then in the year 2002, a show cause notice was issued to the Aurangabad workshop and three show cause notices dated 16.7.1993, 6.12.1993 and 12.4.1994 were issued to Pune workshop for different periods demanding duty on the components and the scrap. These show cause notices were also contested by the appellants and has resulted in these proceedings before the Tribunal.
5. He submitted that as regards the order passed by the Commissioner (Appeals), Aurangabad, he has not at all dealt with the question of limitation though he has noted that the demand in respect of the Aurangabad unit was dropped by the department vide order dated 23.12.1993. The learned counsel submitted that when the very issue for the earlier period has been examined and decided by the department in the appellants favour and the department had accepted the order-in-original and also accepted the surrender of the licence, the demand of duty again by invoking the willful suppression or intention to evade duty does not arise. He further submitted that as regards the merit of the case, when in the earlier order, the adjudicating authority had held that the processes do not result in the emergence of parts which can be bought and sold in the market since the same are specifically designed for and according to the requirement of their own buses and without any contrary evidence relied upon by the Commissioner (Appeals), there is no reason for him to give a different finding. He contended that the burden is on the department to prove that the goods in question were marketable.
6. The learned counsel submitted that as regards the order-in-appeal passed by the Commissioner (Appeals), Pune, this order has been passed in remand proceedings in pursuance of the Tribunals order dated 27.7.1999 and the Tribunal had given a specific direction to decide the issue whether the processes amount to manufacture and whether the components are marketable. He submitted that the Commissioner (Appeals) has stated that merely because the goods are not bought and sold in the market does not make them non-marketable and the fact remains that the appellants are supplying the same to the various divisions. He contended that there is no evidence to show that a market existed for the goods in question and the mere fact that the goods are being used for their own buses in various divisions does not establish the marketability of the components. He relied upon the following case law in support of his contention:-
a) Hindustan Ferodo Ltd. vs. CCE, Bombay 1997 (89) ELT 16 (SC);
b) Bata India Ltd. vs. CCE, New Delhi 2010 (252) ELT 492 (SC);
c) UOI vs. Sonic Electrochem (P) Ltd. 2002 (145) ELT 274 (SC);
d) Sundaram Clayton Ltd. vs. CCE, Chennai 2009 (233) ELT 530 (Tri.-Chennai), and
e) Automobile Corporation of Goa Ltd. vs. CCE, Goa 2006 (197) ELT 564 (Tri.-Mumbai).
He finally concluded that in view of the above case law, the components on which duty has been demanded by the department are not marketable and, therefore, no duty is liable to be paid by them and accordingly the appeals filed by them need to be allowed.
7. The learned Additional Commissioner (AR) submitted that the issue involved in the appeal is whether the bus body parts, viz. aluminium window frames, driver door frame, passenger door frame, windshield frame, battery box stand, MS ladder, MS engine bonnet etc. are dutiable and whether the scrap generated during the course of manufacture of the parts is liable to duty. He submitted that these parts are distinctly identifiable bus body parts and are standardized for their own use and are meant to be supplied to other divisions and depots for undertaking repairs and maintenance of the buses. He submitted that these component parts could have been supplied to other entities including other State Road Transport Corporations for similar use and are therefore marketable and liable to central excise duty. He stated that such goods would be treated as marketable considering that the same are capable of being sold and supplied against an appropriate supply order. He contended that it is not the appellants case that aluminium or MS sheets have not undergone a substantial change so as to lose their earlier identities and the products so arising out of their activity are not one and the same and a new product with different name and character has emerged and, therefore, the components manufactured by them are marketable and liable to duty.
8. He further submitted that the contention of the appellants that the department vide order-in-original dated 27.12.1993 has held that such goods are non-marketable is not correct as the issue of marketability at the time before the divisional AC did not have the factum of manufacture and supply of such goods to other depots and divisions outside the factory of manufacture and the order has only considered the goods manufactured for the captive use only and the crucial fact relevant for consideration of these proceedings was distinct from that in the relevant decision dated 27.12.1993. Similarly, he contended that the scrap generated during the process of manufacture is liable to central excise duty in respect of Aurangabad unit. He also relied upon the following decisions in support of his contention:-
a) Ford India Private Ltd. vs. CC, Chennai 2008 (228) ELT 71 (Tri.-Chennai);
b) Bharat Sanchar Nigam Ltd. vs. UOI 2006 (2) STR 161 (SC);
c) A.B. Mauri India Pvt. Ltd. vs. CCE, Pune-II 2010 (260) ELT 424 (Tri.-Mumbai);
d) CCE, Jaipur vs. Hindustan Zinc Ltd. 2004 (166) ELT 145 (SC);
e) Medley Pharmaceuticals Ltd. vs. CCE, Daman 2011 (263) ELT 641 (SC), and
f) CCE, Meerut-II vs. Sundstrand Forms P. Ltd. 2011 (271) ELT 326 (SC).
He submitted that in view of these decisions, the appeals filed by the appellants deserve to be rejected and the impugned orders are liable to be upheld.
9. We have gone through the submissions made by both sides. We find that in case of unit in Aurangabad Commissionerate, a show cause notice dated 5.8.1993 was issued to the appellant for denying their claim of nil rate of duty and demanding duty on bus body component. This show cause notice was dropped by the Assistant Commissioner vide order No.133/93 dated 23.12.1993. The Assistant Commissioner held as under:-
I examined the said bus body components in light of the above concept. The process goes like this. They procure the required material in the form of rods, sheets, angles etc. Then they will bend, cut and straighten according to the design of the components. These are filled to the body by nuts and bolts or riveted or welded accordingly. These parts are made according to the design of the bus body. The design of the bus body varies from one manufacturer to another manufacturer. To put it in another way, these designs are prepared in house. They body is custom designed by each body builder. So there is no chance of these goods being sold in the market for the reason that they cant be fit into any other body of different design. Thus, these parts are not marketable. Hence, they cant be called as goods for Central Excise purpose. Hence, they are not excisable. This order was accepted by the department and no appeal was filed against this order. The department again issued a show cause notice on 1.3.2002 for demanding duty on component and scrap for the period 1997-98 to 2001-2002 which was confirmed by the Additional Commissioner on 1.6.2003. We are of the view that once the department itself has held the goods as non-excisable and each sale of scrap was intimated to the department by the unit, allegation of suppression of fact against the appellant does not survive.
10. Regarding the merit of the case, we find that in case of order-in-appeal passed by the Commissioner (Appeals), Aurangabad, The Commissioner (Appeals) has confirmed the order-in-original stating that when the appellants own sister unit in Pune is paying the duty on such components, how could they claim the identical goods to be non-excisable on the plea of non-marketability. We also find that the Additional Commissioner also in his order-in-original has held that when their workshop in Pune is paying duty on similar goods, this itself proves applicability of duty on goods manufactured and cleared by them. Both the lower authorities confirmed the demand based on the practice prevalent in Pune unit.
11. The Commissioner (Appeals), Pune, in remand proceedings, has examined the process undertaken by the appellant in their Central Workshop and Divisions and has held these goods as excisable. On the point of marketability, the Commissioner (Appeals) has held as under:-
As regards marketability, I find it is well settled law that merely because goods are not bought and sold in the market does not make them non-marketable and fact remains that they are supplying the same to their various divisions.
12. The Revenue relied on the decision in the case of CCE, Jaipur vs. Hindustan Zinc Ltd. (supra). In that case, a lead sheet fixed with header acts as positive electrode (anode) and an aluminium sheet fixed with header acts as negative electrode (callode). It was held by the Tribunal that these headers are not manufactured goods and it was further held that these headers are marketable. It was observed by the Apex Court that when product is bought in market by one M/s. Cominico Binani Zinc Ltd., this shows the product is marketable. In the case before us, the product is not bought by any party and, therefore, this case is distinguishable.
13. In the case of Medley Pharmaceuticals Ltd. vs. CCE, Daman (supra), the issue before the Honble Supreme Court was valuation of physician samples distributed as free samples. It was pleaded by the assessee that physician samples are not excisable goods when sale thereof is prohibited under the Drugs & Cosmetics Act. It was held by the Court (para 8) that product liabile to excise duty must be marketable on the condition in which it emerges. Marketable means saleable or suitable for sale and goods need not be marketed. It was also observed by the Court (para 29) that market of pharmaceutical company is enhanced substantially by distribution of free samples. In other words, the distribution of such physician samples serves as marketing tool in the hands of pharmaceutical companies. The product involved in the case before us are not samples but components supplied to divisions for repairs and maintenances of buses. The facts of this case are distinguishable from the present case.
14. The Revenue also relied on the case of CCE, Meerut-II vs. Sundstrand Forms P. Ltd. (supra). The issue involved was dutiability of carbonless paper emerging at intermediate stage during the process of manufacture of carbon. It was observed by the Honble Supreme Court that the product available in the market and bought and sold in the market and the assessee themselves sold the carbonless paper in the market. In the present case there is no evidence of sale of product in market. The facts of this case are also distinguishable.
15. The appellant relied on the decision in the case of UOI vs. Sonic Electrochem (P) Ltd. (supra) in support of their contention that the products used by them in buses are not marketable. In para 9 of the judgment, it was observed by the apex court as follows:-
Marketability of goods has certain attributes. The essence of marketability is neither in the form nor in the shape or condition in which the manufactured articles are to be found, it is the commercial identity of the articles known to the market for being bought and sold. The fact that the product in question is generally not being bought and sold or has no demand in the market would be irrelevant. The plastic body of EMR does not satisfy the aforementioned criteria. There are some competing manufacturers of EMR. Each is having a different plastic body to suit its design and requirement. If one goes to the market to purchase plastic body of EMR of the respondents either for replacement or otherwise one cannot get it in the market because at present it is not a commercially known product. For these reasons, the plastic body, which is a part of the EMR of the respondents, is not 'goods' so as to be liable to duty as parts of EMR under para 5(d) of the said exemption notification. The products, components of bus bodies made by the appellant are not available in market. The Revenue has not provided any evidence that the products were sold by the appellant in the market. These components are made for specific use in bus bodies made by the appellant.
16. We also find that the Honble Supreme Court in the case of Board of Trustees vs. CCE, A.P. 2007 (216) ELT 513 (SC) has observed as follows:-
3. Therefore, the principal question involved in this civil appeal relates to exigibility of Cement Concrete Armour Units. At the outset we may state each of these units weight is about 50 metric tones. They are like Tripods which also keep the water calm and tranquil. In order to constitute goods twin tests have to be satisfied, namely, process constituting manufacture and secondly marketability. In the present case the second test of marketability is in issue. It is well-settled that goods are manufactured with the object of being sold in the market. If the goods are not capable of being sold then the test of marketability is not fulfilled. Further, the burden is on the Department to prove whether there is the process which constitutes manufacture and secondly whether the product is marketable.
4. Coming to the facts of the present case we have examined the literature concerning Port Engineering as well as the contract entered into by the Port Trust which indicates that concrete armour blocks are essentially in prisomoid form. These blocks or units are made to order. They are of certain specifications. They are harbour or location specific. It would depend on the water level required to be maintained in the harbour. There is no evidence to show that these blocks could be used in any other harbour. This is where we have stated that each unit is meant for a particular location. Lastly, in the present case there is no evidence coming from the side of the Department to show that the said Cement Concrete Armour Units are bought and sold in the market as a commodity.
17. We find that in the present case before us, the components of bus bodies are meant for specific use in buses made by the appellant for repair and maintenance purposes. These components cannot be used in other buses made by other bus body builders. There is no evidence from the Revenue to show that the components are bought and sold in the market as commodity. The Commissioners finding that merely because goods are not bought and sold in the market does not make them non-marketable cannot be sustained in absence of any evidence from Revenue. We, therefore, following the ratio of the decision of the Honble Supreme Court in the case of UOI vs. Sonic Electrochem (P) Ltd. (supra) and Board of Trustees vs. CCE, A.P. (supra), hold that the products, components of bus bodies, are not marketable commodity and hence not excisable.
18. The appeals are allowed.
(Pronounced in Court on 10.4.2012) (S.S. Kang) Vice President (Sahab Singh) Member (Technical) tvu 1 16