Customs, Excise and Gold Tribunal - Delhi
Sarang Spring Manufacturing Company vs Collector Of Central Excise on 24 October, 1986
Equivalent citations: 1987(11)ECR1(TRI.-DELHI), 1987(27)ELT709(TRI-DEL)
ORDER H.R. Syiem, Member (T)
1. Before the appeals were taken up, the Bench heard the application for condonation of delay in filing appeal No. 1546/86-B1. Considering that this was only a supplementary appeal that arose from the fact that the Appellate Collector passed one order in respect of two orders in original, the Bench condoned the delay and commenced the hearing of the two appeals.
2. The appellants were correct when they said in their revision petition dated 12.10.1981 that the Appellate Collector entered into the aspect of classification which was not a dispute before him for determination. The only dispute was whether end-use certificates were necessary for the purpose of notification No. 99/71-CE.
3. By his order in appeal No. 524/BD-21/81 and 525/BD-22/81 dated 25th April, 1981 the Appellate Collector of Central Excise (Appeals) rejected preferential assessment under notification No. 99/71-CE, because he said the springs were not classifiable under tariff item 34A. It was only those springs classifiable under tariff item 34A used as parts and accessories of motor vehicles which would be exempted from payment of duty under the notification.
4. The manufacturers, M/s. Sarang Spring Manufacturing Company manufactured springs some of which were excisable under item 68 and some others under item 34A of the Central Excise Tariff. The dispute arose because the manufactuers asked for refund of duty which they had paid on goods assessed under tariff item 68 in the past but which they say should be assessed under item 34A, after a classification was approved by the Superintendent in May, 1978.
5. The Assistant Collector rejected the refund claim because he held that there were no end-use certificates for the springs, and that some springs supplied to a buyer were used in making parts of motor parts; or that the products supplied to the customers were not used in the factory but were consigned to other people for which end-use was not known, and that the description in the gate passes did not tally with the certificate. In another proceeding, the Superintendent rejected the claim to exemption on almost the same grounds as to the ones the Assistant Collector gave for rejecting the refund application.
6. In their attack on the Appellate Collector's order, the appellants say that the fact of their not classifying their goods as motor vehicle parts did not prohibit them from correcting an error. They were unable to understand the lower authorities' contention that the springs were used in the manufacture of parts and accessories of motor vehicles and not directly used in vehicles. And notification No. 99/71-CE did not prescribe production of end-use certificate. Therefore, the department had no legal authority to demand such certificates and to deny their lawful claim. If the department wanted to conduct enquiries into the end-use, they were free to do so, but they could not compel the assessees to submit to something not prescribed by law. The lower authorities said that the springs were used not in motor parts but in making parts of motor car parts.
7. The learned counsel Mr. Vora for the appellants argued on the above lines.
8. He also repeated that a part of their refund claim was sanctioned only because the customers were motor vehicles manufacturers. It was wrong for the department to demand end-use certificate when the notification did not require it. Their springs were not interchangeable and were made to specifications for use only as motor vehicle springs. They can be used nowhere else and they will serve no other purpose. He complained that even for goods which moved to original manufacturers refund was rejected on the ground that full particulars had not been given. Their claim was rejected without any notice.
9. On the question of interchangeability, he quoted 1986 (24) ELT 226 re: Ideal Jawa. The High Court held that bolts and nuts made to specifications for motor vehicles were motor vehicle parts.
10. The learned counsel for the department said that springs are goods of general nature and can be used in all kinds of applications. They have multifarious uses and he quoted 1985 (60) STG 80. Then he quoted 1986 (61) STC 58 which ruled that the items not meant exclusively for a particular purpose cannot be categorised in that article. He referred to AIR 1973 S.C. 1947; AIR 1963 S.C. 1319 and 1985 (19) ELT 35.
11. The appellant's counsel claimed that they possessed drawing to show how the springs were manufactured, but these drawings were never produced before the Assistant Collector. Without the end-use it is not possible for the lower authorities to say that the springs formed parts of motor vehicles. For example, a spring can go into a shock absorber. In such a case only the shock absorber is distinguisable, but it cannot be said that the spring has become a part of the motor vehicle. A nut that goes in a wheel that is put on the motor vehicle cannot be said to be a part of the motor vehicle. It is only a part of the wheel, even though the motor vehicle cannot run without the wheel. Similarly, a motor vehicle cannot run without its carburettor, but a part of a carburettor does not become a part of the motor vehicle.
12. The opposite counsel said that there was no hearing before the Assistant Collector. For this the learned SDR quoted 1983 (2) ETR 483. The Appellate Collector heard them and they are now being heard before the Tribunal. The defect, if any, that arose from the want of hearing before the Assistant Collector has been more than made up by the Appellate Collector and by the Tribunal.
13. The learned counsel for the appellants said that it has been ruled that if there is a doubt, the choice should be in favour of the assessee. We agree with this, but, first of all, there must be a doubt.
14. He reiterated that they now have end-use' certificates. The goods were directly used as original equipment and also as parts and when the parts are sent directly to motor vehicle manufacturers, they are original equipment. To reinforce their arguments, the appellants say in the revision petition that the destination of goods and the use to which they are put by the purchasers are not material for the purpose of excise duty, specially when the commodity squarely falls under a particular tariff item in accordance with the understanding thereof in the trade and persons dealing in the commodity under reference. For this proposition, they quoted 1978 ELT 3 626, AIR 1972 SC 2552, 1978 3 6t8, 1980 ELT 280, 1979 ELT 3 653. The difficulty here is not that the department sought to assess the goods on the basis of the end-use. The dispute arose because an exemption was asked for by the assessees and the department, in order to guard against misuse, asked for end-use certificates to make sure that the goods were actually used in a way that would entitle them to the exemption.
15. We can see nothing wrong in this. The exemption notification No. 99/71-CE itself exempted "parts and accessories of motor vehicles and tractors (including trailers) falling under item No. 34A of the first schedule to the, Central Excises and Salt Act", from the whole of the duty of excise leviable thereon. The lower authorities, the Assistant Collector and the Appellate Collector, viewed this notification as' exempting only those parts if they are really parts of motor vehicles, and the reason is clear. Parts of motor vehicles can be used in a large number of applications. Bolts and nuts, wheels, springs and many others can easily find uses elsewhere than in motor vehicles. For example, one has seen frequently wheels and tyres of motor vehicles being used in bullockrarts and hand-drawn carts etc. It may even be true as claimed by M/s. Sarang Spring Manufacturing Company that their springs are specially designed to specification and cannot be used in any other application, but the exemption is not to a spring but to a part of a motor vehicle. When the assessing officer cannot see the use of that spring as a part of a motor vehicle, as for example, when the spring is sold as a spring to a dealer who will sell it as a spare part, even though one can be reasonably certain that the spring will go in a motor vehicle, the assessor cannot see this for assessment; he can see only a spring that has gone out without being able to perceive its use or its entry into a motor vehicle as a part, the condition necessary for the assessment at concession.
16. The lower authorities spoke of parts going as parts of motor vehicles and, therefore, not being parts of motor vehicles. This is not a correct projection of the difficulty. If a part goes as a part of a motor vehicle part, it is a part of a motor vehicle and no amount of argument to the contrary will change our view : A spring used as a part of a shock absorber installed in a motor car, is a motor vehicle part. The real difficulty is not this, but that if the spring, which is used in the shock absorber does not, as a part of that shock absorber enter and integrate with the motor vehicle as a part within the cognizance of the assessing officer, the spring cannot be said to have become a part of a motor vehicle for that officer. The appellants say they do not understand what the Assistant Collector meant by saying that the springs were used in manufacture of parts of motor vehicles and not directly used in vehicles. He (Assistant Collector) meant only that the use of the parts in the parts does not prove that the whole thing is going into a motor vehicle. This is where his demand for the end-use certificate acquire its cutting edge. Quite clearly if an end-use certificate can be produced for this, the spring in the shock absorber can be said to have been used in the motor vehicle and to have integrated into it. However, if the Assistant Collector means something else by not directly used in the vehicles, then he is wrong; there is no sanction for the interpretation that use that must be direct use, whatever that means. As long as the spring eventually forms a part of the motor vehicle after having been used as a part for some other assembly that goes into the motor car, that spring must be held to be a part of the motor vehicle.
17. The learned counsel said that they have end-use certificates to satisfy the central excise authorities, that the springs have been used as parts of motor vehicles. We are not able to examine this; those certificates were not produced before the Assistant Collector. It is evident that the certificates have been procured after these proceedings had started. However, the appellants may produce them to the Assistant Collector and, if he is able to accept them, he may do so and give them the necessary benefit.
18. An important obstacle ramains in the way of the appellants. The claim for refund dated 25.8.1978, it seems, was on goods classified under tariff item 68, that means, goods cleared under classification list valid before 2.5.1978 for which they filed (on 2.5.1978) a revised classification for assessment under tariff item 34A. Notification No. 99/71-CE allows exemption only to parts of motor vehicles falling under item 34A, it does not allow exemption to parts falling under item 68. They do not seek the refund claim on the basis of the assessment already made but on a basis that would require reassessment of their goods under item 34A from the assessment already made under item 68. As the goods have already left central excise control and have been cleared, we do not see on what grounds the reassessment can be done to allow the exemption and the refund claim to be made. Even if the difficulty about end-use and end-use certificates and other problems had not arisen, this would still be a big stumbling block over which we do not know how M/s. Sarang Spring manufacturing Company propose to get over. However, we will leave it to them to convince the central excise authorities, if they can, on this matter.
19. In respect of the rejection by the Superintendent of their claim for assessment under notification No. 99/71-CE, we have already discussed the matter above; they may produce their end-use certificates to the central excise authorities for such action as are appropriate in order to provide them the benefits they seek as may be lawfully permissible and right.
20. The order in appeal is set aside to enable the lower authorities to reexamine afresh as indicated above.