Customs, Excise and Gold Tribunal - Mumbai
Commr. Of C. Ex. vs Dattanand Refrigeration Services Pvt. ... on 4 December, 2000
Equivalent citations: 2001(132)ELT748(TRI-MUMBAI)
ORDER J.H. Joglekar, Member (T)
1. These 3 appeals and 3 cross-objections relate to 3 orders passed by the Commissioner of Central Excise, Pune II. Since the issues are the same, these are being taken up to-gether for disposal.
2. The facts leading to the dispute are as follows:
M/s. Kirloskar Brothers Ltd. manufacture compressors. Any defects within the inwarranty and out of warranty period are rectified by them. For carrying out the rectification, they have several service centers. M/s. Kirloskar Brothers have agreement with the persons operating such centres. The defective compressors are received by the Area Offices of M/s. Kirloskar Brothers Ltd. From there, they are sent to the service centres of that area. The movement of the defective compressors was under the set of documents which show the distinctive number given to each compressor when it initially had left M/s. Kirloskar Brothers Ltd. After the defects are set right, the compressor is sent to the area offices from there it was received. The complainant customer does not have to wait for the entire activity of repair etc. but on receipt of the defective compressor, the area office itself supplies another reconditioned compressor to the customer. For this purpose the area offices maintain an appropriate Register. Thus the customer does not get the same piece as was sent by them. Even the distinctive number is different.
3. Two of the units which undertook such repairs were M/s. Dattanand Refrigeration Services Pvt. Ltd. and M/s. S.C. Industries. Show cause notices were issued to these two units alleging that the activity undertaken by them amounted to manufacture of compressors on which duty was leviable. It was alleged that these units had cleared the goods without discharging the burden of duty. It was alleged that the units had failed to obtain the requisite registration for undertaking the manufacturing activity and had failed to comply with the procedural requirements. Allegations were made to the effect that the units were liable to penalty. The notices demanded duty of Rs. 35,65,69,809.60 from M/s. Dattanand Refrigeration Services P. Ltd., and of Rs. 6,37,50,759.00 from M/s. S.C. Inds. The Commissioner, after hearing the notices passed similarly worded orders. He distinguished the citation made before him (Tribunal's judgment in the case of Shriram Refrigeration Industries Ltd. 1986 (26) E.L.T. 353 and in the case of Kama Industries 1992 (42) E.C.R. 522. In doing so, he observed that the two citations produced were on the issue of interpretation of Rule 173H of the Central Excise Rules, 1944. His order in the case of S.C. Industries bearing No. 02/CEX/1998 is more elaborate than the other judgment. His findings are, however, identical. He held that there was no positive evidence to show that the manufacture of new compressor was involved in the process undertaken by the assessee. He, therefore, declined to confirm the demand raised. He, however, held that the notices did not have a licence or a registration and on this ground while dropping the demands, he imposed penalties on these two appellants. Against these orders, the Revenue have filed the three appeals. The assessees have filed cross-objections contesting the imposition of penalty.
4. We have heard Shri A. Hidayatullah, Sr. Counsel appearing along with Shri M.P. Baxi, Advocate for the respondent units. We have heard Shri Choubey for the Revenue.
5. The two units performed identical operations on the defective compressors received by them. The defective compressors were cut open. The components parts were taken out and critically examined. The defective parts were separated. In their place, suitable parts already earlier repaired were put. Where a part was not capable of being repaired and where the repaired replacement was not available, a new replacement part was put. After so assembling, the compressor was sealed and was dispatched back to the area offices. These procedures have been recounted by 3 experts who had visited the facility of the service centers. Their affidavits are part of the record. They are S/Shri Shanmugam, Samir Saha and Dr. N. Nagaraja. While one of the show cause notices leading to Order No. 02/CEX/1998, dated 17-3-1998 is silent on the process undertaken, the other show cause notices give the details. Perusal thereof makes it clear that there is no significant disparity between the observations made by the experts and the recitation made in the show cause notices.
6. We find that the recountal of the process made in the cited judgments in the case of Shriram Refrigeration Industries Ltd. as well as M/s. Kama Industries was identical and similar to what was stated in the cases before us. In paragraph 9 of the Shriram Refrigeration Industries Ltd. judgment, the method adopted was narrated. In that case, the assessees were manufacturing the compressors as well as undertaking the repairs thereof. The replaced parts were not always new but were often reconditioned old parts. In the judgment in the case of Kama Industries, the procedure adopted was narrated in paragraph 2 of that order. The facts in Kama Industries case are more akin to the facts of the present case where the replacement work resulting in the customer receiving an entirely different product from what was surrendered by them. In the case of Shriram Refrigeration Industries Ltd. the Tribunal held that the activity of repair/reconditioning/remaking did not amount to manufacture of any new articles. The judgment was relied upon and followed in later judgment in the case of Kama Industries where the findings were the same.
7. The Commissioner in the face of the similarity and on facts in the ratio of the judgment, he did not go to the factor distinguishing but in the case of S.C. Industries (Order No. 02/CEX/1998) he merely held the activity to be "distinguishable". In the order in the case of Dattanand Refrigeration Services Pvt. Ltd. (No. 04/CEX/1998) he did not even discuss the ratio of the judgment.
8. These two judgments of the Tribunal were appealed against in the Supreme Court. In fact in the 3 appeals from the Revenue there is a specific claim made of the denial of the ratio of the judgment to the service centers on the ground that the appeals were filed by revenue against these two judgments.
9. We have been given a photocopy of the judgment of the Supreme Court in Civil Appeal No. 1029 of 1987, dated 25-8-1999 where the Revenue appeal against the Tribunal's judgment in the case of Shriram Refrigeration Industries Ltd. 1999 (113) E.L.T. A121 (S.C.) was dismissed by the Supreme Court on merits. The same order in Sr. No. 2534/92 pertained to the Tribunal judgment in the case of Kama Industries.
10. What we find is that the process of repairs adopted by the two service centers viz. M/s. Dattanand Refrigeration Pvt. Ltd. and M/s. S.C. Industries before the Commissioner was similar to those before the Tribunal in the cited judgments. In the cited judgments, it has been held that the activity did not amount to manufacture. In view of the judgment of the Supreme Court, it must be held in the present case also that the process undertaken by the two respondents did not amount to manufacture and that they are not liable to pay duty. The fact that in the cited case Rule 173H was under discussion is not relevant, nor does it operate as a bar for application of the ratio thereof.
11. The Revenue appeals, therefore, do not succeed and are dismissed.
12. In the cross-objection filed by the respondents to the present appeals, agitation is made of the penalties imposed upon the two units. The penalties were imposed on the conviction of the Commissioner that the activity undertaken by the units were covered under the phrases used in Sec. 6 of the Central Excise Act, 1944. We find that where it was held that the respondents had not engaged in the manufacture of excisable goods, there is no requirement for them to be licensed and consequently there was no requirement for penalties to be imposed upon them. Cross-objections are allowed. The orders imposing penalties are set aside and consequential relief, if any, is ordered.