Customs, Excise and Gold Tribunal - Delhi
Geep Industrial Syndicate vs Collector Of Central Excise on 31 July, 1987
Equivalent citations: 1987(14)ECC284, 1987(13)ECR705(TRI.-DELHI), 1987(31)ELT1040(TRI-DEL)
ORDER H.R. Syiem, Member (J)
1. This appeal questions the finding of the Collector of Central Excise (Appeals), New Delhi, in order No. 82-CE/Alld/83, dated nil. (The appellants give the date of this order as 30-4-1983). M/s. Geep Industrial Syndicate question the conclusion that the zinc calots which they make in their factory and which they use for manufacturing dry battery cells are dutiable. According to the arguments presented before us by their learned counsel, Mr. Ravinder Narain, the calots, which are small flat, round or hexagonal tablets of zinc, are punched from zinc sheets and are then placed in extruding machine which extrudes the calots into canisters or cans which form the outer case of the dry cell batteries. The manufacture of the dry battery, from the zinc sheet, and the slab before it, is one continuous endless process and the zinc calots are only intermediates in the manufacture of the dry battery can which will house the dry cell electric batteries. There was no removal of the zinc calots within the meaning of Rule 9 and Rule 49 of the Central Excise Rules in accordance with which alone Central Excise duty is to be collected and recovered. No excise duty can be recovered on such zinc calots so used internally in their own factory in the manufacture of dry cell battery.
2. The learned counsel pointed out that under Rule 9 of the Central Excise Rules, there must be a removal from the place where they are produced, cured, or manufactured or any premises appurtenant thereto, "specified by the Collector in this behalf, whether for consumption, export or manufacture of any other commodity in or outside such place." No such specification has been given by the Collector in this behalf, for the purpose of charging duty on the zinc calots and, therefore, Rule 9 is not satisfied and duty does not become leviable. It can become leviable only when the requisite specification has been made. Rule 49 also acknowledges the specification given under Rule 9 in order to determine goods which become leviable to duty. This rule, like Rule 9, requires for its operation a removal out of a place or premises specified under Rule 9; it, in fact, is entirely dependant on the specification made by virtue of Rule 9. This was the learned counsel's main argument and he said that for this reason alone, the zinc calots cannot be charged to duty.
3. The argument, though a skilful one, has a serious weakness. This dispute is in a period after zinc calots had been specifically listed as Central Excise Tariff Item 26B(2a). The appellants say that after the introduction of this item, they had been paying duty under protest. Apparently, therefore, the payment of duty whether under protest or not, was preceded by all the proceedings for licensing the production of excisable goods and this involves specification of the place required to be specified under Rule 9 had been specified. Even after they paid the duty under protest, they represented to the Superintendent of Central Excise that no duty was leviable on zinc calots since the calots were obtained at an intermediate stage during the manufacture of dry batteries, and that there was no removal within the meaning of Rule 9 and Rule 49. Their action of paying the duty, albeit under protest, nullifies their argument that there was no removal from the place specified by the Collector. If there was a licence and if there was use of the goods for manufacture of other goods, there was necessarily a removal of the goods from the place specified. Rule 9 has these words to delineate the removal :
whether for consumption, export or manufacture of any other commodity in or outside such place.
But if there has been a failure to specify the place, then the major part of the blame will fall upon the licensees/manufacturers of the calots. It was they who created and produced zinc calots which are excisable goods, and manufacture of which was prohibited under the law except upon conferment of a licence under Rule 174 of the Central Excise Rules. And when the licence is given, the licensee is forbidden from conducting his business in regard to such goods "otherwise than by the authority, and subject to the terms and conditions of a licence granted by a duly authorised officer in the proper form." (Rule 174). One of the people listed in Rule 174 as requiring a licence from the proper officer of Central Excise is a manufacturer of excisable goods. All such licences are required to be issued in regard to clearly designated premises and no licences can be given without such designation. Therefore, when M/s. Geep Industrial Syndicate carved out for themselves a role as producers of zinc calots under the terms and' conditions issued by the proper Central Excise authorities, they did so under such conditions that bind their actions and their conduct in respect of such excisable goods. Since they themselves say that they paid duty under protest, they will have received such licence with its permission and with its investitures to conduct their business in accordance with it, and the rules behind it. It does not make a reasonable complaint for M/s. Geep Industrial Syndicate to claim now that there was no place designated thereto; but if such is the case, they are in even more grievous fault.
4. When the licence was issued to M/s. Geep Industrial Syndicate, a place would have been specified by themselves, and approved by the Collector, "where they are produced, ***********, manufactured". That is the place from which the goods, calots, produced, manufactured, were not to be removed, until such and such happens or is done. The removal may be "for consumption, export, or manufacture of any other commodity in or outside such place." The calots were removed from "such place" for "manufacture of any other commodity" viz. battery dry cells, "in ******* such place."
5. But this is not a removal, say M/s. Geep Industrial Syndicate. Sub-section (2) of Rule 9 answers this objection. It says "For the purpose of this rule, excisable goods produced, cured,, or manufactured in any place and consumed or utilized, ******** for the manufacture of any commodity, whether in a continuous process or otherwise, in such place ******** specified by the Collector under Sub-rule (1), shall be deemed to have been removed from such place or premises immediately before such consumption or utilization."
6. Further comment would be a waste. The lily needs no gliding.
7. It is not their defence that they did not know that zinc calots were excisable goods. Nor is it their claim that they have received authorisation from the Central Excise authorities to produce zinc calots without a licence, because the calots are intermediate goods. They cannot usurp themselves the power to produce and use zinc calots in their factory without proper sanction and without proper licence and without payment of appropriate duty. When excisable goods are produced, all the chains of consequences follow automatically and nobody is allowed to dilute or modify one jot or title of the law. The law takes its own course and the breaker of it does so at his own peril. M/s. Geep Industrial Syndicate cannot decide and authorise themselves to use the zinc calots without payment of duty because they have come to the conclusion that intermediate goods are not dutiable. For one thing, there is no such law; for another, an excisable goods is always an excisable goods until it sheds its excisability by discharging all it is liable to under the law, the foremost being payment of the duty to which it is subject. If, therefore, M/s. Geep Industrial Syndicate have received a licence, the question of specification of the place in the context of Rule 9 answers itself. If, however, they have not taken a licence, they have seriously breached the law and have bound themselves to a fearful charge of wrongdoing. But more of this below.
8. It is unacceptable to be told that duty is not payable, because a place has not been designated or specified by the Collector under Rule 9. The excisable goods carries with it the burden of the duty until it is lawfully discharged. Section 3 of the Central Excises and Salt Act places this burden on all excisable goods and this is never discharged and cannot be discharged in any way that can satisfy my mind except by the payment of the duty.
The learned counsel for M/s. Geep Industrial Syndicate said that even this levy and collection of duty must be made in such a manner as may be prescribed; and the prescription, according to the learned counsel, is in Rule 9 and Rule 49 of the Central Excise Rules. 1 do not agree this is the way to read it. Rule 9 and Rule 49 do not contain the manner prescribed for the levy and collection of duties of excise on excisable goods, but only the point of collection of duty : this Rule 9 prohibits the removal of excisable goods from a place where they are produced etc. etc. until the duty leviable thereon has been paid at such place and in such manner as is prescribed in these rules. It is not the manner of collection that Rule 9 provides but the moment of collection of the duty. However, such collection will be in the manner prescribed in these rules and since Rule 9 itself refers to the manner of collection prescribed in these rules, (note the plural), it (Rule 9) cannot be the manner prescribed that the learned counsel for M/s. Geep Industrial Syndicate thinks it is. The rule draws a line beyond which excisable goods may not move or be removed until the burden of excise duty laid on them under Section 3 is discharged or otherwise lifted. For this reason, neither will Rule 49 play the role that M/s. Geep Industrial Syndicate have assigned it.
9. The question : when will the duty imposed by Section 3 be paid? - remains unanswered in the arguments advanced before us by the learned counsel for M/s. Geep Industrial Syndicate. That payment will have to be made, because all excisable goods must pay this duty; they cannot escape it; that is to say, they must pay or in some other way discharge the payment burden. Some goods achieve this discharge of the liability by means of an exemption from the duty. But even in such cases, there is a positive acquitance for the duty that is provided by the law. The load must descend from the shoulders of the excisable goods and it must be seen to descend at a fixed point determined by Rule 9 and Rule 49. When the duty burden does not descend or is not lifted from the excisable goods, then the Central Excise department can, indeed, must, pursue those goods until that burden of duty is discharged. If the liability is not discharged today, it must be discharged tomorrow or the next month or the next year : but discharged it must be, one day. Use in the same factory is not one of the means for such a discharge.
10. It is, therefore, no answer at all to say that the zinc calots produced by M/s. Geep Industrial Syndicate have not been removed and, therefore, the duty burden need not be discharged. The argument places the wrong chronology on the events of the law. It assumes that since the goods are not removed and are intermediate goods, the burden of duty is not cast upon the zinc calots by Section 3 of the Act. There is neither reason nor authority for this conclusion and, as I have said, the events have been placed in the wrong order. The burden of duty is first settled and laid on to the excisable goods, zinc calots; it is for the manufacturer to discharge that burden at a future date in any manner allowed by law. But he cannot conduct his business as if, simply because zinc calots are not removed and are going to be intermediate goods in the manufacture of battery cells, Section 3 will ignore the zinc calots and will not set its burden on them. Death is no respecter of persons nor is Section 3 a respecter of excisable goods. It lays its icy hand on all excisable goods, and they must answer when it comes calling, for it will come. It is impossible to see how the burden gets discharged or the liability liquidated, simply because the goods are not removed or simply because the goods are intermediates. M/s. Geep Industrial Syndicate have not given a full and faithful answer. I hold that the moment of the zinc calots are taken for further use, to be placed in the die punch to make the cans, they have been removed and have become liable to duty at the stage immediately before it.
11. There are no such goods as intermediate goods in Central Excise law. There are only excisable goods and if goods which were not excisable become excisable, they fall into the Central Excise trap and there is no loosening them until they pay. The learned counsel also said that the goods are not sold and, therefore, should not be levied to duty. There is no law to support this and furthermore, the argument ignores a truism. The zinc calots may not be removed by M/s. Geep Industrial Syndicate, because they need them in their own factory. That is not to say that they cannot be removed and cannot be sold. To be sure, zinc calots will not have the market that cigarettes or biscuits have since zinc calots have a very limited circle of users. These users are only manufacturers of dry cell batteries. But if conditions come about or are created where zinc calots become scarce or difficult to obtain for any factory, nothing prevents that factory from buying zinc calots from another. The argument is like saying that a factory which manufactures machinery for its- own use would never have to pay duty on them, because the machinery is not sold, but is used by the factory itself. But this holds only as long as the machinery is not offered for sale. And we know that machinery is bought and sold like any other goods, though the market for them is a very small one, restricted only to people who need that kind of machinery. One can raise the point then that the machinery does not have a market and that that the machinery is not removed for sale; but that is only a half truth used to obfuscate the full truth.
12. 1 am not able to agree with this reasoning. All things have a market. Some take longer to achieve popular demand, but, given time, the demand can accelerate. Goods which were never sold at one time cannot be had today except at a high price. Fifty years ago sand could be had for the taking; today nobody can get sand except by paying a high price; and in towns and cities sand is almost unavailable. Water is known to be sold, especially when there is a water shortage, though in the countryside one can still obtain water free. The doctrine that goods are not sold and, therefore, should not be excisable has nothing to recommend it. It does not appeal to reason. It is furthermore a perilous propaganda from the point of view of the public revenue and I would not be able to endorse it. But for all this argument, we must not lose sight of the most important legal fact in this case. The calots are listed as excisable goods, and so whoever produces them must pay duty on them unless they receive duty exemption. The calots produced by M/s. Geep Industrial Syndicate at their factory have received no duty exemption, and so they were liable to pay duty.
13. But what if M/s. Geep Industrial Syndicate did not take out a licence? There would then be no place of manufacture specified or approved, and, as M/s. Geep's learned counsel would have it, no exigibi-lity arises on the calots. First of all, M/s. Geep Industrial Syndicate knew the calots were listed as excisable goods by law. This failure to have the goods excised by presenting themselves before Central Excise authorities as manufacturers of calots lays them open to a charge of fraud on the revenue. They needed to report their production of an excisable commodity and to pay the duty they knew had been laid upon it. They did nothing, and now they present themselves as an aggrieved person who had been wronged. They proceeded to reason that as no place is specified, no removal took place, and no duty is attracted.
14. Now this is a very dangerous philosophy. Every manufacturer who manufactures goods clandestinely will demand immunity for the same circumstances - absence, of a licence and absence of a specified place. M/s. Geep's learned counsel countered this by proposing that in such cases, a corrective awaits the lawbreaker in the shape of Rule 173Q and the penalties it authorises. The answer to this is that Rule 173Q cannot bring in the lost duty - only penalty. And penalty does not take the place of duty in Central Excise taxation procedures and accounting, because it is not duty, but is or can be in addition to duty.
15. The true and faithful account required from M/s. Geep Industrial Syndicate is an acknowledgement that the calots were dutiable and must pay duty. If, by not taking a licence, no place had been specified for purposes of Rule 9, it was their failure and they are blameworthy; and no one may profit by his lawbreaking.
16. The absence of the demarcation was the factory's dereliction. They should have demanded the demarcation before they allowed the calots to be punched into cans. They shut their eyes to a patent violation, and then proceeded to reap the harvest.
17. M/s. Geep Industrial Syndicate's factory also produce zinc bars and zinc sheets; both these goods are listed in the Tariff as excisable goods. But it appears M/s. Geep Industrial Syndicate have not taken licences for manufacture of these products, nor did they pay duty on the production. So the story about the calots is not an isolated event, nor did that breach spring from a blameless belief that the goods (calots) were not dutiable.
18. However, the position of the calots under the law is clear. They are dutiable and they must be subjected to duty as ordered by the lower authorities.
19. The appeal is rejected.