Customs, Excise and Gold Tribunal - Calcutta
Wpil Ltd. vs Commissioner Of Central Excise, ... on 23 November, 2001
Equivalent citations: 2002(149)ELT415(TRI-KOLKATA)
JUDGMENT
S.S. Sekhon
1. Miscellaneous applications allowed. The appeal is taken up for final hearing. The appellants are manufacturers of power driven pumps including vertical pumps. These vertical pumps essentially consists of:
(i) Discharge head assembly
(ii) Column assembly
(iii) Bowl assembly
2. A show cause notice was issued on 23.3.82, alleging that by mis-declaring union excise duty amounting to Rs. 7,77,129.98 towards basic duty for the period September 1981 to February 1982 was not discharge and the same was required to be recovered under the proviso to Section 11A of the Central Excise Act and the appellants were also asked to show cause why penalty should not be imposed on them as per provisions of Rule 173Q of the Central Excise Rules from the total sale value.
3. The proposal of determination of duty on the value of total 889 column assembly and head assembly was to be recovered classifying these goods under tariff item 68, based on the value apportioned from the total value without giving any basis as to how that apportionment was done. The grounds as they appear from the notice are:-
"M/s. Johnston Pumps India Ltd., cleared vertical turbine power driven pumps-set without payment of Union Excise Duty in terms of Govt. of India's Notification No. 57/78 CE dated 1.3.78. These type of power driven pumps consisting of three parts viz., (i) Head assembly (ii) Bowl assembly (iii) column assembly.
The main function of the pump is to shift liquids from one point to another or from lower point to higher point by the rotating action of the shaft and the impellers. Thus, it converts mechanical energy into kinetic energy of the liquid and liquid is forced out by great pressure from the point itself. It is only the bowl assembly that performs all these functions and the same is, therefore, categorized as power driven pumps which are only assessable under T.I. 30A and since 13.3.78 this item only enjoying exemption in terms of Notification No. 57/78-CE dated 1.3.78.
M/s. Johnson Pumps India Ltd., illegally removed Head assembly & Column assembly without payment of Central Excise duty by misdeclaring all the three parts; i.e. Head assembly, column assembly and bowl assembly as power driven pump set and thus they enjoyed exemption benefit of Notification No. 57/78-CE dated 1.3.78 which is irregular."
4. The Collector after going through records of the proceedings and the decision of the Hon'ble High Court of Gujarat in the case of M/s. Jyoti Ltd., Baroda held as follows:-
"12. For the reasons stated above, I hold that the head assembly and the column assembly do not fall within the scope of Item No. 30A or the said schedule and consequently the same are liable to duty. In the instant case, since the said company did not furnish classification list or price list in respect of the column assembly and head assembly, it amounts to the suppression of the production of column assembly and head assembly and consequently the time-limit prescribed for issue of the Show cause notice in such cases is five years and not 6 months under Section 11A of the said Act. As such I hold that the show cause notice issued by the Asst. Collector of Central Excise, Division XV, is not time barred."
5. In view of the same, he directed the company to pay central excise duty amounting to Rs. 7,77,129.38 on the value of 889 column assemblies and head assemblies cleared during the period September 1981 to February 1982 and keeping in view the contravention imposed a penalty of Rs. 1,00,000/- under Rule 173Q.
6. Aggrieved by these proceedings, the appellants had moved the High Court at Calcutta and requested and brought to the notice of the Hon'ble High Court at Calcutta, the order passed by the Collector of Central Excise, Calcutta and also filed this appeal to avoid technical difficulties/confusion in the matter in future on the following grounds:-
(a) Order has been passed on the assumption that out of the said three parts of power driven pumps namely bowl assembly, head assembly and columns assembly, it is only the bowl assembly which would be regarded as the power driven pump and would fall under item No. 30A of the First Schedule to the said Act and that the other two parts namely column assembly and head assembly would not fall under Item No. 30A but would be covered by item No. 68 of the First Schedule to the said Act. The assumption is wholly erroneous untenable, baseless and incorrect. Bowl assembly, head assembly and column assembly together constitute the power driven pumps and the said three parts are the essential parts of power driven pumps.
(b) That in the Indian Standard Specification for vertical turbine pumps for clear, cold, fresh water (IS 1710-1972), also it has been clearly stated in paragraph 3.1 that the vertical turbine pumps consist of three elements namely bowl assembly, column assembly and head assembly. In Pump Hand Book, edited by Igor J. Karassik, William C. Krutzsch, Warren H. Fraser and Joseph P. Messina and published by Mc.Graw Hill Book Company, New York (1976 Edition), which is one of the most authoritative books on the subject, bowl assembly, head assembly and column assembly have been described to be the essential parts of power driven pumps. In the American National Standard for Deep Well vertical Turbine Pumps (ANSIB58.1.1971-AWWA B 101-71) published by American Water Works Association, New York also it has been stated inter-alia in Section A2 that a basic pump consists of three elements, namely, bowl assembly, column assembly and head assembly.
(c) The exports of power driven pumps, drawback is granted by the appropriate authorities of the Government of India on the basis that bowl assembly, column assembly and head assembly together constitute the power driven pumps. It would clearly be evident that the Govt. of India is also accepting that bowl assembly in itself cannot be regarded as power driven pump and it is only bowl assembly, head assembly and column assembly which together constitute the power driven pumps.
(d) Item No. 30A of the First Schedule to the said Act provides for levy of duty on power driven pumps and not on any specific part thereof. The Central Excise Authorities have no right, authority or jurisdiction to proceed on footing that only bowl assembly which is one of the parts of power driven pumps would be covered by item No. 30A and that the other two parts namely column assembly and head assembly would not be covered by said item No. 30A but would be covered under Item No. 68. The power driven pump is complete only with the said three essential parts and item No. 30A provides for levy of the Central Excise Duty on such complete power driven pumps only.
(e) The appellant sells complete power driven pumps consisting of inter-alia bowl assembly, head assembly and column assembly. The appellant charges to its buyers one consolidated price for such power driven pumps. Power driven pump consisting of bowl assembly, head assembly and column assembly is one single excisable commodity. The Central Excise authorities have further no right, authority or jurisdiction to notionally bifurcate the consolidated price charged by the appellant to its customers into different parts and attribute the same to the various components of power driven pumps.
(f) In business and trade also power driven pumps are taken to mean the complete pumps with bowl assembly, head assembly and column assembly. Bowl assembly itself is not regarded or known or dealt with in the market as power driven pump.
(g) No power driven pump is manufactured by the appellant save and except on the basis of specific orders placed upon it by its customers. Such power driven pumps and all parts thereof are manufactured as per the specific requirements of the customers as mentioned in the orders concerned. Pumps are tailor-made and are manufactured as per the requirements of the individual pumps of the concerned customers. Such parts are all essential parts of the said power driven pumps and they together constitute the said power driven pumps and individual parts such as the head assembly or the column assembly are not salable in the market and the same are not and cannot be regarded as goods.
(h) Assuming though denying that the individual parts of the said power driven pumps such as the head assembly or the column assembly can be regarded as goods or are liable to duty under item No. 68, the said parts are fully exempt from duty in view of the exemption granted under Notification No. 118/75-CE dated 30.4.1975. By the said notification the Central Government has exempted goods falling under item No. 68 of the first Schedule to the said Act, manufactured in a factory and intended for use in the factory in which they are manufactured or in any other factory of the same manufacturer, from the whole of the duty of excise leviable thereon. Assuming though denying that the various parts/components of the said power driven pumps such as the head assembly or the column assembly are or can be regarded as goods and fall under item No. 68 of the first Schedule to the said Act, then also in view of the exemption under the said Notification No. 118/75-CE, no duty whatsoever was or is payable on the said parts/components. As already stated the said parts/components are used at the said factory of the appellant itself in the manufacture of power driven pumps.
(i) Decision relied upon in the case of Jyoti Ltd., - 1979 ELT J-546, the consideration of liable to pay duty under Item 30A and the decision did not lay down that where complete power driven pumps were cleared and sold the value could be divided by central excise officers for the purpose of levy of duty.
(j) In any event the said purported notice to show cause dated 23-3-1982 was barred by limitation under provisions of Section 11A of the said Act.
(k) After instance of the said notification No. 57/78 CE the appellant had filed a revised classification list in respect of the said power driven pumps for approval of the proper central excise officer. In the said classification list the appellant had claimed that no central excise duty was liable to be paid on the said power driven pumps in view of the exemption granted under the said notification. The said classification list was duly approved by the Asst. Collector of Central Excise, Calcutta-VII division. Clearances of power driven pumps were thereafter taken by the appellant on the basis of the said duty approved classification list. By issuing the said purported notice dt. 23.3.82, the Collector has sought to give a go by to and ignore the orders made on the said classification list by proper officer.
(l) Order has been passed by the Collector in gross violation of the principles of natural justice. Inspite of the said letters dated 26.3.82 and 29.5.82 of the advocate of the appellant, and inspite of the said requests for adjournment made personally by the advocate of the appellant on 1.6.82, the Collector arbitrarily and in gross abuse of the powers conferred upon him passed the said purported order.
(m) The Collector erred in imposing pending upon the appellant under Rule 173Q of the said rules. There was no contravention of any of the provisions of the said Act or the said Rules on the part of the appellant and none of the conditions precedent for imposition of penalty under Rule 173Q existed and/or was satisfied and the said purported penalty was levied by the Collector in gross violation of the provisions of the said act arbitrarily.
7. After hearing both sides and considering the material, we find:
a) The learned Advocate for the appellants took us through lot of technical and scientific material placed on record to submit that the articles in question would be essential components and parts of a power driven pump being manufactured by the appellant and have been used in such pumps. In view of the decision of Jyoti pumps as relied upon by the learned Commissioner, we would be bound to consider the entities herein to be classifiable under tariff item 68 and not under tariff item 30A. However, in the facts of this case, we find that no separate valuation thereof has been determined or arrived at by the learned adjudicator or that they have not been used up or not intended to be used in power driven pumps. Their valuation has been arbitrarily split, from the total values of the pump set removed on payment of appropriate duty under tariff item 30A, by the appellants. We also do not find any indication of the 'bowl assembly' being cleared exclusively or/and separately by these appellants. Therefore, we cannot come to a conclusion that the facts are on all four as in the case of Jyoti pumps decided by the Hon'ble Gujarat High Court. Without going into the details of the technical literature produced and submissions made thereto we would examine the demands of duty determined under tariff item 68.
b) An proposal to determine duty on certain articles under Tariff Item 68 separately, which were supplied assembled or otherwise alongwith and as power driven pumps falling under other Tariff item No. 30A, has to be arrived only after considering exemptions, as available to such goods which were proposed to be classified under tariff item 68, when such goods are used in the same factory or intended for use elsewhere from the factory in which they are manufactured. They are exempt from whole of the duty in terms of Notification No. 118/75 dated 30.4.1975 as amended. The full bench of Supreme Court in case of 2000(120) ELT 10 (SC), held that provisions of exemption Notification No. 118/75 as amended to provide that shells and hulls under question as in that case when they have been used or were intended for use in the factory of the manufacture, they were exempt, provided the Assistant Commissioner who exercises jurisdiction over the factory of their manufacture was satisfied. We find that this bench of the Tribunal in the case of Dassani Electra (P) Ltd [2000 (125) ELT 646 (Tribunal)] had held that when goods were undoubtedly being used up in the further manufacture of gensets as in that case in the appellant's own factory, benefit of Notification 118/75 was available. This decision of the Tribunal has been upheld by the Supreme Court in as much as an application filed by the Collector of Central Excise, Calcutta, condoning the delay, dismissed the civil appeal. In the case of Sunrise Structurals and Engineering Pvt. Ltd. [2000(120) ELT 482] the Tribunal has held that when the items under question are not complete machinery by themselves, they are eligible and entitled to the benefit of exemption under Notification 118/75. In 1999 (112) ELT 610 Tribunal had held that if goods had been captively consumed, benefit of Notification No. 118/75 should be extended, once it was held that goods were classifiable under tariff item 68. In this view as the matter is pending for long and in view of the catena of decisions under Notification 118/75 and the facts of this case, we have no hesitation to consider and apply the benefit and grant of the benefit of notification 118/75 as amended to the items under question. The demands of duty made are thus set aside.
c) Since the benefit of exemption Notification 118/75, is found to be eligible in the facts of this case, we do not consider the determination of the demand of duty as raised in the impugned order to be justified, the question of imposition of penalty is not called for. Therefore penalty under Rule 173Q is not upheld as arrived at by the learned Collector. We would therefore set aside the penalty.
8. In view of our findings, we would set aside the order impugned before us and the appeal stand disposed off in above terms.
(Pronounced on 23.11.01)