Custom, Excise & Service Tax Tribunal
Yes vs Represented By : Shri P.M. Dave, ... on 3 March, 2011
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/370 to 372 of 2007 Arising out of : OIO No. 01/Commissioner/2007 dated 11.01.2007 Passed by : Commissioner of Central Excise Ahmedabad For approval and signature : Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Appellant (s) : M/s. Neptune Equipment Pvt. Limited Shri M.S. Shah Shri H.C. Shah Represented by : Shri P.M. Dave, Advocate Respondent (s) : Commissioner of Central Excise Ahmedabad
Represented by : Shri J.S. Negi, SDR CORAM :
Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical) Date of Hearing : 03.03.2011 Date of Decision : ________ ORDER No. _____________ /WZB/AHD/2011 Per : Mrs. Archana Wadhwa;
The impugned order stands passed by the Commissioner in denovo proceedings when the matter was remanded by the Tribunal to decide the issue afresh in the light of the decision of the Andhra Pradesh High Court in the case of XI Telecom Limited vs. Supdt. of Central Excise, Hyderabad 1999(105) ELT 263 (AP)
2. As per facts on record, the appellants are engaged in the manufacture of automobile service equipments, falling under Chapter 84 & 90 of the first schedule of Central Excise Tariff Act, 1985. The dispute in the present appeal relates to the Computerized Wheel Aligner, sold by the appellants to their customers. Whereas, the appellants stand is that they are merely purchasing various components of the said wheel aligner from different manufacturers and selling the same to their customers under one invoice, without bringing any activities on the same, the Revenue has concluded that such sale of various parts of the Computerized Wheel Aligner under one invoice would amount to manufacture of Computerized Wheel Aligner which are classifiable under Chapter heading 90.31 of the first schedule of Central Excise Tariff Act, 1985. Accordingly, duty of Rs. 1,07,89,301/- stands confirmed against the appellant for the period 1999-2001, by invoking the extended period. Penalty of equivalent amount sands imposed on M/s. Neptune Equipment Pvt. Limited under section 11AC of the Central Excise Act,1944 rad with Rule 25 of Central Excise Rules, 2002. Penalty of Rs. 10 Lakhs each stands imposed on Shri M.S. Shah, Director and Shri H.C. Shah, authorized signatory, in terms of Rule 209A of Central Excise Rules, 2002.
3. As per the undisputed facts on record, the appellants are buying following equipments from the market and temporarily storing in their godown situated away from their factory premises :-
(a) Personal Computer (PC) loaded with appropriate software with Dot-matrix Printer.
(b) Two turn tables.
(c) Two sensor holders
(d) Two sensors with cable
(e) Trolley to keep the computer.
4. The above goods are dispatched from the godown itself to the various workshops under the cover of a single invoice. Sometimes, these goods are directly dispatched to the customers from the vendors itself.
5. During the course of investigation, the Revenue recorded statements of Shri Hemant. C. Shah as also Shri Sanjay Pravin Kumar Ramali, Engineer and Shri M.S. Shah, Director of the unit. They all deposed that on receipt of order for Computerized Wheel Aligner, ML 3000CC, their engineer visits the site with a pit diagram for inspection; relevant parts are dispatched from their godown; a software is loaded in the CPU at site itself; that the trolleys are got manufactured from other manufacturing unit, as per their specification and the ready to be used as wheel aligner at site. As a result of above investigation, revenue entertained a view that appellants are manufacturing the wheel aligner and were clearing the same without payment of duty. Accordingly, proceedings were initiated by issuance of show cause notice dated 24.03.2004 for confirmation of demand and imposition of penalties, resulting in passing of present impugned order.
6. Learned advocate Shri P.M. Dave appearing for the appellants draws our attention to the undisputed facts that they are purchasing the five items in question and bringing to their godown and from where the same are being directly dispatched to the customers site without doing any process in respect of any of the item. He submits that a customs based software is loaded in the computer at the site. By drawing our attention to the various items as projected by way of diagram, in the paper books, he demonstrates the use of these five different items. He has also drawn our attention to a certificate given by the appellants engineer. Drawing our attention to the fact as to how the said five items are used at the customers site, he submits that no manufacturing is takes place at their premises. He has also relied upon various decisions of the Tribunal as also various Courts in support of his plea that no manufacturing has taken place.
7. On the other hand, learned DR appearing for the Revenue reiterates the findings of the Commissioner and submits that inasmuch as the appellant were selling the product as Computerized Wheel Aligner, in their invoices it has to be held that the goods were manufactured by the appellants, classifiable under Chapter 90 and liable to duty. He also draws our attention to the fact that the appellants were earlier importing the Computerized Wheel Aligner and were clearing the same on payment of customs duty.
8. We have considered the submissions from both the sides. For better appreciation we would like to reproduce photographs of five different items and method of their use at the customers premises, as placed before us.
Photographs were photostated in the order in green sheet At this stage, we take note of certificate given by Chartered Engineer for better under standing of the activities undertaken by the appellants, we reproduce the said certificate :-
TO WHOMSOEVER IT MAY CONCERN This is to certify that on request of M/s. Neptune Equipment Pvt. Limited, 407 GIDC Estate, Odhav, Ahmedabad, the undersigned had visited one of the workshops at Ahmedabad and inspected the Wheel Alignment of vehicle, on 19th of Nov. 2002. My observations are as under :-
The Wheel Alignment Computer consisting of the following.
1) Personal Computer (PC) loaded with appropriate software with a Dot Matrix Printer
2) Turn Table
3) Sensor Holders
4) Sensor with Cable
5) Trolley to keep the computer The method of use: The computer kept on trolley & stands in one corner of the workshop. When a vehicle comes for wheel alignment check, the front two wheels or the rear two wheels of the vehicle as the case may be, are parked on the turn table with the help of jack so as to provide easy movement of the wheels. The Sensor Holders are attached to both the front wheels or rear wheels as the case may be, to enable the two sensors to be mounted. Both the sensors are then connected to the computer through cables.
The data regarding the wheel angles of the particular model of the car are already fed into the computer. The measurement of the wheels taken at the workshop with the help of the sensor are fed to the computer through the cable attached to computer. The data so fed is matched with the specifications already in the computer. The angle of the wheels to be aligned is then displays by the computer on the monitor in graphics format. The mechanic then adjust the wheels accordingly using spanners and other tools which are already existing in the workshop. This is a complete mechanical hob in which the wheel alignment computer does not do any function. After this job is done allt he components i.e. Sensors, Sensor Holders, Turn Tables etc. are removed from the vehicle and are put back into the corner of the workshop. Then the car is taken out from the workshop.
All the items are kept loosely and individually. All the items have independent roles to play. No processing is also undertaken. On need basis, the sensor is mounted on the wheels to capture the data & that data is sent to computer through the cables connected at that moment.
Most of these items are also used for other purposes such as computer for office work, Trolley to keep other items like PUC, m /c. etc. and Trun Table to par and move the vehicle.
The entire work for the wheel alignment does not require keeping the components assembled on site (at workshop). All the components after alignment kept separately for the purposes of their use for other than alignment purpose.
The detailed drawings showing how these items are used in the workshop are attached.
In my opinion, each of the items in question is used cumulatively, without undergoing any manufacturing process whatsoever for rendering service at the workshop.
The certificate is issued as per standard engineering practice and without any prejudice.
Sd/-x.x.x 19.11.2002 (MAHENDRA V. MEHTA) Chartered Engineer.
9. The above facts as detailed in the certificate are not being disputed by the Revenue. As such, the only question which arises for our consideration is as to whether buying of five different items, dispatching the same to the customers premises under the cover of one invoice and the use of the same in the customers premises for checking the alignment of a vehicle would amount to manufacturing activities on the part of the appellant or not. As is seen from the certificate, all the five items required for wheel aligner are brought together in the customers premises only for checking the vehicle. As soon as the job is done, all the components i.e. sensor, sensor holder, turn table etc. are removed from the vehicle and put back into the corner of the workshop. As per the said certificate, the items are kept loosely and individually, inasmuch as they have independent roles to play. They come together only at the time of use at the customers workshop.
10. The Commissioner has framed the following issues :-
(i) Whether there is any product known in the market as Computerized Wheel Aligner.
(ii) Whether the noticee is undertaking any process which amounts to manufacture under the provisions of Section 2(f) of the Central Excise Act, 1944;
(iii) Whether the equipment, Computerized Wheel Aligner is chargeable to duty;
(iv) Whether the extended period is invokable in the facts and circumstances of the case;
(v) Whether the noticees are liable for penal action; and
(vi) Whether interest in terms of Section 11AB of the Central Excise Act, 1944 is recoverable from the said assessee.
11. By dealing with the issues one by one, he has answered the first issue by holding that Computerized Wheel Aligner is an independent machine known in the market as such and has held that the same is an excisable commodity different from its part and is chargeable to excise. However, we are of the view that the issue No. 2 is required to be addressed first, i.e. whether the appellant has undertaken any manufacturing process or not. If the answer to the said issue is in the negative, the all other issues become infructuous. If no activity of manufacture, as defined in the provisions of Section 2 (f) of Central Excise Act, is being undertaken by the appellant, no duty liability would get fastened upon them.
12. While discussing the second issue, Commissioner has accepted the appellants stand that they are purchasing all the five parts either from the indigenous market or by import. On receipt of an order for Computerized Wheel Aligner, their engineer visits the site and pit is made according to the diagram. Admittedly, the said pit has to be made properly as otherwise the equipment would not work. Thereafter, parts of the computerized wheel aligner are sent from their godown and are connected at the site of the party. Finally the wheel alignment software is loaded in the computer and the machine works as Wheel Aligner. Accordingly, he has concluded that the said equipments delivered to the buyers at the site, is entirely different from its parts and is a distinct item having different characteristics and use. All job for delivery of the goods ordered known as Computerized Wheel Aligner were completed by the noticee unit and known as such. Therefore, the contention of the noticee that no process was carried out by them is virtually incorrect and not tenable as they were responsible for warranty and after sale service.
13. We do not find any merits any contention of the Revenue. There is no dispute about the fact that the bought out items were being delivered by the appellants (may be under the cover of one invoices) to their customers. The appellants were also helping the customers in digging the pit and connecting all the parts at site for the wheel aligner. It is also on record in the shape of a Chartered Engineer certificate that such connections are temporary and after the job is done, they are taken out and kept individually in the corner of the workshop. The same are again reconnected at the time of the second job. Merely because the appellants were responsible for warranty and after sale services, by itself cannot be held to be a reason for holding the activities of the appellants as amounting to manufacture.
14. We find that the Tribunal had earlier remanded the matter to Commissioner for denovo adjudication in the light of the law declared by the Andhra Pradesh High Court in the case of XI Telecom Limited, the Hon'ble High Court has taken note of the test laid down by the Hon'ble Supreme Court in the all time famous case of DCM and has observed that every change does not necessarily fall within the expression manufacture unless it is shown that the process has brought into existent any new product having a distinct identity in the commercial world. As such the Hon'ble Court in Para 12 observed as under :-
12. What emerges from the above is excise duty is? leviable on goods manufactured. The expression manufacture means bringing into existence a new substance and does not mean merely to produce some change in a substance, however minor in consequence the change may be and as a result of treatment, labour and manipulation there should be transformation in the raw material and as a result of treatment, labour and manipulation a new and different article must emerge having a distinct name, character or use. It is not enough if there is change, the change should result in bringing into existence a new and definite article having a distinctive name, character or use and the said article must be marketable and it should be known to the market as such. In the absence of any one of the ingredients referred to above, the provisions of the Act are not attracted and no excise duty is leviable. Even if the goods so produced were excisable goods mentioned in the schedule, they cannot be subjected to duty unless they are marketed or capable of being marketed. The marketability is one of the principle test in determining the liability to excise duty. In addition the product which is brought into existence must have a distinct identity in the commercial world.
By applying the above test to the facts of the case present before the Hon'ble High Court, it was seen that the appellants were putting the duty paid manufactured items in one kit and selling the same to the telecom department. Some of the goods in the cable jointing kit was being manufactured by the appellants himself and some of the goods were being procured from the market. The kit was commercially known as Cable Jointing Kit. By applying the test as laid down by the Hon'ble Supreme Court to the facts of that case, the Hon'ble High Court observed as under in Para 13 :-
13. Let us apply the above tests to the facts of the? present case. As pointed out in the earlier paragraph, the identity of the items placed in the kit is not changed. They are known in the market as such. There is no transformation in the articles which are placed in the kit. They are marketable as such. Further, no process is also involved except that all the articles are put together in one box. It is true that by placing all these articles in one kit the kit has a distinct name known as `cable jointing kit. However, there is no change in character and use of the articles placed in the kit. In other words, except the test that the articles which are placed in the kit has a distinct name, the other tests have not been satisfied. Therefore, placing different articles in the kit does not amount to manufacture. If once the activity of placing the articles in the kit does not amount to manufacture, the provisions of the Act are not applicable as the levy of excise duty is on the production and manufacture of goods.
As is seen from the above, that placing of all the items in one kit, which has a distinct name as Cable Jointing Kit, was held to be a non-manufacturing activity on the part of appellant. The ratio of the above decision can be squarely applied to the facts of the instant case. In fact, the present case stands on a better footing inasmuch as the appellants are not doing anything to the various items purchased by them, which are being cleared as such by them to their customers. Except that all the items are being cleared under one name as Computerized Wheel Aligner, in the commercial invoice being raised by them. As such, we are of the view that buying and selling of various parts of wheel aligner, without undertaking any process there on, would not amount to the appellants undertaking any manufacturing activities so as to invite duty confirmation.
15. At this stage, we take note of the majority decision of the Tribunal in the case of India Medtronics Pvt. Limited vs. CCE, Vadodara 2006 (199) ELT 347 (Tri. Mum.). Originally there was difference of opinion between the two member of the bench as regards the issue as to whether the assembly of various imported goods into a kit used by the Doctors to connect the heart lung machine with oxy-generator and to the patient body during open heart surgery would amount to manufacturing or not. In the said case, before the Tribunal, the manufacturing flow chart of the custom pack showed the various stages of processes undertaken by the appellant like tube cutting, taping, capping, joint, tie-band, laying sub-assembly, sash wrap, final wrap, pack label, heat seal, infection sterilization, packing PUC release etc.0 The majority judgment in the said case held that all the items assembled in a pack already were already in existence and arranging them in a particular order and thus putting them together as a set for ready use, then the items retained their individual entity, cannot be held to be a result of manufacture. As such, by making a distinction between manufacturing and packing, it was held that activity undertaken by the appellant was one of packing and not manufacturing. By taking note of various decisions including the Hon'ble Supreme Court judgment in the case of Narne Tulaman Manufacturers Pvt. Limited 1988 (38)ELT 566 (SC), it was held that no new and commercially different commodity, having different name character and use emerges, so as to hold the activity as amounting to manufacture and liable to duty.
16. In the above referred case, there were some of the processes like cutting, tubing with connector, tubing with blood filters, oxygen filters and packing the same in a ready to use condition pack were involved. In spite of that the majority judgment held that no manufacturing is involved. In the present case, we note that no process is being undertaken by the appellant either at their godown or at their factory. It is a case of simpliciter providing of all the components of the wheel aligner to the workshop and to assist the workshop people to use the same by digging a pit and connecting the various items in their premises. As such, we are of the view that as no manufacturing activities takes place at the appellants end, the confirmation of demand of duty on them is not the legal. The same is accordingly, set aside along with setting aside of confirmation of interest and penalty imposed upon them.
17. At this stage, we may also take note of another contention raised by the appellant on the ground that duty liability has to be addressed in the condition at which the goods were removed from the factory. For the above proposition, reference has been made to various decisions. Particularly in the case of Punjab Breweries Limited, Ludhiana vs. CCE Chandigarh 1985 (22) ELT 513 (Tri.) and in the case of Collector of Central Excise, Indore vs. Parmali Wallace Limited -- 1985 (21) ELT 231 (Tri.). As such it stands contended that admittedly the goods which left in their factory were bought out items without any further process done upon the same, they cannot be held to be Computerized Wheel Aligner. We note that the said fact also stands admitted by the adjudicating authority. No activity is admittedly done by the appellants in their factory. The goods were also not packed in one pack unlike the two cases referred supra. The goods are only cleared under one invoice. Further, the goods are not even brought to the factory and are cleared from the godown itself or sometimes directly from the vendors premises. As such, to hold that the appellant is a manufacturer of wheel aligner, in respect of the various bought out goods cleared in one invoice, would not be in accordance with the law laid down by various decisions.
18. Though, we have held in favour of the appellants on merits, we also find force in the submissions on the point of limitation. Admittedly the demand stands confirmed by invoking the longer period of limitation. The appellants were clearing the goods under the cover of their commercial invoices and also reflecting the same in their sales tax returns. If that be so, it cannot be held that the activities being undertaken by the appellants were with any malafide on their parts. Merely because the appellant did not inform the department, by itself cannot be made a ground to attribute them with any malafide or deliberate suppression with an intent to avoid payment of duty. When the said trading activities being reflected in the statutory records and in the returns filed with the sales tax authorities, it cannot be held that there was any intent to evade payment of duty, on the part of appellants. We accordingly hold that the demand is also hit by bar of limitation.
19. In view of the above, We set aside the impugned order and allow the appeals with consequential relief to the appellants.
(Pronounced in the Court on _______________________)
(B.S.V. Murthy) (Archana Wadhwa)
Member (Technical) Member (Judicial)
.KL
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