Customs, Excise and Gold Tribunal - Bangalore
Bharat Electronics Ltd. vs Cce on 12 September, 1997
Equivalent citations: 1998(74)ECR44(TRI.-BANGALORE)
ORDER
V.P. Gulati, Vice-President
1. This appeal is against the order of the learned lower authority under which he has demanded duty from the appellants for the reason that an excisable product viz., Radar came into existence at site before its installation at the off/on shore platforms at ONGC. The learned lower authority while discussing the merits, in para 10 has held as under:
10. Coming to the merits of the case, it is admitted that M/s BEL have paid duty only on the items manufactured & cleared by them and not on those goods which are assembled at the site along with duty paid items. In other words M/s. BEL have used the items manufactured by themselves and other parts suitable for the project purchased from other sources, in the activity of assembly/installation, at on shore/off shore Radar Station, in accordance with the contract, signed between themselves and ONGC. The cost of all these items used in the project are liable for inclusion in the value for the purpose of payment of Central Excise duty. The contention that the said Radar System is an immovable property cannot be accepted, as prior to affixation to the base, the products on assembly emerge as identifiable "goods" under Central Excise Tariff Act, 1985. It is immaterial whether such goods emerge on or offshore platform or on shore. The Radar and Communication Equipment cannot become operational unless these are integrated by way of assembly. In other words, the system as such comes into being only after such assembly.
2. The learned Advocate for the appellants Shri B.V. Kumar has pleaded that the learned lower authority has not appreciated the facts in the proper perspective and has omitted to take note of the fact that the appellants had contracted to supply radars to ONGC for installation at off shore/on shore at different platforms. They had manufactured part of the equipment themselves and which were cleared under Gate Passes on payment of duty and part of the equipment was procured from outside and which had also been cleared as per law and the equipments which were bought out were directly supplied to site for assembly along with the parts which were manufactured and cleared by the appellants themselves. He has pleaded that the appellants has taken a plea that no radar as such was cleared from the factory and, therefore, the question of demand of duty from the appellants would not arise.
3. The learned Advocate has pleaded that the learned lower authority in para 10 of his order has merely observed that they have used the items manufactured by themselves and other parts suitable for the project purchased from other sources in the activity of assembly/installation at on/off shore radar stations in accordance with the contract and has stated that the cost of these items used in the project are liable for inclusion for excise duty purposes. He has pleaded, he has not taken note of the fact as to how the radar came into existence, whether it came into existence in situ or the item in an excisable form came into existence before it came to be fixed to immovable structures and has pleaded that the learned Collector has merely stated it is immaterial whether such goods emerged on or off shore platforms or on shore. He has pleaded that the learned lower authority has not examined the position with reference to the actual operations carried out to bring into existence the radar at site. He has pleaded the appellant can be called upon to pay duty only if from their factory the goods in a CKD condition answering to the description of the radar had been cleared. He has pleaded that only a portion of the goods have been so cleared and the question of duty for radar as a whole would not arise. He has pleaded, in any case before the duty on full value of the radar as was contracted for supply could be demanded, a finding would be required to be entered whether excisable goods emerged or whether the radar came into existence in situ as an immovable structure. He has pleaded that the learned lower authority has not addressed himself to this aspect.
4. Further he has pleaded that even if for the sake of argument that a radar as an excisable commodity did emerge at site, the question would arise whether the learned lower authority had any jurisdiction for deciding about the leviabil-ity of duty in respect of the radar which emerged at a point where the learned lower authority had no jurisdiction. He has pleaded that these goods which were contracted as a part of the project came into existence at stations beyond the jurisdiction of the Collector of Central Excise, Bangalore. He has pleaded that no doubt this point was not raised before the lower authority, since the jurisdiction goes to the root of the matter, this point can be raised being a legal point. He has in this connection filed a Miscellaneous application before us and has cited the judgment of the Tribunal in the case of Alcobex Metals (P) Ltd. v. CCE the Tribunal has taken note of the observations of the Hon'ble Supreme Court and has held as under:
That apart, in the Central Excises and Salt Act and Rules made thereunder we do not find any provision which precludes the appellants from raising any objection as to the jurisdiction, if the same is raised before the Adjudicating Authority at a subsequent stage or there is a delay in raising it. In the case of Commissioner of Sales Tax v. Sarjoo Prasad, supra while dealing with the case of assessment under the U.P. Sale Tax Act. (15 of 1948) the Hon'ble Supreme Court observed that "unless there is some provision either in the Act or in the Rules framed which precludes the assessee from raising any objection as to jurisdiction, if the same is not raised before the assessing authority, the assessee cannot be precluded from raising that objection at a later stage. An objection as to jurisdiction goes to the root of the case". In Dayalal v. State Transport Authority, supra the Orissa High Court while dealing with the case under Motor Vehicles Act, 1939 repelled the contention raised by the opposite party therein that where a party has submitted to the jurisdiction of an authority such conduct disentitles him from any relief from the hands of the Court observing that where there is absence of jurisdiction to decide a matter and jurisdiction is exercised, the dispute goes to the root of the matter and relied upon observations made by the Hon'ble Supreme Court in the case United Commercial Bank Ltd. v. Their Workmen to the effect that "consent cannot give a Court jurisdiction if a condition which goes to the root of the jurisdiction has not been performed or fulfilled. No appearance or consent can give a jurisdiction to a Court of limited jurisdiction which it does not possess.
5. He has, therefore, pleaded this question will be required to be decided with reference to the various notifications conferring jurisdiction on the Collector of Central Excise, Bangalore. Further, he has pleaded the radars which came into existence at the off shore platforms which were located in the Continental Shelf, the same can be taken to be coming within the purview of the jurisdiction of the Central Excise law only if these have been designated so under The Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976. In this connection he has referred us to Sections 5, 6 & 7 of the said Act and he has particularly referred us to Section 6, sub-para (5)(iv). He has pleaded, it is clear from this that unless a notification is issued to designate this area for the purpose of customs and other fiscal matters, these cannot be taken to have been covered by the Central Excise law. In this connection he has referred us to the notification issued in the context of the demand of duty in regard to the drilling rigs and component and spare parts and the clarification given thereon by the Ministry of Finance in consultation with the Ministry of Law. The said clarification is reproduced below for convenience of reference:
...the question whether drilling rigs and equipments, their spares, components, etc. would be levied to customs duty when such goods are brought at sites located in the continental shelf and EEZ but outside the territorial waters of India and outside the designated areas notified by the Ministry of External Affairs (MEA), has been examined by the Board in consultation with the Law Ministry and the MEA. Section 2 of the Customs Act, 1962, defines "India" to include only its territorial waters. A duty under Section 12 of the Customs Act, 1962 can be levied only if the goods are imported into India as envisaged in the said definition. We may be having sovereign rights over the Continental Shelf or the Exclusive Economic Zone (EEZ) as declared in the Maritime Zones Act, 1976, but the provisions of Customs law would not become applicable to such areas unless the legislations are specifically made applicable to these areas as provided in the Maritime Zones Act, 1976. It has, therefore, been observed by the Law Ministry that "bringing equipments from a foreign country for drilling oil at sites located within the (Exclusive Economic) Zone may not constitute 'import' within the meaning of the provisions of the Customs Act, 1962 until the area where the equipments so brought is declared as a 'designated area' under the Maritime Zones Act, 1976". It has been further opined that "if any area in the EEZ has not been so declared as a designated area, the provisions of the Customs Act, 1962 will not automatically apply to that area".
2. The effect of the aforesaid opinion of the Law Ministry is that if a drilling rig is brought from a foreign country to a place in the EEZ for exploring/exploitation of oil, it would not constitute import for the purposes of the Customs Act, 1962 and no duties can be levied on such rigs/equipments if such rigs operate in the Zone outside the designated areas and beyond the territorial waters of India. It would also follow therefrom that if any oil is generated at such drilling sites (non-designated and beyond the territorial waters) and such oil is brought to the Indian shores, while no excise duty will be leviable on the production of this oil, such oil would be liable to pay the customs duty as if it has been imported into India.
6. He has pleaded that going by this clarification, the question of demand of duty in respect of the radars which were installed at the off shore platforms would only arise in case the notification under proviso to Section 6 were issued by the Ministry of Finance. He has pleaded, as to his knowledge no such notification has been issued and therefore, the learned lower authority's order is null and void for various reasons including vice of jurisdiction, since there was no jurisdiction conferred on him in law.
7. Heard the learned JDR for the department. He has pleaded that the issue as it stands relates to the valuation of the radars and the show cause notice was issued accordingly, setting out in the annexures the value of the goods which had been supplied by the contractors and which were required to be added. He has pleaded, however, that there is no discussion in the order regarding direct supply made by them as well as to the factory of appellants which were made by the sub-contractors and how these came to be put together and at what point of time. By the show cause notice the impression given is that the whole equipment was supplied from the factory. There is nothing in the order to show that this was sent directly to the site.
8. At this stage the learned Advocate clarified that the bought out items to the tune of Rs. 6.25 Crores were directly sent from Visakhapatnam to the site and this is a fact which is borne out by the records.
9. We have considered the submissions of both the sides. We observe that in the context of the issues raised before us the order of the learned lower authority appears to be rather cryptic. The demand had been raised in respect of the radars and the value of the bought out items was sought to be included for the purpose of excise levy. In order to demand duty it has to be first shown that the radar as such came into existence in the hands of the appellants and after it is established, it has to be shown that the same came into existence in the hands of the appellants at their factory which fell within the jurisdiction of the Collector of Central Excise, Bangalore. There is no discussion in this regard in the learned lower authority's order. Rather para 10 goes to show that the radar came into existence at site. If that be so, then the learned Collector should have ensured that he has had jurisdiction to demand duty in respect of goods which came into existence at site and that the said site fell within his jurisdiction as notified by the Government of India.
10. No doubt the question of jurisdiction was not raised before the learned lower authority, but while demanding duty it was the duty of the adjudicating authority to consider whether his arm could reach out to the point where the goods came into existence. In our view, as rightly pointed out by the learned JDR also the learned lower authority's order has not discussed the issue in depth including the aspect of jurisdiction and the coming into existence of the radar i.e. the place where it came into existence and how the appellants would become liable to duty for that reasons and how the learned Collector will have jurisdiction to demand the duty. All these issues will have to be addressed before the demand can be made. The point regarding the designated areas raised above by the learned Advocate in regard to the off shore platforms will also have to be gone into before the duty can be demanded in respect of the radars installed there.
11. We, therefore, in view of the above hold that the learned lower authority's order is not proper and set aside the same and remand the matter for de novo consideration and decision in the light of the above after affording the appellants an opportunity of hearing.
12. The deposit already made shall abide by the final outcome of the proceedings.
(Pronounced and dictated in the open Court)