Customs, Excise and Gold Tribunal - Delhi
Voltamp Transformers Pvt. Ltd. vs Collector Of Central Excise on 12 November, 1986
Equivalent citations: 1987(12)ECR602(TRI.-DELHI)
ORDER S.K. Bhatnagar, Member (T)
1. This is a revision application to the Government of India against the order of the Central Board of Excise & Customs No. 5.(5 dated 18th August, 1980, which has been transferred to this Tribunal to be heard as an appeal.
2. The appellants have submitted that they are manufacturers of transformers and Oil Filter Machine falling under Tariff Item 68. They were holding necessary licence and classification list in respect of the products which had been duly approved. Accordingly, they were maintaining necessary accounts and clearing the said products on payment of central excise duty under Tariff Item 68 as per procedure. They were manufacturing these products since 1969 and on introduction to Tariff Item 68 on 1.3.1978, they obtained necessary licence.
3. To facilitate easy movement from site to site, their product 'Oil Filter Machine' was specially designed and equipped with wheel arrangement (with pneumatic tyres).
4. They first manufacture base frame structures from M.S. Garder or M.I. Section and Channel Section by various engineering processes. The Oil Filter Machine parts are permanently fixed on the base frame and the entire machine gets fitted permanently on the said base structure, which is further provided with wheels and towing arrangement.
5. The base structure with wheels, is a component part of the entire Oil Filter Machine and it will be wrong to describe this component part as Trailer in common parlance.
6. Since 1969 till the instant case, the officers of Central Excise department have been frequently visiting their factory and never described it as trailer even while assessing L-4 licence for Tariff Item 68 for this product and approving classification list under Tariff Item 68. The competent authorities classified the entire product under Tariff Item 68.
7. Nearly after 7 years, the Central Excise officers have suddenly taken a different stand that the wheeled base structure which is in fact a component part of the entire Oil Filter Machine, is a trailer falling under T.I. 34 and they were manufacturing and clearing the said trailer without payment of duty thereof.
8. It was their submission that the Collector has manifestly erred in law in holding that the Oil Filter Machine was trailer falling under T.I. 34. They had specifically cited Notification No. 97/60-CE as amended by Notification No. 13/68-CE and 27/78-CE which uses the following:
every motor vehicle commonly known as trailer" and this raises a question as to whether their product was commonly known as trailer. The learned Collector has evaded this material vital issue. They have cited the Hon'ble Supreme Court judgment appearing in AIR 1961 (SC) 1325 and 1973 Tax L.R. (1682) and Dunlop and Madras Rubber Co. case C.A. No. 1445 and 3766 (1972), but the same have not at all been taken into consideration by the Collector. The gist of this judgment is that:
being a word of every day use, it must be in its popular sense, meaning that sense which people conversant with the subject matter with which the statute is dealing, would attribute to it....
It was their submission that the learned Collector had not given any findings on this aspect.
9. The learned Collector has laid much stress on the explanation to the T.I. 34. However, this has also been mis-construed and mis-understood. The explanation applies to motor vehicles and not to product cannot be called "material holding equipment". It is a transformer Oil Filter Machine as known in common parlance.
10. Their product is not required to be registered under Motor Vehicles Act.
In this connection, they would like to invite attention to Trade Notices of Baroda Collectorate Nos. 53/67 (page 494 and 495 of the notes to Central Excise Tariff of India 1976) in which it has been mentioned "Only such trailers as confirm to the definition of a trailer as given in Motor Vehicles Act should be charged to central excise duty....;
And Baroda Trade Notice No. 53/67 dated 22.3.1967 in which it has been mentioned that "Platform trucks operated with the aid of battery are not required to be registered under the Motor Vehicles Act and are not adapted for use on public roads.
They are not therefore excisable....
11. It was also their contention that as it was not a case of clandestine removal and therefore Rule 9(2) has no application.
12. It was also their contention that the Collector was not competent to reopen the approved classification list and finally assessed R.T. 12 returns It was also their contention that the differential duties, if any, may be demanded only under Rule 10 for which statutory notices are to be issued in accordance with that rule.
13. It was also their contention that the Show Cause Notice is vague as the appropriate rate of duty and amount of duty was not shown It was their submission that the learned Member of the Board has also not appreciated the correct position of law and not given any reason for rejecting their appeal.
The Member, Central Board of Excise & Customs was pleased to set aside the entire penalty as he was convinced that it was not a case of mala fide intention to evade duty. However, the Member of the Board had upheld the re-classification and demanded duty retrospectively.
14. It was their submission that Rule 9(2) can be invoked only in case of clandestine removals and not otherwise. In this connection, they invited attention to the Supreme Court judgment in Elphinstone case and the case of Aggarwal Brothers Madras v. U.O.I. reported in 1973 Tax L.R. 2213 : 1974 Cen-Cus Oct. 1C wherein it was held that "Rule 9(2) cannot be invoked where there has been no earlier levy and the goods manufactured had been cleared with the knowledge of the excise authorities who had, however, not taken steps to levy the excise duty in the manner contemplated by Rule 9. Rule 10-A cannot be invoked if the department itself did not seek to demand under this Rule." Therefore, confiscation of goods and imposition of penalty was unjustified. It was their submission that in the Baroda Collectorate Trade Notice No. 242/75 as well as in Poona Collectorate Trade Notice No. 128/75, it has been mentioned that "Chassis of carry well mobile crane and Hide 600 front and loads equipment on which weight lifting earth moving and similar specified material handling equipment are mounted and which are also not of interchangeable nature for building Motor Vehicles, falling under Item 34 of the Central Excise Tariff are not chargeable to duty under Item 34 of the Central Excise Tariff."
15. It was their submission that in cases Star Chemicals (Bom) v. U.O.J. 1980 and Guest Keen Williams Ltd. v. U.O.I. 1980 ELT 6 (Bom) : 1980 Cen-Cus 417D, it was held that:
the instructions contained in trade notice regarding classification of a product would be binding on the Excise department and the department is estopped from contending to the contrary.
The reference to Motor Vehicles Act and nature of interchangability of a chassis for building Motor Vehicles, in above citations, clearly and conclusively establish that the 'trailer' for the purpose of Item 34 must be as contemplated in the Motor Vehicles Act and must be of interchangeable nature for building Motor Vehicles.
It is their contention that it is an undisputed fact that their so called trailers do not at all fulfil the above conditions.
16. Their product is not required to be registered under Motor Vehicles Act and their literature and pictures show that the same are also not of interchangeable nature for building Motor Vehicles.
17. It was their contention that the main function of the entire product 'Transformer Oil Filter Machine' is for the purpose of filtering oil. For this purpose, the machine has to be taken as such. The movement on road from one point to other is, therefore, purely occasional and incidental and to facilitate the same this machine is wheeled.
It was also their submission that their product is not required to be registered under the Motor Vehicles Act.
It was also their submission that their literature and picture would show that their chassis is not of an interchangeable nature and cannot be used for building motor vehicles.
It was their contention that Item 34 covers only motor vehicles i.e. all mechanically propelled vehicles other than tractors designed for use upon roads. In this respect, they will invite reference to the case of Bharat Earth Movers Ltd. v. U.O.I. 1971 ELT J 15 : 1978 Cen-Cus 280D.
It was also their contention that the term 'vehicle' has been denned as carriage or conveyance of any kind used on land or space in Oxford Concise Dictionary (1977 Edition).
It was their contention that their product is not a vehicle or conveyance and it is not for use upon roads. Its main function is indicated by its name 'transformer oil filter machine' i.e. its purpose is only filtering oil. They would like to emphasise that it is not designed for use on roads in the normal course and the wheels have been provided only to facilitate movement from one place to another.
They would like to draw attention to the judgment of the Delhi High Court in the Civil Suit P.N. 35/68(11) in respect of their contention.
It was their plea that just as tractor, loader etc. are not treated as conveyance, in the same way their machine can also not be treated as conveyance.
It was also their contention that their product is not defined in the Central Excise Tariff or Act and, therefore, it should be classified according to its popular meaning or the meaning attached to it by those dealing with it, i.e. to say, in its commercial sense 1980 ELT 383 SC : 1977 SC 59 : 1977 SC 132 etc. It was, therefore, their submission that the word 'trailer' being a word of everyday use must be constituted in its popular sense.
It was, their prayer that the order of classification and demand of duty may be set aside.
18. The learned departmental representative submitted that the order of the Board is correct in law as also in fact.
In this connection, he would like to draw attention to the language used in Tariff Item 34 which describes the goods covered by it as motor vehicles and tractors including trailers.
19. He would also like to draw attention to the Notification No. 31/66 dated 1.3.1966 in this connection, which exempts motor vehicles commonly known as trailers falling under this item. This shows that trailers have also been treated as a kind of motor vehicles or deemed to be motor vehicles by a legal fiction. If we examine the product of the appellant bearing this in mind, we will find that it has got a mounting arrangement on trailer with either rollers or pneumatic tyres. Not only that, as per appellant's own submissions in Appeal memorandum, the machine is specially designed and equipped with wheel arrangements. As a matter of fact, it has not only got a chassis but one fitted with axle wheels and propulsion system. It has all the accessories provided for the towing out by the tractors and, therefore, the requirements of mechanical propulsion are satisfied. This is apparent from the pamphlet produced by the appellant himself.
19A. It was his contention that it was immaterial from the Central Excise point of view whether the product was required to be registered under the Motor Vehicles Act or not. "It is also immaterial what was its main function till it could be shown that it satisfied the description of the goods covered by Tariff Item 34. In this connection, he would specifically draw attention to Explanation I and Explanation II of the Tariff Item 34. Explanation I refers to 'Motor vehicles, tractors including agricultural tractors and trailers shall include chassis; but shall not include a vehicle running upon fixed rails'.
Explanation II mentions that for the purpose of this Item where a motor vehicle is mounted, fitted or fixed with any weight lifting or other specialised material handling equipment then such equipment shall not be taken into account.
Therefore, in terms of Explanation I even a chassis is covered by this Tariff Item, further keeping Explanation II in mind even if an analogy is drawn, only the machine which has been fitted on the chassis can be excluded but the chassis itself has to be considered as covered by this item, and that is what the Board has precisely done. It has already ordered that there was no justification for demanding duty on the machine portion and the demand of duty may be confined to the trailer portion only.
The Board has, in fact, already set aside the penalty keeping in mind the circumstances of the case and only upheld the order of confiscation of goods and duty as the goods had been manufactured and removed without payment of duty.
20. It was his submission in this connection that declaration for the purpose of Tariff Item 68 was not sufficient and once the appellant had started manufacturing the item falling under Tariff Item 34, they should have declared and made known that fact to the department, obtained a licence for the item, kept proper accounts and cleared the goods only after payment of proper duty. Since they had not done so, the goods have been rightly confiscated and the duty has been rightly demanded.
21. It was also his contention that since it was a case attracting Rule 9(2), therefore, strictly speaking, no time bar applied. It was also his contention that the Trade Notice cannot be equated with law and in any case the Trade Notices of other Collectorates cited by the appellant are not strictly relevant for the purpose of the item in question or applicable to the facts of the case inasmuch as here we are concerned with a deeming provision or legal fiction and analogy could not be drawn.
22. It was also their submission that so far as question of common parlance and the description by which the goods are known in the trade, i.e. by the persons normally dealing with it, is concerned, he would draw attention to the appellant's own pamphlet which describes the mounting arrangement as "on trailer with either rollers or pneumatic tyres". This shows that in common parlance also, the portion in question is known as trailer and it was being offered for sale/purchased by those dealing with those goods as trailer.
23. In view of these facts and circumstances, it was his submission that the order of the Board was correct and may be upheld.
24. We observe that it is apparent from the appellant's own submissions in the written memorandum of appeal and personal hearing and also pamphlet produced by them that the item in question included a transformer oil filter machine mounted on trailer with either rollers or pneumatic tyres. We consider that the Board is correct in observing that it has all the accessories provided for being towed out by tractors including brakes and, therefore, requirement of mechanical propulsion is also satisfied. It is also apparent that the learned Departmental Representative is correct in pointing out that it has its own axle and wheels and towing arrangements. The appellant has himself used the following words 'Trailer on either rollers or pneumatic tyres'. In other words, this portion is correctly classifiable under the Tariff Item 34 by virtue of the language of the Tariff Item read with Explanation I and II.
In the normal course, therefore, the appellant should have obtained a licence for it under Tariff Item 34 and cleared the goods only on payment of duty at the proper rate.
25. We are, however, convinced on the basis of the submissions made by the appellant that they were under the impression that the entire machine was classifiable under Tariff Item 68 and, therefore, a L-4 licence taken for the purpose of Tariff Item 68 was significant and they have duly discharged their duty liability. From the facts and circumstances narrated by the appellants it is apparent that their belief was a bonafide belief and that they had no intention to deliberately evade payment of Central Excise duty or violate the central excise law in any manner. In fact, we note in this connection, that the Board has also conceded their bona fides and set aside the penalty.
26. Once, however, the Board had gone to this extent, it should have taken the whole matter to its logical conclusion and modified the order of confiscation suitably. In this connection, we note that once it is accepted by the department itself that while taking out the licence for Tariff Item 68 and submitting various papers, the appellant had correctly described their goods and the appellant had taken clearance of these goods openly and with full knowledge of the departmental officers then it cannot be considered as a case of clandestine removal and Rule 9(2) could not be applied. Therefore, the duty could be demanded only in respect of those trailers which could be shown as having been manufactured and cleared within one year prior to the date of issue of the show cause notice in terms of Rule 10 read with Rule 173J, The demand for the period beyond this normal period was time barred and is set aside as such.
27. In view of the facts and circumstances of the case as a whole, we consider that the violation has only been a technical violation. We, therefore, set aside the fine in lieu of confiscation and consider that a warning was sufficient and the appellant should be more careful in future. We accordingly uphold the classification, set aside the fine in lieu of confiscation and direct that the duty may be calculated keeping in mind the above observations, and the appellant shall be liable to pay only such amount of duty as is determined by the proper officer in accordance with the above order.
The appeal is thus partly allowed.