Customs, Excise and Gold Tribunal - Delhi
Rallis India Ltd. vs Collector Of Central Excise on 11 October, 1990
Equivalent citations: 1993(67)ELT144(TRI-DEL)
ORDER I.J. Rao, Member (T)
1. After hearing both sides, we allowed the application for condonation (No. 292/90-A) and condoned the delay in filing the supplementary appeal No. 3282/90-A, without opposition from the Department.
2. These two appeals emanate from a common order and were, therefore, heard together and are being disposed of by this common order. The question involved in these appeals is whether certain parts mentioned below are components or accessories of the IC Engines manufactured by the appellants and supplied to a manufacturer of sprayers. The Department held that the value of these parts, being components, should be included in the assessable value of the IC Engines and raised a demand for the period 29-9-1974 to 30-6-1976. The other part of the proceedings is that the appellants asked for a refund of the duty paid by them during 1-12-1976 to 31-7-1978 on the ground, that the value of the concerned parts was not includible in the value of the I.C. engines.
3. The four parts in question are as follows :
Throttle Lever, Bowden Cable, Fuel Tank and Fan Unit.
4. Shri Haksar, the Ld. Advocate for the appellants submitted that in the show cause notice issued on 5-7-1976 the Department invoked Rule 10A and argued that in the light of the Supreme Court's judgment in N.B. Sanjana v. E.S. & W. Mills [1971 AIR 2039 SC. cases of short-levy are not covered by Rule 10-A. He pointed out that the show cause notice itself alleged short-levy and submitted that the limitation applicable to the demand if upheld on merits would be one year under Rule 10A read with Rule 173J Central Excise Rules. In respect of the refund claim, the Ld. Advocate argued that the Assistant Collector rejected the refund only on merits whereas the Collector (Appeals) invoked the question of limitation also, quite wrongly. The Ld. Advocate pointed out that the appellants were paying the duty under protest and referred to a letter dated 25-11-1976 and argued that this letter amounted to a protest. In this context, Shri Haksar relied on a judgment of the Supreme Court in India Cement Ltd. v. Collector of Central Excise [1989 (41) E.L.T. 357 (SC)]. On merits the Ld. Advocate argued that four items in question are brought out items and were not fixed to the engines. He referred to the expert opinion relied on by the appellants and other opinions relied by the Department and submitted that though the Department obtained the expert opinion of the Principal of Dr. S & S.S. Gandhy College of Engineering, Surat, they did not use the same as the opinion went against them. Shri Prabhat Kumar, the Ld. JDR argued that the four parts are not only component parts of the engine but are absolutely essential for the engine to function in a manner required. He argued that the blowers were essential for spraying of insecticides; that the fan unit supplies air to the cylinders for cooling ; that as a engine cannot function without fuel, the fuel tank is an essential component and that Throttle Lever and Bowden Cable are used to regulate the speed of the engine and are therefore, essential parts. He also supported the application of Rule 10A arguing that what was involved was non-levy and the circumstances were not covered by Rule 10A.
5. Shri Haksar in his rejoinder submitted that the Department confused the sprayer machine with the IC Engine. He argued that these four parts were essential for the sprayer machine but not for the IC Machine.
6. We have considered the submissions of both sides. We note that the Collector (Appeals) who passed the impugned order, went into the facts in detail and also examined the expert opinion. In our view, the Collector (Appeals) gave careful consideration to the appellants' pleas (which were also advanced before us) while recording as follows :
"I have carefully considered the various arguments made by the appellants. In the case of Deputy Commissioner of Agricultural Income-Tax and Sales Tax (Law) v. U.O.I. [1976 STC 198 (Kerala)], the High Court considered the meaning of 'parts' and 'accessories'. It observed that a thing is a part of the other only if the other is incomplete without it. A thing is an accessory of the other, only if the thing is not essential for the other, but only adds to its convenience or effectiveness. In the background of this, I would not hesitate to conclude that the above four parts are essential and without this, I.C. Engines of the type in question may not operate. As I see it, the engines were meant to be supplied spray manufacturers, who assembled the said engines alongwith the blowers for spraying of insecticides in the farms and these engines were two-stroke engines. In the expert opinion dated 27/28-7-1976, Principal, Sardar Valabh-bhai Regional College of Engineering and Technology, Surat (Gujarat) has concluded that the Fan-Unit does supply air to the cylinder (of the engine) for cooling. Therefore, it cannot be said that the fan unit is merely an 'accessory' and not an 'Integrated Part'. Similarly, could any I.C. Engine operate without fuel, which has necessarily to be stored in a fuel tank. Therefore, it would not be wrong to held that likewise Fuel-Tank is also an essential part of an engine. As regards the other two parts, viz., Throttle Lever and Bowden Cable, it is observed that these are used to regulate the speed of the engines. In this regard, I may say that the expert opinion has been rather perfunctory and to see the least, solicited by putting a leading question by the appellants in their letter, dated 22-7-1976 to the Principal of the aforementioned College."
7. In our opinion, Fan Unit is a component part because inter alia it cools the engine. Similarly, the Throttle Lever and Bowden Cable are also essential parts because they control the speed of the engine. We, however, hold that the fuel tank cannot be considered as a part of the engine. This is because while an engine cannot work without fuel, a fuel tank is not a part of the engine but would correctly be a part of the sprayer machine. As argued by Shri Haksar fuel can be conveyed to the engine even without a fuel tank. We, therefore, hold that the fuel tank is not a component part of the engine.
8. The remaining questions relating to the limitation for the demand as well as for the refund claim, the show cause notice itself having called the demand a short-levy and as Rule 10 covers cases of mis-statement regarding value it is Rule 10 that should be applicable and not Rule 10A. We find accordingly.
9. In so far as the refund is concerned, the appellants stated that they sent a protest letter on 25-11-1976. The Department would verify the receipt of the protest and if necessary, they should give an opportunity to the appellants to prove that the protest letter was filed. As at the relevant time there was no rule prescribing the method of protest, this letter, if received by the Department would constitute a protest. The refund claim should be dealt with accordingly.
10. Therefore, we dismiss the appeal on merits in so far as parts other than fuel tank are concerned. We further direct that the demand should be re-calculated under Rule 10 CE Rules. We also direct that the refund if due grant after verifying the receipt of the letter dated 25-11-1976 which we hold amounts to a protest.
11. Both the appeals are disposed of accordingly.