Customs, Excise and Gold Tribunal - Calcutta
M/S. Eastern Coils (P) Ltd. vs Cce, Kolkata-I on 3 January, 2001
Equivalent citations: 2001(75)ECC129, 2001(132)ELT369(TRI-KOLKATA)
ORDER
Smt.Archana Wadhwa
1. The issue required to be decided in both the appeals of the appellants is as regards the excisability of armature coils in the form and condition in which the same is used by the appellant captively in the repair of armature sent to them by the Railways.
2. The appellants are engaged in the manufacture of armature coils which they are supplying to the Railways as finished spares. There is no dispute regarding the armature coils which was in a finished condition and were being sold to the Railways as such, in respect of which duty was being paid by the appellants at the appropriate rates. The dispute relates only to the armature coils which are not being sold to the Railways as spares, but are being used for the repair of armatures. As per the appellants the armature coils so used by them in the repairing activity are in an incomplete and unfinished form and are not in a marketable condition and hence cannot be called as armature coils.
3. In Appeal No.E/R-428/99, the above dispute had earlier travelled up to the Tribunal. During the course of various hearings before the Tribunal at New Delhi, after considering the submissions made from both the sides and with the consent of both the parties, a direction was made to RDSO, Lucknow (Ministry of Railways) to examine the goods under dispute. The RDSO,s report dt.19.2.98 was submitted directly to the Tribunal. The Tribunal vide its final order no.E/977/98-B1 dt.14.7.98 remanded the matter to the original adjudicating authority for fresh decision in the light of the said RDSO's report. The order impugned in the present appeal has been passed in de novo proceedings.
4. In the other Appeal No.E/R-244/2000, the Tribunal following the earlier order of the Tribunal had also remanded the matter to the Commissioner for fresh decision after taking into consideration the RDSO's report. The present order impugned before us is also passed by the Commissioner in de novo proceedings.
5. Shri M.Chandrasekharan, ld.sr.adv. along with Shri B.Bhattacharjee, ld.adv. appearing for the appellants submitted that essentially the remand was made by the Tribunal to look into the RDSO's report and re-decide the matter. He submits that inspite of the clear report by RDSO, the Commissioner has ignored the same and has passed the impugned orders on filmsy grounds and pre-conceived notions. Drawing our attention to the report of the Research, Designs and Standard Organisations, Ministry of Railways, Govt. of India given on 19.2.98, he submits that it has been clearly opined that the samples of the armature coils received by the said organisation cannot be taken as finished spare coils. Further as regards the characteristics of coils before fitment into the armature, the report states that the coils must have dimentional accuracy and must withstand the prescribed test voltage before fitment into the armature. As such, submits the ld.sr.adv. that the report clearly show that the coils forming the subject matter of the cases did not acquire the essential characteristics of a finished armature coils as per specifications of the Railways.
6.Elaborating on his arguments, it has been explained to us that the process adopted by the appellant for repair of the armatures is different than the process of manufacture of armature coils. In fact the armature coils, in the process of repair, come into existence only after being fitted into the armatures and while undertaking repair activities. The same are not marketable goods in the condition in which they are being used in the appellants' factory. He submits that through different stages of re-winding process, the slot portion of the coils get moulded by means of slot liner, insulation impregnation, varnish and slot wedges during the processing inside the armature when they are baked at a temperature of about 130(SIC)C for a considerable time. They get moulded inside the armatures in that process and become an integral part of a repaired armature. Without at any stage, becoming full complete and finished armature coils which could be supplied as spare coils. He also clarifies that if, after the processing inside the repaired armature, these coils are sought to be removed therefrom, it cannot be done without considerable damage and deformity and can, thereafter, he sold only as scrap. Shri Chandrasekharan also submitted that it has been the appellants' case right from the beginning that the armature coils so used by them are not marketable goods. When officers of the department had visited their factory and inspected the process, statements of engineers and supervisory staff in the factory were also recorded. The said statements are to the effect that the goods in question in the form in which they were used could not be either called or supplied as armature coils as known in the trade and particularly confirming to these specifications prescribed by the Railways. Referring to the various decisions of the Hon'ble Supreme Court, it has been argued that marketability of the product is one of the essential conditions for excisability of the same and inspite of the appellants contending that the goods are not marketable, Revenue has not produced any evidence to show the marketability of the same.
Shri R.K.Chowdhury, ld.adv. along with Shri B.N.Pal, ld.adv. appearing on behalf of the Revenue and reiterated the reasoning of the authorities below.
After appreciating the submissions made from both the sides, we find that the appellants right from the date of visit of the officers have pleaded that the armature coils being used by them captively are not fully manufactured coils and they come into existence as coils along with the repairing of he armature itself and the same cannot be taken out of the repaired armature as coils and re-used. To appreciate the said contention of the appellants, the Tribunal in the original proceedings had directed the Research Design and Standard Organisation to test the samples. The test report of RDSO, for better appreciation is reproduced below:-
The above coils have been examined by this Organisation in light of directives issued by Hon'ble CEGAT vide their above order and following parawise report is submitted.
Terms of reference Comments of RDSO Para2(a)(i):
What are the characteristics of the coils before fitment into the armature which reference to dimensional accuracy and voltage control, vis-a-vis coils suppplied to the Railways and the difference interest?
The slot portion of armature coils for use in traction motors are mould twice under heart and pressure for certain duration. The finished coils which can be suplied as spares to Rly must have the following features apart from the inner layer insulation and micanite insulation.
(a) First cycle of compaction by way of insulation seasoning under heat and pressure for a fixed duration in a moulding die.
(b) Half layer of glass mica tape to be Provided on the slot protion after (a) above.
(c ) Second cycle of compaction for seasoning of insulation under heat and pressure in a die for another cycle for a fixed duration. With this process the coils attain the dimensional accuracy, compactness and certain amount of immunity to ingress of moisture and dust. Both the samples received have lost insulation with micanite sheet fluffy uneven and also there is no final lay of glass mica tape duly compacted. The coils, therefore, have not passed the stages (a), (b) and (c), as stated above, and hence cannot be taken as finished spare coils. Since the coils are not in a finished Stage, the testing for the desired voltage would be Pre-mature. Para 2(a)(ii): What are the characteristics of coils before fitment into the armature? The coils must hava dimensional accuracy and must
withstand the prescribed test voltages before fitment into the armatures.
Para2(a)(iii) : Whether it is possible to determine the charactistics of the coils after fitment process into the repaired armatures and functions of the armatures?
It is not possible to determine the characteristics of the coils after fitment into the armature of traction motors. After the fitment of coils, the coils are interconnected with sact other through Tig welding or soldering on the commutator of the armature. As such no individual test on a particular coil is possible. The armatures are a part of traction motor and cannot be fully tested on it own.
The complete traction motors are only subjected to detailed functional test to meet the desired paramators of the specification.
Para 3: Whether storage of armature coil for over 4 years has affected the armature coils in any manner or not?
The armature coils for tractions motor supplications are normally stored undo controlled temperature to humidity conditions and that too for a limited duration which should not in any case exceed 06 moths. Beyond this, the insulation of coils deteriorates and the insulation absorbs moilture roundering the coils unsuitable for test application. The coils received the above test memos are not recommended to be used any may be scrapped since the same have not been stored under controlled temperature and, are very old.
In view of the above, the coils sent under above Test memos are unfinished coils.As mentioned, these coils have not been molded twice and the final layer of glass fiber tape has not been provided in the slot portion of the coils. The coil insulation is fluffy and uneven which is not a desirable feature as per the technical requirements.
Therefore, these coils cannot be used for armature of traction motors as spare coils.
Submitted to Hon'ble CEGAT as directed.
A reading of the above test report shows that the finished coils, which can be supplied to the Railways must have inner layer insulation and micanite insulation. It should also have the features showing first cycle of compaction by way of insulation, seasoning under head and pressure for a fixed duration in a moulded die; half layer of half mica tip to be provided on the slot portion and second cycle of compaction for seasoning of insulation under heat and pressure in a die have another cycle for a fixed duration. It has been clarified by the report that the coils attained the dimensional accuracy, compactness and certain amount of immunity to ingress of moisture and temp with these processes only. As the said characteristics are not present in the samples received, RDSO have clearly opined that the said coils cannot be taken as finished spare coils.
9. Inasmuch as the Tribunal had remanded the case to the Commissioner for re-consideration based upon the said RDSO's report, the adjudicating authority was bound by the said report and inasmuch as the said report has opined the coils to be not complete finished coils, there was no other option for the Commissioner but to hold so in terms of the said test report. Accordingly, following the RDSO's report which is clear in its terms that the coils cannot be used for armature of traction motor as spare coils, we hold that the armature coils, being used by the appellants in the repair of armatures are not excisable goods.
10. We also take note of the fact that the appellants have strongly contended that the armature coils in the condition in which they are being used captively are not marketable goods and hence not excisable. They have claimed that inasmuch as the goods in question have no standard specification and having thinner dimension in the slot portion, which required extra insulation material for fitting in the slot of the armature, no customer will purchase the same since he cannot use it for re-winding purpose. The above contention of the appellant has been rejected by the Commissioner by observing that any person in the filed can use the coil by applying the same process as adopted by the said noticee i.e. by using extra insulating material wherever necessary. So the goods in question can be brought to the market and sold to customers in the ordinary course. However, it is seen that the Revenue has not produced any evidence of marketability of the goods in question, for which the onus lies upon them, as is the settled law. Inasmuch as the RDSO's report shows definite differences in respect of specifications between the armature coils fully manufactured by them and armature coils used for repairing purposes, the Revenue should have produced the evidence to counter the appellants' stand that the coils so used by them, being in half baked condition, cannot be marketed, instead of rejecting their claim by observing that this half baked coils can be baked by the customers after buying the same. The marketability has to be shown of the goods, on which the Revenue proposes to levy duty and not that the same would have become goods after certain process carried out by the customers. In view of our foregoing discussions, we hold that the armature coils being used captively by the appellants for repair of armatures are not leviable to duty. Accordingly, we set aside the impugned order and allow both the appeals with consequential relief to the appellants.
11. As the appeals have been allowed on merits, no views are being expressed on the point of limitation raised by the appellants.
(Pronounced)