Customs, Excise and Gold Tribunal - Delhi
Gurukrupa Trading Co. Ltd. vs Collr. Of Central Excise on 15 November, 1996
Equivalent citations: 1997(91)ELT463(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. This is an appeal filed by M/s. Gurukrupa Trading Co. (hereinafter referred to as 'M/s. Guru'), being aggrieved with the Order-in-Original dated 24-10-1987 passed by the Collector of Central Excise, Vadodara.
2. The matter relates to the classification and valuation of the goods -Domestic Electric Grinding Mills (Grinders), sold under the brand name "Nav-jivan" during the period 1-4-1983 to 31-3-1984. The goods had been removed without payment to Central Excise duty. On surprise visit by the Central Excise Officers to the premises of M/s. Guru on 2-8-1984, it was found that they were producing the Domestic Electrical Appliances (Grinders), classifiable under Tariff Item 33C of the erstwhile Central Excise Tariff. They were producing these goods from 1-1-1983 but had not obtained any Central Excise Licence. They had also not filed any declaration as required under Rule 174A of the Central Excise Rules, 1944 (hereinafter referred to as the 'Rules'). They had not maintained any statutory accounts of production and removal of the goods manufactured by them and had not followed any Central Excise Procedure and had not paid any central excise duty on the goods manufactured and removed. In the show cause notice dated 19-2-1985, M/s. Guru were called upon to show cause to the Collector of Central Excise, Baroda as to :-
(1) Why the duty of excise at the appropriate leviable rate should not be recovered from them on the goods falling under Tariff Item 33C totally valued at Rs. 4,43,680/- (11,93,680 - 7,50,000) illicitly manufactured and removed by them during the financial year 1983-84 as mentioned in para 9 of the notice under the proviso to Sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944, read with Rule 9(2) of Central Excise Rules, 1944.
(2) Why penalty should not be imposed on them under Sub-rule (1) of Rule 173Q of the Central Excise Rules, 1944.
The Collector of Central Excise, Vadodara in her adjudication Order dated 24-10-1987 observed that the Electric Motor was kept inside the grinder and the entire unit was one whole article. The grinder had a motor housed in the same cabinet, with a V. Belt System. It was further observed that there was a provision to keep the electric motor inside the grinder. She held that the grinder (domestic, electric grinding mill) manufactured by M/s. Guru was classifiable under Tariff Item 33C of the Tariff. The issue of limitation was discussed in para 15 of the order. The demand of central excise duty amounting to Rs. 69,879.60 was confirmed. A penalty of Rs. 2 lakhs was imposed on M/s. Guru.
3. The matter was heard on 17-10-1996 when Shri Mayur Shroff, Advocate appeared for the appellants. Shri M. Jayaraman, JDR represented the respondents/Revenue.
4. Shri Mayur Shroff, Advocate stated that the grinders manufactured by the appellants were not classifiable under Tariff Item 33C of the Tariff and that in any case those grinders which were removed without motors will be classifiable only under Tariff Item 68 of the Tariff. They did not have full manufacturing facilities and the grinders in fact were manufactured by M/s. Navjivan Udyog Mandir Pvt. Ltd. They were not a factory within the provisions of the Factories Act and thus, they had no duty liability under Tariff Item 68 of the Tariff. For the grinders with motors if it is established that they were required to pay central excise duty under Tariff Item 33C of the Tariff, then they would be eligible for small scale exemption. It was also pleaded that the show cause notice was also hit by time bar.
5. In reply, Shri M. Jayaraman, JDR submitted that the admitted position was that M/s. Guru were the manufacturers and were actually manufacturing the grinders. Some of the items were manufactured directly by them while for others, they were getting the goods assembled from outside. In this connection, the ld. JDR referred to the statement of the Partner of the Firm and para 14 of the Order-in-Original. The goods under consideration with or without motors were Domestic Electrical Appliances - Grinders. On limitation, it was his submission that the appellants had filed no declaration, had obtained no licence and did not file relevant information with the Department. There was no assessment. There were specific allegations of suppression in the show cause notice and the matter had been dealt with by the adjudicating authority in her Order-in-Original. He pleaded for the rejection of the appeal.
6. We have carefully considered the matter. The goods manufactured by M/s. Guru were Domestic Electrical Grinders in which either the electric motor was fitted in the grinder cabinet or the grinder cabinet with mechanism for fitting and operating the electric motor was supplied to the customers. In both cases, the grinder was an electrical appliance and was meant for working with electricity. It is not necessary for classification under Tariff Item 33C of the Tariff that the electric motor should invariably be supplied with the appliances if the appliances in common parlance can be described as an electrical appliance. The classification will not change on the ground that the appliance under consideration was supplied without motor. Tariff Item No. 33C during the relevant time reads as under :-
Tariff Item 33C. - Domestic electrical appliances, not elsewhere specified.
Explanation I. : "Domestic electrical appliances" means electrical appliances normally used in the household and similar appliances used in hotels, restaurants, hostels, officers, educational institutions, hospitals, train kitchens, aircraft or ships' pantries, canteens, tailoring establishments, laundry shops and hair dressing saloons.
Explanation II. : Interchangeable parts or auxiliary devices accompanying an appliance to make it suitable for various purposes shall be assessed to duty alongwith the appliances.
Under Notification No. 33/69-C.E., dated 1-3-1969 (as amended) grinders, among others were one of the items for which no exemption from central excise duty was available.
7. The word 'appliance' means, according to the Random House Dictionary, (1) an instrument, an apparatus or device for a particular purpose or use; (2) a piece of equipment usually operated electrically specially for use in homes or for performance of domestic chores, as a refrigerator, washing machine, toaster, etc. In Webster, 'appliance' is defined "as an act of applying, or machine for specified purpose and instrument or device designed for a particular use in household or office, machine, etc.". The Gujarat High Court in the case of Star Radio Electric Co. v. Commissioner of Sales Tax (1971) 27 STC 367 (Gujarat) had observed that an appliance means a mechanical thing, an apparatus or device; an instrumental means, aid, or appurtenance; a thing applied or used as a means to an end, either independently or subordinately". In order to name an article as 'electrical goods', two things are necessary :-
(1) Its use cannot be had without electrical energy.
(2) By its very nature it should answer the description of electric goods.
Electric motor is a machine that changes electric energy into mechanical power to do work. They are used to operate the various machines. Alternate current motors are commonly used in household appliances.
8. On visit by the Central Excise Officers to the premises of the appellants, it was found that the grinder duly fitted with electric motors was lying in their premises. In his statement dated 2-8-1984 recorded under Section 14 of the Act, Shri Vijay Bhai Chunnilal Panchal, Partner had stated that the unit was engaged in the manufacture of domestic grinding mill; various assemblies including electric motors were supplied by them and lobour charges at Rs. 310/- per set of grinding mill, were paid by them to M/s. Navjivan Udyog Mandir Pvt. Ltd.; the price of their product inclusive of electric motors ranged from Rs. 3,650/- to Rs. 4,000/-. In addition to the sale through the selling agents the grinders were sold direct to the customers "in a complete condition having in-built electrical devices along with electric motors". He stated that their grinding mills were not capable of working without electric motors and they could not function without electric motors. The grinding mills which had a detachable electric motors with V Belt arrangement, for transmission of the motion were being supplied to the customers in a composite condition. He explained that the billing was done separately - one for grinding mills and the other for electric motors for the purpose of saving sales tax, though in fact the grinding mill was being manufactured and removed in composite condition; the arrangement was only to avoid sales tax on electric motors. In his further statement dated 28-8-1984, Shri Vijay Bhai Chunnilal Panchal, Partner explained that they sold fully manufactured grinders duly arranged with electric fittings, to their customers. It was stated "the electrical fittings in the cabinet like wiring, switches, etc., are done by their workers" (refer para-5 of the Order-in-Original). All the grinders were sold under the brand name 'Navjivan' and they gave service guarantee to their customers for one year. In reply to the show cause notice, it was submitted, "even if we assume without admitting that our grinding mill when supplied with electric motor, fitted in the cabinet will fall under the Tariff Item 33C, the said classification under Tariff Item 33C will obviously apply to 109 pieces which were supplied alongwith motor". During the course of personal hearing, the appellants had admitted that sofar as 1903 pieces were concerned, they were grinding mill with electric motors and hence they will fall under Tariff Item 33C of the Tariff. It was not disputed that central excise duty was payable thereon if there was no other exemption.
9. The grinders under consideration cannot be operated without power. It was dependent upon the use of electrical energy for their working and it could not be put to any use except in relation to the utilisation of electrical energy. There was no specific mechanism by which it could be operated by hand manually without electric power. There were electrical fittings in the cabinet. There was wiring and there were switches. From the fittings of these elements, it is obvious that the working parts were so designed and so integrated as to form a unit which could work with the aid of power alone. Even when grinder was supplied without motor, there was internal mechanism in the grinder for its working with the aid of power, as soon as the electric motor was put in the proper place along the grinding cabinet. With regard to the pieces supplied with electric motors it was admitted by the appellants during the course of the personal hearing before the adjudicating authority that they were correctly classifiable under Tariff Item 33C of the Tariff. All items were of the same type. They were sold with the same brand name. There is nothing on record to show that grinders supplied with motors and those supplied without motors were two different classes of goods.
10. In the case of Balkrishna Rechhodlal Shah v. Asstt. Collector of Central Excise -1979 (4) E.L.T. (J377), the article at the stage of production or manufacture was an un-assembled article and was not completely integrated whole domestic electrical appliance. In the case of Shri Punit Ghar Ghanti v. U.O.I. -1981 (8) E.L.T. 121 (Gujarat) the goods in question could be worked either by applying manual labour or with the help of an electric motor. The electric motor was fixed on the specific demand made by a customer. In the case before us, there is nothing to show that the grinders could be operated manually. The goods were marketed under a brand name and most of the goods were marketed through their own agents. Electrical element was fitted in all the grinders (refer statement of the partner of M/s. Guru, dated 28-8-1984). In the case of Collector of Central Excise v. Alco Industries -1991 (55) E.L.T. 184 (Madras), the matter before the High Court of Judicature at Madras related to the Wet Grinder in which the grinder as such had no electrical connection for operation by receiving electrical energy. The electrical motor was placed alongwith and provided with pulleys for rotating the grinders by means of V Belts. The High Court considered that "by mere process of assembling the electric motor in the already existing grinder no commercially new product as such emerged by any manufacturing process." To our mind, there is no relevancy of these decisions to the specific facts before us in these proceedings.
11. In view of the facts specific to this case, we consider that the goods in question were rightly classifiable under Tariff Item 33C of the erstwhile Central Excise Tariff.
12. In the show cause notice while determining the central excise duty liability of the appellants from the value of Rs. 11,93,600/- a deduction of Rs. 7.5 lakhs with regard to small scale exemption had already been given and duty liability had been arrived at on the value of clearances in excess of the small scale exemption limit of Rs. 4,43,680/- only.
13. The orders dated 15-7-1975 passed by the High Court of Gujarat at Ahmedabad were in the case of Navjivan Udyog Mandir Pvt. Ltd. in Special Civil Application No. 1465 of 1974 when the present appellants were not in existence. The appellants in the case before us had undertaken the manufacture of grinders from 1-1-1983.
14. As regards limitation, we find that specific allegations of fraud, wilful mis-statement and suppression of facts with an intent to evade payment of central excise duty had been made in the show cause notice.
15. Para 9 and 10 of the show cause notice are extracted below:-
"9. In view of the facts and evidence discussed in the foregoing paras, it appears that the company with a deliberate and wilful intent to evade payment of duty did not declare before the Central Excise Authorities that they are engaged in the manufacture of "Grinder (domestic electric grinding mills) classifiable and chargeable to duty under Tariff Item 33C as discussed in the foregoing paras, though the manufacture of the said product was undertaken by them from January, 1983. It thus appears that the company by recourse to fraud, wilful mis-statement and suppression of facts illicitly manufactured and removed "Grinders" (domestic electric grinding mills) valued at Rs. 4,43,680/- as worked out by the officers (statement 'A' enclosed) during the financial year 1983-84 in excess of the exemption limit of Rs. 7.5 lakhs as provided under Notification No. 83/83 dated 1-3-1983 as amended without obtaining Central Excise licence as required for manufacture thereof during the relevant period without following any Central Excise Procedure and without payment of duty leviable thereon.
10. In the light of this fact as aforementioned, it appears that M/s. Gurukrupa Trading Co., Avadhootwadi, Billimora have contravened the provisions of Rule 174 read with Section 6 of the Central Excises and Salt Act, 1944, Rule 173F read with Rule 9(1), Rule 173B, Rule 173C, Rule 173G (2) read with Rule 52A, Rule 173G (4) read with Rule 53 of the Central Excise Rules, 1944 in as much as they engaged themselves in the manufacture of excisable goods falling under Tariff Item 33C without having applied for and obtained a licence in form L 4 for such manufacture as required, failed to determine their liability to duty on the said goods manufactured and removed by them without payment of duty leviable thereon as mentioned in para 9 above, failed to file classification list and price list failed to prepare and issued gate passes in the prescribed form for removal of said goods and further failed to maintain statutory accounts of production and removal of the goods manufactured by them which all acts of contravention on their part appear to constitute offences of the nature as described in clause (a), (b), (c) and (d) of Sub-Rule (1) of Rule 173Q of the Central Excise Rules, 1944 committed by them by reason of fraud, wilful mis-statements and suppression of facts with an intent to evade payment of duty."
The matter had been discussed by the adjudicating authority in para 15 of her order. The matter was detected as a result of surprise visit by the central excise officers. The assessee had not filed any declaration nor had obtained any central excise licence. They had admitted the manufacturing of the goods. In the circumstances, we consider that the extended period of limitation had been rightly invoked in these proceedings.
16. From para 8 of the show cause notice, it is seen that the grinders had been supplied with electric motors at the price ranging Rs. 3100 to Rs. 3200 and the cabinet at the prices ranging from Rs. 1725 to Rs. 1790 and the total value had been worked out accordingly. The appellants have not submitted any documents to challenge the above prices taken for calculating the duty liability.
17. The amount of central excise duty demanded in these proceedings is Rs. 69,879.60. The adjudicating authority had imposed a penalty of Rs. 2 lakhs on M/s. Gurukrupa Trading Co. Ltd.
18. Taking all the relevant facts and considerations into account, we reduce the amount of penalty from Rs. 2,00,000/- to Rs. 50,000/- (Rupees Fifty thousand only).
19. Subject to the reduction of amount of penalty from Rs. 2,00,000/- to Rs. 50,000 (Rupees Fifty thousand only) as above, the appeal is otherwise rejected.