Custom, Excise & Service Tax Tribunal
Kerala State Electricity Board vs The Commissioner Of Central Excise & ... on 12 March, 2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench - Division Bench
Court - I
Date of Hearing: 12.03.2013
Date of decision: 12.03.2013
Stay Application Nos. 662/2010 & 1045/2011
Central Excise Appeal Nos. 1190/2010 & 1668/2011
(Arising out of Order-in-Original Nos. 2 & 3/2010 dated 09.03.2010 and 6/2011 dated 23.03.2011 passed by the Commissioner of Central Excise & Customs, Cochin)
For approval and signature:
Honble Mr. P.G. Chacko, Member (Judicial)
Honble Mr. B.S.V. Murthy, Member (Technical)
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3. Whether their Lordship wish to see the fair copy of the Order?
Seen
4. Whether Order is to be circulated to the Departmental authorities?
Yes
Kerala State Electricity Board
Executive Engineer and Team Leader ..Appellants
Vs.
The Commissioner of Central Excise & Customs
Cochin Respondent
Appearance Mr S. Raghu, advocate for the appellants Mr Ganesh Haavanur, Additional Commissioner (AR) for the respondent Coram:
Honble Mr. P.G. Chacko, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical) FINAL ORDER Nos. 25180 & 25181/2013 [Order Per: P.G. Chacko] These applications filed by the appellant, Kerala State Electricity Board (KSEB) seek waiver of pre-deposit and stay of recovery in respect of the respective adjudged dues. After perusing the records and hearing both sides, we have found both the cases fit for summary disposal. Accordingly, after dispensing with pre-deposit, we take up the appeals for consideration.
2. Appeal No. E/1190/2010 and Appeal No. E/1668/2011 are directed mainly against demands of duty of Rs. 2.17 crores and 1.69 crores respectively for the periods April 2008 to March 2009 and April 2009 to March 2010 respectively. Both the demands are on certain items viz. A Pole, Cross Arm, Clamp, Packing Clamp etc. which were found to have been manufactured by KSEB and used as parts of transmission line during the material period. All the items were classified under heading 7308 of the first schedule to the Central Excise Tariff Act. Before the adjudicating authority, KSEB at the outset questioned the excisability of the said items. They submitted that the aforesaid items were distinct or different from the iron/steel materials from which they were made and hence could not be considered as manufactured goods. Alternatively, without prejudice to the above contention, they submitted that they should be given SSI benefit as well as CENVAT credit benefit. They also pleaded time-bar against the demand for the extended period. It appears from the impugned order in one of the appeals that this plea was accepted by the Commissioner. In the other case, the entire demand raised in the relevant show-cause notice was for the normal period and the same stands confirmed against the assessee. There are penalties on the assessee in both the cases.
3. The learned counsel for the appellant refers to the process undertaken by them and submits that no new commodity classifiable under the tariff emerged from the process. In other words, according to the learned counsel, all the aforesaid items are liable to be held to be non-excisable. In this connection, the learned counsel has relied on two decisions rendered by this bench in the assessees own cases viz. Commissioner Vs. KSEB [2001 (133) E.L.T. 448 (Tri.-Bang.)] and KSEB Vs. Commissioner [2001 (133) E.L.T. 104 (Tri.-Bang.)]. Items such as Earth Pipes, Cross Arms, Clamps, Stay Rods etc. were held to be non-excisable in the cited cases. The learned counsel further submits that the A Poles, Cross Arms and Clamps were made by the process of cutting, drilling, bending, punching, welding etc. and that these processes cannot be held to be amounting to manufacture under Section 2(f) of the Central Excise Act. On the other hand, the learned Additional Commissioner (AR) argues that the issue is no longer res integra inasmuch as a Larger Bench of this Tribunal in the case of Mahindra & Mahindra Ltd. Vs. Commissioner [2005 (190) E.L.T. 301 (Tri.-LB)] has held similar items to be classifiable under heading 7308 and excisable. He has drawn our attention to the relevant paragraphs of the judgment of the Larger Bench and has claimed that, in terms of the ratio laid down by the Larger Bench, the subject items should be classified under heading 7308 and sub-heading 7308.90. According to the learned Additional Commissioner (AR), all the items in question are covered by the main description Plates, Rods, Angles, Shapes, Sections, Tubes and the like, prepared for use in structures, of iron and steel. It has also been argued that the earlier decisions rendered by this bench in KSEBs cases are impliedly overruled by the Larger Bench decision.
4. Both sides have extensively referred to the discussion and findings in the impugned orders. On a closer examination of such discussion and findings, we have found a glaring mismatch between the findings of the adjudicating authority and the terms of the Tariff Entry as interpreted by the Larger Bench. In para 50 of order-in-original No. 6/2011 and in para 53 of order-in-original Nos. 2 & 3/2010, the learned Commissioner recorded the gist of his findings as follows:
..Thus before installation they are clearly distinct and identifiable movable goods which satisfy all the characteristics of a structure as explained in the explanatory note to Chapter Heading 73.08 of the HSN. Similarly, Clamps, Cross Arms, Stay Rods, Yard Structure etc are also used in Electrical transmission line as detailed in paragraph 41 & 42 (in order-in-original No. 6/2011)/paragraph 44 &45 (in order-in-original No. 2&3/2010) above and all the items form part of the transmission system. In the light of these facts, I hold that new identifiable goods which are movable and marketable have resulted from the processing undertaken by the assessee and further that their characteristics enable them to be classified under the Tariff entry against Chapter Heading 73.08 of the Central Excise Tariff. Consequently, the contentions of the assessee in this regard are also devoid of merits. The findings contained in paragraphs 41 & 42 of order-n-original No. 6/2011 and those contained in paragraphs 44 & 45 of order-in-original No. 2&3/2010 have also been perused at our end. In these paragraphs, the learned Commissioner examines the specific uses of the various items viz. Cross Arms, Clamps, Earth Pipes, Yard Structure and Lattice Structure and concludes that all the items have been used in electrical distribution and transmission system for the distribution and transmission of electrical energy and each of the items has an independent function. The learned Commissioner consolidates his findings by holding thus:
Moreover, after fabrication and before affixing the above said articles on A Poles or as part of the transmission line, they are all new and distinctly identifiable movable goods with independent functions. Thus the findings of the adjudicating authority are clear to the effect that the subject items are distinctly identifiable goods with independent function, forming part of the transmission line. Apparently, the adjudicating authority has considered the various items as parts of the transmission line. It has also classified all the items under heading 7308. There is a glaring inconsistency in the findings inasmuch as the provisions of heading 7308 as interpreted by the Tribunals Larger Bench require the iron/steel items, to be classified under the said heading, to be structures or parts of structures. The heading gives an illustrative list of structures of iron and steel. According to heading 7308, Plates, Rods, Angles, Shapes, Sections, Tubes and the like, prepared for use in structures of iron and steel are to be classified under this heading. The learned counsel has argued that activities such as cutting, bending, drilling, welding etc. were performed on iron/steel raw materials so as to prepare Cross Arms, Clamps etc. It is submitted that these products were fixed to A Poles which, in turn, were used as a structural support to transmission lines. These arguments of the learned counsel border on the case of the Revenue inasmuch as Plates, Angles, Sections, etc. prepared for use in structures of iron or steel are squarely classifiable under heading 7308. But the crucial point which is still live in our judicial mind is the point of mismatch between the findings of the Commissioner and the terms of heading 7308. It appears from his findings that he reckoned the entire transmission system as one structure of iron/steel and considered A Poles, Cross Arms etc as parts thereof. KSEB has claimed in this case that they have used only A Poles to support the transmission lines. In the earlier cases of KSEB decided by this bench, PCC poles were used to support transmission lines and the question considered by this bench was whether the Clamps etc could be considered as excisable goods falling under heading 7308. This would mean that KSEB not only uses A Poles but also uses PCC poles for supporting transmission lines. This is purely a question of fact. This apart, the question remains as to whether the findings of the learned Commissioner would suffice to justify classification of the subject items under 7308. As the subject items were found to be parts of the transmission line reckoned as iron/steel structure, we have to hold that the view taken in the impugned orders is based on a misreading of the terms of heading 7308. It would follow that the ratio of the Tribunals Larger Bench decision in Mahindra & Mahindra case was misunderstood by the adjudicating authority. It is pertinent to note that the show-cause notices in this case had also relied on the said decision of the Larger Bench. The assessee, in their reply to the show-cause notices disputed the applicability of that decision to the facts of the case. In such circumstances, it was incumbent on the adjudicating authority to correctly understand the ratio of the Larger Bench decision and determine whether it was applicable to the facts of the case on hand. Unfortunately, no attempt at this appears to have been made in the impugned orders.
5. For the aforesaid reasons, we set aside the impugned orders and allow both the appeals by way of remand with a request to the Commissioner to undertake de novo adjudication of the dispute in accordance with law after giving the party a reasonable opportunity of being heard. We trust, the ratio of the Larger Bench decision and any other case law that may be cited before the adjudicating authority would be properly appreciated and the applicability thereof would be determined after hearing the assessee and considering their submissions.
6. The stay applications also stand disposed of.
(Pronounced and dictated in open Court)
(B.S.V. MURTHY) (P.G. CHACKO) MEMBER (TECHNICAL) MEMBER (JUDICIAL)
iss