Customs, Excise and Gold Tribunal - Delhi
Indian Xerographic System Ltd. vs Collector Of Customs on 3 April, 1995
Equivalent citations: 1995(80)ELT337(TRI-DEL)
ORDER K.S. Venkataramani, Member (T)
1. These two appeals have been filed against the two orders of the Collector of Customs (Appeals), Bombay dated 31-1-1984 and another order passed by the Collector of Central Excise (Appeals), Bombay dated 8-4-1986. The latter appeal is by the Department namely the Collector of Central Excise, Bombay-ill. The former has been filed by the Assessee. The matter relates to levy of additional duty of Customs (CVD) on the unassembled photo-copier imported by the assessee under Item 33D of the Central Excise Tariff covering office machine and apparatus whether assembled or un-assembled condition. The other appeal relates to the liability to Central Excise duty on the clearance of the assembled photocopier from the factory from the unassembled machines imported earlier. The sequence of events as narrated by the parties is that the assessee imported the unassembled photocopying machines on which the additional duty of customs (CVD) was levied under Item 33D by the Custom House. The assessee filed a claim for refund of the CVD paid contending that the unassembled machines will not fall for classification as office machines under the description of the Item 33D of Central Excise Tariff. This refund claim, however, was rejected by the Assistant Collector of Customs, Bombay Customs House who held that all the components which comprise complete machines have been imported and hence, it is correctly assessable under 33D Central Excise Tariff. He noted the assessee's admission that no indigenous manufacturing components have to be used in the production of the machines. The appeal against the Assistant Collector's order was rejected by the Collector (Appeals) who referred to the well recognised practice in trade that machines are sold and bought both in completely knocked down condition (CKD). He also relied upon Rule 2(a), of the Interpretation Rules to the Tariff providing that the machine in unassembled condition has to be assessed as complete machines. He, therefore, held that the goods imported rightly answer the description under Item 33D of Central Excise Tariff and rejected the appeal leading to the present appeal by the assessee. In the other appeal by the Department, the assessee was asked to pay Central Excise duty again under the same Item 33D on the assembled machine when it was cleared from their factory. The assessee, however, filed the refund claim contending that the process of merely assembling the duty paid unassembled photocopier does not amount to manufacture so as to attract Central Excise duty once again under Item 33D on its clearance from their factory in the assembled condition. This contention of the assessee found acceptance with the Assistant Collector of Central Excise Division IV, Thane and he granted the refund. Against this order of the Assistant Collector, the Collector filed the Review Application before the Collector of Central Excise (Appeals), Bombay. The Collector (Appeals), Bombay however, found no reason to interfere with the Assistant Collector's order. The Collector (Appeals) found that the assessee has already discharged duty liability under Tariff Item 33D on the unassembled machines and he observed that mere assembling of goods will not amount to manufacture. The machines were subjected to countervailing duty when they were in unassembled condition. Therefore, the Collector held the question of charging them to excise duty will not arise. Hence this appeal by the Collector of Central Excise, Bombay-Ill.
2. On hearing the Learned Counsel Shri V. Sridharan for the assessee appellant and Shri Somesh Arora for the Appellant Collector, we are inclined to agree with the submissions made by both of them that the matter is covered by the ratio of the Tribunal decision in the case M/s. Walchand Nagar Industries v. Collector of Central Excise, Pune in the Tribunal Final Order No. E/39-41/95-B1, dated 9-2-1995 [reported in 1995 (79) E.L.T. 485 (Tri.)] since reported in- which a similar issue had been considered by the Tribunal. The Tribunal observed as follows in Para 12.1 of its decision.
12.1 We agree with the Learned Counsel that the processes carried out by the appellants upon the complete machining centres imported in CKD condition do not amount to manufacture, as no new product bearing a new or different character or use emerges as a result thereof. In arriving at this conclusion, we draw support from the case of T.I. Cycles of India v. Union of India reported in 1983 (12) E.L.T. 681 in which the Hon'ble Madras High Court held that assembling of parts of complete cycles imported in CKD condition does not amount to manufacture as envisaged by Section 2(f) of the CESA as no new marketable commodity is thereby produced or thought into existence. Our view is further fortified by the order of the Tribunal in the case of B.E.L. v. Collector of Customs reported in 1990 (50) E.L.T. 567 holding that assembly does not amount to manufacture. The relevant paragraphs of the order are reproduced below :
"7. The appellants were given an Industrial Licence for the manufacture of Video Tape Recorder Systems with Monitors with an annual capacity of 500 Nos. In pursuance of this Licence, the appellants started manufacturing Video Tape Recorder System with Monitors, from Feb. 1982. The Import Licence issued to the appellants included in the list attached there to 420 numbers of Video Cassettes falling under entry at Sl. No. 689 (26) in Appendix III of Licensing Policy April 1981 - March 1982). After introduction into the market of the VCR, produced by the appellants, it was realised that for successful marketing of the VCRs, it was necessary to have as ready stock about 20 numbers of Video Cassette Tapes per VCR. This amounted to additional imports of Video Casssette Tapes. This was taken up with the DGTD & Import Licensing Authority and as per the advice received from them, the appellants obtained an additional list attached to the aforesaid Import Licence for importation of 5000 sets of Video Magnetic Tapes against Entry No. 580 (35) Appendix V and Video Cassettes without tape against Entry 580 (36) of Appendix V of the Import Policy for April 1981 - March 1982. According to the advice received and according to the additional list that was attached to the licence, the appellants had to import their requirements of video cassette tapes in a dis-assembled form i.e., video magnetic tape as one constituent and the video cassette without tape being the other constituent respectively, falling under Entry 580 (35) and 580 (36) in Appendix V of the Import Policy April 1981-March 1982. As the appellants were not engaged in the manufacture of video cassette tapes in pursuance of the Licensing Policy according to which the additional list attached to their licence, required import of video cassette tapes in two constituents in disassembled form, the appellants accordingly negotiated with the foreign suppliers for the supply of the requisite number of video cassette tapes after disassembly individual video cassette tapes into two constituents, one the Video magnetic tape as for an individual cassette and the other as the video cassette without tape i.e., the empty case, the requisite number of screws for bringing the two constituents together being also supplied. The assembly of video cassette tape takes place merely putting the magnetic tape and plastic case together and fixing the screws supplied by the foreign supplier.
8. The law on the point as to what constitutes manufacture is well settled. In the case of Union Carbide Co. Ltd. v Union of India -1978 (2) E.L.T. 1180 the Calcutta High Court that "Manufacture implies a change but every change in the raw material is not manufacture eligible to duty. To be manufacture eligible to duty there must be such transformation that a new and different article which can ordinarily come to the market to be bought and sold and known to the marketing having a distinctive name, character and use must emerge.
9. In the case of Union of India v Delhi Cloth and General Mills - (1977 (1) E.L.T. 1199 the Supreme Court defined manufacture thus, "The word "manufacture" used as a verb is generally understood to mean as 'bringing into existence a new substances' and does not mean merely 'to produce some change in a substance". However, minor in consequences the change may be. This distinction is well brought about in a passage thus quoted in permanent Edition of Words and Phrases Vol. 26 from an American Judgment. The passage runs thus :
"Manufacture Implies a change but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But, something more is necessary and there must be transformation, a new and different article must emerge having a distinctive name, character or use."
9A. Our attention has been drawn by the appellants' Counsel to the decision of the Madras High Court in the case of T.I. Cycles of India v. Union of India reported in 1983 E.L.T. 681 wherein it was held that assembling of cycle parts does not amount to manufacture as envisaged by Section 2(f) of the CESA as no new marketable commodity is produced or brought into existence when cycle parts are assembled by the buyer, who imports cycles in CKD condition. At this juncture, the Learned JCDR sought to distinguish the facts of the case (supra) from those of the present appeals. She contended that the High Court considered trade practice in cycles which is the reverse of that in Video Cassette Tapes, as the practice in trade relating to cycles was to import them in CKD condition which practice was not established in the present case. We do not see how this would make any difference, as the test of manufacture has not been satisfied in this case. We fail to see how assembly of magnetic tape and plastic covers amounts to manufacture. The arguments advanced by the Learned JCDR do not clinch the issue".
The ratio of the above decision fully applies to the facts of the present case and applying that ratio, it is held that the unassembled photocopier machines imported had correctly been assessed subject to additional duty of Customs (CVD) under Item 33D of the Central Excise Tariff as the goods answer the tariff description. At the same time, it is also held that for the reason that the unassembled machines had discharged duty liability under item 33D on import, the Department has no case for subjecting it again to duty under the same Central Excise Tariff item when the assessee clears the machines in assembled form as no manufacturing activity has taken place. In this view of the matter, the Customs (Appeals) filed by the assessee appellant is rejected. The Central Excise Appeal filed by the Collector of Central Excise, Bombay in, is also rejected. Order dictated in Court.
3. After the orders disposing of the appeals were dictated, the learned Departmental Representative Shri Somesh Arora pointed out that the Department had filed a Miscellaneous application in the matter dated 2-1-1995 which has not been listed along with the appeal and that it should also be considered. On a perusal of the Miscellaneous application it is seen that the Department has submitted therein that the Tribunal ought to have taken decision to rehear the appeal on the basis of an application for the purpose given by the assessee-appellants only after hearing the revenue in the matter and such an application should have been heard by the Bench before which the arguments had been addressed earlier by both the parties. However, it is found from the records that the matter has come up before that Bench constituted for the day by virtue of a Presidential order, consequent upon one of the Members of the earlier Bench having been transferred. Moreover, in the view we have taken, and the terms of disposal of the appeals as above, based on the precedent which had followed High Court and Tribunal rulings on the subject, we are of the view that nothing of substance survives in the Miscellaneous application which is disposed of accordingly.