Customs, Excise and Gold Tribunal - Delhi
Lohia Machines Ltd. Division: ... vs Collector Of Central Excise on 6 September, 1989
Equivalent citations: 1992(41)ECR674(TRI.-DELHI)
ORDER S.L. Peeran, Member (J)
1. The appellants have filed this appeal for setting aside the impugned order-in-original No. 3/Collector/MP/86 dated 20.8.1986 passed by the Collector of Central Excise, Kanpur.
2. The facts as stated in the order-in-original are that the Central Excise officers visited M/s. Industrial Electronics, 72-A, Cooperative Industrial Estate, Dada Nagar, Kanpur on 9,5.1985, 13.5.1985 and 16.7.1985 and detected that the appellants had cleared goods namely Voltage Regulators 28814 pieces and blinkers 28887 pieces during the period 1984-85 (4/84 to 3/85 and from 4/85 to 16.7.1985). As a result of this raid, two show cause notices were issued against the appellants one dated 27.6.1985 and the other dated 14.3.1986 and demanded duty of Rs. 6,49,239.82 P. under Rule 9(2) of the Act and also sought to know why penalty should not be imposed under Rule 173-Q of Central Excise Rules, 1944. The charges in both the show cause notices had been--
(a) that they had failed to obtain Central Excise licence for manufacturing voltage regulators and blinkers and had contravened the provisions of Section 6 of Central Excises and Salt Act, 1944 read with Rule 174 of Central Excise Rules, 1944.
(b) They had failed to issue proper G.P. 1 clearance of 28814 pieces voltage regulators and 28887 pieces of blinkers from April 1984 to 16.7.1985 and had contravened the provisions of Rule 52-A ibid.
(c) They had failed to maintain statutory records as is required for manufacture and clearance of excisable goods and had contravened the provisions of Rule 173-G ibid.
(d) They had failed to determine the duty liability on the goods manufactured and cleared without payment of Central Excise duty and had contravened the provisions of Rules 9 and 173-F ibid.
3. The appellants had explained in their reply dated 27.5.1986 that they were a unit of M/s. Lohia Machines Ltd. and were engaged in the manufacture of parts and accessories of scooters namely blinkers and voltage regulators which were being used as original equipment to Vespa XE Scooters manufactured in the Scooter Unit of Lohia Machines Ltd. They were manufactured according to the design and specification required for use in Vespa XE scooters. They were keeping accounts showing day to day production of the said goods which were removed to Scooter Unit under cover of Interdepartmental Challan-cum-Gate Passes against proforma invoices as they were not meant for sale but were meant only for use in the manufacture of Vespa XE scooters in their Scooter Unit which were cleared on payment of duty in the knowledge and approval of the Excise authorities. They submitted that they were classifiable as parts and accessories of Motor Vehicles under Tariff item 68 and exempted under Notification No. 167/79 dated 19.4.1979 and Notification No. 118/75 dated 30.4.1975. They submitted that they were exempted from licensing control from the operation of Rule 174 due to Notification No. 31/76 dated 28.2.1976 and submitted that they had not contravened any of the provisions of Rule 9, 52-A, 173-F, 53 read with 173-F, 174 and 173-Q of Central Excise Rules, 1944 and hence no penalty was leviable.
4. The Collector in the impugned order accepted the contentions of the appellants that the goods were classifiable under erstwhile Tariff item 68 as parts and accessories of Motor vehicles. The Collector held that Notification No. 167/77 was not applicable as the appellants had not obtained licence under Rule 174-A of the Central Excise Rules, 1944. In order to claim exemption under Notification No. 167/79, the appellants had to satisfy proviso (i) of the said Notification and since they had not complied with it, they were not entitled for the benefit. The exemption under Notification No. 31/76 with regard to non-obtaining of licence under Rule 174 was subject to the appellants satisfying proviso (i) of Notification No. 167/79. Since they had not satisfied the conditions of proviso (i) of Notification No. 167/79, they were thus disentitled to seek exemption of licensing control as laid down under Rule 174-A.
5. The Collector also did not grant the benefit of Notification No. 118/75 dated 30.4.1975 as according to him the goods manufactured by the appellants were not utilised in their own factory but intended for use in a factory of the manufacturer different from them viz. M/s. Lohia Machines Ltd (Scooter Division) and as they had also not followed Chapter X procedure, they were not entitled to the exemption claimed under this Notification. The Collector finding the appellants not holding licence under the Act and Rules to manufacture regulators and blinkers under Tariff item 68 or an L-6 licence under Chapter X of the Rules, he held the exemption under Notification No. 167/79 or 118/75 as not applicable and therefore, confirmed the demand for duty and imposed a penalty of Rs. 3,25,000 under Rule 173-Q of the Rules.
6. Shri R. Santhanam, General Manager (Legal) appearing for the appellants, contended that the reasoning of the Collector was erroneous and that the impugned order was liable to be set aside as it was not correct as per law. The Collector had not correctly interpreted the Notification No. 31/76, 167/79 and 118/75. He submitted that the duty was barred by time and the demand in the show cause notice dated 14.3.1986 was not enforceable as the same had been signed by Superintendent of Central Excise, when the Section 11-A was amended on 27.12.1985 any demand raised by officer other than Collector was unenforceable. He further submitted that the appellants had by its principals M/s. Lohias Machines Ltd., applied for licence for them by letter dated 2.11.1984 by paying licence fee of Rs. 20/- vide Challan No. 4 dated 2.12.1983 and appellants had filed application in Form A.L. 4 under Rule 176 on 2.11.1984. As they were employing less than 10 employees and in terms of Notification No. 46/81 dated 1.3.1981 as amended by Notification Nos. 92/81 dated 1.4.1981 and 74/83 dated 1.3.1983, they were exempted from whole of duty of excise leviable thereon and also were exempt form licensing control. Therefore, by letter dated 9.3.1984, they sought for cancellation of their application for licence applied earlier. He further submitted that the appellants although were exempted under the above noted notifications, but yet as an abundant caution, had applied for L-6 licence vide their letter dated 26.3.1985. On 12.7.1985, they sought for issue of L-4 licence and licence was issued to them on 19.7.1985. He submitted that as they were employing less than 10 workers and on account of the application of the notifications, the imposition of Rs. 3,25,000/- penalty was unjustified and uncalled for. He further submitted that the Department had forced upon them L-4 licence although in law it was not required to be obtained by them or by M/s. Lohia Machines Ltd (Scooter Division). He further submitted that the Collector had accepted the classification of the goods under Tariff item 68 and hence, they were exempted from the operation of Rule 174(i.e. licensing control) by virtue of Notification No. 31/76. Further, as per Notification No. 167/79 parts and accessories of motor vehicles falling under Tariff item 68 intended for use in further manufacture of excisable goods were exempt from the whole of the duty of excise. He submitted that a combined reading of Notification No. 167/79 and No. 31/76 would lead to the inescapable conclusion that blinkers and voltage regulators falling under Tariff item 68 intended for use in further manufacture of excisable goods are exempt from licensing control i.e. operation of Rule 174, as the said parts and accessories are wholly exempted goods falling under Tariff item 68. He submitted that alternatively they were entitled for exemption under Notification No. 118/75. Further the non-observation of Chapter X procedure need not and cannot be a bar for exemption under the notification particularly when demand is being sought to be made retrospectively. In support of his contention, he relied upon the following authorities--
1. Structurals & Machineries (Bokaro) Pvt Ltd. v. Collector of Central Excise, Patna
2. Sundaram Fasteners Ltd. v. Collector of Central Excise, Madras
3. E. Septon & Co. Pvt. Ltd. v. Superintendent of Central Excise and Anr.
4. Hiranyakeshi Sahakari Sakkara Karkhana Niyamit v. Collector of Central Excise
5. Lohia Machines Ltd v. Collector of Central Excise, Kanpur
7. Shri K.D. Tayal, Sr. Departmental Representative appearing for the Department, at the outset, took a preliminary objection that the appeal is not maintainable as the proceedings were against M/s. Industrial Electronics while the appeal is filed by M/s. Lohia Machines Ltd. For this Sh R. Santhanam pointed out that the cause title in Appeal Memo, the appellants are described as Lohia Machines Ltd. Dn. Industrial Electronics and column (5) of the appeal, the address is correctly given. He also relied upon the citation in the case of Lohia Machines Ltd. v. Collector of Central Excise, Kanpur in which in their own case, this question has already been answered and that the appeal is in order.
8. Shri K.D. Tayal, Sr. Departmental Representative submitted that the appellants had withdrawn the application for licence by their letter dated 9.3.1984 on the ground that they had employed less than 10 workers and were exempted under the respective notifications referred therein. He submitted that this was not turned false by the verification of the attendance register by the Visiting officers and hence they were, obliged to take out a licence. They had suppressed the facts and hence the demand was justified for extending longer period and for imposing penalty. He further submitted that Notification No. 31/76 dated 28.2.1976 exempted from the operation of Rule 174 only if the parts and accessories of Motor vehicles were fully exempted. Notification No. 167/79 dated 19.4.1979 which dealt with exemption to parts and accessories of Motor vehicles used for further manufacture and falling under item No. 68 had two provisos. The appellants had not produced enough evidence before the lower authorities under proviso (i) of the Notification and hence the Collector was justified in refusing grant of exemption to the appellants. As the appellants had not satisfied the proviso (i) of Notification No. 167/79, it followed that Notification No. 31/76 was not applicable to them. They were thus obliged to obtain licence following the procedure under the Rules. As they had contravened the Act and the Rules, the Collector was justified in confirming the demand and imposing the penalty. However, Shri K.D. Tayal conceded the demand made in the show cause notice dated 14.3.1988 was not enforceable as the show cause notice had been signed by the Superintendent of Central Excise, who on that point of time had no powers to issue the show cause notice as is well laid down in the decisions of our Tribunal.
9. We have heard the arguments of both the sides carefully, perused the records, notifications and case laws referred by the parties. The questions for our consideration are as to whether the demand made in the show cause notice dated 27.6.1985 is enforceable and whether the appellants are entitled for the benefit of Notifications No. 31/76 and 167/79. Before we go into these questions, it is necessary to answer the preliminary question raised by Sh K.D. Tayal regarding maintainability of the appeal. It is observed that the appellants name appears along with the name of M/s. Lohia Machines Ltd., both in the Cause title and column (5) of the Appeal Memo. This question is also further answered in their own case as . As such, the preliminary question is overruled. The appellants cannot seek benefit of Notification No. 46/81 dated 1.3.1983 amended by Notification Nos. 92/81 dated 1.4.1981 and No. 74/83 dated 1.3.1983 as the appellants have been found to have employed more than 10 employees as confirmed by checking the attendance register by the visiting officers of the Department. As regards the benefit of Notification No. 31/76 for claiming exemption of licensing Control under Rule 174, the appellants will be so exempted if these goods are fully exempted. The parts and accessories of Motor Vehicles falling under Tariff item 68 are fully exempted under Notification No. 167/79 provided the party satisfies the provisos (i) and (ii) of the Notification to the satisfaction of the Proper officer.
10. The proviso of Notification No. 167/79-CE dated 19.4.1979 as amended by Notification No. 187/79-CE dated 10.5.1979 reads as hereunder--
Provided that--
(i) where such use is in a factory of a manufacturer different from his factory in which the said parts and accessories have been manufactured, the exemption contained in this notification shall be allowable subject to the proper officer being satisfied that the said parts and accessories are intended for such use, and
(ii) where such use is in a factory of another manufacturer, the exemption contained in this notification shall be allowable subject to the observance of the procedure set out in Chapter X of the said Rules.
11. Shri R. Santhanam contended that M/s. Industrial Electronics and M/s. Lohia Machines Ltd. (Scooter Division) are one and the same manufacturer except that they were different factories and hence proviso (i) was applicable to them. To this effect, he has produced the Balance sheets to show that a single licence has been obtained under Companies Act. All units are incorporated under one Company only. A single consolidated balance sheet is filed and for assessment under Income-tax Act, all the units have been clubbed for single assessment. There is force in the contention of Sh R. Santhanam. A perusal of the evidence produced satisfies his contention that the units are different factories of same manufacturer and hence the proviso (i) of Notification No. 167/79 as amended as applicable to the facts of this case. Therefore, the reasoning of the Collector that benefit under Notification No. 167/77 as amended cannot be granted to the appellants is erroneous. However, in order to get the entitlement of this notification, the appellants have not produced evidence to the satisfaction of the proper officer as provided in proviso (i) of Notification No. 167/79 as amended.
12. Both the parties in the end, conceded for remand of the case to the Collector to examine the materials to be produced by the appellants under proviso (i) of the Notification to seek the grant of exemption. If the Collector holds that the appellants have satisfied the requirements of proviso (i) of Notification No. 167/79 as amended, then the goods manufactured are fully exempted under Tariff item 68 and in consequence, Notification No. 31/76 will be attracted entitling them for exemption under licensing control under Rule 174 of Central Excise Rules, 1944. The demand raised in show cause notice dated 14.3.1986 is without jurisdiction, as the show cause notice is signed by person other than the Collector. The demand is unenforceable as per amended section HA of the Central Excise Act as the Superintendent of Excise has signed the said show cause notice after the date of amendment i.e. 27.12.1985. The appellants succeed by remand. The appeal is allowed by remand to the Collector to examine the materials to be placed by the appellants to show that they are entitled to seek exemption under proviso (i) of Notification No. 167/79-CE as amended by Notification No. 187/79-CE dated 10.5.1979 with regard to the period mentioned in the show cause notice dated 27.6.1985 only. The Collector shall hold proceedings to the limited extent indicated supra and complete the same within six months from the receipt of this order.