Customs, Excise and Gold Tribunal - Tamil Nadu
Cce vs Q Max Test Equipment Pvt. Ltd. on 11 March, 2003
Equivalent citations: 2003(88)ECC738, 2003(159)ELT665(TRI-CHENNAI)
JUDGMENT Jeet Ram Kait, Member (T)
1. The Revenue by these appeals challenges the Order-in-Appeal No. 79/98 (M-II) dated 13.3.1998 passed by the Commissioner of Central Excise (Appeals), Chennai by which he has set aside the Order-in-Original passed by the Assistant Commissioner wherein he has demanded duty of Rs 1,12,505.37 under Section 11A of the CE, Act 1944.
2. The brief facts of the case are that the respondents who are 100% EOU are engaged in the manufacture of varieties of varieties of PCB test and Diagnostic Equipments falling under tariff heading 9031.00 of the CETA 1985. They get goods for the said purpose, without payment of Customs duty as per Notification 1/95 dated 4.1.95. They have cleared the goods viz. PCB test equipment to domestic tariff area on payment of 50% of Customs duty applicable and 50% of Central Excise duty as per Notification No. 13/81-Cus dated 9.2.81 read with Notification 2/95-CE dated 4.1,95. They have also claimed the rate of duty at 15% as a concession as per Notification 56/88-Cus. According to the department, as per the product literature, the product appeared to be only a PCB tester. It was also revealed that the test equipments were sold only to customers other than manufacturers of goods falling under 85.42 and therefore the department took the stand that the assessees are not eligible to claim the benefits of Notification 56/88-Cus dated 1.3.88. Proceedings were therefore, initiated by issue of show cause notice dated 30.4.96 and the proceedings resulted in the order of the original authority demanding duty as noted above which on appeal was set aside by the Commissioner (Appeals) under order impugned. Aggrieved by the said order of the Commissioner (Appeals), the Revenue has filed this appeal on the following grounds:
(a) The Govt. has granted exemption to the goods falling within Chapters 84 or 85 or 90 required for manufacture of the goods falling under heading 85.42. The exemption was rightly denied by the Assistant Commissioner because the exemption is only available when the impugned goods are required for manufacture of the goods falling under Chapter heading 85.42.
(b) The Commissioner (Appeals) has misinterpreted the Notification 56/88 and has unnecessarily distinguished the meaning of the words 'manufacture' and 'required for manufacture' and reached a wrong conclusion that the notification was much more liberal than the word 'used'.
(c) The Commissioner (Appeals) has misdirected himself by arriving at a conclusion that the goods need not be sold only to the manufacturer and so long as it is proved that the goods are required for the manufacture of goods under Chapter 85.42, the benefit of Notification in question can be given,
(d) The Commissioner (Appeals) has held that the Notification does not indicate 'required and used' for the manufacture and arrived at a conclusion that the goods need not be sold only to the manufacturer.
(e) The burden to prove eligibility to a particular notification is on the party who claims the exemption as held by the Hon'ble Apex Court in the case of Mysore Metal Industries v. CC, Bombay, 1988 (36) ELT 369 (SC) and also in the case of Mangalore Chemicals and Pertilizers Ltd., 1991 (55) ELT 437 (SC) white the burden to establish taxability of an item is on the department as held by the Hon'ble Apex Court in the case of Garware Nylon Industries, 1996 (87) ELT 12 (SC).
(f) It is for the assessee to prove that the goods are required for the manufacture and when the assessee has failed to do so, the benefit of Notification cannot be given.
(g) It was not the case of the department that end use certificate was required to be produced.
4. The learned DR for the Revenue pleaded on the above lines and submitted and sought for allowing the Revenue appeal.
5. On the other hand Shri Habibulla Badsha, learned Senior Advocate assisted by Shri R. Sudhakar vehemently argued that the words used in the Notification are "required for the manufacture" of the goods falling under 85.42 and the word "required" does not mean that the item should be used in the manufacture of the goods. He further submitted that the words 'used in the manufacture' is not there in the Notification. Further, there was not end-use condition in the Notification for availing the exemption under this Notification, according to the learned Sr Counsel and the only condition is that the goods should be capable of being used and need not be actually used in the manufacture of goods falling under chapter sub-heading 8542.00. He has also relied upon the certificate dated 2.4.1996 issued by the Electronic Corporation of Tamil Nadu (A Govt. of Tamil Nadu Undertaking) which certifies that M/s Q Max Test Equipment Pvt Ltd. are manufacturers & Exporters of "Bench Top General Purpose PCB Diagnostic and Repair System which are used for testing of LSI (Large Scale Integration), VLSI (Very Larger Scale Integration) Circuits, Micro sub-assemblies and printed Circuit Boards". He vehemently argued that the item being a testing equipment is required for item falling under 85.42 and the item need not really go into the manufacture of "Electronic Integrated Circuits and Micro-assemblies". He, therefore, argued that there is no room for further discussion after having accepted that the impugned item viz. LSI/VLSI tester is capable of being used by the assessee. He also submitted that the Assistant Commissioner's finding that the impugned goods should be actually used for manufacture of the goods falling under heading 85.42 is wrong. He has also relied upon the decision of the Tribunal rendered in the case of Sha Harakchand pharkaji v. CC, Madras, 1996 (88) ELT 764 wherein it was held that the phrase "For use" in a particular industry does not constitute condition to prove "actual use, otherwise it would have provided executing a bond and obligation on the importer to produce proof of actual use. The learned Senior Counsel has submitted that the lower appellate authority has passed a well reasoned order and it should be sustained and the Revenue appeal dismissed.
6. We have carefully considered the rival contentions and gone through the case records. We find that the following facts are undisputed:
(a) What is manufactured by the assessee respondents is Varieties of PCB test equipment falling under Chapter 9031.00.
(b) As per the certificate issued by the Electronic Corporation of Tamil Nadu Ltd and which is heavily relied upon by the assessees, the assessees are manufacturers & Exporter of Bench-Top General Purpose PCB Diagnostic and Repair System of various models which are used for testings of LSI (Large Scale Integration). VLSI (Very Large Scale Integration) Circuits, Micro sub-assemblies and printed Circuit Board. In other words, the goods manufactured by the assessees are used for testing LSI/VLSI Circuits, Micro-sub-assemblies and PCBs.
(c) In terms of the Notification 56/88 benefit of the Notification will be available when LSI/VLSI tester, imported into the country and is required for manufacture of the goods falling under chapter heading 8542.00 viz. Electronic Integrated Circuits and Micro-assemblies.
For better appreciation of the facts the relevant portion of the Notification 56/88 is extracted below:
"In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962, the Central Government, being satisfied that it is necessary in the public interest to do, hereby exempts the goods specified in the table below and falling within Chapter 84 or Chapter 85 or Chapter 90 of the First Schedule to the Customs Tariff Act, 1975 and are required for the manufacture of goods, falling under the heading No. 85.42 of the said First Schedule, when imported into India, from so much of that portion of the duty of customs leviable thereon which is specified in the first Schedule, as in excess of the amount calculated at the rate of 15% ad valorem."
TABLE
1. LSI/VSLI tester 2 to 38 xxxxxxxx On a plain reading of the above Notification it is clear that what is required to be imported is LSI/VLSI tester required for manufacture of item falling under 8542.00 viz. "Electronic integrated Circuits and micro-assemblies. The language used in the Notification relates to specific requirement for manufacture of a particular item and it has to be shown that it is required by the manufacturer of that item falling under chapter 85.42 item.
7. In the present case the goods manufactured by the assessee is Bench Top General Purpose PCB Diagnostic and Repair System of various models which is used for testing of LSI (Large Scale Integration), VLSI (Very Large Scale Integration) Circuit, Micro-sub-assemblies. As per their reply to the show cause notice dated 1.7.1996 filed in paper book, PCB tester manufactured by them is not different from LSI/VLSI tester whereas, the certificate produced by them from Electronic Corporation of Tamil Nadu states that the testing system manufactured by them is used for testing LSI/VLSI tester. Be that as it may, as noted above, the concession is admissible when LSI/VLSI is imported into the country and is proved that the same is required for manufacture of "Electronic Integrated Circuits and Micro-assemblies" falling under chapter 85.42. The thrust of the argument of the learned Senior Counsel is that the PCB tester manufactured by them is an equipment for testing of "Electronic Integrated Circuits and micro-assemblies falling under Chapter 85.42 and therefore, the PCB tester need not be used in the manufacture of Electronic Integrated Circuit and Micro-assemblies. We are not able to agree with this contention of the learned Senior Counsel because as per the certificate issued by the Tamil Nadu Electronic Corporation (supra), what is manufactured by the assessee is PCB system which is used for testing LSI/VLSI Circuits, Mictro-sub-assemblies and PCBs. whereas according to the Notification, the concession is available when LSI/VLSI tester is imported into the country and are "required for manufacture" of Electronic Integrated Circuits and micro-assemblies. It has therefore to be shown that the imported item viz. LSI/VLSI tester was required by manufacturer of item falling under Chapter 85.42 viz. Electronic Integrated Circuits and Micro-assemblies, whereas they have not shown that either they are manufacturers of item falling under Chapter 85.42 or they have sold the item to the manufacturers of the item falling under the said chapter.
8. In the present case, it is an admitted position that the assesses have sold the goods viz LSI/VLSI tester to persons other than manufacturers of the specified goods viz. Electronic Integrated Circuits and micro-assemblies. It is well settled proposition of law laid down by the highest Court of the land that condition in the Notification becomes part of the exemption and the Notification has to be strictly construed and neither liberal construction which enlarges the terms and scope of the Notification is permissible nor extended meaning assignable to the exempted item. Therefore, it was for the assessee to discharge the burden of proof that imported goods were sold to persons who are manufactures of the specified goods falling under heading 85.42. As rightly held by the original authority, inasmuch as the phrase "and are required for manufacture of goods falling under Chapter 85.42" has been used in the Notification, the benefit of notification can be extended only when it is actually required by the manufacturers of goods falling under that heading. In the present case, the assessee has not rebutted that buyers are not the manufacturers of the specified goods. Thus the assessee not having discharged the burden cast on them, are not entitled to the concession envisaged in the Notification. The conclusion arrived at by the Commissioner (Appeals) is that the Notification does not indicate "required and used" for the manufacture and therefore, it need not be sold only to the manufacturers and there is no end use condition in the Notification. In terms of the law laid down by the Hon'ble Apex Court as noted above, we are not required to examine those phrases and words which are not employed in the Notification such as "used for manufacture" or about the end use condition, and we have to go strictly according to the words used in the Notification which we have done, as discussed above. The case law in the matter of Sha Harakchand Dharkaji v. CC Madras, 1996 (86) ELT 764, relied upon by the learned Sr Counsel does not help the assessees, because the facts and circumstances in that case are not similar to the one involved in the present case. In that case Notification involved was 45/94 which prescribed two headings i.e. there was no condition attached to the goods figuring under Heading A whereas there was condition attached to the importation of the goods falling under Heading B to the effect that the importer shall furnish an undertaking to the Assistant Collector that the goods imported shall be used for the purpose specified. The assessee therein imported the goods falling under Heading A which stipulated no condition and it was in that context that the Tribunal held that the words "for use in a particular industry does not constitute condition to prove actual use". In the present case, there is a specific condition attached to the Notification that "LSI/VLSI tester imported into the country are required for manufacture of item falling under heading 85.42 viz. Electronic Integrated Circuits and micro-assemblies. Therefore, we are of the considered opinion that the Commissioner (Appeals) has gone beyond the terms of the Notification while arriving at his conclusion that the benefit of the Notification would be available even if the goods are not sold to the manufacturers of goods falling under chapter 85.42. In terms of the Notification 56/88, the manufacturer of the item falling under Chapter 85.42 alone would require LSI/VLSI tester for manufacture of the item falling under that heading viz. Electronic Integrated Circuits and micro-assemblies. We therefore, hold that the order impugned is not legal and proper and we accordingly set aside the same and allow the Revenue appeals.
S.L. Peeran , Member (J)
9. I have carefully gone through the order recorded by my learned brother but I am unable to agree with the conclusion arrived at in his order. Hence, I am recording my separate order. The findings recorded by the Commissioner (Appeals) in para 4.1 & 4.2 are noted hereinbelow:
"4.1 I have carefully gone through the records of the case and the submissions made by the appellants in the grounds of appeal as well as during hearing. There are two points at issue:
The first point is whether the goods are required by the manufacturer for the manufacture of goods falling under 85.42. I find that this is interpolating the notification with the word 'manufacturer'. The notification only indicates 'required for the manufacture of goods under 85.42'. It does not say anything about the manufacturer. The buyer need not be therefore manufacturers of the product. Secondly, the notification does not say that the goods should be used for the manufacture. In only says that 'required' for the manufacture. It is much more liberal than the word 'used'.
4.2 Further, the Assistant Commissioner has held that the appellants have not rebutted that buyers are not manufacturers of the goods falling under 85.42. As rightly mentioned by the advocate, the notification does not indicate "required and used" for the manufacture. In the circumstances, it need not be sold only to the manufacturer, As long as it is proved that the goods are required for the manufacture of goods under 85,42, the benefit of the concessional exemption can be given, As mentioned by the advocate, there is no end use condition specified as in the case of Notification 45/94 and other such exemptions. All that the Notification 56/88 requires is that the equipments mentioned are required for manufacture of goods under 85.42. When it is proved that it is required for the goods under 85.42, the benefit can be straightway given.
In the circumstances, the impugned order is set aside and the appeal is allowed."
10. The appellants are a 100% EOU. They get excisable goods without payment of duty as per the Notification No. 1/95-CE dated 4.1.95 and they were also permitted to clear the excisable goods to the domestic tariff area on payment of appropriate duty as per Section 3. They cleared the impugned goods namely LSI/VLSI test equipments to the DTA on payment of 50% of Customs duty and 50% of Central Excise duty as per Notifications 13/81-Cus read with 2/95-CE. They also claimed concessional rate of duty at 15% adv. as per Notification 56/88-Cus. The department denied the benefit of the concessional duty in terms of Notification No. 56/88-Cus on the ground that the product was only a PCB tester which can find the faults in the PCAT boards and other PC Boards very quickly as compared to the traditional tools such Oscilloscope. The department's further stand was that the appellants have sold the test equipment only to customers other than the manufacturers of goods under Chapter 84.52; hence they were not eligible for availing the benefit of the said notification.
11. The Commissioner has taken a different view and hence this Revenue appeal.
12. On my careful consideration of the submissions, as well as the findings recorded by learned Commissioner, I am of the considered opinion that the finding recorded by the Commissioner (Appeals) is just, proper and legal and does not require any interference at our hands. There is no word used for "manufacture" in the exemption notification. On a plain reading of the notification, the exemption is available to the item and it is required for manufacture of goods falling under chapter heading 85.42, namely, Electronic integrated circuits and Micro-assemblies. There is no indication in the notification for production of any end-use certificate. If the item is required for manufacture of goods falling under chapter heading 85.42. them the benefit is required to be extended. In this regard, the assessee's contention is that the item being LSI/VLSI tester, it is eligible for the benefit of the concession as the said item is required for the manufacture of goods falling under chapter heading 85.42. The term used in the notification is "required for manufacture". The simple interpretation that has to be imported to these words are as to whether they are necessary for the purpose of manufacture of goods falling under chapter heading 85.42. It is not for us to include other meanings than to give a simple meaning of its utility in the manufacture of goods falling under chapter heading 85.42. The importation of the term "used in the manufacture of goods" is not proper and to hold that it is required to go into the goods to be manufactured by the assessee himself or by the person who are using it. So long as it is shown by the expert opinion, as has been shown in the present case, that it is required for use for testing of LSI/VLSI circuit micro assemblies and printed circuit board, the benefit has to be extended. In the present case, M/s. Electronic Corporation of India Ltd., a Govt. of India Enterprise, has certified that the item is for testing of the said LSI/VLSI etc. In view of absence of any end-use condition in the notification, the benefit cannot be denied. It cannot also be included that the goods are required and sold for the manufacture of items falling under chapter heading 85.42 and it is not necessarily required to go into the final product.
A plain reading of the notification indicates that it is enough if it is required for the manufacture of goods falling under chapter heading 85.42. The benefit for the testing equipment which are utilized for testing equipment falling under chapter heading 85.42. Therefore the ruling of the Apex Court rendered in the case of Sha Harakchand Dharkaji v. CC Madras (supra) clearly applies to the facts of the case and is not distinguishable. So also the judgment rendered in the case of Bermalt (India) Pvt. Ltd. v. GOI and Ors., 1986 (10) ECC 268 (Del) : 1986 (23) ELT 411 (Del.) will also apply to the facts and circumstances of the case. It was also brought to our notice that in the present case, the Revenue did not obtain any end use certificate. Neither there is any condition for production of end-use certificate in the notification. Therefore the key for understanding of this notification is to read the notification in simple terms and not to import any other meaning which is not intended in the notification. The notification exempts the goods specified in the table annexed to the notification falling within Chapter 84 or Chapter 85 or Chapter 90 of the First Schedule to the Customs Tariff Act, 1975 and are required for the manufacture of goods, falling under heading No. 85.42 or the said First Schedule. The certificate produced from M/s. Electronic Corporation of India Ltd. clearly indicates that the item is required for manufacture of goods in question which falls under chapter heading 85.42. In that view of the matter, the Commissioner's order granting benefit on the simple reading of the notification is justified and correct and there is no infirmity in the same. There is n6 merit in this appeal and it is rejected.
POINTS OF DIFFERENCE In view of difference of opinion arisen in the matter, the following question is referred to Third Member for answering the same:
"Whether the revenue's appeal is required to be allowed for the reasons given by learned Member (Technical) by denying the benefit of Notification No. 56/88-Cus dated 1.3.88 to the goods in question."
OR "The Revenue's appeal is required to be dismissed by holding that the Commissioner (Appeals) has passed a proper and legal order and there is no infirmity in the same and that the benefit of the said notification has been rightly extended to the goods in question."
G.A. Brahma Deva, Member (J)
13. Whether the item, "LSI/VLSI tester" is eligible for the exemption benefit or not in terms of Notification No. 56/88-Cus. 1.3.88 is the issue to be considered herein.
14. The department was of the view since the item in question was sold to the buyer, who is not the manufacturer, the same is not eligible for exemption in terms of the aforesaid notification. This view was confirmed by the Member (Technical) as can be seen from his proposed order.
15. On the other hand, Member (J) has taken the view that in the absence of the word "used for manufacture" in the exemption notification, the word "requirement" as such cannot be read that it must be used in the manufacture, of the goods. The Commissioner as well as the Member (J) has arrived at the conclusion based upon the ratio of the judgment of the Supreme Court in the case of State of Haryana v. Dalmia Dadri Cement Ltd., 1988 (14) ECR 292 (SC) and also relied upon the decision of the Tribunal in the case of Sha Harakchand Dharmaji v. CC Madras, 1996 (88) ELT 762 (T).
16. Shri Habibulla Badsha, Senior Counsel, assisted by Shri Sudhakaran, Counsel drew my attention to para-10 of the decision of the Supreme Court in the case of State of Haryana v. Dalmia Dadri Cement Ltd. (supra). The relevant para is as tinder:
"10. We are unable to accept the submission of Mr. Bana that, in order to get the exemption it must be shown that the goods in question, namely, the cement supplied by the assessee in this case was actually used in the generation or distribution of electrical energy. It must be noted that the important words used in the relevant provisions are goods for use by it in the generation or distribution of such energy" (emphasis supplied by us). On a plain reading of the relevant clause it is clear that the expression "for use" must mean "intended for use". If the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in the generation and distribution of electrical energy, the phraseology used in the exemption clause would have been different as, for example, "goods actually used or goods used".
17. Smt. Bhagya Devi, SDR, on the other hand, submitted that the word referred to and interpreted in the case of Dalmia Dadri Cement Ltd., was with reference to the context of word "for use" and in the instant case, since the word "requirement for use" is there, and, therefore, the said citation is not applicable. She also submitted that the word "required for manufacture" is there in the relevant notification and accordingly since it is required for the manufacture, the same cannot be said to be eligible exemption in terms of the notification.
18. I have carefully considered the submissions made by both sides and perused the records. There is sufficient force in the arguments advanced on behalf of the assessee that the expression "for use" has got a higher footing than the expression "requirement for use". In the facts and circumstances, particularly in view of the decision of the Supreme Court with reference to the word "for use", I find that the ratio of that decision is more applicable to the facts of this case. In the absence of the word "specifically used for manufacture" in the relevant notification, Member (Judicial) was correct in arriving at the conclusion that 'requirement' at best can be understood as only that "intended for use".
19. In view of this position, the view expressed by Member (Judicial) is concurred with. Registry is directed to place the file before the original bench to pass an order accordingly.
MAJORITY ORDER In terms of the majority order the appeal filed by the revenue is required to be dismissed by upholding the order passed by Commissioner (Appeals).