Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs Unknown on 24 August, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT-II
Application No.E/1030-1033/09
Appeal No.E/53, 54, 183, 184, 185, 186, 763, 764/09
Arising out of OIO No.195-196/Commissioner/2008, dt.28.12.2008
Passed by: Commissioner of Central Excise, Ahmedabad
For approval and signature:
Honble Mrs. Archana Wadhwa, Member (Judicial)
Honble Mr. B.S.V. Murthy, Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant/s M/s. Gabbar Engineering Company,
Shri M.R. Paudal, M/s. Ginza Machinery,
Shri. U.K. Panchal, Shri M.H. Panchal
Shri M.M. Panchal
M/s. Girnar Machinery Co. P. Ltd.
Shri M.H. Panchal
Represented by Shri Devan Parikh (Adv)
Vs.
Respondent/s CCE Ahmedabad
Represented by Shri S.K. Mall (SDR) CORAM:
MRS. ARCHANA WADHWA, MEMBER (JUDICIAL) MR. B.S.V. MURTHY, MEMBER (TECHNICAL) Date of Hearing:24.08.09 Date of Decision:
ORDER No. /WZB/AHD/2009 Per: MR. B.S.V. Murthy:
M/s. Gabbar Engineering Company, M/s. Ginza Machinery Company Pvt. Ltd. are engaged in the manufacture of industrial sewing machines and bag closer machines and portable bag closer machines etc. After investigation and issue of show cause notice, in the impugned order the Commissioner has framed the following issues for adjudication.
i) Various models of the industrial sewing machines manufactured and cleared (in some cases stand/table/motors are separately billed) by the said notice could be considered as Industrial Sewing Machines other than those with In-Built motors, eligible for exemption under Notfn.No.6/2002 dated 01.03.2002, as amended from time to time, as contended by the notice, or should be considered as Industrial Sewing Machines with In-Built motors as proposed in the show cause notice.
ii) The Crank Shafts manufactured and cleared by the said notice as well as the Waste & Scrap generated during the manufacturing process and cleared by the said noticee are liable for duty of excise duty and if so, whether they are eligible for SSI exemption.
iii) The goods cleared by the said noticee without payment of duty is to be held liable for confiscation under the provisions of Rule-25 of Central Excise Rules, 2002. After considering the submissions made by the appellants, he has held that the bag closer machines and industrial sewing machines manufactured by the appellants cannot be considered as industrial sewing machines other than those with In-Built motors eligible for exemption under Notification No.6/2002 dated 01.03.2002. He also held that the crank shafts manufactured and cleared and also the waste and scrap generated during the manufacture process and cleared are liable for excise duty. He also upheld the liability to confiscation. Further, he demanded interest as applicable and imposed penalty equal to the duty amount demanded under Section 11AC of Central Excise Act, 1944 and a penalty of Rs.50,00,000/- (Rupees fifty lakhs only) was also imposed on Shri Mangaldas Hiralal Panchal, partner of Gabbar Engineering Company, Ahmedabad.
2. We also find that in the case of M/s. Girnar Machinery Manufacturing Company sister concern of the appellant also the same issue has been decided and the difference is only in respect of amount of duty demanded and penalties imposed on various appellants. In respect of Ginza Machinery also the issue is similar and the decision is also similar. Since the issue involved in respect of the three sister units, employees, partners etc who are in appeal but for the difference in duty demanded and penalties imposed, a common order is being passed in respect of all the appellants.
3. Shri Devan Parikh, learned advocate, on behalf of the appellants submitted that the main issue to be decided is whether the industrial sewing machines, bag closer machines manufactured by the appellants and by all the appellants and the portable bag closer machines are eligible for exemption under Notification No.6/2002 or not. The exemption is available to the sewing machines which do not have an inbuilt motor. He submits that the very same issue had come up before the Tribunal in the case of Harichand Anand & Co. reported in 2008 (223) ELT 598 (Tri. Bang.). In that case the Tribunal was considering the eligibility for exemption of industrial sewing machines imported by the appellant without inbuilt motors. It is his contention that in that case also the motor was connected with the help of V-belt and pulley. As in their case the motor was also imported along with the sewing machine. Even then the Tribunal had taken a view that the appellant was eligible for the benefit of exemption notification which provided exemption for sewing machines without inbuilt motors. Further, he also relies upon the view taken by the Central Board of Customs & Excise in respect of the audit para raised in respect of imported sewing machines wherein the Board had taken a similar stand and had not accepted the audit objection raised by the C&AS in respect of industrial sewing machines imported into India. Further, he also produced the brochures to show that none of the products in the case of the appellants have an inbuilt motor and all the motors are connected with the help of V-belt and pulley only. He also submitted that the Commissioner had actually reproduced the brochures in his order. He submits that the stand taken by the Commissioner that the meaning of inbuilt motor does not mean that motor cannot be connected with the help of V-belt and pulley. The Commissioner has observed that the electric motor is an essential part of the original machine and it is an integral and essential part and is designed in such a way that the sewing machine cannot be operated without the electric motors. He also submits that electric motor is supplied as a separate package and is not even manufactured by the appellants, but purchased from other parties. He also submits that the motors are supplied separately and in some cases motors are visible and detachable. But the Commissioner has observed that even where it is visible and detachable it is still forming part as an integral and essential part of the machine. The Commissioner has also observed that electric motor is not required to be inbuilt in sewing head but the sewing machine.
4. The learned DR on the other hand submits that the decision of the Tribunal in Harichand Anand case relies on the decision of the Honble Madras High Court which was rendered in a totally different context. He also submits that the decision of the Tribunal was rendered in the case of industrial sewing machines imported into India and not in the case of indigenous goods. He also submits that there is no evidence to show that the industrial sewing machines discussed in the order of the Tribunal are the same or similar to the ones manufactured by the appellants. He also submits that reply given by the Board to the audit para also cannot be considered on the same ground that it is not possible to know whether the product considered in the reply to the audit para is similar or the same as the one under consideration before the Tribunal here. Further, he also submits that in respect of bag closer machines, the motor is not at all visible, inbuilt and pulley are also not visible. Further, he also submits that the bag closer machine is not at all classifiable under Chapter 84 at all.
5. We have considered the submissions made by both the sides in detail and also have considered the records. Even though there are other issues, the learned advocate argued mainly on the eligibility aspect of the industrial sewing machines, bag closer machine and portable bag closer machines manufactured by the appellants.
6. It is noticed from the brochure produced was that in portable bag closer machines, the motor as well as the pulley and v-belt are not at all visible and they form an integral part of the machine. Further, in the case of portable bag closer machine, motor has to be inbuilt with the machine in view of the fact that it has necessarily to be held while stitching the filled bags and it is risky to keep the motor open in such cases. Therefore it is quite clear that as regards portable bag closer machines appellants do not have a case. As regards the classification of portable bag closer machines, the learned DR submitted that it does not come under Chapter 84 at all. However, we find that this was not an issue before the adjudicating authority and there is no discussion or finding of the Commissioner as regards the classification aspect. Therefore we are not going into this aspect.
7. Coming to the industrial sewing machines and bag closer machines which are not portable, from the brochure we find that motors are separately fitted and connected to the sewing machine by means shaft, v-belt and pulley.
7.2. We find considerable force in the argument advanced by the learned advocate that the same issue had come up before the Tribunal in Bangalore in Harichand Anand case. The first and second paragraphs of the order cited above makes it clear hence the same are reproduced.
This Revenues appeal arises from the Order-in-Appeal No.170/2006, dated 14.12.2006 by which the Commissioner (Appeals) has set aside the Order-in-Original No.43/2006, dated 13.7.2006 passed by the Deputy Commissioner of Customs, Air Cargo Complex, Bangalore and held that the assessee is eligible for the benefit of Notification Nos.21/2002-Cus. And 6/2006-CE in respect of 04 Nos. of Industrial sewing machines. The Notification No.6/06-CE exempts only sewing machines other than those with inbuilt motors. The importer took the stand that these machines were without inbuilt motors and that in an inbuilt machine the motors are built on the main shaft of the machines and motors cannot be separated from the sewing head. It was further clarified that motor has been imported along with the sewing machine; that motor is not at all connected to the machine and it runs the machine by a v-belt; that machine can operate without motor. The lower authority has held that the machines were with inbuilt motors and therefore held that the item is not eligible for the said exemption. On a detailed consideration, the Commissioner (Appeals) has accepted the plea of the assessee and passed the impugned order.
2. The learned Counsel submits that the issue is no longer res-integra and the matter has reached finality by judgment of the Madras High Court in the case of Collector of Central Excise V. Alco Industries reported in 1991 (55) ELT 184 (Mad.) which has been affirmed by the Apex Court [1994 (73) ELT A131 (S.C.)]. He contends that the Division Bench of Madras High Court has taken a view that the motor was fitted outside and connected by v-belt and it is not inbuilt. That proposition is applied to the facts of the case. 7.3. Further, the reply given by the Central Board of Customs & Excise to the audit para which has been produced by the learned advocate is also reproduced below for ready reference.
The statement of facts contained in the draft audit para is not admitted. The main point is as to which type of motors will be treated as inbuilt motors. The issue was discussed in the Commissioners conference held at Bangalore in June 2000. (Copy enclosed). It was concluded that the sewing machines having motors connected externally by means of a belt and not directly, are of the type other than those with built-in motors and are rightly eligible for the benefit of exemption notification. As regards the case law, {(1999) (106) ELT 165}, it is stated that the issue in that case was whether the clutch motors were parts of sewing machines of otherwise. An integral part of a machine may not necessarily be inbuilt it could be other than inbuilt also. The motors in this case were not inbuilt in the machines but located outside and were connected to the sewing machine externally with the help of a pulley and belt system. Thus, the notification benefit has been correctly extended in this case. Further, the similar issue was discussed in the Chief Commissioners Conference and the points raised, the discussion and the conclusion portion in the conference are reproduced below.
The Conference noted that sewing machines in this case are imported with separate motors and that the motors are not inbuilt in the said sewing machines. The technical literature also indicated that the driving pulley of the sewing machine is connected to the power source i.e. motor by a belt. Since the motor is connected to the sewing machine externally by means of a belt and not directly the Conference concluded that the machines are of the type other than those with inbuilt motors and are rightly eligible for the benefit of exemption contained in notification No.5/99-CE dated 28.2.99. 7.4. Learned DR argued that the reply given by the Board to the audit para is not relevant and not conclusive. But he was not able to show that the reply was rejected by PAC and subsequently the decision was modified. In the absence of any such indication, we have to assume that the reply to the audit para reflects the stand taken by the government and has not been changed thereafter. The learned DR fairly admitted that he has no information as to the final conclusion of the C&AS on the issue.
7.5. The learned DR also contended that reliance on the decision of the Honble Madras High Court by the Tribunal was misplaced in view of the fact that the Honble High Court was considering the issue as to whether a particular product is a domestic electric appliance or not. The issue before the Honble Court had nothing to do with the issue before us. However, we take note of the fact that the Tribunal had relied upon the decision of the Honble High Court only for the purpose of showing that in that case also the motor was fitted outside and connected by v-belt and was not inbuilt. Basically the Tribunal was applying the proposition that when a motor is fitted outside and connected by v-belt, it cannot be considered as in-built.
7.6. We also notice that the Commissioner has simply rejected the contention of the appellants stating that they cannot apply to the present set of facts. After considering the issue in depth, we find merit in the appellants contention that the non portable bag closer machine and industrial sewing machines which have motors connected externally with the help of v-belt and pulley are eligible for the exemption.
8. We also find that the issue before the Commissioner was not limited to only this but there were other issues such as liability of the crank shafts manufactured by the appellants, waste and scrap etc.. Apparently, in view of our decision that portable bag closer machines are not eligible for exemption, the eligibility of the appellants for SSI exemption will have to be reconsidered. Prima-facie going by the very nature, crank shafts and waste and scrap would be liable to duty as applicable.
9. Therefore we uphold the order of Commissioner as regards crank shafts and waste & scrap. Further, in view of the fact that the issue involves classification and different interpretations were possible, we do not find fault with the view taken by the appellants that they were eligible for the exemption and therefore they did not need Central Excise Registration. Therefore, penalty imposed on all the appellants is also to be set aside.
10. In the result except for eligibility of portable bag closer machine for exemption under Notification No.6/2002 and the liability of crank shafts and waste and scrap to duty, all other issues are decided in favour of the appellants with consequential relief. The matter is remanded back to Original Adjudicating Authority for re-determining eligibility for SSI benefit, quantum of duty liability, if any, in the light of our conclusions.
(Pronounced in Court_____________________)
(Archana Wadhwa) (B.S.V. Murthy)
Member (Judicial) Member (Technical)
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