Bombay High Court
Kirloskar Cummins Ltd. vs Union Of India on 10 June, 1993
Equivalent citations: 1993ECR42(BOMBAY), 1993(67)ELT72(BOM)
JUDGMENT Pendse, J.
1. The petitioners are a public limited company and runs a factory where various internal combustion engines known as diesel engines are manufactured. The diesel engines are used for various industrial purposes such as generating sets, shovels, oil drilling rigs, bull-dozers, excavators etc. A small number of internal combustion engines manufactured by the petitioners are used in dumpers. For the purpose of manufacture of diesel engines, the petitioners have been importing certain components from time to time, a list whereof is annexed as Exh. 'B' to the petition. The petitioners also import other components such as crankshafts, camshafts, turbochargers, governors, starters, belts etc. Prior to August 2nd, 1976 the said components imported by the petitioners were liable to customs duty under the provisions of the Indian Tariff Act, 1934. At the time of assessment of the components, the customs authorities claimed that the components were liable to countervailing duty under Item No. 34A of Central Excise Tariff.
2. The petitioner disputed the claim made by the authorities pointing out that the components were imported for assembling the internal combustion diesel engines and components are not parts or accessories of motor vehicle. The Assistant Collector of Customs passed various orders and a copy of the specimen order dated February 14,1978 is annexed as Exh. 'C' to the petition. The petitioners filed several appeals before the Appellate Authority but the appeals ended in dismissal and a specimen copy of the appellate order dated October 28th, 1978 is annexed as Exh. 'F' to the petition. The petitioners thereupon preferred revision applications to the Central Government but the applications ended in dismissal and a specimen copy of the revisional order dated November 12th, 1982 is annexed as Exh. 'K' to the petition.
3. The petitioners approached this Court by filing the present petition under Article 226 of the Constitution of February 24,1983 and the relief sought is for setting aside the orders passed by the authorities below and restraining the respondents from recovering any countervailing duty on the components imported by the petitioners. During the pendency of the petition, the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi in a proceeding adopted by the petitioners, accepted their claim that they are not liable to pay countervailing duty in respect of the components imported for the purpose of assembling diesel engines. The petitioners thereupon amended the petition and sought refund of the sum of Rs. 31,77,846.45, particulars of which have been given at Exh. 'D' to the petition.
Shri Korde, learned Counsel appearing on behalf of the petitioners, submitted that the findings of the authorities below that the components imported by the petitioners are liable to payment of countervailing duty is unsustainable. Shri Korde submitted that reliance on Item No. 34A of Central Excise Tariff to conclude that the petitioners are liable to payment of countervailing duty is entirely erroneous. Shri Korde, submitted that it was not in dispute before any of the authorities below that all the components imported by the petitioners had gone into assembly of diesel engines. It was also not in dispute that 89% of the diesel engines manufactured by the petitioners are used for stationary purposes and hardly 11% are used in dumpers. Shri Korde submitted that merely because negligible part of diesel engines are used in dumpers which are treated as motor vehicles, it is futile to suggest that the import of components which went into assembly of diesel engines, were imported as parts and accessories of motor vehicles. In support of the submission, learned Counsel relied upon the decision of one of us (Pendse, J.) reported in [1980(6) E. L. T. 557(Bom)] Kirloskar Cummins Ltd. V. N. K. Kapoor and Others and the decision of the Supreme Court M/s. Annapurna Carbon Industries Co. v. State of Andhra Pradesh.
It is required to be stated that the respondents have not cared to file any return though the petition is pending in this Court for last over ten years. After the petition was amended and the orders of the CEGAT were passed, the hearing of petition was adjourned on more than two occasions to enable the Counsel for the respondents to ascertain whether any appeal is preferred against the orders of the CEGAT before the Supreme Court. Though more than two months have lapsed, the department has not cared to ascertain the fact. Shri Sethna, learned Counsel appearing for the department, very fairly stated that the order of the Tribunal is binding on the department.
4. The short question which falls for determination is whether the authorities below were right in concluding that the components imported by the petitioners are liable to payment of countervailing duty as the said components fall within Item No. 34A of the Central Excise Tariff. Item No. 34A deals with parts of motor vehicles, tractors and trailers and the tariff description reads as under :-
"34A. Parts and accessories of motor vehicles and tractors, including trailers, the following, namely:- (i) Brake linings; (ii) Clutch facings; (iii) Engine valves; (iv) Gaskets; (v) Nozzle and nozzle holders; (vi) Pistons; (vii) Piston rings; (viii) Gudgeon pins; (ix) Circlips; (x) Shock absorbers; (xi) Sparking plugs; (xii) Thinwalled bearings; (xiii) Tie rod ends; (xiv) Electric horns; (xv) Filter elements, inserts and cartridges. Explanation I.-The expression 'Motor vehicles' has the meaning assigned to it in Item No. 34."
The plain reading of the tariff item makes it clear that various articles set out under Item No. 34A are liable to countervailing duty provided the items are parts and accessories of motor vehicles. It is not in dispute that the parts or components imported by the petitioners were for the purpose of assembling diesel engines and it is equally not in dispute that all the components imported forms part of the diesel engines manufactured by the petitioners. On the strength of findings recorded by the authorities below, it is clear that the diesel engines are predominantly used for stationary purposes and a negligent portion of diesel engines are fitted on dumpers which are treated as motor vehicle. It is impossible to accede to the contention of the department that the predominant user of diesel engines should be ignored. Once it is established that the parts were not imported as parts and accessories of motor vehicles, then the application of Item No. 34A can never arise and consequently the liability to pay countervailing duty does not exist. Shri Sethna submitted that the components imported are those which are set out under Item No. 34A and those components were used in the manufacture of diesel engines which were ultimately fitted on dumpers and therefore the components imported should be treated as parts and accessories of motor vehicles. It is impossible to accede to the submission. The parts and accessories even though specifically referred to in Item No. 34A, were imported specifically for the purpose of assembling diesel engines and not as parts and accessories of motor vehicles. The final product i. e. diesel engine may have been fitted on dumper but that would not make every component or part of the diesel engine as part and accessory of the motor vehicle. In our judgment, the view taken by the authorities below is entirely unsustainable and the petitioners are entitled to the relief.
5. Shri Sethna then submitted that even thought the impugned orders are set aside and the respondents are restrained from recovering countervailing duty on the components imported by the petitioners, still the relief of refund sought by amendment cannot be granted. Shri Sethna submitted that unless the department ascertains the correctness of the claim made by the petitioners, it is not permissible to pass the order of refund. It was also pointed out that the department will have to examine the applicability of amended Section 27 of the Customs Act. Shri Korde submitted that the department cannot decline to grant refund by restoring to the doctrine of unjust enrichment and referred to a decision of the Division Bench of this Court reported in [1992 (57) E. L. T. 201 (Bom.)] Solar Pesticides Pvt, Ltd. v. Union of India. We are not expressing any opinion as regards the contention of the petitioners in the present proceeding and that contention will have to be examined by the department while computing the amount of refund to be paid.
6. Accordingly, petition partly succeeds and rule is made absolute in terms of prayers (a), (b)(i) and (b)(ii) only. As regards prayer (b)(iii), the proceedings are remitted back to the Assistant Collector of Customs, Refund Department for passing appropriate order in accordance with law. The Assistant Collector to pass orders on the claim of the petitioners within a duration of six months from the date of receipt of the writ. In the circumstances of the case, there will no order as to costs.