Customs, Excise and Gold Tribunal - Delhi
Perfect Electric Concern (P) Ltd. vs Collector Of Central Excise on 10 March, 1987
Equivalent citations: 1987(32)ELT110(TRI-DEL)
ORDER M. Santhanam, Member (J)
1. The revision application filed before the Govt. of India, on transfer to the Tribunal is being treated as an appeal.
2. The appellants manufacture Motor Vehicle Parts and accessories at Sunder Nagar, Jamshedpur. During the period prior to 1-3-1979, the goods were exempted under Notification No. 99/71 dated 29-5-1971. During the Finance Bill of 1975 Motor Vehicle Parts were taken of TI 34A and were described as "Parts and Accessories of the Motor Vehicles, tractors including trailers as having been specified under TI 34A but classifiable under the said items". The above description determined the liability till enactment of the Finance Bill of 10-5-1979. From 1-3-1979 to 31-3-1979 clearances not exceeding Rs. 1,25,000/- were allowed in respect of unclassified motor vehicle parts subject to the condition (i) that the Capital Investment on Plant & Machinery in the factory was below Rs. 10 lacs and the clearance value of such parts and accessories during the period 1-4-1978 to 28-2-1979 did not exceed Rs. 27,50,000/-. For the period 1-4-1979 to 9-5-1979 clearances upto Rs. 2,00,000/- was exempted from duty under Notification No. 146/79 dated 30-3-1979 subject to the condition that the capital investment on plant and machinery was below Rs. 10,00,000/- and the clearance value of the goods under TI 68 during the previous financial year 1978-79 did not exceed Rs. 30,00,000/-. Unclassified motor vehicle parts and accessories fell under TI 68 from 10-5-1979 when the Finance Bill was enacted.
3. The controversy in this case arose out of three show cause notices. The first show cause notice is dated 30-8-1978 and related to the period 1-3-1979 to 30-4-1979. In this show cause notice it was alleged that the appellants had cleared more than the value admissible for exemption i.e. from 1-4-1978 to 28-2-1979 they have cleared goods for Rs. 28,65,789.01.
4. The second show cause notice was issued on 23-2-1980 for the period 10-5-1979 to 6-8-1979. In this show cause notice it was alleged that the clearances to the value of Rs. 7,37,316.45 was removed without payment of duty.
5. The third show cause notice was issued on 23-2-1980 for the period 17-8-1979 to 12-10-1979, alleging that there was a short levy of Rs. 6,991.74. In their reply to the first show cause notice, the appellants contended that the motor vehicle parts were used as original equipment by M/s. TELCO Ltd. It was also urged that the appellants were exempted from applying for the licence. They were also completely exempted from Central Excise formalities prior to Finance Bill, 1979. They claimed the benefit of Notification No. 74/79 dated 1-3-1979 in respect of the supply as original equipment. For the second show cause notice it was urged that for calculating the aggregate value of clearances under Notification No. 89/79 dated 1-3-1979, the value of clearance of motor vehicle parts and accessories under TI 34A was completely exempted. They were also not required to take a licence under Notification No. 31/76 dated 28-2-1976. For the third show cause notice the appellants urged that they have fulfilled the conditions envisaged in Notification No. 89/79 dated 1-3-1979 and hence the demand could not be justified.
6. The Asstt. Collector in his order held that before 1-3-1979 unclassified motor vehicle parts were exempted from duty and licencing control. By a Finance Bill, 1979 those parts were brought under licencing control and were made liable under Notification No. 76/79. The parts were classified under TI 34A upto 9-5-1979. From 10-5-1979 these came to be classified under TI 68. The Asstt. Collector held that the value of clearances from 1-4-1978 to 31-3-1979 had exceeded Rs. 30,00,000/-and, therefore, the appellants were not entitled to the benefit of Notification No. 89/79. For exemption during March, 1979, the clearances from 1-4-1979 to 28-2-1979 exceeded Rs. 27,50,000/- and on that account the appellants were not entitled to any relief. The Asstt. Collector confirmed the demand from 1-3-1979 to 12-10-1980 and also imposed a penalty of Rs. 1,500/-. On appeal, the demand was confirmed but the order of penalty was set aside.
7. Shri B.B. Gujral, learned counsel for the appellants filed an application raising a plea that in any event the motor vehicle parts and accessories fall under Item 34A from 1-3-1979 and supplied as original equipment and that the manufacturers were entitled to the benefit of Notification No. 74/79. He urged that such additional claims could be raised and it would not change the nature of the enquiry. The powers of the Tribunal are very wide and depended upon sound judicial discretion. He relied on the following rulings :-
(1) 1984 (18) E.L.T. 476 (2) 1987 (29) E.L.T. 1001 (3) 1984 (15) E.L.T. 186.
8. Shri A.K. Jain, SDR submitted that this is a new claim and that the appellants should not be allowed to raise any grounds which were not raised before the Appellate Collector. Emphasis was laid on the doctrine of merger. The SDR relied on 1987 (164) ITR 1987 (MP), 1986 (157) ITR 549 (Kar) and 1967 SCR Vol. 1 463 and also 1986 (154) ITR 277.
9. On a perusal of the documents we found that it was not a new claim and that the appellants have referred to the exemption under this notification even in their reply to the show cause notice. As the contentions have been put forward at the earlier opportunity, and the matter involves classification, in the interest of justice we allow the appellants to raise the additional grounds. The application was allowed.
10. On merits, Shri B.B. Gujral, learned counsel for the appellants urged that the show cause notice did not mention the particulars of the exemption notification nor quantify the demand. Particulars as to the rate were also wanting. There was no reference as to why Rule 9(2) was resorted to.
11. Regarding the second show cause notice it was alleged that the old claim was barred by time and that the particulars were not furnished even in this show cause notice. The third show cause notice was also devoid of particulars. In the order duty had been demanded from 1-3-1979 to 12-10-1979 even though the three show cause notice did not cover the entire period. The first show cause notice was for the period 1-3-1979 to 30-4-1979, second show cause notice was from 10-5-1979 to 6-8-1979 and the third show cause notice was from 17-8-1979 to 12-10-1979. The order of the Asstt. Collector included the periods not covered by the show cause notices. The duty had not been quantified and no reasons have been given for imposing a penalty.
12. On merits, Shri Gujral urged that for the period 1-3-1979 to 9-5-1979, the benefit of Notifications 74/79 & 75/79 should be accorded and the matter had not gone into by the lower authorities. In respect of Notification No. 89/79 which is applicable for the period 10-5-1979 to 12-10-1979, it was urged that the total clearances of Rs. 30 lacs should be in respect of goods falling under TI 68. In this case, prior to that date, the items manufactured by the appellants fell under TI 3 4A. The authorities ought not to have construed the clearances under TI 34A as clearances of goods under TI 68. All the items manufactured by the appellants were assessable under Item 68 only after the Finance Bill and the relief ought not to have been denied to the appellants. He laid emphasis on the words "said goods" occurring in the notification. The penalty was not justified and the Appellate Collector has wrongly mentioned the amount as Rs. 150/- instead of Rs. 1,500/-. He also placed reliance on the following rulings:-
(1) AIR 1976 (S.C.) 57 (2) 1985 (19) E.L.T. 329 (M.P.) (3) 1985 (21) E.L.T. 727 (it) 1983 (12) E.L.T. (533) (5) 1986 (23) E.L.T. 205 (Trib.) The SDR submitted that the appellants did not have L-4 Licence till 23-6-1979 from Item 68 goods and only from 1-4-1979 for goods falling under 34A. In the absence of licence, the appellants are not entitled to the benefit of the notification. He relied on AIR 1976 (SC) 2221 and also Order No. 127/84-C dated 29-2-1984 and Order No. 98/84-C dated 22-2-1984. 1984 (17) E.L.T. 127 was also cited. He urged that the question of time bar was not raised by the appellants and that they cannot raise the plea now. 1983 (12) E.L.T. 728 (Mad) and 1983 (14) E.L.T. 1870 were cited. It was contended that Rule 9(2) made mention of only a written demand and not a show cause notice. The charges were specific in this case and no prejudice has been caused. Notification No. 75/79 cannot be applicable because the appellants have not claimed the benefit of the notification and they have not followed Chapter 10 procedure. In regard to Notification No. 89/79, the SDR submitted that from the date of Finance Bill, the rate of duty was 8% on non-specified items under 34A which was the same as Item 68 goods. Even non-specified items under TI 34A should be taken into account for the purpose of determining the 30 lacs mentioned in Notification No. 89/79. The ruling 1986 (24) E.L.T. 492 - 1986 (8) E.C.C. 78 was cited for the proposition that a notification had to be so construed as would achieve the objective of granting the rebate in the Excise duty.
13. The points for consideration in this appeal are :-
(i) Whether the appellants are entitled to the benefit of Notification No. 74/79 and 75/79?
(ii) Whether the appellants are entitled to the benefit of Notification No. 89/79? and
(iii) Whether the demands are justified?
14. The three show cause notices related to three different periods. For the purpose of appreciating the controversy, the following facts should be noted. The appellants are admittedly manufacturers of non-specified motor vehicle parts. The period and the value of clearances are as follows :-
Period Value of Clearance 1-3-1979 to 31-3-1979 Rs. 3,55,367.60 1-4-1979 to 9-5-1979 Rs. 4,25,532.30 10-5-1979 to 16-8-1979 Rs. 7,37,316.45
15. The Notification No. 74/79 dated 1-3-1979 exempted parts and accessories of motor vehicles and tractors including trailers falling under TI 34 of the First Schedule from the whole of the duty of excise thereon - Provided that -
(i) It is proved to the satisfaction of the Collector of Central Excise and subject to the conditions and procedure prescribed by him that the aforesaid parts or accessories are intended to be used in the manufacture of assembled components of motor vehicles, and tractors including trailers, such as Automobile Engines, Pistons, Assemblies, Break Assemblies and Clutch Assemblies and such assembled components are utilised as original equipment parts by the manufacturers of motor vehicles and tractors including trailers falling under Item 34 of the aforesaid First Schedule; and
(ii) In relation to any concession in respect of any such parts, the procedure set out in Chapter X of the said rules is followed by such manufacturer of assembled parts.
16. Notification No. 75/79 also exempted parts and accessories of motor vehicles and tractors. But this notification had a condition that
(i) it should be proved to be to the satisfaction of an officer not below the rank of an Asstt. Collector of Central Excise that the aforesaid parts of accessories are intended to be used as original equipment parts by the manufacturers of motor vehicles and tractors including trailers falling under Item No. 34 of the aforesaid First Schedule-, and
(ii) in relation to any concession in respect of any such parts or accessories, the procedure set out in Chapter X of the said rules is follows.
The Notification No. 74/79 would, therefore, apply to assembled components. In this case, the parts are stated to have been used as original equipments and hence Notification No. 75/79 alone would be attracted. Thus applicability of Notification No. 75/79 has to be considered by the lower authorities. We must point out that the appellants have raised this plea specifically in reply to the show cause notices but it was not considered. The appellants have now raised the plea by way of additional grounds and we are of the view that the applicability of this notification has to be considered by the department. This would relate to the period 1-3-1979 to 30-4-1979 covered by the first show cause notice. Shri A.K. Dain argued that the benefit of notification should have been claimed even at the time of clearance. In this case, we find that the appellants have supplied the parts as original equipment to TELCO and even their GP. 11 discloses such a supply. They have also set out this claim in their reply notice. Under those circumstances, we are of opinion that the applicability of Notification No. 75/79 has to be determined with reference to the contemporaneous documents.
17. In regard to the periods 10-5-1979 to 6-8-1979 and 17-8-1979 to 12-10-1979, the appellants claimed the benefit of Notification No. 89/79. This notification exempted goods falling under Item 68 and cleared for home consumption on or after the first day of any Financial year. The first clearance be to the value not exceeding Rs. 15 lacs is exempted from the whole of the excise duty. This notification also refers to the subsequent clearance. The material portion of the notification is Clause (2) which reads as follows :-
"Nothing contained in this notification shall apply to a manufacturer of the total value of the said goods cleared for home consumption by him on his behalf from one or more factories in the preceding financial year and exceeded rupees thirty lakhs."
The lower authorities have denied the exemption to the appellants on the ground that during the preceding financial year, the total value of TI 34A goods exceeded Rs. 30 lacs. The department endeavoured to point out that notifications prior to 89/79 have also to be looked into in order to find out the objective of the notification.
18. Prior to 1-3-1979, the unclassified motor vehicle parts and accessories were exempted under Notification No. 99/71 dated 25-9-1971. The licence formalities were also waived under Notification No. 31/76 dated 28-2-1976. For the period 1-3-1979 to 31-3-1979 Notification No. 77/79 dated 1-3-1979 was in force. A perusal of this notification shows that the Capital investment on Plant and Machinery should be below Rs. 10 lacs and the clearances value of parts and accessories during the period 1-4-1978 to 28-2-1979 should not exceed Rs. 27,50,000/-.
19. From 1-4-1979 to 9-4-1979 Notification No. 146/79 was issued and the whole of duty of excise was exempted upto the aggregate value of Rs. 2 lacs. Nothing contained in this notification would apply if the aggregate value of the goods under 34A and goods under T1 68 exceeded Rs. 30 lacs during the preceding financial year. Notification No. 89/79 was issued on 1-3-1979. It was applicable to 68 goods. The restriction is that the total value of the said goods during the preceding financial year should not have exceeded Rs. 30 lacs. The lower authorities have construed this notification as one issued solely for goods under 3 4A. They have interpreted this notification against the appellants on the ground that during the preceding financial year, the aggregate value of the clearances had exceeded Rs. 30 lacs. This interpretation is fallacious because the restriction is to "said goods". If a manufacturer had cleared Item 68 goods daring preceding financial year exceeding Rs. 30 lacs, the benefit of Notification No. 89/79 could not be extended to him. In this case the appellants have not produced Item 68 goods exceeding Rs. 30 lacs. They have produced Item 34A goods but the benefit of Notification No. 89/79 cannot be denied to them on that account. Each notification has to be read distinctly and if the intention was to deny the benefit to manufacturers of goods other than 68 also, the Govt. would have used the phraseology as in Notification No. 146/79. In the absence of such a wording the benefit of Notification No. 89/79 cannot be denied to the appellants. The contention that the appellants have not taken out a licence has to be rejected because even the Appellate Collector has set aside the penalty imposed on that account. Further the appellants had applied for licence and the Appellate Collector has held that the allegation that they had manufactured and cleared excisable goods without valid licence had failed. Under those circumstances, the benefit of Notification No. 89/79 cannot be denied.
20. We also notice that the second show cause notice was for a period beyond six months and in the absence of any plea of suppression of clandestine removal, the demand cannot be sustained. The SDR urged that Rule 9(2) referred to a written demand and not a show cause notice. But in this case, the Revenue has issued show cause notices and the contention of the SDR is not tenable.
21. Hence on a careful consideration of the contentions, we hold that the matter has to be remanded to the Asstt. Collector for determining the applicability of Notification No. 75/79 in respect of period 1-3-1979 to 30-4-1979. The demand for the remaining period cannot br sustained. The Appellate Collector has set aside the penalty but has by mistake referred to the amount as Rs. 150/- instead of Rs. 1,500/-. We direct the entire penalty of Rs. 1,500/- be set aside. The impugned orders are modified and the matter is remanded to the Asstt. Collector for determining the applicability of Notification No. 75/79 for the period 1-3-1979 to 30-4-1979. The demand is set aside for the remaining period.
The appeal is disposed of accordingly.