Custom, Excise & Service Tax Tribunal
C.C.E. Chandigarh vs Punjab Tractors Ltd on 26 May, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
Date of Hearing: 14/05/2015
Date of Pronouncement:26/5/2015
Appeal No. E/1855/2005-EX[DB]
(Arising out of OIO No. 48/CE/2004 dated 01.5.2004 passed by Commissioner of CCE Chandigarh)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordships wish to see the fair copy of the order?
4.
Whether order is to be circulated to the Department Authorities?
C.C.E. Chandigarh Appellant
Vs.
Punjab Tractors Ltd Respondent
Appearance:
Present for the Appellant: Smt. Ranjan Khanna, AR Present for the Respondent: Shri B.L. Narsimhan. Advocate Coram: Honble Mr. Rakesh Kumar, Member (Technical) Honble Smt.Sulekha Beevi C.S., Member (Judicial) Final Order No. 51710/2015 Per: Sulekha Beevi C.S. The moot question that arises for consideration in this appeal is whether the Transmission Assemblies (hereinafter referred to as TA) captively consumed in the manufacture of tractors of Engine Displacement Capacity (EDC) below 1800-CC manufactured by respondent during the period 1.8.1996 to 1.06.1998 is exigible to excise duty.
2. Revenue filed this appeal against the Order-in-Original passed by CCE Chandigarh. In the impugned order the CCE has come to the conclusion that it is not established that TA is an excisable product emerging at intermediate stage in the manufacture of Tractors by the respondent. The proceedings initiated for excise duty demand of Rs.5,50,99,810.00 on T.A. was thus dropped.
3. The facts of the case in brief are as under:-
The respondent is engaged in manufacture of Tractors of EDC 1800-CC or below and also EDC above 1800-CC. They are availing Cenvat/Modvat credit on the inputs used in manufacture of Tractors. The factory premise of the respondent was visited by Officers of the Preventive, Central Excise Commissionerate, Chandigarh on 27.6.2001. It was found that the assessee was not paying duty on T.As. used captively in the manufacture of Tractors of EDC below 1800-CC.
4. A show cause notice dated 31.8.2001 was issued to the respondent alleging that the respondent is liable to pay excise duty on 7014 pieces of TAs captively consumed in the manufacture of Tractor EDC below 1800-CC which was exempt from Central Excise duty upto 01.6.1998. The TAs are separately classifiable under Central Excise Tariff heading 8708 and therefore attracted Central Excise duty @ 15% ad valorem during the period 01.08.1996 to 01.06.1998. The exemption Notification No. 67/95-CE dated 16.03.1995 exempts from payment of duty the goods manufactured in a factory and used within the factory for the manufacture of the final products, subject to the condition that final product are fully exempt from duty or attract nil rate of duty. The respondent during the period of dispute had manufactured and captively consumed 7014 pieces of T.A. in the manufacture of Tractor cleared at NIL rate of duty. Accordingly to Department, these 7014 pieces of TAs captively consumed were not eligible for exemption as per Notification No. 67/95-CE dated 16.3.1995. The respondent was thus asked to show cause as to why Central Excise duty of Rs.5,50,99,810/- payable on 7014 TA should not be recovered under Section 11A of the Central Excise Act, 1944 and why penalty should not be imposed under Section 11AC and why interest under Section 11AB should not be demanded and recovered and also why penalty should not be imposed under Section 9(2),173Q and Rule 26 of Central Excise Rules.
5. After adjudication, the proceedings were dropped by the Commissioner, Chandigarh holding that no identifiable product such as TA has emerged in the intermediate stage in the manufacture of Tractor which is exigible to duty. Aggrieved by this Order-in-Original dated 1.5.2004 the Revenue has filed this appeal.
6. The learned Counsel for the appellant Shri Ranjan Khanna submitted that the dutiability of TA needs to be appreciated in light of full facts and records. It is his case that in the process of manufacture of Tractor, TA comes into existence as an independent product and is then put for online assembly along with other components of Tractors. He submits that on 26.7.2001 the officers of Central Excise Preventive took photographs of the assembly which was assembled by putting together the following sub assemblies:
a) differential sub-assembly including trumpet I axle sub-assembly.
b) Rear cover sub-assembly.
c) Gear box sub-assembly.
d) Steering sub-assembly.
That the sub-assembly has a specific function of transferring energy generated by the engine to its wheels and that it is an integral part of Tractor; and one T.A. is used per Tractor. He relied upon the technical opinion and explanation of the word transmission and contended that T.A. comes into existence in the premises of the respondent which is marketable. That actual sale of the article is not important, but it must be capable of being bought and sold. He also submitted that the extended period of limitation is to be invoked in this case as there is fraud, willful misstatement and suppression of facts. In support of his argument he relied on the following judgement:
i) Union of India Vs. J.G. Glass Industries Ltd. reported in 1998 (97) E.L.T. 5 (S.C.)
ii) Escorts Ltd. Vs. CCE, New Delhi-IV reported in 2004 (172) E.L.T. 223 (Tri.-Del.)
iii) M/s ESCORTS LTD Vs. CCE, Faridabad reported in 2015-TIOL-92-SC-CX Civil Appeal No. 6561 of 2004, Civil Appeal No. 457 of 2006 and Civil Appeal Nos. 9469-9470 of 2010 judgment dated 29.4.2015.
7. The submissions made for the respondent by learned Counsel Shri B.L. Narsimhan was two fold. Firstly, that TA was not something which came in to existence in the manufacture of Tractor but was only part of continuous process of manufacture. He laid much thrust on the finding of the CCE Chandigarh that no identifiable product such as, TA has emerged at intermediate stage in the process of manufacture of Tractor by respondent. According to him so-called TA was only an aggregate of various sub assemblies which connected the engine of Tractor with its wheels. He pointed out that the TA which is relied on by the revenue as an excisable product was only components in the continuous process of manufacture. He contended that the sub-assemblies would not constitute T.A. which is excisable under law. The second argument advanced by the respondent is that they have not sold a single TA and the TA was designed for respondents Tractor. Therefore, it was not exigible to duty.
8. We have heard both sides and considered the matter carefully. The issue whether T.A. is an excisable good emerging in the course of manufacture of Tractor has been analyzed in detail and settled by the Apex Court in M/s ESCORTS LTD Vs. CCE, Faridabad (supra). Therefore we do not think it necessary to delve into the submissions and various judgments placed before us. The Apex Court in the above case, whose facts are identical to the facts of this case, has held that TA comes into existence during manufacture of Tractor, is an intermediate product and the same is a distinct product commercially known to the market as such. The Apex Court has categorically held that the transmission assemblies of tractors are commercially known products, and that the fact that not a single sale of such Assembly has been made by the appellants is irrelevant. The ratio in the above case is squarely applicable to the case before us. We, therefore, have no doubt to hold that in this case the TAs came into existence in manufacture of Tractors by the respondent and the same are excisable goods. We therefore, uphold the levy of excise duty on TAs which came into existence in the course of manufacture of Tractors,
9. The next issue to be addressed is whether the extended period of limitation can be invoked in the present case. The period of dispute is from 1.8.1996 to 1.6.1998 for which SCN has been issued on 31/8/2001. The learned Departmental Representative strenuously argued that there is fraud, wilful misstatement and suppression of facts on the part of the respondent as the respondents knew that T.A. was marketable and as such had suppressed this fact while claiming exemption of excise duty on the Tractors below 1800-CC. That therefore it is a fit case to invoke the extended period of limitation.
10. Against this the learned counsel for the respondent submitted that respondent was under bonafide belief that TA emerging as intermediate product in the manufacture of Tractor was not subject to excise duty and that there was no fraud willful mis-statement or suppression of facts. We find some force in this argument. In the process of manufacture filed with the department, from time to time the respondent has declared the identifiable sub assemblies. The process of manufacture undertaken by respondent has been made known to the department. It has never been the case of Department that these sub-assemblies were suppressed in the declaration filed and applying the decision in M/s.Escorts Ltd. v.CCE (supra). In such circumstances, the respondent cannot allege of any contumacious conduct warranting invocation of extended period. We, therefore are of the view that respondent cannot be accused of any fraud, wilful misstatement or suppression of facts so as to invoke the extended period of limitation clause as per proviso to Section 11A(1) of the Central Excise Act, 1944. Since the Show Cause Notice for demand of duty for the period from 1.8.1996 to 1.6.1998 has been issued on 31.8.2001, the same is wholly time barred and the duty demand is not sustainable on limitation.
11. In view of the above discussion the impugned order is not sustainable and the same is set aside. The appeal is disposed accordingly.
(Pronounced on 26/5/2015)
(Sulekha Beevi C.S.) (Rakesh Kumar)
Member (Judicial) Member (Technical)
K. Gupta
8