Customs, Excise and Gold Tribunal - Delhi
Perfect Sealing Systems Private ... vs Collr. Of C. Ex. on 6 November, 1996
Equivalent citations: 1997(91)ELT205(TRI-DEL)
ORDER
S.K. Bhatnagar, Vice President
1. This is an appeal filed against the order of Collector of Central Excise, Pune dated 29-11-1985.
2. Learned Counsel stated that the appellants were engaged in the manufacture of four types of filter elements bearing Nos. 158139, 256834, 3226018 and 3226019, according to the specifications and designs supplied by Kirolskar Cummins Ltd., Pune (KCL). The said filter elements are exclusively or in any event, for a maximum purpose, used in industrial products such as compressors, generating sets, marine propulsion, quarry equipment, standing power unit for radar installation, vacuum evacuating grains handling units, pressure evacuating cement handling units, rock crushers, concrete mixers, conveyor belts, draglines, backhole mechanical cranes, general fluid filtration, air filtration fuel/water filtration and generally for all predominantly industrial and non-vehicular usages.
3. The appellants were enrolled under the Shops and Establishments Act. They had four workers (but increased to nine at the time). They were manufacturing filters and gaskets for industrial use and their annual capacity was approximately Rs. 20 lakhs and annual turnover was approximately Rs. 16.75 lakhs. The appellants were not a "factory" within the meaning of Section 2(m) of the Factories Act, 1948 since at the relevant time, the appellants employed only nine persons.
4. By a Notification No. 85/79-C.E., dated 1-3-1979, the Central Government exempted, under Rule 8(1) of the Central Excise Rules, all goods falling under Tariff Item No. 68 of the First Schedule to the said Act and manufactured in a factory from the whole of the duty. By the Explanation to the said notification, the expression "factory" had been assigned the meaning as in Section 2(m) of the Factories Act, 1948. By a Notification No. 46/81-C.E., dated 1-3-1981, issued under Rule 8(1) of the said Rules, the Central Government once again exempted all the goods falling under Tariff Item 68 of the First Schedule to the said Act under the goods manufactured in a factory from the whole of the duty. On account of the aforesaid two Notification Nos. 1 and 2, the goods of the appellants were exempted from payment of excise duty.
5. By its Notification No. 31/76, dated 28-2-1976, the Central Government inter alia notified that the goods falling under Tariff Item No. 68 of the First Schedule were exempt from the operation of Rule 174 of the said Rules. By virtue of the said Notification No. 3, the appellants were exempt from obtaining any licence, in respect of its products, under Section 6 of the said Act.
6. Tariff Item No. 34A inter alia provides for payment of 20% ad valorem duty plus 5% of 20% on parts and accessories of motor vehicles, tractors, including tractors described thereunder. Sub Item (3) of Tariff Item 34A mentions "engine valves" and sub-item (15) mentions "filter elements, inserts and catridges". Explanation I under Tariff Item No. 34A defines the expression 'motor vehicles' having the meaning assigned to it in Item 34. Item No. 34 defines motor vehicles to mean all mechanically propelled vehicles, other than tractors, designed for use upon roads.
7. On 25th February, 1984, the Superintendent, Central Excise, visited the premises of the appellants and seized the goods belonging to the appellants described as filter elements' of the value of Rs. 96,364.60 under a Panchnama on the ground that no central excise licence in Form. No. L 4 had been obtained and no declaration had been filed from time to time by the appellants. On the date of the said seizure, since the Chairman of the appellants was out of India, the statement of the appellants' Accountant was recorded on 28th February, 1984. Thereafter, an affidavit of one of the Directors of the appellants dated 1-3-1984 was submitted to the Superintendent, Central Excise and it was stated that the seized goods were predominantly used as components of internal combustion engines and hence were exempt from payment of any excise duty. Some correspondence ensued thereafter between the appellants and the Department and a statement of the Chairman of the appellants was recorded on or about 13-3-1984.
8. Thereafter, a show cause notice dated 10th August, 1984 was issued by the Additional Collector, Central Excise, Pune and served upon the appellants. A detailed reply to the show cause notice was submitted by the appellants on 15-10-1984. Several documents were tendered along with the said reply to the said show cause notice. Written submissions dated 24-11-1984 were also filed with the Collector of Central Excise and Customs. A personal hearing was given to the appellants on 19-12-1984. During the course of the arguments before the Collector, Central Excise, the following points were highlighted :-
(a) That by a judgment and order dated 10th October, 1984 passed by the Hon'ble Tribunal bearing No. 750/84B in Appeal No. ED (SB) (T) 713/81B arising out of Order No. 21/81 dated 16th June, 1981 wherein Kirloskar Filters Ltd. were the appellants and the Collector of Customs, Pune was the respondent, it was inter alia held that since the filters in question were manufactured for Kirloskar Cummins Ltd. and that since 90% of them were utilised in stationary and industrial application, they were predominantly used in stationary and industrial applications, and hence were not chargeable to excise duty applicable to the motor vehicle parts.
(b) That the show cause notice dated 10-8-1984 made a reference to the order passed by the Central Board of Excise and Customs bearing No. 21/81 dated 16th June, 1981 which was the subject matter of the aforesaid appeal and that hence, the final order was the said order dated 10-10-1984 of the Tribunal, which was binding on the Collector of Customs and not the said order dated 16th June, 1981. The Collector should rely upon the said order of the Tribunal and hold that the said goods produced and manufactured by the appellants were not chargeable to excise duty and that the Collector should order accordingly.
(c) That the show cause notice on the face of it was barred under Section 11A of the said Act.
(d) That relying upon the affidavit made by Kirloskar Cummins dated 22-8-1984, it was proved that the filter elements which were being supplied by the appellants to Kirloskar Cummins were being used by the said Company which were manufacturing only internal combustion engines which were commonly known as Diesel Engines and that the predominant use of the engines was for industrial type (99.5%) and a very negligible percentage (about less then 0.5%) was for vehicular type of applications.
(e) The said decision dated 10-10-1984 of the Hon'ble Tribunal was binding on the Collector and that the show cause notice should therefore, be quashed.
(f) The certificate dated 24-3-1984 issued by the Automotive Research Association of India and which certified that the filter elements manufactured by the appellants cannot be fitted in any of the automotive engines manufactured by KCI was conclusive evidence of the fact that the filter elements were applicable to non-vehicular engines.
(g) That in the circumstances, the filter elements manufactured by the appellants should be classified as exempted from excise duty under Tariff Item 68 and should not be classified under Tariff Item 34A.
9. In this connection, they would also like to draw attention to the catalogues of Kirloskar Cummins and in particular, to the Table of contents of the part catalogue for engine models N-743-NT-743-NTA-743 which includes cleaner air, filter fuel, filter lubricating oil and displays the drawings of the machine and its parts.
10. Learned DR drew attention to the impugned order and emphasised in this connection that admittedly these are components of the type which have got vehicular type of applications also. Further, the filter elements, inserts and cartridges are specifically noted in Tariff Item 34A of Central Excise Tariff. Therefore, there is no reason why they should not be classified under this heading.
11. CEGAT's judgment in Kirloskar Cummins case is a judgment 'in personam' and the aspect that the filters are used in dumpers and haulers whose main function is that of transportation or conveyance and the said filters are required to be treated as specified parts of motor vehicles has to be appreciated.
12. Further, the certificate issued by the Automotive Research Association of India can only be considered when there is ambiguity in Tariff Item. But, where there is an explicit provision in the tariff itself, there was no need to look towards any other opinion.
13. The demand is not time barred as the appellants have neither taken out a licence nor filed any declaration or complied with any other central excise formality and the facts were discovered only during the course of the visit of the Inspector of Central Excise and subsequently, the Superintendent.
14. We have considered the above submissions. It has already been held in a series of judgments and orders of the Tribunal that parts of internal combustion engines which are predominantly or mainly or principally used in stationary type of industrial vehicles are classifiable under Tariff Item 68. That some of them may be interchangeable with vehicular type of engines does not make any difference as it is not the inter-changeability but predominant use which is the main criterion to be kept in view.
15. Since the parts manufactured by the appellants are meant for Kirloskar engines of the above type as evident from the catalogue and part catalogue, the ratio of these orders of the Tribunal will apply in the case of the appellants also. The fact that some of them can be used in dumpers also and dumpers are recognised as a type of motor vehicles has also been taken note of in some of these orders of the Tribunal and does not make any difference. The Department's appeals against the Tribunal's orders have been dismissed by the Hon'ble Supreme Court and therefore, they have become final and therefore, the benefit will have to be extended to the appellants also.
16. Furthermore, the point that all the items in question have been mentioned in Tariff Item 34A does not help the Department in view of the above position in respect of parts of engine used for non-vehicular applications as well as dumpers. Although the dumpers are motor vehicles, the Department has not been able to show that they are of a type classifiable under Tariff Item 34A as observed in Tribunal's Final Order Nos. C/1078-1085/96-B2, dated 18-10-1996/25-10-1996 in the case of Kirloskar Cummins Limited where the tariff entries and the HSN explanatory notes have been referred to.
17. In the same order, various other orders and judgments have been discussed and it has been noted that the Tribunal's orders have emphasised the pre-dominant of normal use of articles and it has been held that since dumpers are generally fitted with off-the-road wheels, it cannot be said that they are designed for or normally used upon roads although the excavated or other material could be transported in them over soft ground as well as roads. In fact, certain dumpers are specially designed for working in mines and tunnels as mentioned in HSN itself which have classified them under Heading 8704.10 as vehicles designed for off-highway-use.
18. Since the Hon'ble Supreme Court had dismissed the Department's appeals against the Tribunal's orders regarding motor vehicle parts used in Kirloskar Cummins Engines of stationary types and dumpers, the criterion of predominant use is to be kept in view; And, the Department has also not been able to produce any evidence to show that the quantity in question was used in motor vehicles of a type classifiable under Tariff Item 34 whereas the appellants have produced the catalogue and part catalogue of Kirloskar Cummins in support of their contention which is found to be correct.
19. In view of the above position, the appeal is accepted.