Custom, Excise & Service Tax Tribunal
M/S. Bharat Sanchar Nigam Ltd vs Commissioner Of Central Excise, ... on 29 January, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
EAST ZONAL BENCH: KOLKATA
EXCISE APPEAL NO.E/A/43/2008
(ARISING OUT OF ORDER-IN-ORIGINAL NO.21/COMMR/CE/KOL-III/2007-08 DATED 15.10.2007 PASSED BY COMMISSIONER OF CENTRAL EXCISE, KOLKATA-III COMMISSIONERATE)
FOR APPROVAL AND SIGNATURE OF
SHRI S.K.GAULE, HONBLE TECHNICAL MEMBER
DR. D.M.MISRA, HONBLE JUDICIAL MEMBER
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should 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 Departmental :
Authorities ?
M/S. BHARAT SANCHAR NIGAM LTD.
APPELLANT (S)
VERSUS
COMMISSIONER OF CENTRAL EXCISE, KOLKATA-III
RESPONDENT (S)
APPEARANCE:
SHRI A.D.RAY, ADVOCATE FOR THE APPELLANT(S);
SHRI S.MISRA, A.R.(ADDL. COMMR.) FOR THE REVENUE.
CORAM:
SHRI S.K.GAULE, HONBLE TECHNICAL MEMBER DR. D.M.MISRA, HONBLE JUDICIAL MEMBER Date of Hearing: 06.11.2012 Date of Decision:29.01.2013 ORDER NO. A-15/KOL/2013 Per Dr. D. M. Misra This Appeal is directed against the Order-in-Original No.21/COMMR/CE/KOL-III/2007-08 dated 15.10.2007 passed by Commissioner of Central Excise, Kolkata.
2. The facts of the case, in brief, are that on the basis of information, the Officers of Anti-Evasion Unit, Kolkata-III Commissionerate, visited the Panihati Telephone Exchange, BT Road, Panihati, 24-Paraganas (North) and, the Office of the Appellant at Kolkata for verification of the invoice raised by M/s. Alcatel Network Systems India Ltd., Gurgaon on the Appellant for supply of component parts of Digital Switching System as per the Purchase Order No.ES/079/PHT-OCB dated 14.01.2002. Consequently, from time to time, documents were collected and Statements of the employees were recorded and necessary investigation was conducted on the installation of the Digital Switching System at the said premises. On completion of investigation, a show cause-cum-demand notice was issued to the Appellant on 15.01.2007 alleging that the Appellant had assembled various parts of the Digital Switching System at Panihati Telephone Exchange, chargeable to Central Excise duty under the Chapter Heading 85.17 of Central Excise Tariff Act, 1985, but failed to discharge duty of Rs.1,03,64,469/- on installation of the said Digital Switching System at Panihati Telephone Exchange, which was put to use in July, 2002. The ld. Commissioner of central Excise confirmed the demand and imposed equivalent penalty on the Appellant under Section 11AC of the CEA, 1944. Aggrieved, the Appellant is in appeal.
3. Shri A.D.Ray, Advocate for the Appellant has submitted that the Appellant is a Government of India Undertaking and provider of telephone services. For providing such services, it require various upgraded systems and one such system is known as Digital Local Telephone Exchange Equipment (DLTEE) System. The ld. Advocate further submitted that the Appellant had placed an Advance Purchase Order(APO) bearing No.IT/APO/034/2001-02 dated 01.11.2001 and a Purchase Order bearing No.ES/079/PHT-OCB dated 14.01.2002 on M/s. Alcatel Network Systems India Ltd. The said material was received by them under Packing Note-cum-Delivery Challan No.P-1-75 being case No.INPDC-65919/1-141 and the required Central Excise duty was paid on the same. He has submitted that from the said APO and the PO, it is crystal clear that the Appellant could not have manufactured the said Digital Local Exchange System, as they did not have necessary expertise to manufacture the same, since in the APO as well as in the PO, it had been specifically stipulated that all technical assistance like training for installation, commissioning and monitoring of the equipment would be provided by the supplier of the said equipment. He has submitted that the present system was an extension of the main system.
4. Further, the Ld. Adv.has submitted that the Central Excise authorities had visited the said premises of the Appellant under a wrong notion that DLTEE is an excisable commodity, and therefore the Appellant should discharge excise duty being manufacturer of the said System. He has submitted that such a System is not available in the market. He has contended that the statements that were recorded from various employees of the Appellant, wherein it had been stated that various equipments assembled at the site of the Exchange was neither sold nor used for consumption and manufacture of other articles. He has submitted that even though it was alleged in the impugned Notice that the said Exchange was assembled, the Department could not show that the said System had been bought and sold in the market as a commodity. He has relied on the judgement of the Honble Supreme Court in the case of Board of Trustees vs. CCE [2007(216)ELT 513(SC)] in submitting that the onus lies on the Department to establish that such a commodity is available in the market.
5. Further, he has submitted that in the statements of the employees furnished to the Department, it has been categorically stated that the System is fixed to the ground so that it does not get displaced while running. It is his argument that this fact itself proves that the System cannot run successfully without affixing it to the ground, thereby, making it immovable and not marketable for all practical purposes. He has submitted that the Certificate issued by M/s. ITI on whom M/s. Alcatel Network Systems India Ltd. placed the sub-contract for supply of such a System in dismantled condition, shows that the entire system was so huge that it could not be moved as a whole and accordingly, on its assembly at the site of the Appellant, becomes immovable.
6. Further, he has submitted that assuming though not admitting that a new equipment had emerged, but since the same was never brought outside from the place where it was assembled nor used in the manufacture of any excisable commodity, hence, no duty was payable on the same. It is submitted that for calculating duty of excise, goods are to be valued and for determination of value, Section 4 of the Central Excise Act needs to be adopted. It is contended that if value cannot be determined under Section 4(1)(a) simply on the sale price, then it would be determined in such a manner as prescribed, that is, under Rules, which is, Central Excise (Determination of Price of Excisable Goods) Rules, 2000. His contention is that under such Rules, valuation is arrived at, if the goods are sold some way or the other except under Rule 8 of the said Rules, which clearly states that if the goods are not sold but used for consumption and for manufacture of other articles, the value shall be the cost price. Finally, these Rules also state that if still the value cannot be determined, then the same sould be ascertained by reasonable means consisting of the principles of these Rules and Section 4 of the Act. He has further submitted that in such circumstances, the principles to explanation to Rule 5 of Central Excise Rules, 2002 would be relevant as to the date of removal and would be the date when the goods were issued for consumption or for manufacture of other articles. It is his submission that in view of the above provisions when the special Digital switching system was not moved out of the premises nor used for further manufacture of other articles, the question of valuation of the same under Central Excise Law does not and cannot arise. In support, he has placed on the following judgments,viz. Anjaleem Enterprises Pvt. Ltd. vs. CE, Ahmedabad 2006(194)ELT 129(SC); CCE, Belgaum vs. Akay Cosmetics Pvt. Ltd. 2005(182)ELT 294 (SC); Indorama Synthetics (I) Ltd. vs. CCE, Nagpur 2005(190)ELT 193(Tri.-Mumbai); Metzeller Automotive Profiles India P. Ltd. vs. CCE, Ghaziabad 2004(167)ELT 208(Tri.-Delhi); CCE, Mumbai vs. Ashida Electronics Pvt. Ltd. 2011(272)ELT 305(Tri.-Mumbai); and Indica Laboratories Pvt. Ltd. vs. CCE, Ahmedabad 2007(213)ELT 20(Tri.-LB). Further, he has submitted that on an identical issue in respect of Dum Dum Telephone Exchange, the ld. Commissioner (Appeals) has decided another case in their favour.
7. Per contra, Ld. AR (Addl. Commr.) for the Revenue has submitted that the Appellant had floated tender for supply of Digital Local Telephone Exchange Equipment (DLTEE) System and on selection of the vendor, the Advance Purchase Order(APO) dated 01.011.2001 and Purchase Order(PO) dated 14.01.2002, had been placed on the vendor M/s. Alcatel Network Systems India Ltd. for supply of 22.25 K of Digital Local Telephone Exchange Equipment (OCB-283) at Panihati, Kolkata at a total cost of Rs.5,63,28,635.45 on the terms and conditions that were mentioned in the said orders. The ld. AR submitted that during investigation, on scrutiny of the commercial invoices raised by M/s. Alcatel Network Systems India Ltd. bearing No.PST/1006/2002 dated 31.03.2002 for Rs.5,63,28,636/-, it came to the knowledge of the Department that M/s. Alcatel Network Systems India Ltd. were neither involved in the manufacture of any item nor concerned with the supply of any item directly to the site, as the whole of the purchase order was sub-contracted to M/s. ITI Ltd. Consequently, when statements of various officers of the Appellant were recorded and from the statement of Shri Sekhar Chandra Saha, AGM (E/S), it revealed that all the above equipments were installed by the engineers of the Appellant at Panihati.
8. He has further submitted that from the statement of Divisional Engineer of the Appellant Shri Nikhil Kr. Das, it revealed that Digital Switching System means combination of software and hardware cable to provide communication and the main/principal equipments which were required to be assembled to make the digital switching system, consist of (i) SMM rack; (ii) Subs Connection Rack; (iii) SFC Rack; (iv)STS Rack; (v) SMT Rack; (vi) SMX Rack; (vii) DMB Rack etc. It is further revealed from his statement that to avoid vibration/displacement, the Digital Switching System had been screwed by nuts and bolts on the floor and it would be movable after unscrewing; that the component parts of Digital Switching System had been assembled, installed and put to use by the Appellant at Panihati Telephone Exchange on 30.07.2002.
9. The Ld. AR submitted that , explaining the process of assembly of the Digital Switching System, Shri Nikhil Kumar Das revealed that the engineers had inserted PCB (Printed Circuit Board) in different racks viz. common control unit, i.e.SMA, SMT, SMC racks and connection unit, i.e.multi-media unit and non-multi-media unit which were received from different suppliers. Interconnecting Patch Cards were connected as per documents. Cables were laid and connected, Power on to the racks & Software loaded. Power is transmitted from rectifier, viz. RMPS or SMPS to DCDB, i.e. Direct Current Distribution Board and from DCDB to rack. Common control unit control the whole Digital Local Telephone Exchange Equipment and connection unit where only subscribers were connected. MDF interconnects between subscriber cable and equipment side cables. MDF means as Iron structure consisting of Tag Block. One side of subscriber cable and other side of Digital Switching System are connected.
10. The ld. AR further submitted that by undertaking the process of assembly of the various equipments the resultant product that emerged was the Digital Switching System , an excisable goods, as defined under Section 2(d) of the Central Excise Act, 1944 being classifiable under Chapter Heading 8517.00 of CETA,1985.
11. He has submitted that the Honble Supreme Court in the case of Commissioner of Central Excise, Ahmedabad vs. Solid & Correct Engineering Works [2010(252)ELT 481(SC)] has held that mere affixing the goods by nuts and bolts cannot be said that it is permanently attached to earth and become an immovable property. Further, he has referred to the judgement of the Honble Supreme Court in the case of Medley Pharmaceuticals vs. CC & Cus., Daman [2011(263)ELT 641(SC)], wherein their Lordships, while considering the scope of marketability, had observed that the test of marketability of that product which is made liable to duty, must be marketable in the condition in which it emerges. The word, marketable means salable or suitable for sale and it need not in fact be marketed. He has also referred to the judgment of the Apex court in the case of AIR Liquide North India Pvt. Ltd. Vs. CCE,Jaipur 2011 (271) ELT 321(SC) to emphasize the meaning of marketability, that when the goods purchased by a consumer from a trader for consumption, itself indicates that the goods become marketable as the same become fit for consumption which it was not so in the hands of trader.
12. He has submitted that since the Digital Switching system has been fixed to the floor with nuts and bolts only to avoid vibration and displacement, which could easily be unbolted and shifted, as admitted by the Divisional Engineer of the Appellant; also the said goods being marketable as Digital Switching System and tendered by the Appellant, hence, it satisfies the twin tests of movability and marketability and accordingly the same is chargeable to excise duty.
13. The ld. AR further submitted that the judgement of Honble Supreme Court in Board of Trustees vs. Collector of Central Excise [2007(216) ELT 513(SC)] is not applicable to the facts of the present case, as in the said case, the point of marketability was not established by the department. He has submitted that in the present case, the Digital Switching System is itself a marketable commodity and could be bought and sold in the market. He has submitted that way back in the year 1990 effective rate of duty had been prescribed by Notification No.73/90CE dt. 20.03.1990 on Rural automatic Telephone exchanges and hence the excisability of telephone exchanges was never under doubt.
14. On the issue of determination of value of the said Digital Switching system, rebutting the argument that it could be done only when the goods are removed, he has submitted that it is not always necessary for determination of the value of the goods, the same is required to be physically removed from the place of its manufacture. It is his argument that even if the manufactured goods are used at the place where it is manufactured, then also, it could be considered to have been removed within the meaning of Section 4 of CEA,1944. Hence, the relevant date for determination of value is 30.07.2002, when the said Digital Switching System was put to use; since the said System was not sold but used, hence, the assessable value of the same had been correctly determined under Section 4(1)(b) of CEA, 1944 read with Rule 8 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000. The Ld. A.R. further submitted that the judgements relied by the ld. Advocate are not applicable being not relevant to the facts in issue.
15. In his written submission dated 09.01.2013, the ld. Advocate for the Appellant distinguishing the judgement of Medley Pharmaceuticals Ltd.(supra), submitted that the said decision is based on the principle that the goods in question must be capable of being brought into the market for being bought and sold as it is, and in the show cause notice, there is nothing to show that Digital Local Telephone Exchange (DLTE) System is being brought into the market for being bought and sold. Simply stating that the same is movable does not make it capable of being brought into the market as it is, since the size of the same is too big to be brought in the market as it is. Further, distinguishing the judgement of Air Liquide North India Pvt. Ltd. case (supra), he has submitted that the marketability depends on the consumer who buys the goods; hence, it proves the point of the Appellant that it bought DLTEE and as such, marketability in question is in respect of the person who sold the same to the Appellant and not in the hands of the Appellant. Further, he has submitted that the judgements cited by him being not distinguished by the Department stood admitted.
16. Heard both sides at length, considered their written submissions and perused the record. The question, in short, in the present case relates to determination of excisability of the Digital Local Telephone Exchange Equipment (DLTEE) System installed in their premises at Panihati Telephone Exchange, B.T.Road, Panihati by the Appellant. It is not in dispute that the Appellant had floated tenders and consequently, placed an Advance Purchase Order on 01.11.2001 and a Purchase Order dated 14.01.2002 on M/s. Alcatel Network Systems India Ltd. for supply of the said DLTEE System. Initially, it has been the claim and stand of the Appellant that the said System was manufactured and supplied by M/s. Alcatel Network Systems India Ltd. on payment of duty and due to its huge size and for easy transportation, various parts of the said system were dispatched to their Panihati site and mere assembly of various duty paid parts of the said System, would not result into manufacture of the said Digital Local Telephone Exchange Equipment (DLTEE) System. In support of the aforesaid submission, the Appellant had referred to the conditions in the said Purchase Order dated 14.01.2002 wherein it had been stipulated that all technical assistance like training for installing, commissioning and monitoring of the equipment would be provided by the supplier of the equipment. Taking cue from the said condition, it is argued that the said DLTEE System could not be installed and commissioned by the Appellant without necessary expertise and training. But, the evidence gathered by the department, is contrary to the said claim.
17. We find that rebutting to the said claim of the Appellant, the Department has adduced evidence establishing the fact that even though the APO and PO were placed on M/s. Alcatel Network Systems India Ltd., but on the basis of a sub-contract clause in the said APO/PO, the entire equipment was sub-contracted to M/s. ITI Ltd. Further, the Department, on investigation, found that not only the equipments supplied by M/s. ITI Ltd., various other parts were also procured by the Appellant and by employing their own engineers, all these equipments were assembled at their site at Panihati.
18. It has also been brought to our notice by the learned AR that in the impugned Order, the learned Commissioner has recorded a specific finding that besides the equipments manufactured by M/s. ITI Ltd. at Bangalore, various other equipments were procured from other sources, namely, ITI, Raiberili Unit, M/s. ITI, Pallakad Unit, M/s. Pouyet Communication India Pvt. Ltd., Pondicherry, M/s. Annapurna Enterprises, Peenya Industrial Estate, Bangalore, M/s. Exide Industries, Tamil Nadu etc. She has observed that the equipments could not have been entirely manufactured by M/s. Alcatel Network Systems India Ltd. and supplied to the Appellant after payment of appropriate excise duty. The said finding of the adjudicating authority has not been challenged in the present Appeal nor any contrary evidence has been produced before us. Thus, it is crystal clear that the Appellant had procured various parts of DLTEE System from different sources including M/s. ITI Ltd., Bangalore, on whom M/s. Alcatel Network Systems India Ltd. had sub-contracted for supply of the said System and the same were assembled at their site by their own engineers.
19. Also, we find that the evidences in the form of statements of the Divisional Engineer, Shri Nikhil Kumar Das and Shri Sekhar Chandra Saha, AGM are relevant, as both these employees of the Appellant had clearly agreed/accepted that all these parts were assembled by the engineers of the Appellant at their site resulting into emergence of the said DLTEE. Therefore, the claim of the Appellant that in view of the stipulation in the APO and PO, the DLTEE could not be assembled without necessary training and expertise, being contrary to the evidence, hence, in our considered view cannot be accepted.
20. The central issue to the present dispute needs to be addressed is: whether the process of assembly of various parts of Digital Local Telephone Exchange Equipment (DLTEE) procured from different sources has resulted into manufacture within the meaning of Section 2(f) of CEA,1944, of an excisable goods at Panihati, and leviable to excise duty at the said premises.
21. The principal argument of the Appellant that the Digital Local Telephone Exchange Equipment (DLTEE) System cannot be considered as goods, as on assembly of various parts of the said system and by attaching the system to floor/earth by nut and bolts the System could function, and on reaching that stage only, the DLTEE comes into existence. Thus, by affixing the System to the ground through nuts and bolts, it ceases to be movable and becomes immovable and hence cannot be considered as goods, and accordingly, not leviable to excise duty.
22. Answer to the said argument, in our view, could be located in the judgement of the Honble Apex Court in the case of Solid & Correct Engineering Works (supra). The Honble Supreme Court in the said case after analyzing the principle of law on the subject, laid down the tests to ascertain in what circumstances the attachment to earth by various means, makes the goods immovable. At para 33 of the said judgement, their Lordships observed as under:-
?33.It is noteworthy that in none of the cases relied upon by the assessee referred to above was there any element of installation of the machine for a given period of time as is the position in the instant case. The machines in question were by their very nature intended to be fixed permanently to the structures which were embedded in the earth. The structures were also custom made for the fixing of such machines without which the same could not become functional. The machines thus becoming a part and parcel of the structures in which they were fitted were no longer moveable goods. It was in those peculiar circumstances that the installation and erection of machines at site were held to be by this Court, to be immovable property that ceased to remain moveable or marketable as they were at the time of their purchase. Once such a machine is fixed, embedded or assimilated in a permanent structure, the movable character of the machine becomes extinct. The same cannot thereafter be treated as moveable so as to be dutiable under the Excise Act. But cases in which there is no assimilation of the machine with the structure permanently, would stand on a different footing. In the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. In that view of the matter we see no difficulty in holding that the plants in question were not immovable property so as to be immune from the levy of excise duty.
23. A plain reading of the aforesaid observation of the Honble Apex Court, it is clear that if the attachment to earth is with an intention of affixing the property permanently, then it becomes immovable. On the contrary, if the goods are attached or affixed to earth by way of nuts and bolts to provide a wobble free operation to the machine, such attachment cannot be considered as a permanent attachment, and be called as an immovable property. Applying the said ratio to the facts of the present case, we find that the Divisional Engineer, Shri Nikhil Kumar Das in his statement dated 01.02.2006 had categorically stated that the DLTEE was screwed by nuts and bolts on the floor to avoid vibration and displacement and the same could be movable after unscrewing. It is commonsense that the DLTEE can easily be shifted to any place from the premises where it is installed, and many a time, these Exchanges are installed in different floors of a multistoried building. Therefore, we are of the opinion that by affixing the said DLTEE to the floor by nuts and blots would not make it an immovable property and cease to be goods as the intention of affixing it to the floor is not to make it a permanent structure, but to make it functional. Further, we agree with the learned AR for the Revenue that it is an excisable goods being classifiable under Chapter sub-heading 85.15 of CETA, 1985 and the Appellant did not dispute about the said classification in their Appeal nor at any stage of the proceeding.
24. The next objection raised by the Ld. Advocate for the Appellant that even if it could be considered as an excisable goods, it cannot be subjected to excise levy, as of the twin test prescribed by the Honble Apex Court, the test of marketability has not been satisfied in this case, i.e. the said DLTEE is not bought and sold in the market. The said argument of the Appellant seems to rest on the understanding that the goods would become marketable only if they are bought and sold, in its real sense, in the market. We are not in agreement with the said proposition of the ld. Advocate, in view of the settled principle of law in this regard by the Honble Supreme Court. In the recent case of Medley Pharmaceuticals Ltd. (supra), their Lordships after discussing precedents on the concept of marketability, laid down the principle, at para 8 of the said judgment as:
8.?The consistent view of this Court is that for the purpose of levy of excise duty, an article must satisfy two requirements to be Goods i.e. (a) it must be movable and (b) it must be marketable. In these appeals, we are primarily concerned whether the Goods namely Physician samples of patent and proprietory medicines intended for distribution to the medical practitioner as free samples, satisfies the test of Marketability. Marketability is an essential criteria for charging duty. The test of marketability is that the product which is made liable to duty must be marketable in the condition in which it emerges. The word Marketable means saleable or suitable for sale. It need not in fact be marketed. The article should be capable of being sold to consumers, as it is without anything more. The essence of marketability of goods is neither in the form nor in the shape or condition in which the manufactured article is found. It is the commercial identity of the article known to the market for being bought and sold. The fact that the product in question is generally not being bought or sold or has no demand in the market, would be irrelevant. [See Indian Cable Co. Ltd. v. CCE, 1994 (74) E.L.T. 22 (S.C.). We will now refer to some of the decisions of this Court, which have explained the concept of Marketability for the purpose of the Act.
25. The aforesaid ratio lays down the guidelines for ascertaining whether the test of marketability is satisfied in a given case or otherwise. The litmus test is, whether the article is capable of being bought and sold, and the true meaning of being bought and sold to a consumer, means the commercial identity of the article as is known in the market for being bought and sold in the market, and the fact whether the product in question is generally not being bought or sold or has no demand in the market, would be irrelevant for determination of marketability. In the present case, the Digital Telephone Exchange (DLTEE), as a commodity, is known in the market as the supply of the said product has been tendered and necessary Purchase Orders were also placed on M/s. Alcatel Network Systems India Ltd. for supply of the said System. This indicates that the said Digital Switching System is being bought and sold and therefore, the test of marketability is satisfied in the present case. Since the twin test of movability and marketability, as laid down in Medley Pharmaceuticals Ltd. case, had been satisfied, we have no hesitation to observe that the product emerged after assembly of various parts at Panihati known as DLTEE, is an excisable goods and leviable to excise duty under Chapter Heading 85.17 of the CETA.
26. We agree with the contention of the ld. A.R. that the judgement of the Honble Apex Court in Board of Trustees case (supra) is not applicable to the facts and circumstances of the present case. In the said case, their Lordships had come to the conclusion, after considering the facts and evidences brought on record, that the department failed to discharge its onus in establishing the test of marketability of the goods and the said aspect was also not considered specifically by the Tribunal, rendering the Order bad in law. In contrast, the marketability of DLTEE has been established by the Department in the present case.
27. The other argument of the Ld. Advocate resisting collection of excise duty on the Digital Local Telephone Exchange Equipment (DLTEE) System rests on the aspect of determination of its value under Section 4 of CEA, 1944. The ld. Advocate emphasized that under the existing valuation provisions, the assessable value cannot be determined unless the manufactured goods are removed from the place of its manufacture. It is his contention that the method for determination of value of excisable goods laid down under Section 4 of CEA,1944, is necessarily dependent on removal of goods from the place of its manufacture, and in absence of removal of the goods from the place of its manufacture, its value cannot be ascertained; since the Digital Local Telephone Exchange Equipment (DLTEE) System after installation, was not removed, its value cannot be determined and accordingly no excise duty could be collected on the same.
28. We do not find substance in the argument of the learned Advocate as the said hypothesis is misconceived being contrary to the specific provision and a confusion between the nature and measure of excise duty which has been clarified by the Honble Supreme Court in a catena of cases. In a very recent land mark case on valuation of excisable goods under old and new Section 4, reported as CCE Vs. Fiat India Ltd. [2012(283) ELT 161(SC)], their Lordships at para 23 observed as:
23.?Section 3 of the Act is the charging provision. The taxable event for attracting excise duty is the manufacture of excisable goods. The charge of incidence of duty stands attracted as soon as taxable event takes place and the facility of postponement of collection of duty under the Act or Rules framed thereunder can in no way effect the incidence of duty. Further, the sale or ownership of the end products is also not relevant for the purposes of taxable event under the central excise. Since excise is a duty on manufacture, duty is payable whether or not goods are sold. Duty is payable even when goods are used within the factory or goods are captively consumed within factory for further manufacture. Excise duty is payable even in case of free supply or given as replacement. Therefore, sale is not a necessary condition for charging excise duty.
29. In the aforesaid ratio, it is clearly laid down that even if manufactured goods are put to use at the place of its manufacture, in theory as well as in practice the same is leviable to excise duty. This situation of use of goods without its removal from the place of manufacture, is covered through a specific provision prescribed at Explanation-II to Rule 4 of the Central Excise Rules, 2002, as was in force at the material time. The said provision acknowledges that manufactured goods could be said to have been removed from the place of its manufacture when the same has been put to use at the place of manufacture and consequently, chargeable to excise duty. In the instant case, it is not in dispute that after assembly of the said DLTEE by the engineers of the Appellant, the same was tested and handed over for its use on 30.07.2002. This fact has been admitted in the statement of Shri Nikhil Kumar Das dated 01.06.2006, an evidence not been contradicted and hence the said DLTEE System could be considered as manufactured and removed on 30.07.2002 and therefore, liable to excise duty on the assessable value determined as per the principles laid down under Sec.4 of CEA,1944.
30. We agree with the submission of the Ld. A.R. that the case laws cited by the ld. Advocate in support of the argument that valuation of goods could be determined only when the manufactured goods are physically removed from the place of its manufacture and accordingly, if not removed, neither valuation of the goods could be ascertained nor excise duty is payable, are not applicable to the facts of the present case and also in view of the judgment of the Honble Supreme Court in Fiat Indias case.
31. In Anjuleem Enterprises case (supra), the issue involved was whether a programmed or designed EPROM is an integral part of STD-PCO unit. In that context, the Honble Apex Court has held that the software were embedded in the programmed EPROM, which is an IC chip consisting of the brain of the System and the programmed EPROM is an integral part of the System and entire Unit is leviable to duty. In Akay Cosmetics Pvt. Ltd. case (supra), the issue involved was admissibility of certain deductions from the assessable value, namely, cost of secondary packing freight, handling charges, insurance, octroi, turn-over tax and cost of bought-out items under Section 4(4)(d) of the CEA,44. In Indorama Synthetics case (supra), the issue involved was on change of the ownership of the factory, whether the stock lying inside the factory would attract duty without removal of goods, to which this Tribunal has replied in the negative. Similarly, in Metzeller Automative Profiles India P.Ltd. case (supra), the question involved was, whether on transfer of ownership of the factory, without removal of capital goods and inputs on which MODVAT Credit availed, would be required to be reversed, to which the answer was also in negative. In Ashida Electricals Pvt. Ltd. case (supra), the issue involved was includibility of value of bought-out items in the assessable value of the SCADA System classifiable under Chapter Heading 8537.00 of CETA. In Indica Laboratories case (supra), the issue involved was that whether on the facts of the case, the goods would be subjected to assessment under Section 4 or Section 4A of the CEA, 1944. Thus, the present issue of using the manufactured goods at the place of manufacture, was not before any of the forums in the aforesaid cases.
32. We find that the value of the said DLTEE has been determined under Section 4(1)(b) of the Central Excise Act, 1944, read with Rule 8 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000. The contention of the ld. Advocate is that Rule 8 is provided for determination of value of the goods used for captive consumption. In the present case, there is no doubt that the Exchange had been put to use by the Appellant for rendering telephone lines to the respective customers for their use. Hence, the assessable value is correctly determined under Rule 8 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000. The Appellant have not disputed the cost price adopted for the determination of the value under the said Rule 8 of Valuation Rules,2000.
33. The Ld. Advocate for the Appellant did not advance any argument on the point of limitation. However, we find that in their Grounds of Appeal, a feeble argument has been advanced by the Appellant that the show cause notice was issued after a period of four and a half years without justifying that there was suppression or misdeclaration. On perusal of the records, we find that the initial claim of the Appellant in response to the inquiry of the department was that they had procured the duty paid DLTEE System from M/s. Alcatel Network Systems India Ltd., and merely assembled the same. But, later on investigation, it was found that, they had sub-contracted the System in favour of M/s. DLTEE and the ld. Commissioner has recorded a specific finding that necessary equipments were procured from other sources also. From the statement of the Divisional Engineer Shri Nikhil Das, it became clear that the entire DLTEE System had been assembled and put to use by the Appellant themselves without any external training or help. Thus, the claim of the Appellant has been found to be incorrect leading to an irresistible inference that the facts were suppressed from the knowledge of the Department, as no excise duty was intended to be paid on the said DLTEE nor any Central Excise registration was taken for manufacture/assembly of the DLTEE System. In these circumstances, the extended period of limitation is rightly invoked and imposition of penalty justified. In view of our above findings, we do not find merit in the Appeal filed by the Appellant and accordingly, the Order passed by the ld. Commissioner is upheld and the Appeal being bereft of merit, is accordingly, dismissed.
His con
(Pronounced on 29.01.2013)
Sd/- Sd/-
(S.K.GAULE) (D.M.MISRA)
TECHNICAL MEMBER JUDICIAL MEMBER
DUTTA/
17 EXCISE APPEAL NO.E/A/43/2008