Customs, Excise and Gold Tribunal - Delhi
Paharpur Cooling Towers Pvt. Ltd. vs Collector Of Central Excise on 28 February, 1986
Equivalent citations: 1987(13)ECR1044(TRI.-DELHI), 1986(24)ELT611(TRI-DEL)
ORDER Syiem, Member (T)
1. An appeal was filed on behalf of M/s. Paharpur Cooling Towers Private Ltd. against Order of the Central Board of Excise and Customs, New Delhi, No. 71-B of 1980 dated 25-1-1980. This order of the Board was issued on an appeal against order No. 81/33/72 Collr-49/76 dated 24-4-1976 passed by the Collector of Central Excise, Calcutta. The dispute is in regard to manufacture of goods which the Central Excise Department called electric industrial fans assessable under Central Excise Tariff Item 33(2), and which the factory calls blade assemblies and which it says were not assessable under Tariff Item 33 (2). The appeal was once posted for hearing on 1st November, 1985, but as the counsel for M/s. Paharpur Cooling Towers insisted that he should be allowed to file a large number of additional documents and grounds such as an affidavit by an engineer by the name of Mr. Kundu, the hearing could not be completed and had to be postponed pending a decision on the additional documents. None of the additional documents were necessary nor does the affidavit filed by the engineer give any help in determining the dispute. As a result, much time was wasted on a matter that could have been concluded in one hearing.
2. The dispute was whether a hub with blades called by the manufacturers a blade assembly was an electric fan assessable under Item 33(2). These goods or fans are assembled by M/s. Paharpur Cooling Towers from hubs and blades they purchase in the market; they fix the assembly fan or blade assembly in the cooling tower which they build on contracts with buyers. The fans, when they are removed from M/s. Paharpur Cooling Towers' Factory, have no electric motor or any other kind of driven. The motor power is provided/connected only after they are fixed/installed/ mounted at the site of the cooling towers.
3. The manufacturers claim that blade assemblies are not electric fans because they do not have any electric motor mounted or encased or coupled integrally with the fan blade assemblies to qualify the latter as an electric fan. The blade assemblies are only a number of blades mounted on a common hub made of cast steel, with adjustments provided to vary the pitch of the fan blades as may be required. But as could be seen from the sample produced in court, this assembly has no integral electric motor drive which is necessary for a fan to be classified an electric fan.
4. The Item 33(2) Central Excise Tariff covers electric fans :
Designed for use in an industrial system as parts indispensable for its operation and have been given for that purpose some special shape or quality which would not be essential for any other purpose.
The main topic, of course, is that the manufacturers claim this is not an electric fan. For the purpose of seeing the precise in the drawing of the fan it is significant to note that there are provisions for keys, keys for yoke, key motor shaft or key diesel engine shaft. A key must fit into a keyway or a spline, so that the driven member does not turn relative to the driving member. The appellants do not say that the fans are not driven by electric motors. All they say is that they do not manufacture electric motors, which is a fact. They also say that the blade assemblies can be driven by any other kind of power like integral combustion engine, oil driven engine, steam engine as well as an electric motor. All this is quite true because the drive for the fan is not an internal integral drive but an external power source to which the fan is only required to be coupled or connected. There are various methods of coupling like endless belt, a rigid shaft, or gears; it depends on the type of driving power source available and the method thought most feasible for coupling the fan to the driving source. In the drawing we see an arrangement is made for an electric motor or a diesel engine; in either case we can see from the drawing that the coupling is the same, whether the drive is an electric motor or a diesel engine. There is an external shaft or tube and flange assembly to connect the gear shaft end to the motor/engine rotor shaft, one end connecting to the gear reducer by means of the key yoke and the other end connecting to the motor end yoke. It is clear from this that the blade assemblies are power driven fans and that the power, in most cases is electric power. There has been no evidence or submission by M/s. Paharpur of any of the disputed fan or blade assemblies, as they call them, being driven by any but electric motor power. Of course, any fan driven by, say, a steam engine or an internal combustion engine would not be an electric fan and would go out of this item. That is all we need to say on this context of the dispute that we have to decide.
Nature of the fan, we reproduce partly modified the drawing P. 73 319 Rev. submitted by Paharpur Cooling Towers :-
Appeal Nos. ED(SB)(T)/686/80-BI & ED(SB)(T)/190/82-ED M/s. Paharpur Cooling Towers Pvt. Ltd., Calcutta v. Collector of Central Excise, Calcutta.
5. M/s. Paharpur argued that there are some customers who have certified that they have used diesel engine driven fans. There is indeed such a customer named Mico Farm Chemicals Ltd. who wrote that as they were experienced in power cut almost throughout the year, they used an engine for their fan of the cooling towers supplied by them (M/s. Paharpur). They also proposed using the star and universal joint as an alternative proposal as they would like to start the engine and fan immediately. We have already discussed that these blade assemblies can be driven by power other than electric power and, therefore, this customer's letter proves nothing except that a particular fan or fans were not driven by electric power. Other fans or blade assemblies can just as easily be driven by electric motors.
6. It is true that the fans have no electric device integrated with the assembly and the fans are not mounted on the shaft of the electric motors. But most industrial fans especially cooler fans have no integrally built drive devices. The reason for this is simple. Most of industrial fans are large and heavy structures and have to be mounted on a firm and strong foundation to reduce vibration etc. Furthermore, they are generally provided with an external shaft or similar arrangement which can be coupled to the drive such as an engine, an electric motor, a steam engine or any other power source; sometimes they even have pulleys and gear wheels to which chains and belts can be fastened to drive the fans. Therefore, the argument that these fans are not electric fans, since they have no electric motors integrally built, is a misunderstanding of the technology of industrial fans. Such fans when driven by electric power source are electric fans and must be assessed as electric fans. We would like to repeat again that M/s. Paharpur have not stated that they use other kinds of power except electricity for driving their fans.
7. The learned counsel for the appellants stressed strongly during the entire course of his arguments that the goods went in CKD condition and were only blade assemblies. These are correct statements and no debate is necessary on them. He further stated that there was no correspondence between gear boxes and fans, which possibly is quite true, but this need not deflect us from our discussion.
8. He also said that the meaning of industrial fan has not been spelt out. It is difficult to understand what he means by this, because an industrial fan is one that is installed and used in an industrial system. The counsel does, of course, contend that cooling towers are not an industrial system but in this he is mistaken. The cooling tower is part of a thermal electric generating station. If such a generating station is not an industrial system, then we are unable to understand what it is. He also said that a cooling tower is not directly involved in the performance of an industrial system. This is an equally difficult proposition to understand. Cooling takes different forms and is known in all kinds of industries like petroleum fractionation industries, and a host of other industries; they take different procedures. Cooling may also be used for the purpose of refrigeration to preserve and keep perishable goods. In the present cooling system, the water used by the steam turbines is cooled in the towers and in this cooling these fans are an aid. The water is also subjected directly to heat loss in the atmosphere thereby enhancing the cooling. Thereafter, the water is recycled. In other cooling systems a coolant like ammonia gas, carbon dioxide gas, flourocarbon gas, do the cooling of the stock or subject and they themselves are cooled sometimes by the atmosphere, sometimes by cold water. In all cases, cooling is a well known process in industrial systems and factories. We do not agree that a thermal electric generating station and its cooling system are not an industrial system; no authority has been shown to convince us that they are not such industrial systems. And it follows that the cooling, here achieved by or in the cooling tower, of the water used by the steam turbine performs a necessary office in the industrial system without which the system would not be able to operate at its best. To say that the cooling towers do not directly participate in an industrial activity is a fallacy; many constituents of an industrial plant or system do not take part directly in an industrial activity but that will not disqualify them as part of the industrial system.
9. The learned counsel for M/s. Paharpur Cooling Towers said that the fans are fixed immovably and once this is so, they can no longer be assessed since they are no longer movable. He referred to the DCM judgment of the Supreme Court and said that to be assessable under central excise, the goods must be movable goods. As pointed out by the learned counsel for the department this is an erroneous argument because the fans are very far from being immovable. They were, in fact, taken to the cooling towers from another place. Had they been immovable, it would not have been possible to take them from place to place or to install them wherever the manufacturers wished. In fact, in the cooling tower the fans had to be installed at predetermined place if their full beneficial effects are to be derived. An immovable cooling fan is next to valueless and indeed could be a liability. This is a costly fan with reducing gear arrangements; its operation requires a lot of investment and installation before it can develop and reach its full capacity. Because they are heavy and so have to be fixed in what appears to be a permanent position should not deceive us into holding that they are immovable. Fixing them is necessitated by the need to direct their flow in a certain direction, to reduce vibration, and to minimise interference with their coupling arrangements to the gear box, to the drive etc. etc. all of which are heavy structures and components. Careftu and inflexible alignment and/or levelling are necessary in mounting the fans because, as we have noted, they are coupled not only to the gear box but are driven through the gear box by an external power source to which they are all coupled by shaft or a tube or flange assembly. Many large machineries are fixed to the ground for the above reasons, and for optimum operation and to reduce other undesirable-by product effects that may arise during their work and operation. Stability alone demands a firm base and rigid placement; but to say that such a machinery is immovable is to ignore the fact that machineries are themselves bought and sold and have regular markets with regular sellers and regular buyers. Commerce in them is spread all over the world and a buyer frequently transports the machinery hundreds or thousands of kilometres to the place where he installs it. The heaviest machineries can and do form articles of merchandise which are bought and sold like any other article or commodity, without any difference at all in their marketability, susceptibility to the laws of demand and supply, seasonal changes and a host of other influences that act on commodities and markets. Like other commodities, there are good machineries and bad machineries; they are equally subject to wear, to pilferage, to breakage, to loss, and they can even, after having been installed in one place, be dismantled and carted away to another place, when they are sold, to find another owner and a new home. We cannot understand why the appellants say that because the machinery and fans are fixed they are immovable property. They are nothing of the kind.
10. Furthermore, these are industrial electric fans and are specifically covered by an item of the Central Excise Tariff. When that is the case, then no matter what may be said against it, excisability follows naturally as night is followed by day and there can be no swerving and deviation from this rule of the law. This is the rule spelt out by the Hon'ble High Court at New Delhi in the judgment Hyderabad Asbestos Cement Products v. Union of India- 1980 E.L.T. 735. The Hon'ble Court said that asbestos is listed in the tariff by law as leviable to central excise and, therefore, no further, argument was necessary to discover whether there was a manufacture or not, to qualify for a charge under central excise duty. Once the law lists a product, it pays duty and that is the end of it.
11. The learned counsel for the department rejected the argument that the goods were not fans by saying that the makers themselves call them fans and so do the buyers. It is a fan and is known as a fan in the trade parlance and furthermore he emphasised that they are all electrically driven. We are in total agreement with him here.
12. The learned counsel for the department further said that the Supreme Court judgment in the Bombay Tyre International supports him in his reasoning that the levy on these fans when they became fans on installation was quite correct, but we are not quite able to follow his logic of this.
13. The learned counsel for the appellants made arguments to the effect that axial flow fans and man coolers do not need installation at site. When the counsel says this he is speaking perhaps only in respect of axial flows and man coolers that he had seen did not need installation at site; but the fact is that there are axial flow fans and man coolers which do need installation at sites. These, together with certain types of centrifugal fans or blowers are very heavy pieces and require regular build-up not only of the foundation but assembly, alignment with gears and or power drive source, or belt or chain section and pulley angles etc. etc. that it will not do to speak in general terms as that such things need no installation at sites. Such a statement has no universal application, though it may be true in some cases. He further said that a fan must be identifiable on removal as a fan. We hope, however, that he is not suggesting these fans or blade assemblies, as they call them, are not identifiable as fans; even in their CKD conditions or disassembled conditions they are distinctly identifiable as fans, just like a bicycle or a motorcar in CKD condition is identifiable as a bicycle or a motorcar. The counsel should not mistake appearances for substance. For example, a loose leaf book is not less a book than a bound book, although in appearance a loose leaf book till it is strapped, stapped etc. may not look like a book, but only a sheet of papers.
14. A number of trade notices issued by the Collectorates were submitted by the party in support of their arguments but these contain little or no technical details to enable us to judge for ourselves the basis for what they say. We are not able to accept them.
15. There is a judgment of the Calcutta High Court which the appellants seem to think support their case. In fact, it supports the department's case. In the case of civil rules 119W-73 decided on 21-7-1976. In re : M/s. Suburban Industrial Works who manufactured electric fans and blowers with or without electric device claiming that blowers without any electric device were not liable to excise duty under Item 33 of the Central Excise Schedule, the court came to the conclusion that unless the articles mentioned in sub-item (2) of Item 33 were electric fans or were operated by electrical device, they cannot come within the purview of such item. The court ordered refund of the duty on blowers without electrical device, but making clear that the petitioner would not be entitled to claim refund of duty on blowers with electrical devices or electrically operated; and also that the department should not charge any excise duty on blowers without any electrical device or which are not electrically operated. The court took care to speak about blowers electrically operated because it knew that even though there may be blowers which have no electrical in-built electrical device, they can be electrically operated. This is an acknowledgement that a blower without an internal electrical device but operated externally electrically is a blower assessable under item 33(2).
16. In respect of appeal No. 190/82-BI, the learned counsel for the appellants attacked the order to assess the fan with the gear. This, he said, was unjustifiable as the gear is not a part of the fan/blade assembly that is manufactured by M/s. Paharpur Cooling Towers and, therefore, its (gear's) value cannot enter into the assessable value of the fan.
17. We are not able to agree. The gear is a very important component of the fan and has the vital role of varying, as desired, the speed of the fan. The fan is, in fact, driven by the drive through the gear reducer assembly. To assess the fan together with the gear, where there is a gear is not improper or irregular. On the contrary, it is the most natural and correct thing to do.
18. We reject both the appeals.