Customs, Excise and Gold Tribunal - Delhi
Uptron Powertronics Ltd. vs Collector Of Central Excise on 23 January, 1991
Equivalent citations: 1991ECR3(TRI.-DELHI), 1991(56)ELT245(TRI-DEL)
ORDER S.K. Bhatnagar, Member (T)
1. This is an appeal filed against the order of Collector of Central Excise, Meerut.
2. The learned counsel stated that the Appellant M/s. Uptron Powertronics Limited are a Government of U. P. Undertaking, promoted by the UP Electronics Corporation Limited, Lucknow, a wholly owned corporation of Government of Uttar Pradesh. M/s. UP Electronics Corporation holds 75% equity share capital in the company. The company was incorporated in April 1977 and commenced manufacturing operations as a small scale unit in December 1979. Appellant company is engaged in the manufacture of high technology power electronics equipments like, power plants, Battery chargers, switching cubicles, UPS systems, Float Rectifiers, Servo Controlled Voltage Stabilizers, compressor Driers etc. - All these equipments are tailor-made/custom built for customers viz. P&T, Indian Telephone Industries, Bharat Heavy Electricals Limited, Thermal Power Stations, Naval Projects etc.
3. Appellant company manufactures power plants etc. They are custom built items which are manufactured according to the prescribed specifications of respective customers' purchase order in hand/orders in pipe line (against those tenders which have already been opened). Hence, the items manufactured by the company are usable only by the particular customer for whom they are manufactured and do not have any alternative user and as such are incapable of being sold to any other party.
4. Each machine/equipment is allotted a separate serial number for purposes of identification of the customer for whom it is being manufactured and for monitoring its completion. After the manufacture is completed, test call letters are issued to the concerned customers, inspectors.
5. On 27-9-1984, the Central Excise Officers of Ghaziabad intercepted the truck hired by the Appellant carrying three wooden boxes and one small wooden case containing one set of 48V, 200 Amps Power Plant bearing S. No. 2935, 2510 & 2728 which were duly covered by GP-1 No. 54 dated 30-6-1984 and invoice-cum-delivery challan No. UPL: 062(C) dated 30-6-1984. It was alleged that the said GP-1 No. 54 had been overwritten and changed from the original Nos. 2757, 2759 and 2729. It was also alleged that these goods were despatched on 27-9-1984 while the GP-1 No. 54 and invoice-cum-delivery challan showed the dates as 30-6-1984. The Central Excise Officers accordingly seized these goods alongwith the truck.
6. Thereafter, physical verification of the stocks lying in the factory was done on 28-9-1984 and three numbers of 50V, 12Amps Power Plants bearing S. No. 3083, 3085 & 3086 which were lying in the factory premises were also seized on the ground that they were not accounted in the RG-1 Register although they had been inspected by the customer's representatives on 18-9-1984 (in fact, such inspection had been made on 24th and 25th September, 1984).
7. The Central Excise officers also seized the records of the factory for further examination. On examination of these records, it was alleged that the Appellants had cleared some machines/equipments from the factory without payment of Central Excise duty by using old and used gate passes in the form of GP-1 Nos. 55 and 56 both dated 30-6-1984 and GP-1 Nos. 78, 79 both dated 2-7-1984 and by allotting the same S. Nos. to the equipments which had already left the factory on earlier dates through the respective GP-1s as per details mentioned in the Annexure to the show cause notice which was issued to the Appellants on 19-3-1985. It was also alleged that the Appellants had cleared one 16-Channel Tape Recorder without any gate pass and payment of duty.
8. In the light of show cause notice the appellant denied the charges and explained the position and substantiated their contention with the help of company documents.
9. The appellants no doubt admitted that there was delay in actual despatch of the goods on the relevant gate passes. They also admitted that the relevant gate passes on this account were not cancelled and the information regarding the delay in despatch was not given to the Department. The reason for this minor lapse was also duly explained by stating that 30th June was the closing for half yearly purposes in the factory. Hence, all the machines/equipments which were fully manufactured were shown as manufactured and cleared on 30th June itself, so as to display the achievement of projected targets of production and turnover. Similarly, clearances shown on GP1s dated 2nd July 1984 were also the Spillover of 30th June 1984 and were deemed to be manufactured and despatched during the half year ending 30th June 1984 and these could therefore, be shown in the performance results of the company. Since all these items had been manufactured these were ought to be included in the total turnover as the delay was on account of minor technical reasons like, delay in clearing the same by customers' inspecting and testing staff. It was however, asserted that the goods seized on the truck as stated above had paid proper duty on GP-1 No. 54 dated 30-6-1984. Similarly, proper duty had also been paid on other goods listed in the Annexure to the show cause notice which were covered by the gate passes Nos. 55 & 56 both dated 30-6-1984 and 78 & 79 both dated 2-7-1984. It was submitted that the Central Excise Department has not adduced even an evidence to the contrary and in support of their allegations. In the absence of the evidence, it was entirely unwarranted to assume that the goods had been cleared without payment of duty.
10. As regards three power plants Nos. 3083, 3085 & 3086 seized by the Central Excise Officers in the factory as unaccounted, the Appellants submitted that they were still incomplete in as much as several finishing process were yet to be undertaken before they were duly numbered and entered in the Sr. No. register. It was further explained that the formal clearances from the P&T department had not been received and several minor jobs like, bakelite and acrylic sheet fixing, panel fixing and retouching were to be carried out before these power plants could be considered as complete for accountal in the RG-1 Register. The rubber stamp alleged to have been affixed on the equipment by the Customers' representative showing the inspection made on 18-9-1984 was limited to electrical characteristics only and the remaining jobs as stated were to be undertaken by the factory before the power plants were fit for being despatched (in fact this inspection was made on 24th and 25th September, 1984 and not on the 18th September 1984). This being the correct position seizure of these three power plants are unwarranted.
11. The Central Excise Officers on examination of the records had also detected invoice No. UPL : CA : P001 dated 30-6-1984 covering sale of a 16-Channel Dual Deck communication tape recorder. It was alleged that the appellants had cleared this item without payment of duty and without issue of any gate pass. The Appellants clarified in their reply to the show cause notice that the aforesaid invoice Nos. itself clearly indicated that it was a sale of capital item which was not manufactured in the factory and was therefore, not liable to payment of any Excise Duty.
12. The learned counsel further stated that for the sake of convenience they have filed a chart and divided the items into following categories :
I. Machines/equipments seized in transit:
It will be observed from Sr. No. 1 of the Chart that three items of power plant (Sr. Nos. 2935, 2510 & 2728) were manufactured against specific order, placed by the Divisional Engineer, Telegraph(s), Calcutta on 25-6-1984 and were covered by the GP-1 No. 54 dated 30-6-1984 after payment of duty by PLA entry No. 24, dated 30-6-1984. The test call to the Customers' inspector was given on 30-6-1984. However the testing authorities did not carry out the inspection on account of some ambiguity in the description of the items. In order to obtain necessary clarification, appellants had to approach the actual users through the Purchasing Authority. Ultimately the user conveyed his readiness to accept the offered equipments vide their letter dated 3-9-1984. Thereafter, testing authorities carried out testing on 20-9-1984 and 21-9-1984 and issued their test report on 22-9-1984. After giving the finishing touches and carrying out the packing work, the appellants despatched these machines on 27-9-1984 when the departmental officers intercepted them in transit. It will thus, be seen that although, the excise gate pass was made on 30-6-1984, the machines were physically lying in the factory till 27-9-1984. Full documentary evidence in support of the above submission was produced before the lower authorities and again the same is submitted hereto.
II. The power plants/equipments seized in the factory:
These power plants were serial numbered as 3083, 3085 and 3C86 and they were lying in the factory's inspection shop and were seized on the ground that they were not accounted in the RG-1 register. It is submitted that these units had not reached the stage of recording in the RG-1 register since the customers' inspectors conducted the testing of these units on 24-9-1984 and 25-9-1984 and made their report on 26-9-1984. This report had not been received in the factory till the time of confiscation of the excise records on 27-9-1984. These units were custom built and in terms of the purchase order were subject to testing by the customer's inspectors. These therefore, cannot be treated as fully manufactured before they are formally approved by them since there is always a possibility of inspectors noticing some deviation from the approved specifications and the consequential requirement of major/minor modifications before despatch. Accordingly, it was necessary to wait for the customer's test report/release report before treating the units as complete. It is, therefore, clear that seizure of these power plants was entirely unwarranted.
III. Machines/Power Plants mentioned under Sr. Nos. 7 to 18 in the Chart, Annexure 'A'.
(i) Machines covered under Gate Pass No. 55 dated 30-6-1984 vide S. No. 5 of the chart, Annexure 'A'.
The power plant was manufactured for supply against the order placed by the D. E. Telegraph(s), Calcutta, and as usual, was subject to testing by their testing department. The appellants gave the test call to the testing authorities on 30-6-1984. The customer's inspector tested the units on 12-7-1984 and cleared for despatch vide test/release report dated 18-7-1984. After carrying out the finishing touches, this unit was finally despatched on 20-7-1984. Although gate pass No. 55 had already been made on 30th June 1984, this unit was not physically despatched and was kept lying within the factory premises till 20-7-1984 i.e. the date of actual despatch.
(ii) Machines covered under Gate pass No. 56 dated 30-6-1984 vide S. No. 6 of the chart, Annexure-A:
These units were manufactured for supply against the order placed by the General Manager, Telecom Stores, Calcutta. The excise gate pass No. 56 was made on 30-6-1984. However, the units were not physically despatched till the receipt of the test/release report of the Customer's inspector. The test call had been issued to the purchaser's testing authority on 30-6-1984 itself. The Customer's inspectors tested the units during the period 23-8-1984 to 25-8-1984 and cleared the same vide their test report dated 28-8-1984. The units were given finishing touches and after packing, were despatched on 4-9-1984.
(iii) Machines covered under Gate Pass Nos. 78 and 79 both dated 2-7-1984 vide S. Nos. 7 to 18 of the chart Annexure-A;
These machines consist of 40 Nos. Compressor Drier units supplied to the different exchanges of P&T Department against the specific order received from the Asstt. Director General, Ministry of Communication, Sanchar Bhawan, New Delhi. The critical parts and sub-assembly for these units were imported from United Kingdom in April, 1984. The bill of entry and invoices of foreign supplier's would conclusively prove that the imported components could make only 40 Nos. compressor drier units and not more. Besides, these compressor driers are usable exclusively by the P&T department, for keeping the moisture level of their underground telegraph cables within the permissible limits and there is no other user in the country for these compressor driers. The manufacture of these 40 units was completed in June 1984 and the formal test call for inspection was issued to the customer's testing authorities on 22-6-1984. The testing authorities inspected the units in two lots of 30 and 10 Nos. each. It was found that the first lot of 30 Nos. was not meeting customer's specifications on 7 accounts and whole lot was rejected by them vide their letter dated 10-7-1984. The second lot of 10 units was inspected on 11th, 13th and 27th of July 1984 and was cleared by them on 28-7-1984. These 10 units were given final touches and packed and was physically despatched on 30-7-1984. The lot of 30 units which was earlier rejected was later modified to match the customer's specifications and fresh test calls were sent to the Inspectors during last week of July 1984. Reinspection was carried out during 3rd and 4th August 1984 and all the units were cleared this time on the various dates of test reports between 3rd and 6th August 1984 and were despatched on different dates from 8th to 13th and 17th August 1984 after giving final touches and packing work.
It will be observed from the above that although the gate pass was made on 2-7-1984, all the units were physically lying in the factory awaiting clearance by the Customer's inspectors and they were physically despatched from the factory only on the dates mentioned in the respective RRs/GRs. The receipt of all these 40 Units have been confirmed by the customers in their certificate to this effect.
IV. Taperecorder:
They have since further checked the position and would like to submit that this item was assembled out of imported components and thereafter sold to Madras Port Trust.
It was their contention that assembling does not amount to manufacture. Hence they were not required to maintain RG1 or pay any duty or clear the goods against GP1.
13. The learned SDR reiterated the department's case as narrated in the order-in-original and drew attention to the discussions and findings of the adjudicating officer.
14. He emphasised that in respect of the goods in transit admittedly the gate pass was of a different date and was not valid. The appellants have themselves accepted that the goods had not been cleared on the date indicated on the gate pass. Hence the goods have been cleared without valid documents.
15. It was also his contention that this was not merely a technical error but a serious matter.
16. It was also his contention that the appellants have not been able to corelate the work order and the manufacturing programme indicated by them with the goods in question and it would be unusual to start manufacturing even before receipt of the order in case of custom tailored goods.
17. As regards the machine and equipments seized from the factory the goods were in completely manufactured stage and therefore were required to be entered in RG-1 but had not been so entered. Hence the violation is clear.
18. Further in view of their own admissions it is evident that the records have not been properly maintained and the Central Excise formalities have not been fully followed.
19. As regards tape recorder the appellants had denied before the adjudicating authority that they had manufactured the goods and emphasised that they had merely imported the items and then sold them.
20. From the submissions now made by the learned counsel it is apparent that their reply to show cause notice and submission during the course of proceedings before the Collector were incorrect and the items had indeed been manufactured in the factory.
21. The appellants are now claiming that they had merely assembled the imported components. But assembling of components also leads to manufacture. Hence it was the department's contention that the tape-recorder had been manufactured in the factory and this fact was required to be declared correctly and the RG1 enteries in respect thereof was required to be maintained and it could be cleared only on payment of duty and under a gate pass. Since this has not been done the violation was apparent.
22. In view of the above position he would request that the order of the Collector may be upheld.
23. The learned counsel speaking in reply briefly reiterated his submissions and emphasised that once the tenders are opened and the company comes to know that its tender is the lowest and is likely to be accepted it immediately draws up the manufacturing programme in anticipation of receipt of the formal order to cut down the time to be able to deliver the goods on schedule.
24. Similarly once the goods are ready from their side, they request the customers to inspect and test and thereafter give the finishing touches and then only the goods are considered as ready for despatch.
25. In the instant case the entries in RG-1 had been made before testing to meet their targets. The relevant entries had been made in the PLA and the gate pass were kept ready for despatch. However the goods could not be actually despatched and were cleared only subsequently. Thus in fact the duty on these goods had been actually paid in advance of the due date. Hence no revenue loss was involved and there was no question of mala fides.
26. The appellant company was a public sector undertaking and the customers were also Government departments and public sector undertakings and the contract provided for charging the duty from the customers. Hence there could be no cause for or intention to evade duty. From the very size and nature of goods namely heavy machinery requiring cranes, etc., there was no scope for clandestine removal. Further in view of the records provided for technical and accounting purposes as per firm's own instructions there was no scope for any mischief as alleged. Moreover the work order in the circumstances explained by them merely cited as a document meant for record and further reference and had no other significance.
27. It was also his submission that in any eventuality in a public sector undertaking it was not possible to manufacture and supply machines against the same order of the same customer and the department has not shown that the order was placed for two machines or two machines were actually supplied against one and the same order.
28. He again reiterated and re-emphasised that only technical violations were involved in respect of the goods seized in transit as well as the machines seized in the factory and added that the tape recorder was only assembled and not manufactured.
29. We have considered the submissions of both the sides.
30. We find that all the goods in question can be conveniently grouped under three headings, indicated by the Ld. Counsel.
1. Goods seized from the truck while in transit:
In respect of these goods it is observed that admittedly the gate pass was dated 30-6-1984 but the goods were actually transported on 27-9-1984. These facts are not in dispute.
The legal position that a gate pass is valid only for the date of issue is also not in dispute. Hence it is obvious that the gate pass dated 30-6-1984 was not valid for transport of the goods on 27-9-1984 and to that extent there was admittedly a violation of the rules.
The real question before us therefore is as to whether it is merely a case of mistake (serious or otherwise) committed wittingly or unwittingly or it is a case of deliberate violation of the rules with the intention to evade duty.
In this respect it is observed that the goods admittedly consisted of one set of 448V, 200 Amps power plant bearing Sl. No. 2935, 2510 & 2728 and covered by the in-voice-cum-delivery challan apart from the gate pass No. 54 dated 30-6-1984 in question and was meant for delivery to P&T department.
The appellants have explained in detail the system of receiving orders and organising manufacturing activity and keeping the goods ready for inspection and have attributed the delay in clearance due to delayed inspection. The appellants have backed up their submission with the technical write up the master production plan, the dates of inspection and test, the letter of P&T department and the invoices, the correctness of which have not been denied or controverted and the department has only been able to point out that the date of the work order is later than the date of taking up manufacturing programme and that the date of gate pass and the gate pass do not tally apart from minor discrepancies and the GP1 attributed to over-writing.
Taking note of the fact that these are tailor-made specialised heavy equipment and the well-known system of Government procedure regarding budgeting and sanction, etc., we feel that the points mentioned by the Collector and emphasised by the learned DR are not sufficient in the circumstances of the case and it was necessary on the part of the department to show either that orders were placed for 2 sets and/or two sets of the goods within the same or different Sl. No. were manufactured and cleared to establish the alleged degree of seriousness beyond doubt. On the contrary taking into account the material placed before us by the learned counsel and in particular the master production plan the date of inspection and test and the letter of P&T department and the invoices, the appellants' explanation is plausible one. Hence we hold that use of gate pass twice on clearances of two different consignments, to P&T department or any other party has not been established and there was no proof of evasion of duty.
In the circumstances the only fact which emerges is that the goods were not covered by the valid gate pass and to that extent and that extent only the charge is established and it amounts to a wrong entry of a serious nature which calls for penalty but no duty was demandable against this consignment.
2. Machines and equipments seized from the factory:
In this respect the question basically looks down to the determination of the correct RG-1 stage as the goods are required to be entered only when such a stage has been reached. However both the parties have not been able to show that any RG-1 stage has been notified by the board or the Collector.
In these circumstances it becomes necessary to look to mainly to two aspects (i) the evidence of completion of manufacture if any and (ii) the conditions of the contract if any. As far as the completion is concerned the appellants have stated that some minor jobs were further required to be carried out and this has not been shown to be incorrect or even denied by the department. Further the appellants have drawn our attention to the contract and to the mandatory clause of inspection included in it. Under the circumstances it cannot be stated that the appellants did not deliberately enter the goods in the RG-1 to evade duty and the matter could appear to be more in the nature of difference of opinion between the appellant and the department regarding the point of time at which entries were required to be made in the RG-1 i.e. RG-1 stage.
In view of the fact that the learned counsel has shown us the contract and the mandatory condition of inspection therein they cannot be blamed if they had a reasonable belief that the goods were required to be entered in the RG-1 only after inspection.
The department has also not been able to show as to what was the established practice in this regard although it has succeeded in pointing out that in the first case (i.e. in respect of the goods seized in transit) the entry had been admittedly made even before inspection. The learned counsel has explained it as over-zealousness of the officials to enable to show achievement of target although this sounds a bit strange, it is within the realm of possibility. That apart an exception has to be distinguished from a practice and in respect of the later both the sides have not pleaded sufficient material before us. In the circumstances, we hold that in view of the inclusion clause in the contract and the admitted fact that the inspection had not been carried out no mala fides could be attributed and the appellants were in any eventuality entitled to the benefit of doubt.
3. Taperecorder:
In this respect we note that the appellants had initially denied that these goods were manufactured by them and had insisted before the Collector that they had imported the parts which are meant for a very specialised type of tape recorder and sold it to Madras Port Trust. However in response to our queries they have now accepted that this item was assembled within their factory premises. The learned counsel has however pleaded that such assembling did not amount to manufacture.
In this connection we observe that since the appellants have virtually changed their stand now, and the facts which are now being pleaded were not squarely placed before the Collector and in the absence thereof he had based his order on inferences and circumstances only, hence the matter is required to be remanded to the Collector for re-examining the matter in the light of this admission.
31. In view of the above discussion we modify the order of the Collector as follows :-
1. The confiscation of goods (and consequentially) the redemption fine is set aside.
2. The demand of duty is quashed.
3. The penalty is reduced from Rs. 25,000/- (Rupees Twenty five thousand only) to Rs. 20,000/- (Rupees Twenty thousand only) and
4. The matter in so far as it relates to tape-recorder is remanded for de novo consideration in accordance with law.