Customs, Excise and Gold Tribunal - Tamil Nadu
Foredge Granites Pvt. Ltd. vs Collector Of Central Excise on 16 December, 1992
Equivalent citations: 1993ECR407(TRI.-CHENNAI), 1993(65)ELT415(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. This appeal is against the order of the Collector of Central Excise, Bangalore. The lower authority denied the appellants the benefit of Notification 77/83 and 77/85 as available at the relevant time under the respective notification in respect of the clearances made during July '84 to March '86. The lower authority held that the value of plants and machinery installed in the appellants' factory was more the limit set out in the Notifications for the purpose of eligibility to the exemption notifications and for that reason therefore the appellants had wrongly availed of the benefit of the said exemption in respect of the goods cleared by them and the appellants were held to be liable to pay duty amounting to Rs. 3,56,788.14 besides a penalty of Rs. 35,000/-.
2. The learned Consultant for the appellants pleaded that for the purpose of reckoning the value of Plant and machinery installed in the appellants' factory they have not included the value of crane and accessories and also slicing machine installed in the unit and pleaded that the value of these equipments should not be taken to be includible in the value of the Plant and machinery installed in the factory as these items were not used in the manufacture of the excisable goods and the Crane was only a material handling equipment. On a query from the Bench, he conceded that the crane was used for the movement of the granite slabs during manufacture. On a further query, the learned consultant conceded that the Crane was installed to increase the production and stated that its installation had contributed to the increased production in the appellants' factory. He did not cite any case law in support of his plea.
3. The learned SDR for the Department pleaded that the Crane installed in the appellants' factory has to be considered as part of the Plant and machinery as it was participating in the manufacturing process.
4. We observe that so far as the installation of Crane in the appellants' factory is concerned, there is no dispute in regard to its use in the factory for the purpose of movement of granite slabs. The only point made out by the Consultant is that the same was in the nature of material handling equipment and therefore should not be taken into reckoning for the purpose of arriving at the value of Plant and machinery installed in the appellants' factory. We observe that benefit of Notifications 77/83 and 77/85 is available in case the value of the Plant and machinery installed in a Unit is not more than Rs. 20,00,000/- (Rupees Twenty lakhs). The appellants have declared before the authorities the value of Plants and machinery installed in their factory as Rs. 17,92,908.60 and after filing this declaration they came to install Crane and slicing machine in the factory. They did not make the authorities aware of the installation of Crane etc. as additional equipment or machinery in their factory and it was only when the audit of the Unit was taken up by the Accountant General that this fact came to be noted. In the balance sheet the appellants have included the value of the material handling equipment. Not having informed the authorities in respect of the same the learned Collector has rightly observed that the appellants have suppressed the fact in regard to the same. The appellants' only plea is that the Crane is in the nature of material handling equipment and its value should not be included in the value of Plants and machinery. We observe that the appellants are manufacturing polished granite stones. Taking into consideration the nature of the product, the appellants have to necessarily move heavy slabs of stones during the process of manufacture and also after the polishing is complete and this job is being carried out by using the crane in their factory. The point therefore that falls for consideration is, if the crane is performing the limited function of movement of stone in their factory whether the same can be taken to be part of the Plants and machinery for the purpose of reckoning total value of plants and machinery installed in the appellants factory for the purpose of notifications in question. There is no doubt that Crane is an item of machinery or equipment and the term Plant and machinery wide enough to cover it within its scope. There is nothing mentioned in the notifications as to which equipment or item in a factory can be taken to be included or excluded for the purpose of arriving at the total value of plants and machinery. The question therefore that has to be examined is from the aspect of as to what are the items of Plant & machinery which are contributing to the production process and facilitating production of the goods in the appellants' factory. One point that stands out is that those items of machinery which are in the nature of fixtures installed in the factory can be considered as part of the Plants and machinery installed in the factory and so long as these are participating in the process of manufacture the value of the same has to be included. Therefore the only point to be considered is whether movement of stone slabs can be taken to be as part of process of manufacture. We observe that in the case of manufacture of a product, the process can be in the nature of preparatory to the stage in which the actual manufacturing process of a product takes place or can be in the nature of an ancillary process after a product comes into existence. The process preparatory to the manufacture can be in the nature of pre-treatment of materials or even water as in the case of Paper Mills or treatment of raw-materials to be put in the manufacturing stream or it can be at the end of the manufacturing process like cutting of reams of paper after the paper has come into existence, or even movement or lifting up of the materials during the course of manufacturing process or of the raw materials which may be required to be moved by material handling equipment like conveyor system or lift mechanisms for putting the material in hopper or work benches or on to the machines on which the process of manufacture is taking place. What is required to be seen is that the use of the machinery should be such as would contribute to the process of manufacture and helps in taking the manufacturing process a step further. In the present case, the appellants have admitted that installation of Crane in their factory has contributed to the increased production. Even otherwise in the case of manufacture of polished granite stones heavy stones are required to be taken and placed on the machines and thereafter lifted after the manufacturing process is over. In view of what we have stated above, we are of the view that Crane installed is part of Plants and machinery for the manufacture of polished granite stones. We observe that in the context of pumping of brine and lifting of raw material by using power for manufacture of lime at the head of kiln, while interpreting the scope of the Notifications in regard to use of power in or in relation to the manufacture of a product, the Hon'ble Supreme Court in the case of Collector of C. Ex. v. Rajasthan State Chemical Works and Ors. - reported in 1991 4 Supreme Court cases 473 has held as under : (paras 13 & 21.).
"Manufacture thus involves series of process. Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to (sic that the) manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process manufacture of processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture".
"The transfer of raw material to the reacting vessel is a preliminary operation but is a part of a continuous process but for which the manufacture would be impossible. The handling of the raw materials for the purpose of such transfer is then integrally connected with the process of manufacture. The handling for the purpose of transfer may be manual or mechanical but if power is used for such operation, it cannot be denied that an activity has been carried on with the aid of power in the manufacturing process. The use of diesel pump sets to fill the pans with brine is an activity with the aid of power and that activity is in relation to the manufacture. It is not correct to say that the process of manufacture starts only when evaporation starts. The preliminary steps like pumping brine and filling the salt pans form integral part of the manufacturing process even though the change in the raw material commences only when evaporation takes place. The preliminary activity cannot be disintegrated from the rest of the operations in the whole process of manufacture. Similarly when coke and lime are taken to the platform in definite proportions for the purpose of mixing such operation is a step in the manufacturing process. It precedes the feeding of the mixture into the kiln where the burning takes place. The whole process is an integrated one consisting of the lifting of the raw materials to the platform mixing coke and lime and then feeding into the kiln and burning. These operations are so interrelated that without any one of these operations manufacturing process is impossible to be completed. Therefore, if power is used in any one of these operations or any one of the operations is carried on with the aid of power, it is a case where in or in relation to the manufacture the process is carried on with the aid of power".
Therefore, in relation to the manufacture of a product, it would be seen that processes which are integrally connected with the manufacture of a product has to be held to be part of manufacturing process. In the present case, as we have stated above, this is the position and following the ratio of the ruling of Hon'ble Supreme Court, we hold that the learned lower authority has correctly held that the appellants had installed in their factory machinery in excess of the limits prescribed in the two notifications referred to supra. We, therefore, uphold the demand of duty as held by the lower authority. We also hold that since the appellants did not come forward with necessary information to the authorities regarding installation of Crane, they are liable to penalty as held by the learned lower authority. However, we hold that interests of justice would be served if the penalty is reduced to Rs. 10,000/- (Rupees Ten thousand). But for the above modification, the appeal is otherwise dismissed.