Customs, Excise and Gold Tribunal - Delhi
Hatim Carbon Co. (P) Ltd. vs Collector Of Central Excise on 1 February, 1988
Equivalent citations: 1988(17)ECR241(TRI.-DELHI)
ORDER K. Prakash Anand, J.
1. In this case it is alleged that the appellant company manufactured excisable goods without obtaining Central Excise licence and cleared them without payment of duty. The matter was adjudicated by the Collector of Central Excise, Bangalore. He demanded Central Excise duty amounting to Rs. 13,42,629.22 on carbon brushes and slot wedges manufactured and cleared by the appellant from 1979-80 to May, 1984 13,149 pcs. of carbon brushes which were seized at the time of making of the case were confiscated, the appellant being allowed to pay Rs. 30,000/- towards the value of the goods which had been provisionally released to the appellant company. A personal penalty of Rs. 1,00,000/- (one lac) was also imposed on the appellant.
2. Heard Shri D.N. Kohli, Consultant for the appellant company and Shri Vineet Kumar, SDR for the department.
3. The learned Consultant submits that the appellant company is not making general purpose carbon brushes and slot wedges. It is contended that the carbon brushes and slot wedges are made according to specifications required for use in electric motors.
4. It is pointed out that the Collector has made a false distinction between parts and components in order to deny the benefit of an exemption notification which covers parts of the electric motors. In this connection he has quoted in his favour the decision in the case of Commandant Embarkation Hqrs. Bombay v. Collr. of Customs Bombay 1984 ECR 1789 (Cegat).
5. An alternative plea, Shri Kohli submits that if it is held that the appellant's goods are liable to duty then at least set off should be permitted of Excise duty paid on carbon. In this connection the decision in the case of Collector of Central Excise, Bangalore v. M/r. Vikrant Tyres Limited 1986 (9) ECR 616 (Cegat SRB) is relied upon and the point made is that the set off entitled should be allowed even where the prescribed procedure could not be observed.
6. It is also submitted that demand of duty beyond 6 months period would be barred by limitation as there has been no suppression of facts as alleged by the department.
7. Finally, it is submitted that there is no justification at all for such a heavy penalty as it has not been shown that there was any mens rea.
8. Responding Shri Vineet Kumar, the learned SDR adopted the Collector's arguments on the issue of classification and had nothing further to add on this point.
9. As regards time bar, it is pointed out by Shri Vineet Kumar that the appellant company did not make a full declaration of all necessary particulars to the local authorities and worked without a licence. The fact that the appellants were enjoying an exemption in Calcutta Collectorate, it is pointed out, did not absolve the company from following the requirements of law and procedure in the Bangalore Collectorate.
10. The learned SDR justifies imposition of penalty by referring to not only the clearance of the excisable goods without payment of duty but also their manufacture without taking out a Central Excise licence.
11. The facts of the case and submissions made before us have been carefully considered. While the learned Consultant has submitted before us that the appellant company have not been making what he calls "general purpose" carbon brushes and slot wedges, we find that even in their appeal before us, it is admitted that during the period of 5 years, while 75% of the carbon brushes were cleared for use in electric motors the remaining 25% of the carbon brushes, "were capable of being used in the manufacture of dynamos, alternators and generators". In the circumstances a decision necessarily has to be separately taken in respect of these two kinds of products, that is, those which are for use in electric motors and those which are usable for other purposes. The contention of the learned Consultant that the appellant company is making carbon brushes which are tailor made for electric motors only has therefore, to be rejected, as being contrary to what has been accepted in the appeal itself.
12. We are of the view that in so far as the carbon brushes and slot wedges usable in dynamos, alternators and generators are concerned appellants have not been able to make out any case for their being treated as parts of components of electric motors. They would, therefore, be rightly classifiable and liable to duty under tariff item 68. In so far as the carbon brushes which are used in electric motors are concerned the department's case is difficult to fathom. The Collector in his Order-in-Original has sought to make a distinction between parts of electric motors and components. He has maintained that "parts of electric motors should essentially have the main characteristics connected with the working of the motor, that is to say, rotar stator and like". It is added by him that there are several components which do not quite fit in the definition of parts and these would include electric wires, bolts, nuts and screws. Carbon brushes and slot wedges manufactured by the appellant company have been held by the Collector to fall in this second category as parts which "do not go into the actual running in the electric motor". The Collector also appears to be of the view that since carbon brushes are used in electric motors as well as in generators, dynamos or alternators, therefore, carbon brushes as such cannot be considered as parts of only electric motors. A further argument which is equally difficult to understand is that carbon brushes are "often worn out and have to be replaced unlike the regular parts of electric motors like stators and rotars which do not need replacement so often, and repairing these parts is rather more an expensive and difficult job than to replace worn out carbon brushes. It, therefore, follows that carbon brushes is a component distinct from the parts of an electric motor like a bolt, nut and screw used in the assembly of electric motors". Finally, it is held that carbon brushes do not find any specific entry under any of the Central Excise Tariff Items 1 to 67 and therefore they rightly fall under Tariff Item 68 as goods "not elsewhere specified". Accordingly, it is held that the argument of the appellant company that the goods are tailor made for electric motors is not relevant.
13. We are unable to accept these arguments of the Collector. It seems to us that the distinction that is sought to be made between parts of electric motors and components of electric motors is unreal to the extent of being devoid of any meaning. What is a part of electric motor will have to be considered as a component, and what is a component of electric motor will have to be considered as a part thereof.
14. Collector has referred to electric wires, bolts, nuts and screws and observed that they cannot be considered as parts of electric motors Although he does not elaborate his point of view in the same words as we are doing here, it appears to us that he is making a distinction between parts which are made exclusively for electric motors and those parts, such as electric wires, bolts, nuts and screws, which are general purpose items, usable also in items other than electric motors. This argument however, does not lend any support to the attempt that has been made to differentiate between parts and components; all items which can be shown as specifcally manufactured for electric motors (and which are not specified elsewhere in the tariff) would be entitled to the benefit of the relevant notification as parts of the electric motors. Items which are of general use and not manufactured specifically for electric motors such as electric wires, bolts nuts and screws would obviously not be entitled to the benefit of exemption given to parts of electric motors.
15. In the light of foregoing discussion we also hold that it is irrelevant whether certain parts of electric motors get worn out faster than others or require replacement or are less expensive of less difficult to replace. This by itself would not come in the way of their being recognised as parts or components of electric motors.
16. Coming now to the claim of time bar, we find that appellants are relying on a letter dated 18th November, 1981 which they clairn, they addressed to the Superintendent of Central Excise, Kanakapura Range Bangalore intimating him that they were manufacturing carbon brushes cut into required shapes and sizes from duty paid carbons. The Collector in his order has referred to this claim of the appellants and observed that appellants have failed to produce acknowledgement from the Range Officer for having received the letter under reference. During the course of hearing before us, appellants requested the Bench to issue directions to the Assistant Collector to allow them to inspect the Record of Receipts in the office of the Jursdicational Range Officer and to make available an attested copy of the relevant portion of the record which would show receipt of appellants letter dated 18th November, 1981. While no such directions were issued by the Bench, it was left to the petitioner to approach the Assistant Collector for getting a certified copy of the Record in question. Thereafter, appellant has filed before us a photo copy of Inward Correspondence Register maintained in 335E form in the Kanakpura Road Range, Bangalore 25. This shows that appeallant's letter No. B02/GC/532/81 dated 18th November 1981 furnishing certain particu are was duly received in the Range. We find that appellants had constantly claimed, even before the lower authorities that they had furnished necessary information to the department in their letter of 18th November, 1981. Now they have produced before us a photo copy of the Inward Correspondence Register of the Range Officer duly attested by the Superintendent, Central Excise of the Range which proves the receipt of such a letter. In the face of this evidence, it cannot be said that there has been any suppression of facts after the submission of the letter dated 18th November 1981.
17. The Show Cause Notice is dated 21.5.1984. As discussed in the preceding para, department became aware of the manufacturing activity as a result of the letter dated 18.11.1981. Till this date, therefore, the appellants had kept the department in the dark by suppressing that information. The department would, therefore, have a period of 5 years for demanding duty from the date of Show Cause Notice, but this period would not extent beyond 18th November, 1981, the date on which necessary information was given to the department. Hence the duty could be demanded if otherwise permissible for the following periods:
1.4.1979 to 31.5.1979 Beyond 5 years. Demand of duty to be dropped.
1.6.1979 to 17.11.1981 Demand of duty valid as being within 5 years period.
18.11.1981 to 31.11.1983 Barred as being beyond 6 months before the date of notice.
1.12.1983 to 31.5.1984 Within time.
18. According to the information furnished by the appellants (page 54 of Paper-book), the aggregate value of clearances from their Calcutta and Bangalore factories is as under:
1979-80 : Rs. 3.94 lakhs
1980-81 : Rs. 23.43 lakhs
1981-82 : Rs. 25.06 lakhs
1982-83 : Rs. 26.91 lakhs
1983-84 : Rs. 24.40 lakhs
The exemption limit in respect of goods falling under Item No. 68-CET was Rs. 15 lakhs in 1979-80 and Rs. 30 lakhs in each of the four succeeding years. This apart, the appellants also claim that the value of plant and machinery at Calcutta and Bangalore put together was Rs. 8.92 lakhs as on 31st March, 1983 (page 53 of the Paper-book). This claim as regards aggregate value of clearances as well as the value of plant and machinery will have to be gone into carefully by the lower authorities, subject also to our decision supra as regards the dutiability of parts of electric motors.
19. Accordingly, the demand for duty as well as the confiscation of goods is set aside and the matter remanded for de novo consideration in the light of our observations in the foregoing paras.
20. There is no satisfactory answer from the appellants regarding their failure to take out a Central Excise licence when they had crossed 80% of the exemption limit of Rs. 30 lakhs. During the course of hearing the learned Consultant observed that their clearances at Bangalore did not exceed the cut off limit. This contention is of no avail in view of the appellant's own admission in para (ii) of statement of facts in the appeal before us that while the aggregate value of the annual clearances of tariff item 68 mods in both their factories had been less than Rs. 24/- lakhs (80% of the exemption limit) prior to 1981-82, the same exceeded 24 lakhs of rupees during 1981-82, 1982-83, 1983-84. They therefore failed to apply for L-4 licence as required, on crossing the 80% exemption limit. Appellant's obligation in this regard was dependent on the total production of the Company. In the light of these facts imposition of some penalty would be Justified and is therefore upheld.
21. However, so far as quantum of penalty is concerned, we have taken note of the fact that in the Collectorate at Calcutta a different view had been taken as regards the dutiability of the appellant's products. Taking all the facts and the circumstances into consideration we therefore reduce the personal penalty to Rs. 10,000/-.
22. Appeal partly allowed in aforementioned terms.