Customs, Excise and Gold Tribunal - Mumbai
Bajaj Auto Ltd. vs Commissioner Of Central Excise on 7 June, 2000
Equivalent citations: 2000(120)ELT668(TRI-MUMBAI)
ORDER J.H. Joglekar, Member (T)
1. The appellants M/s. Bajaj Auto Ltd. manufactured two & three wheeled motor vehicles and parts thereof. They also manufactured cylinder blocks. They purchased pistons, piston rings, gudgeon pins and circlips from the market. These bought out items were packed along with duty paid cylinder blocks manufactured by them and were marketed as cylinder block piston assembly. They paid duty on these goods from 3-7-1996. Thereafter, they unilaterally stopped paying duty but continued such clearance of cylinder block piston assembly (hereinafter called CBPA). Show cause notice alleging suppression etc. was issued on 8-9-1998 demanding duty not paid on such assembly during the period 4-7-1996 to 31-5-1998. After hearing the assessee, the Commissioner held that CBPA was a new excisable product commercially known in the concerned trades and was a specifically identifiable product. He confirmed the duty amounting to Rs. 1,55,83,924/- and imposed penalty of Rs. Two lakhs under Rule 173Q and a penalty of Rs. 1,49,37,565 under Section 11 AC of the Central Excise Act, 1944. Hence, the appeal.
2. We have heard Shri L.B. Attar, ld. counsel for the appellants and Shri K.M. Patwari JDR for the revenue.
3. The single issue for determination is whether CBPA is product separately known and identifiable from the components of which it is made. In the show cause notice and in the Commissioner's finding it has been so held. However, no evidence was before the Commissioner in the form of a statement of a trader or of an automobile engineer to substantiate it. The assessee also did not give any evidence of any trader in this respect.
4. Reference is made in paragraph 8 of the impugned order to the statement of Shri Shivaramakrishnan, Dy. General Manager. It is not known as to how this extract supports the Commissioner's belief because Shivaramakrishnan in his statement has claimed that the product viz. CBPA had no functional utility as a cylinder block or piston taken individually. He further stated that functional utility is a combined effect when all the parts were properly assembled on vehicle before putting to use on the vehicle.
5. We had asked Shri Attar to demonstrate the items before us. He showed us the individual items. We find that these 5 items put together do not strictly speaking constitute a sub-assembly in the absence of piston which is not in the packet. Therefore, the second part of Shri Shivramakrishnan's statement does not support the department's theory that the assembly was a distinct entity.
6. We have also seen the statement of the same functionary of 28-5-98. He was specifically asked the question about the new product emerging. The question and reply .given is as under : Question No. 14 :-
"Q.14. Block Piston Assembly is a completely a new product emerging out of the process of assembly and is a new commercial product different from the one with which the process started. It is a item with different name, character and use and the same appears to fall under chap. No. 8409.00 by its factual utility and is dutiable. What you have to say about this?
Ans. CYLINDER BLOCK PISTON ASSEMBLY as described in the commercial Invoice is a collection of cylinder block, piston, piston rings, G. Pin, Circlips and does not emerg as a new commercial product. I wish to state that as such only the cylinder block appears to fall under Chap. No. 8409.00 for which duty is payable."
6. The extract above shows that the assessees have not accepted the contention of the department that a new item separately known to the market had emerged out the act of putting together these parts.
7. The Commissioner had relied upon the Supreme Court decision in the case of Narne Tulaman v. CCE 1988 (38) E.L.T. 566 (S.C.) to support his case that these parts put together would constitute manufacture. We have seen the judgment. The facts before the Hon'ble Court were that parts of weighbridge were bought out for assembly at site. The Hon'ble Court held that on such assembly being made, a new product known in the market and known under the excise item "weighbridge" had come into being. On this ground it was held that the act of manufacture was involved and the appellant was the manufacturer. In the case before us, in the market the components continued to be known as spare parts of engines. Reliance on this judgment, therefore, is misplaced.
7. We have also seen the Larger Bench Judgment in the case of Western India Paints & Colour Co. Ltd. [2000 (117) E.L.T. 555 (Tri.)]. The question involved was whether the process of repacking of bulk aluminium paste into smaller packing would amount to manufacture which issue is distinct from the issue on hand.
8. We have seen the Andhra Pradesh High Court judgment in the case of XI Telecom Limited v. Supdt. of C. Ex. 1999 (105) E.L.T. 263 (A.P.). In this case, the High Court was examining the components of cable jointing kit and observed that on being put together, there was no change in identity, character and use of the articles placed in the kit even though the kit had a distinct name and identity. In yet another judgment in the case of 77 Diamond Chain Limited v. CCE 1999 (35 ) RLT 517 (CEGAT) the Tribunal had held that putting together some items-manufactured by the assessee did not amount to manufacture even where the assessee undertook to the job of testing and packing. In arriving at the conclusion, the Tribunal observed as under :
"It is an admitted fact that each of the four item have different activity and different use and each of the item can be replaced as a spare. For the purpose of maintaining market and quality and in order to ensure that the chains fit properly to the sprockets they get these sprockets manufactured according to dimension and specifications and supply the same along with their chains, so that the chain is properly put to use. Merely supplying in the kit form will not bring about new product as each of the item is separate and they are parts of motor vehicle having independent use. After careful consideration we notice that the activity of testing and packing does not change the item into a new product and the products remain the same. Therefore, the judgment of the Andhra Pradesh High Court in the case of XI Telecom is not distinguishable as even in that case various articles were put in a kit and the kit was known as cable jointing kit".
9. We find that the situation before us in this case is similar to what was before the Tribunal in the cited judgment. Incidentally, this judgment was upheld by the Supreme Court in Civil Appeal 310/2000 dated 3-3-2000.
10. In our opinion, in dealing with such a situation, the question to be asked is this - if the various components are assembled or are put together, would the assembled components be able to perform a function different from that could be performed by the individual components? If the answer is in the affirmative, then assembly would amount to manufacture. As we have observed above, the demonstration made by Shri Attar before us made it clear that in the absence of the piston rod, even the sub assembly would not function. On this ground, we hold that the activity of placing the bought out items along with duty paid parts would not amount to manufacture and therefore, no further duty was levialble. On these findings, this appeal succeeds and the impunged order is set aside with consequential relief.