Customs, Excise and Gold Tribunal - Delhi
Tube Investment Of India Ltd. vs Collector Of C. Ex. on 23 February, 1987
Equivalent citations: 1989(42)ELT484(TRI-DEL)
ORDER M. Santhanam, Member (J)
1. By this appeal (Transferred Revision Application), the appellants challenged the order of the Collector of Central Excise, Madras dated 3-5-1982 classifying their products as falling under T.I. 28A.
2. The Supdt. of Central Excise, Madras (Preventive) visited the appellants factory on 27-4-1981 and noticed various types of laminations falling under T.I. 28A. These laminations were manufactured by punching MS Sheets in a Godrej 100 TON automatic press. They were ultimately consumed in the factory for the manufacture of Cycle Dynamos. Officers noted 1360 kgs. of electrical laminations. It was noticed that the clearances of excisable goods falling under T.I. 68 was Rs. 1,37,68,679.28 during 1979-80, Rs. 42,39,460.89 during 1980-81. The value of dynamo sets cleared from 19-6-1980 to 31-3-1981 was Rs. 1,41,45,575.04 and the value of the excisable goods cleared during the year was exclusive of the value of clearances of cycle dynamos. It was found that the appellants had exceeded the limit of Rs. 20 lacs during the period 1978-79,1979-80 and 1980-81 and were not eligible for the benefits of exemption under Notification 71/78-C.E. dated 19-6-1980. The total weight of the laminations used for the periods have been set out in paragraph 5 of the order-in-original.
3. A show cause notice was issued on 30-7-1981 asking them to show cause as to why duty of Rs. 18,955.46 due on electrical laminations manufactured and cleared during the period 1-4-1979 to 27-4-1981 should not be demanded; (ii) Why 1360 kgs. of electrical laminations seized should not be confiscated; and (iii) why a penalty should not be levied. In their reply, the appellants contended, inter alia that the goods were not strictly laminations as are available in the market and cannot be classified as laminations. After adjudication, the Collector held that the appellants had manufactured laminations and stampings and that they were classifiable under T.I.28A. He imposed a penalty of Rs. 5,000?-, confirmed the demand for duty and directed the release of the confiscated articles on payment of Rs. 7,500/-.
4. Shri K. Narsimhan, learned counsel for the appellants urged that the goods are semi-fabricated components which were ultimately used after finishing and shaping in captive consumption in the manufacture of cycle dynamos. The four pieces of stampings were used in the dynamo as a production device to one of the rotor/stator components of the dynamos. He referred to Technical Dictionaries for the definition of the terms Laminations/Stampings.
(A) McGraw-Hill-Dictionary of Scientific and Technical Term - II Edition.
"Page 888: Laminations : One of the thin punchings of Iron and Steel used in building up a laminated core for a magnetic circuit."
Page : 1525 : "Stamping: A transformed lamination that has been cut out of a strip or sheet by punch press."
(B) Chambers Technical Dictionary - page 484 "Lamination (Elec. Engg.) A sheet steel stamping so that a number of them can be built up to form the magnetic circuit of an electric machine, transformer or other piece of apparatus."
Based on the above definitions, Sh. K. Narsimhan urged that the laminations should either be a coir for magnitude circuit or number of them could be built up to form the magnetic circuit before they could be classified as elect, laminations. He further pointed out that under Tariff Advice 9/76 dated 17-12-1976 appearing in page 464 of the Central Excise Tariff of India indicates that Protective Device would not be classified under T.I. 28A. Thirdly, Shri Narsimhan submitted that these components were not known in the market or marketed by anyone as electrical stampings or laminations. He cited 1986 ELT 169 (S.C.) (Union Carbide of India v. Union of India and Ors.).
5. He then urged that even assuming components fell under T.I. 28A then, under Notification 71/78 for clearances upto Rs. 5 lacs, the components should be excluded. The aggregate value of all excisable goods concept was introduced only by Notification 80/80 dated 19-6-1980. The lower authorities has by mistake considered all excisable goods for purpose of determining the exemption limit under Notification 71/78. Fifthly, it was pointed out that the show cause notice was dated 30-7-1981 and was served on the appellants on 6-8-1981. The claim from 6-2-1981 was barred by limitation in the absence-of any allegation of suppression. In any event, the appellants had acted bonafide in view of clarification and there was no mens rea to evade payment of duty. The imposition of penalty was not justified.
6. Shri A.K. Jain, SDR argued that the Tariff Entry referred to electrical stampings and laminations all sorts. The laminations/stampings in this case were meant for use in the electrical appliances namely dynamos. The stampings were in a marketable condition and were to be used in the manufacture of dynamos. The value of the stampings have been set out in paragraph 3 of the order-in-original and the appellants cannot claim the benefit of Notification 71/78. The appellants have not obtained licence for the manufacture of the goods. He placed reliance on the decision reported hi 1981 ELT 97 (Gopal Paper and Board Mills v. Union of India and Ors.) and also 1985 (15) ELT 260 (Rishi Enterprises, Bombay v. Collector of Central Excise, Bombay), the penalty was rightly levied because the appellants have contravened the provisions.
7. The points for consideration in the appeal are :-
(i) whether the goods are correctly classifiable under T.I. 28A; (ii) whether the appellants are entitled to the exemption under Notification 71/78, dated 1-3-1978;
(iii) whether the demand for the extended period was justified; and (iv) whether the imposition of penalty is called for.
8. The main contention of the appellants is that the products do not come within the definition of the laminations as set out in the Technical Dictionaries. But a close reading of the definitions cited by the learned counsel for the appellants indicate that the laminations are Thin Punching of Steel used in the building up of a laminated core. We were shown a sample of the goods and also how they were fitted into dynamos. It is seen therefrom that these goods are not mere stampings but became laminations because they are used for building up of a laminated core for a magnetic circuit in the dynamo. Even the Chambers Dictionary indicates that a number of them can build up to form magnetic circuit. From the product shown to us, we find that two of the stampings were fixed to a shaft as to form the upper portion, and two were placed at the lower portion both connected through the shaft. There is a copper wire circuit between the two laminations so positioned as to form the magnetic circuit in the dynamo. When the rotor and stator action take place by virtue of the magnetic circuit energy is produced. The Tariff Entry does not speak of any particular laminations but of electrical laminations all sorts. The goods are used for the production of electricity in the dynamo and have been rightly classified by the Adjudicating Authority as laminations. We also notice that the Adjudicating Authority has on a physical verification of the laminations held that they were identifiable finished products falling under Tariff Item 28A. We are also not impressed with the contention that these laminations are not marketed as such. But the test would be whether they are capable of doing so. Actual sale of the product may not be necessary in all cases. Considering that the appellants are using these laminations for further production in their own factory, much emphasis cannot be laid on the contention that they were not marketed as they were stampings/laminations. The nature of the products indicate that they are not semi-finished but are components for the manufacture of cycle dynamos. The argument that this is merely a protective device is also not acceptable considering the nature of the function these laminations are expected to perform in the dynamo. The ruling of the Supreme Court in the case of Union Carbide of India (cited supra) will have no application as the torch bodies concerned therein were in a crude and elementary form incapable of being employed at that stage as a component in a flash light.
9. Hence on a careful consideration of the materials placed before us, we are of the view that the products are rightly classifiable under T.I.28A.
10. The appellants claimed the benefit of Notification 71/78, dated 1-3-1978. The learned counsel for the appellants was right when he stated that the concept of consideration of all excisable goods was envisaged only by the later notification and not under 71/78. We find in paragraph 3 that the Adjudicating Authority has taken into account all the excisable goods falling under T.I. 68 for the purpose of denying the benefit of the notification to the appellants. From the total weight of laminations used during the period calculating they have been @ Rs. 23/- per kgs. notified for 79/80, the value would be about Rs. 2.17 lacs. Further this is a matter which has to be verified by the Assessing Authority having regard to the observations made in the judgment. We leave open the question regarding the benefit of Notification of 71/78 till 18-6-1980.
11. An objection has been raised that the show cause notice was barred by time. The learned counsel for the appellants relied on the decision reported in 1986 (24) ELT 305 (Kiran Spinning Mills, Thane v. Collector of Customs, Bombay). The appellants had not obtained Central Excise Licence nor had they followed Central Excise formalities. In paragraph 8 of the order-in-original, we notice a reference to a deliberate intention to evade payment of duty by suppressing the facts of production. The appellants are admittedly manufacturers of other goods and it is far-fetched to suggest that they were not aware of the excisability of the laminations. In their written submissions, they have described the goods as protective device to the rotor and stator component of the dynamo. If the appellants had any doubt in the matter, they should have ascertained the actual position from the concerned authorities. Having regard to these circumstances, we are unable to agree that the demand could not be made for the extended period of limitation. On the question of penalty, it is argued that the appellants had no intention to evade payment of duty having regard to the Tariff Classification. We have already held that the appellants had not observed the Central Excise formalities nor had they obtained the Central Excise Licence for the manufacture of these goods. Having regard to the facts, the penalty is justified; but in view of the decision taken by us in regard to the applicability of the exemption limit, the penalty is reduced to Rs. 1,000/-.
12. In the result the classification of the products under T.I.28A is confirmed. The demand has to be re-worked. The question of according benefit of Notification 71/78, dated 1-3-1978 for the period during which it was in force is left open. Penalty is reduced from Rs. 5.000/- to Rs. 1.000/-. Except for the above modifications, the appeal fails and is dismissed.