Customs, Excise and Gold Tribunal - Delhi
Travancore Cement Ltd. vs Collector Of Central Excise on 3 April, 1998
Equivalent citations: 1998(103)ELT260(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. In this appeal filed by M/s. Travancore Cements Pvt. Ltd. against the Order-in-Original No. 49/89, dated 26-9-1989 passed by the Additional Commissioner Central Excise, Cochin, the issues involved are whether the revolving screening plant machinery manufactured by the assessee is leviable to excise duty and whether the extended period of time for issuing the show cause notice under Section 11A(1) of the Central Excise Act was available to the department.
2. M/s. Travancore Cements Ltd. manufacture white cement out of lime shell dradged from the bed of the Vembanad lake. For removing water and impurities from the lime shell they designed and made the revolving screening plant on their own and cleared the same in 1985 for placing it on dredger without payment of Central Excise Duty and without following the excise formalities. A show cause notice dated 12-6-1989 for demanding duty and imposition of penalty was issued to them. The Additional Commissioner, Central Excise in the impugned order has confirmed the demand amounting to Rs. 2,13,789.20 P, imposed a penalty of Rs. 5000/- and after confiscating the revolving screening plant gave the appellants an option to redeem the same on payment of fine of Rs. 20,000/-.
3. Ms. Tamali Wad, learned Advocate for the appellant, has submitted that as no screening plant or its design was available anywhere in the country, the design was developed by their Works Manager from scratch with particular reference to the specific requirements of the Company and the screening plant was got fabricated on steel pontoon in an open yard outside their licensed premises, that such ferbication and use of the screening plant was well known to the Excise officers; that as the screening plant was entirely unknown in any market in India or elsewhere, it cannot be bought or sold and as such it is not goods and not chargeable to Excise Duty. The ld. Advocate also contended that the screening plant was not manufactured in a factory and accordingly was not liable to duty under Tariff Item 68 of the old Central Excise Tariff in view of the Notification No. 46/81-C.E., dated 1-3-1981 as the open yard outside their licensed premises was not a 'factory' as defined in the Factories Act, 1948; that the word precinct mentioned in the definition of factory in Section 2(e) of the Act meant an area which encompasses the factory; that in any event they were entitled to the benefit of Notification No. 118/75. Reliance was placed on the decision in the case of Gujarat Machinery Manufacturer Ltd. v. CCE, Baroda - 1983 (12) E.L.T. 825 (Tribunal). It was also contended that they were eligible to the benefit of Notification No. 201 /79, dated 4-6-1979 following the decision in the case of Haryana State Electricity Board v. CCE -1988 (37) E.L.T. 81 (Tribunal).
4. The learned Advocate finally argued that the demand of duty was barred by limitation as the said plant was assembled in May, 1985 and it was put into use in 1985 itself and was in continuous use thereafter to the knowledge of the Central Excise officers who had seen the same on periodic visits to their factory and dredging area and the existence and use had all along been disclosed in their balance sheet and accounts and other statutory records; that the entire material was culled out from their own statutory records; that no duty liability was discharged or demanded owing to the mutual understanding of the appellant and the department that the assembly of the machinery in question was not an excisable activity. Reliance was placed on the decision of the Supreme Court in the case of CCE v. Chemphar Drugs Liniments 1989 (40) E.L.T. 276 (S.C); and Tamilnadu Housing Board v. CCE, Madras - 1994 (74) E.L.T. 9 (S.C.) in which it was held that the proviso to Section 11A(1) is hedged on one hand with existence of such situation, as have been visualised by the proviso by using such strong expression as fraud, collusion etc. and on the other hand it should have been with intention to evade payment of duty; that both must concur to enable the Excise officer to proceed under the proviso. She contended that as no specific averment about suppression has been made in the notice, extended period cannot be invoked in view of the decision of the Appellate Tribunal in the case of Haryana State Electricity Board v. CCE -1988 (37) E.L.T. 81 (Tribunal) and Singareni Collieries Co. Ltd. v. CCE - 1988 (37) E.L.T. 361 (Tribunal). She also mentioned that the Appellants were under the bona fide impression that the screening plant was not chargeable to duty and in support, the affidavit of Shri Raju A. Cherian, Works Manager, was referred to. It was also contended that assembly of a product for own use and not for sale does not amount to manufacture as held in Haryana State Electricity Board v. CCE - 1993 (68) E.L.T. 469 (Tribunal). It was also mentioned that in any event, all the facts necessary for the demand was within the department's knowledge by 17-8-1988 and the show cause notice could legally be issued only within six months of such knowledge which was admittedly not done.
5. Shri Nunthuk, ld. JDR, argued that neither any declaration was filed nor any classification list was filed by the appellants regarding manufacture and clearance of screening plant; that the product is not unknown in the market as the same was fabricated after taking the alternatives into consideration, that the periodical visits by the officers do not absolve the manufacturer from his obligation under the excise law of making a correct declaration. See R.G. Nagori & Sons v. CCE - 1989 (39) E.L.T. 303 (Tribunal). He also contended that screening plant was not an immovable goods and benefit of Notification No. 201 /79 is not available as the procedure prescribed therein was not followed.
6. In the appeal memorandum, a reference was made to the appeal filed by the appellant against confirmation of duty in respect of Pontoon manufactured by M/s. Kerala Electricals & Allied Engg. Co. Ltd. for the appellants. The ld Advocate for the appellants furnished a copy of the Final Order No. E/1213-1214/97-B1, dated 3-6-1997 on 4-3-1998.
7. We have gone through the submissions of both the sides. The fact that the screening plant has been manufactured by the appellant for their Own use by itself does not mean that it is not goods. The screening plant was fabricated by them as no suitable screening plant was available in the country as solemnly affirmed by Shri Cherian, Works Manager, in his affidavit. The screening plant is a goods which is used for removing the water and other impurities from the lime shell dredged from the lake bed. Merely because the appellants was the only unit using the impugned plant it does not cease to be goods. It is not necessary that the goods should actually be marketed. The Supreme Court held in Indian Cable Co. Ltd. v. CCE - 1994 (74) E.L.T. 22 (S.C.) that 'Marketability' is a decisive test for dutiability. The word 'marketable' only means 'saleable' or 'suitable for sale'. It need not be in fact, "marketed". Similar views were expressed by the Appellate Tribunal in the case of Geep Industrial Syndicate v. CCE 1994 (5) RLT 104 (Tribunal) in which it was observed that the propensity of the goods to be marketed is the relevant fact and actual marketing of the goods is of no relevance.
8. We also observe that the benefit of Notification No. 46/81-C.E., dated 1-3-1981 is not available to them as the screening plant was got fabricated by the appellant in an open yard outside their licensed premises which place will be covered by the word 'precincts' used in the definition of factory under Section 2(e) of the Central Excise Act. Further this argument was also rejected by the Appellate Tribunal in their own case relating to Pontoon under Order No. E/1213-1214/97-B, dated 3-6-1997. They are also not eligible for the exemption contained in Notification No. 118/75, dated 30-4-1975 as the exemption was not available to complete machinery and the screening plant manufactured by them was a complete machinery. As far as the question of invoking the extended period for issuing the show cause notice is concerned, it is found that it is admitted fact that neither the classification list was filed by the appellant nor any duty was paid before clearing the screening plant for their own use nor any excise formality was followed. As such the fact of manufacture and clearance of screening plant was not brought to the notice of the department. It is also observed that there is specific averments in the show cause notice that the impugned goods were cleared with intent to evade payment of duty which attracts the provisions of proviso to Section 11A(1) of the Central Excise Act. It has been held by the Appellate Tribunal in the case of Best Liquefiable Gases Ltd. v. CCE - 1997 (22) RLT 557 (Tribunal) that if the averments in the notice clearly spelt out the allegation of suppression, the extended time limit is invokable even if there was no specific reference to the provisions of law. We find no force in the submissions of the appellant that show cause notice should have been issued within six months from the date of knowledge by the department. It is settled by the Appellate Tribunal that extended time limit from the date of removal is applicable in respect of period prior to date on which department came to know of appellant's manufacturing activities. See Indian Oxygen Ltd. v. CCE - 1996 (16) RLT 867 (Tribunal). Accordingly the extended period for issuing the notice was available to the department in the present matter and the demand is, therefore, not hit by time limit.
9. We, however, agree with the appellants that they were eligible to avail the benefit of Notification No. 201/79, dated 4-6-1979 in respect of the duty paid components used in the manufacture of impugned screening plant machinery. The Adjudicating authority was not justified in not following decision of the Appellate Tribunal in the case of Haryana State Electricity Board 1988 (37) E.L.T. 81 (Tribunal) in which it was clearly held that it would not be proper to deny the benefit under Notification No. 201/79, if otherwise available, only for the reason that the procedural part had not been complied with because the appellants were, till the receipt of the notice, under the bona fide impression that no duty was payable and, therefore, there was no need to observe the procedural requirement of the notification. The same views have been expressed by the Appellate Tribunal while considering the eligibility of the assessee for Modvat credit in similar situations in the case of Agrawal Metal Industries v. CCE - 1996 (12) RLT 36 and K.C. Palaniasamy & Co. v. CCE, Tricky - 1996 (16) RLT 716 (Tribunal). Accordingly the appellants will be entitled to the benefit of Notification No. 201/79 subject to the condition that they satisfy the department about the duty paid character of the inputs used in the manufacture of the impugned goods.
10. Regarding the issue of addition of merger of profit we find that adjudicating authority has dealt with the point in his order and there is no material on record to interfere with the said finding. Similarly the amount of penalty Rs. 5,000/- imposed in the impugned order cannot be considered to be high at all.
11. The appeal is accordingly disposed of.