Patna High Court
Tata Iron And Steel Co. Ltd. vs Union Of India (Uoi) And Ors. on 9 March, 1987
Equivalent citations: 1987(12)ECC55, 1988(33)ELT297(PAT)
JUDGMENT Uday Sinha, J.
1. Tata Iron and Steel Company Ltd. (hereinafter called "TISCO") is the petitioner in this application under Articles 226 and 227 of the Constitution. By this application the petitioner has prayed for quashing Annexure-13 by which (the) Collector, Central Excise, Patna ordered as follows :
(i) The cranes involved in the proceeding be confiscated in terms of Rule 9(2) read with Rule 196(1) of the Central Excise Rules, 1944. In lieu of confiscation TISCO may pay fine of rupees four crores.
(ii) M/s. TISCO to pay duty amounting to Rs. 1,72,22,678.66 under Rule 9(2) of the Central Excise Rules, 1944.
(iii) TISCO to pay penalty under Rule 173Q(1) of the Central Excise Rules, 1944 as follows :
(a) Rupees fifty lakhs on TISCO Maintenance Workshop.
(b) Rupees fifty lakhs on M/s. TISCO in the capacity as L-6 Licensee,
(c) Rupees one crore on M/s. TISCO as L-4 Licensee for TISCO including Modernisation Plant.
Corollary to the orders contained in Annexure-13, the petitioner has prayed for a mandamus commanding the respondents to release 10 E.O.T. (Electric Overhead Travelling) cranes and restraining the respondents from realising the penalty, confiscation and excise duty.
2. The petitioner, pioneer in steel making in the country, is licensed manufacturer of a number of excisable goods. It had steel melting shops No. 1 and No. 2 (hereinafter called "SMS 1 and 2") with production capacity of 1.5 million tonnes of saleable steel. In 1980 or thereabout, the petitioner launched upon a Scheme of replacing the two steel melting shops by two 130 tonnes basic oxygen converters which would produce extra 1.1 million tonnes of crude steel per annut. This replacement was intended to increase the annual production of saleable steel by 190000 tonnes. Installation of a new bar forging machine was contemplated (later on, in fact, installed) to meet the exacting requirements of the Indian engineering industry. The Duplex process of production was 70 years old in SMS No. 1 and 55 years old in SMS No. 2. The Duplex process was replaced by basic oxygen furnace (BOF) shop. This Project was classed as Steel Modernisation programme. In order to effectuate in the petitioner had to lean heavily on one of its own units, located at Adityapur which is known as "TISCO Maintenance Shop", now called "Growth Shop". By letter dated 14-11-1980 the Chief Engineer (Modernisation) and the Resident Manager of M.N. Dastur & Company (P) Ltd., the consultants placed orders with the Divisional Manager of the Maintenance shop at Adityapur in the following terms :
"Please arrange to_ design, manufacture, assemble and supply one number Lance Crane 35 tonnes x 6.6 M-span AC with all structural and mechanical components, AC electricals and conventional controls, complete as per TMS drawing No. 3263.00.001/A....
The above crane shall be manufactured and supplied complete new conforming to TISCO Standard 046006 already with you and latest decision/developments on AC cranes....
After complete assembly of the crane at your shop, a joint inspection will be carried by CE (Mod) and CEE's representatives and any defects pointed out after inspection shall be rectified by you before despatch of the crane parts.
The crane shall be despatched after match marking duly approved by CE (Mod).
Lance Crane. - A consignment list of parts and five copies of all assembly and erection, electrical schematic and wiring diagrams, panel and cable route layout drawings shall be sent to CE (Mod) before despatch of the crane.
Trial run. - Idle trial run in the presence of CE (Mod) and CEE's representatives of all motions to be done at your shop to check lubrications, alignment and performance of the crane parts.
Delivery : November, 1982.
The cost indicated is based on your letter No. TMS/D/1346, dated 15th October, 1980."
The above are the relevant extracts from Annexure-2, the work order by the petitioner to the Divisional Manager of the Maintenance Shop. This was issued in terms of the Modernisation Programme. The Project Code No. was MD. 01/4.10.
3. The work order was duly executed. On 23-3-1983 the Steel Modernisation Programme was accomplished and with great fanfare, and justifiably, the basic oxygen furnace was commissioned by Mr. J.R.D. Tata. The process of modernisation was hailed as a significant achievement, more so, when it was accomplished two months ahead of schedule. The petitioner announced with legitimate pride in its brochure that "the Duplex process was being consigned to its due place in steel making history enabling Tata Steel to enter the modern age of Oxygen tool making." Needs no mention that the due place of the Duplex process was the backyard of anonymity. Three cranes supplied by the Adityapur Machine Shop were used for erecting BOF Converters by 3 Mobile-Crane Method. In all ten such cranes were acquired by the petitioner. The bill for the ten cranes was to the tune of rupees two hundred thirty crores.
4. The Maintenance Shop of M/s. TISCO at Adityapur holds licence (independent of the Plant of the TISCO Steel Factory) authorising it to manufacture components, sub-assemblies and assemblies of equipments in Form L-4. The licence was issued originally in 1977 and was extended to manufacture of components, sub-assemblies and assemblies of equipments from time to time.
5. In June, 1982 the Deputy Controller of Accounts of TISCO requested the superintendent of Central Excise, TISCO Range, 3amshedpur that "they may be granted a licence to obtain without payment of the whole or part of the Central Excise duty leviable thereon on components, sub-assemblies and assemblings of equipment required for maintenance of Steel Plant to be used by them at their factory during the three years ending 31st December, 1984". Paragraph 2 of that letter was a declaration on behalf of the company that the components, sub-assemblies and assemblings of equipment would be used only captively for the maintenance of Steel Plant. Along with the letter there was a Schedule in terms of which the assemblies, etc., were to be used and that they would not be put to any other use. Serial No. 2 in the Schedule related to the nature of excisable goods on which remission of duty was desired and the answer in regard there to was : "Components, sub-assemblies and assemblings of equipment required for maintenance of Steel Plant." Serial No. 6 required a declaration in regard to the purpose for which the manufactured product was to be applied and the declaration was "for maintenance of their Steel Plant". It need only be pointed out here that there was no mention of 'crane' in the declaration of the Schedule annexed to Annexure-5. In terms of the declaration a licence was granted to the petitioner in Form L-6 (See Annexure-6). After some months the Assistant Collector, Central Excise, Jamshedpur felt that never had a licence been taken by the petitioner for production of cranes and no excise duty had been paid thereon. In the view of the Department, manufacture of cranes was exigible to excise duty. The petitioner was, therefore, noticed by Annexure-7 dated 8-2-1984 to show cause why a duty of Rs. 1,57,46,375.00 be not demanded in terms of Rule 9(2) of the Central Excise Rules, 1944. The company was directed to produce alt evidence upon which they intended to rely in support of their defence. The notice also informed the Company that without prejudice to any other action taken under the Rules, they may also be held liable to action under provisions of other law and/or as per the provisions of Sections 9 and 11 of the Central Excises and Salt Act, 1944. A statement of facts running into seven typed pages was enclosed with the notice. By letter dated 14-4-1984 the petitioner showed cause to the Collector, Central Excise. The stand taken up by the petitioner in the show cause (Annexure-8) was that no crane had been assembled/manufactured in Adityapur Maintenance Shop and that it had been assembled and installed only in the Work Shop of the petitioner. It would be apposite here to quote two sentences from paragraph 6 of the Show Cause :
"It may be noted that wordings used are 'please arrange to design, manufacture, assemble and supply'. It is no where mentioned in the order that the complete crane will be made in the Maintenance Shop at Adityapur."
6. The Collector, Central Excise heard the petitioner at length on several dates. The petitioner's stand not having found favour, the Collector passed the impugned order (Annexure-13). The petitioner did not choose to move up in appeal, but preferred to move this High Court in its writ jurisdiction. Rule having been issued on 23-8-1985, we do not think it will be right for us to send back the petitioner to pursue its statutory remedy by way of appeal. We have, therefore, heard learned counsel for the petitioner at length.
7. The core questions for consideration are : Whether the crane was assembled and manufactured at Adityapur Unit of the Tatas or was it manufactured in the factory of the petitioner. Secondly, whether the crane was utilised for maintenance of the existing plant of the petitioner or was it a part of a new plant in the Modernisation'Project to augment for the purpose of excisable duty. Fourthly, whether the action taken for the purpose of excisable duty (sic). Fourthly, whether the action taken for realising excise duty on crane was barred in terms of Section 11A(1) of the Central Excises and Salt Act, 1944. Lastly, whether there is a case for imposition of penalty inasmuch as whether there was any fraud, collusion or wilful mis-statement or suppression by the petitioner.
8. The TISCO Ltd. and the Maintenance Shop at Adityapur are units of the TISCO Ltd., but both are two separate entities running under separate independent licences.
9. The facts must be straightened, in order to appreciate the questions agitated in their proper perspective. It is not in controversy that before 1982 the company was producing steel in SMS Nos. 1 and 2 by Duplex process which had the capacity to produce 1.5 millions tonnes of steel. The entire Duplex process was cast aside as they were too old. That was replaced by two 130 tonnes basic oxygen converters. A new bar forging machine was installed to meet the exacting requirements of the Indian engineering industry. The whole thing was a big leap in steel production. The project was to improve upon the production of steel by the latest method. It was a part of "Tata Steel Modernisation Programme". In the terms of the company itself- this project of steel production by basic oxygen furnace shop was epochal in the history of steel making. In this project overhead mobile cranes were integral parts and unconventional 3 - mobile crane method was adopted for erecting the BOF converters.
10. Learned counsel for the petitioner was at pains to impress upon us that the Adityapur Unit did not produce any crane, but it only produced components and assemblies of cranes. On that footing it was contended that only components and assemblies were liable to duty. The documents of the petitioner itself belie its claim. I have quoted earlier in paragraph 2 extracts from Annexure-2 what the petitioner intended to buy from Adityapur Machine Shop. The authenticity of this document is not in doubt. It is copy of the Work Order placed by the petitioner with the Divisional Manager, Maintenance Shop. Annexure-2 clearly shows that the petitioner wanted to buy cranes, a known commercial item of trade. The petitioner ordered for "complete assembly of_the crane". Complete assembly was to be effected in the shop of the Adityapur Unit. After they had been completely assembled, the cranes would be put on "trial run", in the factory at Adityapur in the presence of CE(Mod) - (Chief Engineer Modernisation) and CEE's representatives, of all motions. Annexure-2 leaves no manner of doubt that the entire crane was assembled in the factory at Adityapur. That is what TISCO wanted. Ten such cranes were ordered and were supplied by them to the petitioner. It is another matter that the cranes when fitted in the plant of the petitioner worked on gantry, but it is well known that gantry is no part of a crane. It is something independent of a crane. I have not the least doubt that the whole crane was assembled at Adityapur.
11. Mr. Chatterji for the petitioner submitted that the cranes could not have been installed at Adityapur Unit and, therefore, no crane came into existence there. The submission, with great respect, is fallacious. If the whole thing was not assembled at Adityapur Unit, there could not have been a "trial run" and approval thereof. It is not the petitioner's case that there was no trial run nor any inspection of the crane at Adityapur. The very fact that the cranes were assembled and were supplied to the petitioner after "trial run" proves conclusively that the entire assembly of the cranes took place at Adityapur.
12. It is true that the entire assembly could not have been transported from the Adityapur unit to the plant of the petitioner, but that does not derogate from the fact that the whole thing was assembled at Adityapur. Thereafter, it was shifted/transported to the petitioner's plant. That could be done only in knocked down condition. The Collector was, therefore, amply justified in his conclusion that the cranesd were assembled at the Adityapur Factory and were then transported to the petitioner in knocked down condition. There is material on record to show that the petitioner had bought overhead cranes from other companies also. They also were supplied to the petitioner in knocked down condition. Large equipments are always supplied to buyers in knocked down condition. The supply in that condition does not mean that no excisable article has come into existence. Can the petitioner take up the position that it did not buy anything from Calcutta or Bangalore which it had described in its orders as supply of crane. The submission that cranes were not purchased but only parts were purchased is too simplistic and cannot be sustained. Can a buyer purchasing a motor car say that he has not purchased a motor car but he has only purchased tyres, wheels, distributors, etc.
13. Learned counsel for the petitioner submitted that overhead cranes cannot operate, but on gantry. A crane, is not a crane until it is affixed to a gantry, as it cannot function till then. I regret, I have some difficulty in accepting this submission. A crane is a distinct identifiable object in the commercial world. It is true that it works on a gantry, but it is well known that gantry is no part of a crane. A "crane" is a machine for raising, lowering and moving heavy weights. A "gantry" is a frame or platform for carrying a crane or similar structure (See Shorter Oxford English Dictionary). It is thus obvious that a "gantry" is only the track on which a crane operates. Nevertheless, a crane is an object distinct from a gantry. A train moves on rails and yet a train is a distinct item even if they are not put on rails. Rails are no part of train. It must be accepted that the cranes before being supplied to the main unit had a "trial run" at the Machine Shop at Adityapur. One does not know whether there was gantry or not. For aught one knows the cranes may have been tried and tested on gantries set up in the Machine Shop itself. It is, therefore, not possible to accept the contention advanced on behalf of the petitioner that no crane was assembled at the Adityapur Unit of the petitioner. After they had been assembled at Adityapur unit, they were removed to the petitioner's site. That could have been done only in knocked down condition.
14. Learned counsel for the petitioner placed reliance on a decision of the Supreme Court in Ram Singh and Sons Engineering Works v. Commissioner of Sales Tax, U.P. [1979] 43 STC 195 to establish that the erection of a crane is not complete until it is affixed to a gantry. Special reliance was placed upon the observations at page 202 where it was stated as follows :
"The 3-motion electrical overhead travelling crane comes into existence as a unit only when the component parts are fixed in position and erected at the side, but at that stage it becomes the property of the customer because it is permanently embedded in the land belonging to the customer. The result is that as soon as 3-motion electrical overhead travelling crane comes into being, it is the property of the customer and there is, therefore, no transfer of property in it by the manufacturer to the customer as a chattel. It is essentially a transaction for fabricating component parts and putting them together and erecting them at the site so as to constitute a 3-motion electrical overhead travelling crane. The transaction is no different than one for fabrication and erection of an open godown or shed with asbestos or tin sheets fixed on columns. There can, therefore, be no doubt that the contract in the present case was a contract for work and labour and not a contract for sale."
I regret, the reliance placed upon the decision of the Supreme Court is misplaced. What binds is the ratio of a decision and not the logical extensions therefrom. The point falling for consideration in that decision was clearly different from the controversy before us. The question which fell for consideration in that case was whether fabrication and erection of an electrical overhead travelling crane was a contract for work and labour or a contract for sale. It may be recalled that the Supreme Court held in the case of The State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., AIR 1958 S.C. 560 that where a contract of work involves labour as well as supply of materials, the supply aspect cannot be separated from the work and, therefore, the supply of material was not exigible to sales tax. Again in Sentinel Rolling Shutters & Engineering Co. (P) Ltd. v. Commissioner of Sales Tax [1978] 42 STC 409 the same matter came up for consideration. Before the Supreme Court, in the case of Ram Singh and Sons (supra), the assessee was a firm carrying on business of manufacturing and erection, of cranes. The question arose whether the assessment to sales tax of Rs. 1,34,500 received by the assessee under contract with M/s. Kamlapat Moti Lal Sugar Mills and of Rs. 2,38,000 received under contract with M/s. Upper Doab Sugar Mills Ltd. formed part of the turnover of the assessee liable to sales tax. The answer to the question depended upon whether the contracts were contracts for sale or contracts for work and labour. The observations of the Supreme Court must be understood in the light of this background. Their Lordships in order to resolve that question held that erection of overhead travelling crane was a fundamental and integral part of the contract because without it the 3-motion electrical overhead travelling crane cannot operate. Mark the observations of their Lordships at page 202, quoted above, that the transaction is no different than one for fabrication and erection of an open godown or shed with asbestos or tin sheets fixed on columns. Their Lordships laid down that there could be no doubt that the contract was a contract for work and labour and not a contract for sale. That was the ration of that case. Their Lordships were not deciding what is crane and what is not so. Their Lordships were not deciding whether a crane is a crane or not until it is put on a gantry. A decision is only an authority for what it actually decides and not the logical extensions therefrom. In the Regional Manager and Anr. v. Pawan Kumar Dubey, AIR 1976 S.C. 1766 it was laid down that ratio decidendi is the rule deducible from the application of law to the facts and circumstances of a case and not some conclusion based upon facts which may appear to be similar. So also in C.I.T. Bihar, Patna v. Sheo Kumari Devi, 1986 BLJR 825. It is not necessary to multiply decisions on this aspect of the matter. I am clearly of the view that the case of Ram Singh and Sons (supra) does not lay down that a crane is not a crane until it is affixed to a gantry. Reliance placed by Mr. Chatterji for the petitioner is clearly misplaced and must be rejected.
15. The documents of the petitioner clearly show that the order was for design, manufacture and supply of complete crane. It was complete crane which was assembled at Adityapur. They were not mere assemblies or components of a crane. Finding of the Collector that complete crane was fabricated and assembled at Adityapur and then removed and affixed at the company's plant in knocked down condition is well founded and cannot be disturbed. His conclusions are reasonable and cannot be held to be arbitrary by any stretch of imagination. The stand of the petitioner in this behalf is squarely rejected.
16. Learned counsel for the petitioner also submitted that a dictionary is not an appropriate guide for ascertaining what is a crane. The decision of the Supreme Court in Deputy Chief Controller of Imports and Exports, New Delhi v. K.T. Kosalram and Ors., AIR 1971 S.C. 1283 was pressed into service. It need only be stated as laid down in South Bihar Sugar Mills Ltd. and Anr., etc. v. Union of India and Anr., etc. AIR 1968 S.C. 922 that where an Act does not define goods, the legislature must be taken to have used that word in its ordinary dictionary meaning. The dictionary meaning is, that to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market." By this test crane is certainly [an) identifiable commercial item.
17. Learned Advocate General appearing on behalf of Union of India brought to our notice two documents showing purchase of 5 ton single girder E.O.T. crane having wheels including all accessories, com missioning spares, tools and tackles from Manubhai Engineers Pvt. Ltd., Calcutta and 2 ton single girder E.O.T. crane from ARMSEL (BANGALORE) Unit III. These documents have been mentioned in the order of the Collector and were sent to the Collector by the petitioner itself. Learned Advocate General was, therefore, justified in placing those documents before us for proper appreciation. Learned counsel for the petitioner did not doubt the authenticity of those documents. Since these documents knock out the entire submission on behalf of the petitioner, it would be apt to quote the relevant parts thereof. Purchase order dated 14-4-1983 in respect of purchase from Manubhai Engineers Pvt. Ltd., Calcutta reads as follows :
"1.0 Design, manufacture, assembly, testing, Ex-works, Calcutta packing and supply of 1 No. 5 Ton single girder Rs. 2,55,500.00 EOT crane having wheels as per TISCO standard and (Rupees two lakhs group lubrication for wheels including all accesso- fifty five thousand ries, commissioning spares, tools and tackles con- five hundred only).
sumable and operating supplies as per the enclosed Order Specification No. TSM/338 and as per general conditions for supply of plant, machinery and equipment (TSM/GC-2) (Copy already available with you.) 2.0 BREAK-UP OF EX-WORKS PRICE
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Description Amount
(Rs.)
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(a) 5-ton capacity single girder EOT crane 2,42,000.00
(b) Commissioning spares 4,500.00
(c) Tools and tackles 6,000.00
(d) Consumables and operating supplies 3,000.00
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TOTAL : 2,55,500.00
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3.0 PRICE BASIS
3.1 Even through the price stated in the order are on ex-works, Calcutta basis, you will be responsible for delivery of the materials at TISCO WORKS SITE GOODS SHED for which the following charges shall be paid extra against documentary evidence.
3.1.1 Packing charges - Rs. 7,300.00 3.1.2 Forwarding charges - Rs. 2,600.00 3.1.3 Transportation charges ex-your works to TISCO WORKS SITE GOODS SHED at actuals supported by documents, but within Rs. 18,000.00 3.1.4 Transit insurance charges at actuals supported by documents, but within Rs. 2,600.00 3.2 Excise duty will be payable by us at the rate of 8% on the ex-works value plus packing and forwarding charges, central sales tax at the concessional rate of 4% will be payable by us on the ex-works value plus packing charges and excise duty. D.F. will be issued by our Director of Accounts, quarterly against your bills.
3.3 Prices stated in the order for the crane, packing and forwarding charges shall remain fixed, firm and binding and shall not be subject to any variation under any circumstances, whatsoever. Transportation charges and transit insurance charges shall be paid at actuals but within the amount indicated.
3.4 Any stautory variation in the existing rate of excise duty and sales tax or imposition of any other taxes, levies, duties in future shall be borne by you."
Paras 12.1 and 12.1.1 stipulating despatch of materials in Railway wagons booked to TISCO WORKS SITE GOODS SHED, S.E. Railway. This order was placed on behalf of the petitioner by its consulting engineer, Tata & Co.
18. The gate pass in regard to supply of E.O.T. crane by Bangalore firm reads as follows :
"Date of Removal - 12-3-1984 Name of - E.O.T. Crane.
Name and Address -ARMSEL (BANGALORE) excisable
-Unit III Commodity
94, Keramanjala Industrial
Layout,
BANGALORE - 560034,
Variety of Total assessable value or Rate of Total duty paid
goods Tariff value duty Rs. P.
Rs. P.
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2 Tonnes capacity capacity 2,25,100.00 10% 22,510.00" EOT Crane
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19. It will be seen from the above that in the case of purchase of crane from Calcutta the petitioner paid 8% excise duty on ex-works value and in the case of purchase from Bangalore the petitioner paid 10% excise duty. They were all transported to the petitioner's plant by railway. It is not difficult to presume that they were supplied in knocked down condition. In the face of the above documents, the petitioner hardly has any case worth contending that a crane is not a crane until it is affixed on a gantry and that no crane had been. manufactured at Adityapur. The observations of the Supreme Court in the case of Ram Singh and Sons (supra) that a crane is chattel and not goods have hardly any relevance to the present situation.
20. Learned counsel for the petitioner submitted that the Collector was not justified in reading the works orders by the petitioner to the Growth Shop as repository of stipulation in a contract. As there was only one party, there could be no contract. I regret, this submission is fallacious. It is not a question of a contract being interpreted, but it it only trying to appreciate the facts in proper perspective. We have to see what did the petitioner intend to buy. The works orders are pointer to the idea conveyed by the works orders. No one says that the works order was a contract nor were the contents thereof stipulations in a contract, but the wordings can certainly be read to appreciate what was intended to be conveyed. If the works order was to assemble complete crane, I do not see why it cannot be read as implying that the crane as a whole was to be assembled at Adityapur.
21. Mr. Chatterji for the petitioner conceded that if the works orders were given literal construction, it will certainly give the impression that a complete crane was to be assembled, but according to him, a literal construction would not be apt and that what was, in fact, done was the real issue. I regret, I am unable to appreciate why the wordings of the works orders should not be given literal construction. The first rule of interpretation of a document is to give it a literal construction. Other rules of interpretation are attracted only when the literal construction does not bring out the idea correctly and fully and that there is some ambiguity left in it. In giving a literal construction there is no ambiguity. I do not think why it should not be given a literal construction.
22. Learned counsel for the petitioner assailed the order of the Collector by contending that all that the Collector had found was that the goods manufactured at Adityapur were trolley assemblies and bridge assemblies and that constituted a ciane. He contended that the trolley assemblies and bridge assemblies are only components of the entire ensemble. It was contended that it had considerable electrical contraptions as well and, therefore, the finding/conclusion of the Collector that complete crane was manufactured at Adityapur was ill founded. Thus contended learned counsel for the petitioner. I regret, there is no substance in this submission. Annexure-2 nails down all questions agitated on behalf of the petitioner. The components assembled at Adityapur were not only trolley assembly or bridge assembly, but it was a complete assembly of all electrical, mechanical, contraptions and devices. "Trial run" at Adityapur could not have been conducted as stipulated in Annexure-2 unless the electrical and mechanical parts had also been assembled. It may be stated, at the cost of repetition, that before despatching the crane, Annexure-2 stipulated that, "trial run" and "load testing" in regard to all motions were to be conducted in the workshop at Adityapur. The load testing could have been done only on gantry. It, therefore, appears that there was gantry in the machine shop as well. The conclusion of the Collector in regard to the item manufactured cannot be dissected as contended by learned counsel for the petitioner. The entire conclusions of the Collector show in unmistakable terms that complete crane was assembled at Adityapur and despatched to the petitioner's plant. That completes the submission on the first point urged on behalf of the petitioner.
23. The second limb of the submission on behalf of the petitioner was that the acquisition and induction of the cranes were only part of a programme of revamping the old plant and that it was not a new plant. This submission has only got to be stated to be rejected. It is obvious that a new plant had been set up. Previously the petitioner had steel melting shop No. 1 and No. 2 and they were producing steel by Duplex process. SV1S nos. 1 and 2 disappeared. They were consigned to the log yard and were replaced by basic oxygen converters. A new bar forging machine was set up. All these were parts of a Modernisation Project. The modernisation was effected by petitioner's consultant M.N. Dastur and Company (P) Ltd. The modernisation programme was accomplished and was celebrated with great fanfare - and justifiably. The new project was located at the old site. Possibly some parts of the old plant may have been utilised, but there can be no doubt that it was absolutely a new plant - basic oxygen converters with 3-motion E.O.T. cranes. Upon the materials of the petitioner itself, it is obvious that new plant had been set up.
24. That brings us to the third question agitated at the Bar. Learned counsel for the petitioner submitted that even if a crane was assembled at Adityapur and supplied to the petitioner's plant, it was exempted from the levy of excise duty. Reliance was placed in support of this proposition on Government Notification No. 118/75-CE dated 30-4-1975 as amended by Notification No. 105/82-CE dated 28-2-1982 which is Annexure-4 to this application. It would be apt to quote this notification in full in order to render a compact judgment :
"NOTIFICATION NO. 118/75-CE DATED 30-4-1975 AS AMENDED BY NOTIFICATION NO. 105/82-CE DATED 28-2-1982.
In exercise of the powers conferred by Rule 8(1) of the Central Excise Rules, 1944 and in supersession of the notification of the Government of India in the M.F. (D.R. & I.) No. 58/75-CE dated 1-3-1975, the Central Government hereby exempts goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), manufactured in a factory and intended for use in the factory in which they are manufactured, or in any other factory of the same manufacturer, from the whole of the duty of excise leviable thereon :
Provided that where such use is in a factory of a manufacturer, different from his factory where the goods have been manufactured, the exemption contained in this notification shall be allowable subject to the observance of the procedure set out in Chapter X of the Central Excise Rules, 1944 :
Provided further that nothing contained in this notification shall apply to complete machinery manufactured in a factory and meant for production or processing any goods, even if they are intended for use in the same factory in which they are manufactured or in any other factory of the same manufacturer."
25. From the notification, quoted above, it would be seen that the Central Government exempted goods manufactured by a factory if it was to be used in the factory in which the goods had been manufactured or in any other factory of the same manufacturer. In this case the crane was manufactured at Adityapur Machine Shop which is a factory of the TISCO. It was utilised in the factory of the petitioner. Prima facie, therefore, the petitioner would be entitled to the benefit of the exemption. There are, however, two provisos to it. The first proviso is that in order to be entitled to the benefit of the exemption, the manufacturer was required to act in terms of Chapter X of the Central Excise Rules, 1944. The second proviso lays down that the benefit of the exemption will not be available where the goods manufactured is a complete machinery manufactured in a factory and is meant for production or processing any goods, even if the machinery manufactured was intended for the use in the same factory or in any other factory of the same manufacturer.
26. It was contended on behalf of the petitioner that the petitioner having fulfilled the requirements of the first proviso, the main exemption clause remained operative to the benefit of the petitioner. It was contended that the petitioner had observed the procedure set out in Chapter X of the Central Excise Rules, 1944. Our attention was drawn to Annexures-5 and 6 in support of this submission. Annexure-5 is a letter from Director of Accounts of the petitioner to the Superintendent, Central Excise, TISCO Range, Jamshedpur whereby the petitioner prayed for grant of licence in L-6 for receiving components, sub-assemblies and assemblings of equipment required for maintenance of steel plant falling under Item No. 68 of Central Excise tariff from their Maintenance Shop at Adityapur. The quantity of goods expected to be received was expected to be approximately 5,000 tonnes and the approximate value to the tune of Rs. 7.5 crores, as indicated in the Company's application. In the application in Form A.L.-6 the petitioner prayed for grant of a licence to obtain, without payment of the whole or part of the central excise duty leviable thereon, on components, sub-assemblies and assemblings of equipment required for maintenance of steel plant to be used at their factory during three years ending 31st December, 1984. In paragraph 2 of the application there was a declaration that the components, sub-assemblies and assemblings of equipment will be used only captively for the maintenance of the steel plant. In paragraph 7 there was a declaration that the information furnished in the application was true and complete. The Schedule to that application is also relevant. Serial 2 of the Schedule reads as follows :
"2. Nature of excisable goods on Components, sub-assemblies and which remission of duty is assemblings of equipment requi-
desired. red for maintenance of steel plant."
The petitioner was granted licence in L-6 No. L-6/3/T,1.68/82 (Annexure-6) in respect of components, assemblies and sub-assemblies. Rule 192 of the Central Excise Rules provides that where the Central Government has sanctioned remission of duty on excisable goods used in a specified industrial process any person wishing to obtain remission of duty on such goods shall make an application to the Collector in proper form stating the purpose for and the manner in which it is intended to be used and declaring that the goods would be used for such purpose in such manner, On an application received, the Collector, if satisfied that the applicant is a person to whom the concession can be granted without danger to the revenue, the Collector may grant the application. We have to see whether the petitioner had complied with the requirements of Chapter X. That Chapter contains several rules, but we are concerned only with rule 192.
27. The Adityapur Maintenance Shop was manufacturing several items which could form components of .machines used in the factory of the petitioner. Even before the Modernisation Project, the Adityapur Unit must be having a licence to manufacture such goods and the TISCO plants must be having licence to receive those goods free of duty. The remarkable aspect is that the petitioner did not give any inkling that what it was applying for was in respect of a crane. Components and assemblies were being manufactured at Adityapur Unit and the petitioner was indenting day in and day out. If the petitioner had disclosed that the components, sub-assemblies and assemblings were parts of a crane, things would have been different. The petitioner could then very well contend that it had made all the necessary declarations to bring out explicitly that it was going to indent components of a crane. Whether exemption could be granted on that basis or not would be the collector's concern. If the Collector granted the exemption even after that declaration, no remissness could have been found on the part of the petitioner. The petitioner, however, made no such declaration. The Superintendent of Excise could not conceivably think that the application was for indenting a crane manufactured at the Adityapur Unit. In my view, therefore, there was want of disclosure of full particulars by the petitioner. It is obvious thus that the petitioner had not complied with the provisions of Chapter X as mentioned in the exemption notification (Annexure-4).
28. There was want of complete and accurate disclosure in other respect as well. In the application for licence (Annexure-5) it was stated that the components, sub-assemblies and assemblings of equipments were required for maintenance of steel plant. It is obvious that would imply that they were meant for the maintenance of the existing steel plant. Was that so? Certainly not. I have already held earlier that the petitioner had installed new plant for steel manufacturing. The petitioner had a new gigantic project. The implication thereof was that the assemblies of the old plant were to be cast aside and new plant basic oxygen furnace was to be introduced. The cranes were part of that Project. It is thus obvious that the cranes - or the components or assemblies [of] equipment as the petitioner likes to describe were required for a new project and not for maintenance of the steel plant. From that angle as well the petitioner had not stuck to its declaration that the contents of the application were true and complete. In that view of the matter, the first proviso was complied in its breach.
29. Let us now see how matters stand in relation to the second proviso of the exemption notification (Annexure-4f). The second proviso (quoted earlier at paragraph 19) specifically denied the benefit conferred by the notification, if the goods manufactured in a factory were meant for production or processing of goods, even if they were intended for use in the same factory in'which they were manufactured or in any other factory of the same manufacturer. Question to be seen is were the cranes to be used in the production or processing of goods. The cranes were meant for placement of heavy goods from one place to another. The 3-motion crane was designed to facilitate production of steel through those cranes as they had the capacity to remove goods at one stroke of the weight of 5/10 tonnes and over. The cranes were surely not meant for the maintenance of the Duplex process steel smelting shop. It does not need much persuasion to hold that the cranes were part of the new production pattern. It is obvious, therefore, that they were meant for production and processing of goods. Without those cranes with increased weight bearing capacity, the process of augmenting steel production may not have been fulfilled. In that view of the matter, the second proviso to the exemption clearly stands in the way of the petitioner claiming the exemption. For the aforesaid reasons, I am clearly of the view that the petitioner cannot claim the benefit of the exemption notification (Annexure-4).
30. The next aspect of the matter is whether the steps for realisation of the excise duty were barred by time. Prior to 1980 excise duty was levied by the department on every item of goods produced before they left the factory premises. Since 1980 a self removal scheme was introduced. Commensurate with that scheme Section 11A(1) in the Central Excises and Salt Act, 1944 was enacted. With the introduction of the self removal scheme producers were free to remove goods by assessing themselves. The manufacturer is required to file a classification list. When the classification list is approved, the manufacturer is required to assess the duty himself and deposit them in an account meant for that purpose. To meet the situation, Section 11A(1) was enacted which laid down that when any duty of excise has not been levied or paid or has been short-levied or short-paid, an Officer of the Central Excise department may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid. It thus followed that steps for realisation of duty, not paid, had to be taken within six months from the relevant date. A proviso, however, was added to it which reads as follows :
"Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words 'six months', the words 'five years' were substituted."
The proviso extended the period within which duty, not paid, could be realised to five years from six months. That extension is available to the department only if the non-payment or short-payment has been occasioned by fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act. At the lowest, upon the findings recorded by me earlier, it is elementary that there was mis-statement or suppression of facts. The petitioner at no point of time declared that it was clearing cranes. It tried to take shelter under an application in Form L-6 in a manner which was, to say the least, not a complete disclosure. The crane was meant not for maintenance of a plant, but was meant to be used in production or processing of goods in a new plant. In that view of the matter, the department is entitled to the benefit of the extended period of limitation set down in the proviso to Section 11A(1).
31. Learned counsel for the petitioner contended that there was no fraud or collusion or wilful mis-statement of facts by the company and, therefore, the six months rule should apply in the present case. It is not necessary to observe that there was fraud or collusion on the part of the company, but it is obvious that there was as least mis-statement and wilful suppression of facts. The petitioner was not entitled to the benefit of the exemption notification. It is not open to the petitioner to take up the position that it could not have conceded what it was contesting, namely, that a crane had been manufactured. The facts are so obvious that the petitioner was required to declare it specially when the department and the assessee work on self assessment scheme. I have not the least doubt that the five-year rule must rule this case. The steps, therefore, for realisation of the duty are obviously within time. The stand of the petitioner in regard to the bar of limitation must be squarely rejected.
32. It only remains to consider whether the petitioner was liable to penalty and the order for confiscation and fine in lieu thereof is legal and justified. Rule 173Q (1)(a) and (d) provide that if any manufacturer removes any excisable goods in contravention of any of the provisions of these rules or contravenes any of the provisions of these rules with intent to evade payment of duty, then all such goods shall be liable to confiscation and the manufacturer shall be liable to pay penalty not exceeding three times the value of the excisable goods in respect of which the contravention has taken place. Sub-rule 2(a) prescribes that where the duty leviable on the excisable goods exceeds one lakh of rupees, then the officer adjudging the case under Section 33 of the Act may in addition to the award of confiscation and penalty under Sub-rule (1) direct confiscation of any or all belongings of the category mentioned in Sub-clauses (i) and (ii) of the manufacturer. Upon the conclusions arrived at by me earlier, it is obvious that there was suppression of facts. The suppression of facts was made to evade payment of excise duty. This is not a case where it can be said that the manufacturer was so arranging his affairs as to avoid the duty payable by him.
33. The theory of liberty of the citizen to so arrange his affairs that the tax attaching under the appropriate Acts is less than it otherwise would be is itself undergoing change. The changed and hardened attitude against avoidance was sounded by no less than Lord Greene, M.R. in Lord Howard de Walden v. IRC [1942] 1 KB 389 in the following words :
"For years a battle of manoeuvre has been waged between the legislature and those who are minded to throw the burden of taxation off their own shoulders on to those of their fellow subjects. In that battle the legislature has often been worsted by the skill, determination and resourcefulness of its opponents of whom the present appellant has not been the least successful. It would not shock us in the least to find that the Legislature has determined to put an end to the struggle by imposing the severest penalties. It scarcely lies in the mouth of the tax payer who plays with fire to complain of burnt fingers."
34. In Greenberg v. IRC [1971] 3 All ER 136 Lord Reid observed at page 401 as follows :
"Indeed, I sometimes suspect that our normal meticulous methods of statutory construction tend to lead us astray by concentrating too much on verbal niceties and paying too little attention to the provisions read as a whole."
35. Equally significant were the observations of Lord Wilberforce in W.T. Ramsay Ltd. v. IRC [1982] AC 300 which are as follows :
"For the Commissioners considering a particular case it is wrong an unnecessary self limitation, to regard themselves as precluded by their own finding that documents or transactions are not 'shams', from considering what, as evidenced by the documents themselves or by the manifested intentions of the parties, the relevant transaction is. They are not, under the Westminster doctrine or any other authority, bound to consider individually each separate step in a composite transaction intended to be carried through as a whole."
Later again it was observed :
"While the techniques of tax avoidance progress and are technically improved, the Courts are not obliged to stand still. Such immobility must result either in loss of tax, to the prejudice of other tax payers, or to Parliamentary congestion or (most likely) to both. To force the Courts to adopt, in relation to closely integrated situations, a step by step dissecting approach which the parties themselves may have negated, would be a denial rather than an affirmation of the true judicial process. In each case the facts must be established, and a legal analysis made : legislation cannot be required or even be desirable to enable the Courts to arrive at a conclusion which corresponds with the parties' own intentions."
36. I bow with respect to the observations of Chinnappa Reddy, 3. in McDowell and Co. Ltd. v. Commercial Tax Officer 154 1TR 148 at page 160 which are as follows :
"We think that time has come for us to depart from the Westminster- [1936] AC 1 principle as emphatically as the British Courts have done and to dissociate ourselves from the observations of Shah, J., and similar observations made elsewhere. The evil consequences of tax avoidance are manifold. First there is substantial loss of much needed public revenue, particularly in a welfare State like ours. Next there is the serious disturbance caused to the economy of the country by the piling up of mountains of black money, directly causing inflation. Then there is 'the large hidden loss' to the community (as pointed out by Master Wheatcraft in 18 Modern Law Review, 209) by some of the best brains in the country being involved in the perpetual war waged between the tax-avoider and his expert team of advisers, lawyers and accountants on one side and the tax-gatherer and his perhaps not so skilful, advisers on the other side. Then again there is the 'sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it'. Last but not the least is the ethics (to be precise, the lack of it) of transferring the burden of tax liability to the shoulders of the guideless, good citizens from those of the 'artful dodgers'. It may, indeed, be difficult for lesser mortals to attain the state of mind of Mr. Justice Holmes, who said : 'Taxes are what we pay for civilized society. I like to pay taxes. With them I buy civilization.' But, surely, it is high time for the judiciary in India too to part its ways from the principle of Westminster [1936] AC 1 and the alluring logic of tax avoidance. We now live in a welfare State whose financial needs, if backed by the law, have to be respected and met. We must recognize that there is behind taxation laws as much moral sanction as behind any other welfare legislation and it is a pretence to say that avoidance of taxation is not unethical and that it stands on no less moral place than honest payment of taxation. In our view, the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it."
37. A Full Bench of this Court of which I also was a party in.Commissioner of Income-tax v. Sheo Kumari Devi [1986] 157 ITR 13, Sandhawalia, C.J. laid down that in India where tax evasion is rampant, the early Victorian approach that the taxing statutes must invariably be tilted in favour of the assessee has to be given a go-by.
38. In view of the law, discussed above, there is no scope for taking a liberal approach to the matter. The petitioner cannot take shelter under the dictum that it was only trying to so arrange its affairs that the excise duty on cranes was avoided. This was not a case of avoidance of duty. It was a clear case of acting with intent to evade duty. It is true that a citizen need not concede and give up his stand on any matter, but there are limitations to it. The petitioner cannot contend for a moment that it was bona fide believing that cranes were not definite commercial items. This was a case of evasion of duty. It requires a great deal of naivete to accept that the company did not know that the cranes were definite commercial items. It has itself been purchasing cranes from different producers and paying excise duty thereon. In the background of the purchase orders placed with the Calcutta and Bangalore firms, mentioned earlier, it is obvious that the petitioner was tryihg to evade payment of excise duty. Having entered into an agreement to pay excise duty to the Calcutta and Bangalore manufacturers, the least that the petitioner was expected was to declare what it was manufacturing and contested the fact whether the article manufactured was crane or not or whether it was dutiable. In a self removal scheme a manufacturer is expected to act uberrimae fidei. That would have shown the bona fide of the company. The petitioner knew that all manufacturers of cranes were paying excise duty. It should have, therefore, filed classification list for cranes under protest and gone through the process of a contested case. The petitioner did not do so. It carefully avoided mentioning the fact of manufacture of cranes. It could now, however, restrain itself from gaining applause for the installation of the basic oxygen furnace within record time for the operation of which E.O.T. cranes were indispensable complements. The company had embarked upon a new dashing venture to augment steel production. It is difficult to. conceive that it would think of these cranes being used for the purpose of maintenance of the steel plant. It should have been obvious to the company that the cranes were to be used essentially in the production process. The handling of heavy goods was essential for the production. The cranes were thus integral part and essential link in the chain of production. I am, therefore, firmly of the view that the company had assembled excisable goods and thus contravened the provisions of the Central Excise Rules with intent to evade payment of duty.
39. In regard to the quantum of penalty and the order for confiscation, the law permits levy of penalty up to three times the value of the excisable goods. The penalty levied in this case is much less than that. The levy of penalty, therefore, cannot be held to be illegal or without jurisdiction. The order for confiscation as well does not suffer from any vice of legality. The levy being legal this' Court has no jurisdiction to tinker with it. In my view, therefore, the order for levy of penalty and confiscation cannot be interfered with.
40. In fine, I am of the view that the petitioner manufactured cranes. There was mis-statement and suppression of facts. It removed them without paying duty and thus contravened the provisions of the Excise Act .and the Rules. This was done with an intent to evade payment of duty.
41. Large number of cases were cited at the Bar on behalf of the petitioner. This judgment will not be complete without referring to them. The first case cited on behalf of the petitioner was Garware Nylons Ltd. v. Union of India 1980 ELT 249. This was a case where the question was whether nylon twine be considered as specific type of nylon yam. Nylon yarn fell within Item 18. The revenue contended that nylon twine was specific item distinct from nylon yarn and, therefore, it fell within the mischief of Item No. 68. Their Lordships of the Bombay High Court held that there was no reason why nylon twine should be denied its rightful place and put in the residuary clause. This case has no application for the simple reason that the petitioner claimed that no goods had been delivered to it. Its contention is that there is no commercial item like crane. In my view, this decision can be of no help to the petitioner.
42. In Ashok Griha Udyog Kendra Pvt. Ltd., Kanpur v. Collector of Central Excise and Customs, Kanpur 1982 ELT 309 a Bench of the Allahabad High Court was called upon to decide whether mixed ground masalas were liable to excise duty under Tariff Item 68. Their Lordships held that although specific items had not been specified in Tariff Item 68, but there was no vagueness about it. In the background of concept of excise law, it is elementary that whenever specific commercial item is manufactured or comes into being, if it does not fall within any specific tariff item, it must be deemed to fall within the mischief of Tariff Item 68.
43. In Re : Patco Industries 1980 ELT 358 is a Government of India Order. That case has no relevance to the matter falling before us.
44. Learned counsel for the petitioner placed reliance upon a Government of India decision reported in Re : Otis Elevator Company (India) Ltd. 1981 ELT 720. That related to levy of duty on elevators. It was laid down that if an article does not come into existence until it is fully erected or installed, adjusted, tested and commissioned in a building, and on complete erection and installation such article becomes a part of immovable property, then it cannot be described as "goods" attracting levy of any central excise duty. I regret, I find myself unable to accept it as a correct proposition.
45. Reliance placed by learned counsel for the petitioner in Tata Yodogawa Ltd. v. The Assistant Collector of Central Excise, Jamshedpur and Ors. 1982 BBC3 596 is ill founded. On the facts of this case, I have not the least doubt that there was intentional evasion of duty by the petitioner.
46. The Supreme Court case in the Cement Marketing Company of India Ltd. v. The Assistant Commissioner of Sales Tax, lndore and Ors. [1980] 45 STC 197 is also distinguishable on facts. That was a case where the question was whether freight deducted from invoice and paid by purchasers formed part of sale price. The question was quite contentious one and, therefore, it was held that the return of the assessee could not be said to be false. That is not the situation here.
47. The case of Hindustan Steel Ltd. v. The State of Orissa [1970] 25 STC 211 also cannot be of any help to the petitioner. Where the breach is technical or where the breach flows from the bona fide belief that the offender is not liable to act in the manner prescribed by statute, a penalty may not follow. The case is distinguishable on facts.
48. Lastly, learned counsel for the petitioner submitted that Tariff Item 68 is ultra vires the Constitution inasmuch as unspecified items are designated as excisable goods. I regret, I find no substance in this submission. Item 68 is not vague at all if we bear in mind the basic concept of levy of excise duty which is that whenever any definite trade article is brought into being or manufactured, it is dutiable. It may be difficult to specify all goods coming into being specifically and, therefore, a residuary item can well be enacted. In my view, there is no substance in this submission. It is rejected accordingly.
49. For all the reasons, stated above, I find no merit in this application. It is dismissed accordingly with costs. Hearing fee rupees one thousand.