1. By the order impugned in this appeal, the Coll. C.E., Madras, has found that the appellant-assessee had not declared the item "cable gland" in the classification list filed during the period 1989-90 & 1990-91 and cleared the same without payment of duty and issuing separate set of invoices with two different serial numbers and the fact of supply of "cable gland" alongwith "flame proof electrical fittings" had not been intimated to the department and hence, there was suppression of facts within the meaning of proviso to Section 11A(1) of CESA, 1944. The Collector thereupon confirmed the demand of differential duty made in the show cause notice and imposed a penalty of Rs. 75,000 on the appellant under Rule 173Q of CER, 1944. This order is now challenged.
2. Appellant, in the factory at Madras, manufactures the finished product by name "flame proof electrical fittings" falling within the Chapter 85 of the Tariff. The dispute in this appeal relates not to this finished product but to another item called "cable gland" which is a bought out item. Appellant had not referred to cable gland in the classification list filed during the relevant period. That cable gland was being purchased and sold to the customers alongwith the finished product, namely "flame proof electrical fittings" using two separate invoices came to the notice of the department only subsequently.
Thereupon a show cause notice dated 27-5-1993 was issued in the matter and by the impugned order the notice was confirmed.
3. In the impugned order, the Collector has referred to the function of the cable gland, as explained by the appellant. It is stated that the "cable gland perform the function with reference to the cables when the cables enter into the equipment by action as compression and clamping device to prevent pulling and twisting applied to the cable thereby, preventing transmission of flame to the light fittings and thereby the equipment is protected from explosion." Appellant has placed before us literature published by manufacturers of cable gland which has to be fitted to flame proof electrical fittings. This literature is at page 72 of the paper book. It contains a photographic picture as well as the cross-section diagram of the same. The literature explains the function of cable gland as three-fold, i.e., provides for armour clamp, provides seal on inner sheath of cable and provides seal on outer sheath of cable and the seal is meant obviously rubber seal.
4. The learned Counsel has shown to us a model of the flame proof light fitting and the model of cable gland as well as the cable conduit. At the top portion of the light fitting, there is a threaded grove into which either the cable gland or the cable conduit can be fitted. The sample of cable gland with cable fitted at either side has been shown to us. It is also dismantled and demonstrated to us. We find that there are seals at either end of the cable gland. In the cable conduit shown to us there is also a threaded grove over which rubber seal can be attached. It is thus clear that the purpose of cable gland or cable conduit is to ensure a device which will enable the cable to enter the light fitting and at the sametime ensure that no extraneous inflammable gases enter the fitting lest the equipment explode causing damage to the equipment as well as to the neighbourhood.
5. From what we have indicated above, it is clear that the light fitting can function as an equipment in which a bulb can be fitted even without the cable gland or cable conduit. One of the purposes of cable gland and cable conduit is to ensure the placement of one end of the cable inside the fitting and the other end of the cable at the source of supply of electric power. That can be done by passing the cable through the grove. If the user of the fitting desires total flame proofness, he will have to use either the cable gland or the cable conduit. From our own examination of these two items, it appears that cable gland is likely to be more effective than the cable conduit.
6. From what we have indicated above, it is clear that cable gland is not an essential part of the light fitting in the sense the light fitting can be operated even without the cable gland. Even in the reply to the show cause notice, appellant had provided necessary particulars regarding the sales pattern. The figures of two succeeding years are before us. In the two succeeding years, the number of items sold are as follows :-------------------------------------------------------------------------------Year No. of light fittings No. of light fittings Sales of only without cable gland sold without cable cable gland sold gland-------------------------------------------------------------------------------1991-92 229 389 761992-93 230 364 67------------------------------------------------------------------------------- In the reply to the show cause notice, there is definite averment that all the buyers of the light fittings were not buying cable gland also and a majority of the sales were only of light fittings without cable gland and only a minority of purchases were of light fittings with cable gland. The impugned order does not challenge the correctness of this stand taken by the appellant.
7. From the purposes and functions of cable gland and the sale pattern, it is possible to draw the inference that cable gland which is a bought out item is only an optional accessory. We already indicated that it is not such an integral part of the light fitting that the same cannot function without it. Having regard to the inferences we have drawn, the finding of the Collector that the value of cable gland wherever it is sold to the customers who also purchase light fittings has to be added to the assessable value of light fittings cannot stand. That being so, the impugned order deserves to be set aside.
8. Appellant has also contended that the show cause notice dated 27-5-1993 is barred by limitation inasmuch as it was issued after six months of the relevant date and the extended period of limitation contemplated by proviso to Section 11A of the Act is not available.
There is no dispute that the classification filed by the appellant do not advert to cable gland at all. Appellant has no case that there existed any material available to the department with the aid of which the department could have acquired knowledge of the existence of these bought out items. The show cause notice makes it clear that it was only on perusal of the records subsequently which revealed this state of affairs. In these circumstances, we are not inclined to agree with the contenction of the appellant regarding the bar of limitation.
9. In the result, we set aside the impugned order and allow the appellant's appeal.