Judgment:
1. Appellants are absent in spite of notice. On last 3 occasions also appellants were absent though appellants had submitted written submission. We have heard Shri M. Ali, JDR and perused the papers.
2. Appellants have failed to produce copy of the original order passed by the Assistant Collector without which it is difficult to unravel all the facts.
3. The appeal memorandum indicates that the appellants are engaged in the manufacture of goods under erstwhile Tariff Item 68 of Central Excise Tariff and preferred a refund claim for Rs. 27,346.40 in respect of duty paid on bought out items and on certain design charges alleging that the duty had been paid on these items under protest. The basis of the claim was that no processing has been done on the bought out items by the appellants. Apparently Assistant Collector agreed with the appellants and allowed the refund claim. A copy of the order is not before us. Appellants have produced only a copy of the letter of the administrative officer enclosing a cheque for the amount to be refunded. The Collector of Central Excise under Section 35E of the Central Excise Act, 1944 (for short, the Act) directed the Assistant Collector to file an application against the order of the Assistant Collector allowing refund. Accordingly an application was filed as per the directions of the Collector of Central Excise before the Collector (Appeals) who was to dispose of the application as an appeal. Collector (Appeals) repeatedly issued notice of hearing to the appellants but appellants did not attend. Collector (Appeals) heard the Departmental Representative and perused the papers, and set aside the order of the Assistant Collector and allowed the appeal. This order is challenged now.
4. Appellants in written submission before the Collector (Appeals) stated that order for refund can be reviewed only within six months under Section 11A of the Act and could not be challenged as it was done in this case after slightly less than 2 years. Appellants also contended in the written submission that the bought out items can be procured directly and items like magnetic pulley and magnetic separator can work independently without any machine and these bought out items are not manufactured by them. They also contended that design charges do not pertain to the manufacturing design of equipments manufactured by them. Collector (Appeals) overruled all the contentions and held that bought out items are parts of the goods manufactured by appellants and supplied to the customer and, therefore, their value had to be added in the assessable value. He also held that design charges were incurred for promoting sales of the machines and rendering machines workable and, therefore, the design charges should be included in the assessable value of the manufactured products.
5. Appellants have filed an affidavit terming the same to be "Cross Objection". We take it that appellants were filing the affidavit only to reflect their submissions. We take it to be written submission. In Paragraph 3(B) of the written submission, it is stated as follows :- "The main point for determination is whether the value charged on the parts so purchased from the open market which became integral parts/components of the machinery should be considered for determination of the assessable value and whether cost/value of design charge is also required to be included in the assessable value for determination of central excise duty." The above passage make it clear that the appellants agree that the bought out items became integral parts of the machinery manufactured.
That being so, there can be no doubt that the value of such bought out items has to be included in the assessable value of the machinery manufactured and supplied. At another place in the written submission, it is stated that two of the bought out items, magnetic pulley and magnetic separator can work independently without machine.
Nevertheless, since they are admittedly component parts of the machinery designed and manufactured by the appellants, their value has to be added to the assessable value of the machinery.
6. It is contended that Section 35E of the Act was incorporated in 11-10-1982 and since Assistant Collector's Order was issued on 25-1-1982, Section 35E of the Act cannot be invoked in this case.
Section 35E (2) of the Act enables the Collector of Central Excise may, of his own motion, call for examine the record of any proceeding in which an adjudicating authority subordinate to him has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision. On such examination, the Collector may direct the subordinate authority to apply to the Collector (Appeals) for the determination of such points arising out of the decision [or] order as may be specified by Collector of Central Excise in his order. There is nothing in this provision to indicate that Collector of Central Excise could pass such an order only in reference to decisions or orders of lower authorities passed after the incorporation of Section 35E. This provision was in replacement of erstwhile 35A(2) of the Act conferring suo moto power of Collector of Central Excise to review orders passed by the subordinate authorities.
Section 35E of the Act incorporated w.e.f. 11-10-1982 limits the power of the Collector of Central Excise inasmuch as it enables him to direct the lower authorities to a decision from the Collector of Central Excise (Appeals) while the pre-existing power enables him to review the decision himself. Section 35E does not restrict the exercise of power only to orders around on or after 10-11-1982. In these circumstances, we are unable to agree that the order passed prior to 11-10-1982 when Section 35E of the Act in its present form was incorporated cannot be dealt with under Section 35E of the Act.
7. It is also contended that the order passed by the Collector requiring Assistant Collector to apply to the Collector (Appeals) was passed on 21-1-1984 more than one year after the date of the order of the Assistant Collector (25-1-1982) and, therefore, the Collector cannot have passed order under Section 35E(3) of the Act. Under Section 35E (3) the period originally prescribed was 2 years; that has been reduced to one year by Finance Act, 1984 which came into effect subsequent to 21-1-1984. Therefore, when the Collector passed the order the period allowed was two years. We, therefore, find that the order was passed within time. The only other dispute relates to addition of designing charges to the assessable value of the machinery. Appellants had undertaken manufacture of certain items of machinery and the designs would obviously relate to such machinery. Naturally the cost thereof should be part of the assessable value for the machinery items.