Collector of C. Ex. Vs. Utility Engineers (India) Ltd. - Court Judgment

Excerpt:
1. this is a department's appeal filed with reference to the order of collector (appeals), new delhi dated 8-6-1987.2. it appears that a notice was issued to the respondents by the registry but neither any appearance has been caused nor there is any other communication requesting for adjournment or otherwise. in the circumstances, we have gone through the records and heard learned departmental representative.3. learned dr stated that the respondents are manufacturers of refrigeration and air-conditioning appliances. they had availed concession under notification no. 56/78, dated 1-3-1978 and supplied six window type air- conditioners 1.5 ton each to m/s. u.p.s.e.b.(electricity microwave telecommunication station at sultanpur) at concessional rate of 25% b.e.d. and 5% s.e.d. against ct-2 issued by the supdt, central excise, sultanpur on 11-7-1983 as per details as under :- (i) 2 nos. vide ar-3a s. no. 10, dated 11-7-1983 vide gp-i no. 66, dated 11-7-1983 to sub-station at goniganj. (ii) 2 nos. vide ar-3a s. no. 11, dated 11-7-1983 vide gp-i no. 67, dated 11-7-1983 to sub-station at raniganj. (iii) 2 nos. vide ar-3a s. no. 12, dated 11-7-1983 vide gp-i no. 68, dated 11-7-1983 to their sub-station at sultanpur.later, on re-examination, it was observed by the assistant collector, central excise, lucknow that under notification no. 93/76 and 56/78, the u.p.s.e.b. were not entitled to the supply of air-conditioners at concessional rate, since as per the notification, only thermal or hydel power generating stations, factories or electricity load despatch centres were eligible for installation of such air-conditioners.4. in reply to the s.c.n., the respondents had stated that the concessional rate was availed as per ct-2 issued by the supdt, central excise, sultanpur. the central excise duty was paid as per approved price lists on the strength of ct-2 issued by the competent authority.in case, there was short payment of duty, the same may be recovered from the u.p.s.e.b. and not from them and they were not liable to pay any differential duty. the ct-2 certificates were granted to u.p.s.e.b.on the grounds that they were holding the l-6 licence. in the facts of the case, the u.p.s.e.b. were liable to pay the amount of differential duty. they also stated that in the demand-cum-show cause notice dated 5-1-1984 which relates to two other air-conditioners supplied to u.p.s.e.b. by g.p. no. 69 the ground given is that the goods were not used for the purpose for which the ct-2 was issued. they also quoted a reference of order-in-appeal no. 125/ce/ald/83, dated 19-10-1983 passed by collector (appeals), central excise, new delhi in the case of u.p.s.e.b. and they further repeated that they were not able to pay the differential duty.5. the collector (appeals) examined two main issues in the impugned order-in-appeal :- 1. whether the u.p.s.e.b. were entitled to the concessional rate and, on the first question, the collector (appeals) agreed with the respondents' contention that the microwave telecommunication sub-station was an extension of the electricity generating station which could be regarded as a 'factory' eligible for concessional rate of duty. on the second question, the collector (appeals) observed that the liability for the payment of duty in respect of goods moving under chapter x is on the person who makes application under rule 192 and obtains the goods on the basis of ct-2 issued to him by the jurisdictional officer. since he had allowed the case of eligibility of u.p.s.e.b. for concessional rate of duty on merits, he did not pass any order on the second plea and allowed the appeal.6. only certain specified categories of users were entitled to avail concessional rate of duty and these have been specified in the schedule to notification no. 56/78, dated 1-3-1978 as amended by notification no. 25/79 and notification no. 108/80 as 'computer rooms, research, and test laboratories, animal, houses, telephone exchange, broadcasting studies, trawlers, dams, mines and tunnels, thermal and hydel power-stations, technical buildings of m.e.s. hospitals run by central government or state government or local authority or public charitable institution, factories and electricity load despatch centres'. for the purpose of this notification, 'factory' means any premises including the precincts thereof where any goods are manufactured or stored but does not include any premises used for other purposes. factory as defined in the notification relates only to the generation or storage of electricity and microwave station is neither concerned with storage nor with generation and storage of electricity. it was their contention that the collector (appeals) has erred in holding the microwave station to be an extension of generating station. there was no material brought on record as to how microwave station constituted an extension of a factory. microwave station even if it was deemed to be situated in a factory, as its premises are not used for manufacturing or storing any goods, the concession was not available.7. on the second question as to who would be liable to pay the duty, whether manufacturer or the user, even though learned collector (appeals) has not passed any final order, he had made some observations which were in the nature of obiterdicta or secondary pronouncements. he had concluded that under chapter x procedure, liability to discharge duty would be on the receiver of the goods. this conclusion was erroneous inasmuch as chapter x is only a procedure prescribed and the substantive aspect of actual non-use in such establishments as is permitted under the notification no. 56/78 and liability to pay duty thereafter is contained in condition (ii)(a) of the notification itself which provides as under :- "the manufacturer furnishes to the collector of central excise a written undertaking by the owner, or, as the case may be the chief executive of the establishment in respect of which such air-conditioners are required, that he will satisfy the proper officer of the central excise within one month of the date of clearance of such air conditioners by the manufacturer, after payment of duty, or such extended period as the collector of central excise may allow, that the air-conditioners are actually used in such establishment and, in default, to pay the duty which is exempt under this notification." 8. since in the department's view, the u.p.s.e.b. was not eligible and in any case, had not used two of the air conditioners for the purpose for which the ct-2 was issued, the order was required to be set aside.9. although the respondents have not appeared, we have considered the submissions made by them before the lower authorities and the impugned orders.10. we observe that the respondents had availed of the benefit of notification no. 56/78 with reference to the ct-2 certificates issued by the supdt. of central excise, sultanpur.11. the fact that ct-2 certificates were issued by the supdt. can only be taken to mean that chapter x procedure was duly followed. even otherwise, there is nothing to show that the procedure was not adhered to.12. the main issue which remains for consideration is whether the establishment in which the air-conditioners were installed was one of those specified in the schedule to the notification. we notice in this connection that this schedule includes inter alia thermal & hydel power stations, telephone exchanges and electricity load despatch centres and factories. the notification no. 56/78, dated 1-3-1978 (as amended) covers room air conditioners and window air conditioners used in specified establishments subject to the following conditions :- "(i) the collector of central excise is satisfied that such air-conditioners are required for use in any of the establishments specified in the schedule hereto annexed; (ii) the manufacturer furnishes to the collector of central excise a written undertaking by the owner, or, as the case may be the chief executive of the establishment in respect of which such air-conditioners are required, that will satisfy the proper officer of the central excise. (a) within one month of the date of clearance, of such air-conditioners by the manufacturer, after payment of duty, or such extended period as the collector of central excise may allow, that the air-conditioners are actually used in such establishment and, in default, to pay the portion of the duty which is exempt under this notification; and (b) the air-conditioners shall not be resold within a period of five years from the date the air-conditioners are installed in such establishment, and in the event of breach of any of the terms of the undertaking aforesaid, he shall pay, on behalf of the manufacturer, the portion of the duty which is exempt under this notification; and (iii) the procedure specified in chapter x of the central excise rules, 1944 is followed." 12. learned collector has allowed the benefit observing inter alia that "electricity is totally unlike other excisable commodities. it cannot be stored in the place of its 'manufacture' within factory, like other excisable goods. it has to be transmitted immediately through power lines. generation (production), storage or transmission has to simultaneously take place and control on transmission of electricity is essentially a control on generating process. microwave station was thus considered extension of the electricity generating stations. i, therefore, observe that the u.p. state electricity board were entitled to receive air-conditioners on concessional rate of duty as per notification no. 56/78." 13. we consider that the learned collector was right in his observations about the special features of power stations and the nature of electricity. the power stations were obviously covered during the relevant period by the notification and even otherwise, being premises where an excisable commodity was produced were required to be considered as a factory (in fact, they are even recognised as factories under the factories act). further, we see that not only factory or electricity load despatch centres but also telephone exchanges are covered by notification 56/78. these microwave telecommunication centres are not extensions of power stations (and they can hardly be deemed to be so even though being attached to or connected with power stations/sub-stations and other units and they may be utilised for exercising control in respect of production and distribution of electricity also). but, they are, in fact, akin to telephone exchanges (the only difference being that instead of telephone wires, microwaves are used for long distant communication purposes). the room air conditioners in question were installed in the microwave stations (which thus fall under specified establishments) after being cleared on the basis of ct-2 certificates in accordance with the prescribed procedure. we, therefore, see no reason to interfere with the above order. the department's appeal is, therefore, rejected as already announced in the open court.

Judgment:
1. This is a Department's appeal filed with reference to the order of Collector (Appeals), New Delhi dated 8-6-1987.

2. It appears that a notice was issued to the respondents by the Registry but neither any appearance has been caused nor there is any other communication requesting for adjournment or otherwise. In the circumstances, we have gone through the records and heard learned Departmental Representative.

3. Learned DR stated that the respondents are manufacturers of Refrigeration and Air-conditioning appliances. They had availed concession under Notification No. 56/78, dated 1-3-1978 and supplied six window type air- conditioners 1.5 ton each to M/s. U.P.S.E.B.(Electricity Microwave Telecommunication station at Sultanpur) at concessional rate of 25% B.E.D. and 5% S.E.D. against CT-2 issued by the Supdt, Central Excise, Sultanpur on 11-7-1983 as per details as under :- (i) 2 Nos. vide AR-3A S. No. 10, dated 11-7-1983 vide GP-I No. 66, dated 11-7-1983 to sub-station at Goniganj.

(ii) 2 Nos. vide AR-3A S. No. 11, dated 11-7-1983 vide GP-I No. 67, dated 11-7-1983 to sub-station at Raniganj.

(iii) 2 Nos. vide AR-3A S. No. 12, dated 11-7-1983 vide GP-I No. 68, dated 11-7-1983 to their sub-station at Sultanpur.

Later, on re-examination, it was observed by the Assistant Collector, Central Excise, Lucknow that under Notification No. 93/76 and 56/78, the U.P.S.E.B. were not entitled to the supply of air-conditioners at concessional rate, since as per the notification, only thermal or hydel power generating stations, factories or electricity load despatch centres were eligible for installation of such air-conditioners.

4. In reply to the S.C.N., the respondents had stated that the concessional rate was availed as per CT-2 issued by the Supdt, Central Excise, Sultanpur. The central excise duty was paid as per approved price lists on the strength of CT-2 issued by the competent authority.

In case, there was short payment of duty, the same may be recovered from the U.P.S.E.B. and not from them and they were not liable to pay any differential duty. The CT-2 certificates were granted to U.P.S.E.B.on the grounds that they were holding the L-6 licence. In the facts of the case, the U.P.S.E.B. were liable to pay the amount of differential duty. They also stated that in the demand-cum-show cause notice dated 5-1-1984 which relates to two other air-conditioners supplied to U.P.S.E.B. by G.P. No. 69 the ground given is that the goods were not used for the purpose for which the CT-2 was issued. They also quoted a reference of Order-in-Appeal No. 125/CE/ALD/83, dated 19-10-1983 passed by Collector (Appeals), Central Excise, New Delhi in the case of U.P.S.E.B. and they further repeated that they were not able to pay the differential duty.

5. The Collector (Appeals) examined two main issues in the impugned order-in-appeal :- 1. Whether the U.P.S.E.B. were entitled to the concessional rate and, On the first question, the Collector (Appeals) agreed with the respondents' contention that the Microwave Telecommunication sub-station was an extension of the electricity generating station which could be regarded as a 'factory' eligible for concessional rate of duty. On the second question, the Collector (Appeals) observed that the liability for the payment of duty in respect of goods moving under Chapter X is on the person who makes application under Rule 192 and obtains the goods on the basis of CT-2 issued to him by the jurisdictional officer. Since he had allowed the case of eligibility of U.P.S.E.B. for concessional rate of duty on merits, he did not pass any order on the second plea and allowed the appeal.

6. Only certain specified categories of users were entitled to avail concessional rate of duty and these have been specified in the Schedule to Notification No. 56/78, dated 1-3-1978 as amended by Notification No. 25/79 and Notification No. 108/80 as 'computer rooms, research, and test laboratories, animal, houses, telephone exchange, broadcasting studies, trawlers, dams, mines and tunnels, thermal and hydel power-stations, technical buildings of M.E.S. hospitals run by Central Government or State Government or local authority or public charitable institution, factories and electricity load despatch centres'. For the purpose of this notification, 'factory' means any premises including the precincts thereof where any goods are manufactured or stored but does not include any premises used for other purposes. Factory as defined in the notification relates only to the generation or storage of electricity and Microwave Station is neither concerned with storage nor with generation and storage of electricity. It was their contention that the Collector (Appeals) has erred in holding the Microwave Station to be an extension of generating station. There was no material brought on record as to how microwave station constituted an extension of a factory. Microwave station even if it was deemed to be situated in a factory, as its premises are not used for manufacturing or storing any goods, the concession was not available.

7. On the second question as to who would be liable to pay the duty, whether manufacturer or the user, even though learned Collector (Appeals) has not passed any final order, he had made some observations which were in the nature of obiterdicta or secondary pronouncements. He had concluded that under Chapter X procedure, liability to discharge duty would be on the receiver of the goods. This conclusion was erroneous inasmuch as Chapter X is only a procedure prescribed and the substantive aspect of actual non-use in such establishments as is permitted under the Notification No. 56/78 and liability to pay duty thereafter is contained in condition (ii)(a) of the notification itself which provides as under :- "The manufacturer furnishes to the Collector of Central Excise a written undertaking by the owner, or, as the case may be the Chief Executive of the establishment in respect of which such air-conditioners are required, that he will satisfy the proper officer of the Central Excise within one month of the date of clearance of such air conditioners by the manufacturer, after payment of duty, or such extended period as the Collector of Central Excise may allow, that the air-conditioners are actually used in such establishment and, in default, to pay the duty which is exempt under this notification." 8. Since in the Department's view, the U.P.S.E.B. was not eligible and in any case, had not used two of the air conditioners for the purpose for which the CT-2 was issued, the order was required to be set aside.

9. Although the respondents have not appeared, we have considered the submissions made by them before the lower authorities and the impugned orders.

10. We observe that the respondents had availed of the benefit of Notification No. 56/78 with reference to the CT-2 certificates issued by the Supdt. of Central Excise, Sultanpur.

11. The fact that CT-2 certificates were issued by the Supdt. can only be taken to mean that Chapter X procedure was duly followed. Even otherwise, there is nothing to show that the procedure was not adhered to.

12. The main issue which remains for consideration is whether the establishment in which the air-conditioners were installed was one of those specified in the Schedule to the notification. We notice in this connection that this schedule includes inter alia Thermal & Hydel power stations, telephone exchanges and electricity load despatch centres and factories. The Notification No. 56/78, dated 1-3-1978 (as amended) covers Room Air Conditioners and Window Air Conditioners used in specified establishments subject to the following conditions :- "(i) the Collector of Central Excise is satisfied that such air-conditioners are required for use in any of the establishments specified in the schedule hereto annexed; (ii) the manufacturer furnishes to the Collector of Central Excise a written undertaking by the owner, or, as the case may be the Chief Executive of the establishment in respect of which such air-conditioners are required, that will satisfy the proper officer of the Central Excise.

(a) within one month of the date of clearance, of such air-conditioners by the manufacturer, after payment of duty, or such extended period as the Collector of Central Excise may allow, that the air-conditioners are actually used in such establishment and, in default, to pay the portion of the duty which is exempt under this notification; and (b) the air-conditioners shall not be resold within a period of five years from the date the air-conditioners are installed in such establishment, and in the event of breach of any of the terms of the undertaking aforesaid, he shall pay, on behalf of the manufacturer, the portion of the duty which is exempt under this notification; and (iii) the procedure specified in Chapter X of the Central Excise Rules, 1944 is followed." 12. Learned Collector has allowed the benefit observing inter alia that "electricity is totally unlike other excisable commodities. It cannot be stored in the place of its 'manufacture' within factory, like other excisable goods. It has to be transmitted immediately through power lines. Generation (production), storage or transmission has to simultaneously take place and control on transmission of electricity is essentially a control on generating process. Microwave station was thus considered extension of the electricity generating stations. I, therefore, observe that the U.P. State Electricity Board were entitled to receive air-conditioners on concessional rate of duty as per Notification No. 56/78." 13. We consider that the learned Collector was right in his observations about the special features of power stations and the nature of electricity. The power stations were obviously covered during the relevant period by the notification and even otherwise, being premises where an excisable commodity was produced were required to be considered as a factory (in fact, they are even recognised as factories under the Factories Act). Further, we see that not only factory or electricity load despatch centres but also telephone exchanges are covered by Notification 56/78. These microwave telecommunication centres are not extensions of power stations (and they can hardly be deemed to be so even though being attached to or connected with power stations/sub-stations and other units and they may be utilised for exercising control in respect of production and distribution of electricity also). But, they are, in fact, akin to telephone exchanges (the only difference being that instead of telephone wires, microwaves are used for long distant communication purposes). The Room Air Conditioners in question were installed in the Microwave Stations (which thus fall under specified establishments) after being cleared on the basis of CT-2 certificates in accordance with the prescribed procedure. We, therefore, see no reason to interfere with the above order. The Department's appeal is, therefore, rejected as already announced in the open Court.