Coromandal Engineering Co. Ltd. Vs. Commissioner of Central Excise, - Court Judgment

Excerpt:
1. in both these appeals the issue is common and hence is taken up for disposal as per law. by order-in-original no. 33/92 dated 11.11.1992 the commissioner of central excise (appeals), madurai has confirmed the duty of rs. 22,77,871/- under rule 9(2) of ce rules read with section 11a(2) of ce act, in respect of clearance of structurals of 1396.584 mts, a penalty of rs. 1 lakh has also been imposed on m/s. the coromandal engineering company under rule 173 (q) of ce rules besides a penalty of rs. 50,000/- on m/s. india cements ltd under rule 209(a) of ce rules. the appellants have taken up a stand that the items cleared by them that is structures like columns, trusses, bracings, purlins and stair cases, etc., appeared to have been fabricated in the factory of m/s. india cements ltd are not goods and such an activity is not an activity of manufacture. they are not to be treated as marketable goods and are not known in the market as goods for the purpose of classification under chapter sub-heading 7308.90. they also took a stand that through out the country, such an activity was never considered as activity of manufacture and none paid duty. therefore, in terms of the bonafide belief held by them, the same has to e considered and it cannot be held that they had an intention to evade duty.therefore, duty was not demandable on the allegation of clandestine removal and suppression. they also pleaded that merely because the items was described in the tariff heading by that count itself the test of marketability is not satisfied in terms of the apex court judgment rendered in the case of bhor industries ltd. v. cce as reported in 1989 (40) elt 280 (sc).2. they also relied on a large number of tribunal judgments and high court judgments which held the view that these items cannot be treated as goods for the purpose of exciseability. however, the ld.commissioner in the impugned order did not accept any of their contentions and confirmed the duty amount. they had also taken a plea that the modvat credit ought to have been granted besides various deductions in the assessable value, for which they are entitled to besides treating the duty as cum duty. they had also pleaded that the authorities treating fabrication charges include profit addition of another 15% towards profit is not warranted.3. the revenue took up the matter before the apex court in cce, raipur v. man structural company ltd. as reported in 2001 (130) elt 401. the constitutional bench comprising of hon'ble 5 ld. judges of the apex court has remanded the appeals for de novo consideration with an observation that the tribunal should take up these matters and re-decide the issue in the light of its earlier rulings rendered in the case moti laminates pvt. ltd v. cce as reported in 1995 (76) elt 241 (sc) and that of delhi cloth & general mills v. cc as reported in 1997 (44) rlt 113 (sc).4. the tribunal took up all the appeals for consideration in the case of sae india ltd. v. cce as reported in 2001 (45) rlt 570 and noted that the case required detailed examination of facts and such examination can be properly done only by the original authority.therefore, in the light of the observations made by the bench, the matter has been remanded for de novo consideration to the original authority.5. in view of this situation, this bench dealing with similar matters has noted that the burden of classification is on the revenue and on that the bench has remanded the cases to the original authority. a similar matter came up for consideration on 4.9.2001 in e/2971/1989 in the case of l&t v. cce. the tribunal noted all the submissions and has remanded the matter to the original authority for de novo consideration.6. we have heard ld. counsel shri r.raghavan for coromandal engineering company ltd. along with shri t.s. balasubramanian, adv. and sri kuppusamy, consultant for the india cement ltd. and shri soundarajan, dr.7. ld. counsel and the consultant contented that they have a strong case both on merits as well as on time bar. they stated that the apex court has already held in bhor industries ltd. v. cce that mere inclusion in the tariff of certain items ipso facto does not make the item marketable. the test of marketability has been laid down in delhi cloth & general mills which require to be applied in de novo consideration. they contend that the items are made to specific drawing and are not sold in the market and just for identification purpose the item have been give some nomenclature. however, it does not specify the test of name, characteristic and use to be called as "goods" in terms of section 2(f) and section 3 of ce act. they further contend that all the assessee through out the country were not paying duty and there were contradictory judgments on this issue and most of the judgments were in assessee's favour. therefore a clear bonafide belief arose regarding to non-dutiablity. in such a circumstance larger period was not invokeable as held by the apex court in the case of cce v. hmm ltd as reported in 1995 (76) elt 497 (sc), cce, calcutta v. eastern chemofarb ltd as reported in 1994 (74) elt 953 (t) and in the case of pushpam pharmaceuticals company v. cce, bombay as reported in 1995 (78) elt 401 (sc).8. they further relied on the larger bench judgments rendered in the case of srichakra tyres ltd. v. cce, madras as reported in 1999 (108) elt 361 (t) to plead that the duty was cum-duty and deductions of duty is required to be granted. they have also referred to the order of the original authority who has rejected the prayer for non-inclusion of profit margin. they further claim various deductions including claim for modvat credit which is required to be granted in terms of apex court judgment rendered in the case of bombay goods transport association v. union of india as reported in 1995 (77) elt 521.9. ld. dr defended the order and contended that the apex court in the case of cc v. man structural has clearly indicated that the items are shown in the tariff heading. therefore, the legislative intend to consider it as goods as been established. therefore, test of marketability having been established, the items has to be treated as goods. he contends that the appellants had not taken out licence and had not filed declarations. therefore the larger period was invokeable besides a case made out for imposition of penalty as there existed clear intention to evade duty.10. on a careful consideration, we notice that the tribunal in the case of elicon engineering ltd. v. cce had clearly held that these items are not marketable and they are not goods. however, the hon'ble apex court in the case of cc v. man structurals (supra) has set aside the said findings and has remanded the cases for de novo consideration to decide the matter in the light of its observations. the tribunal in the case of sae india ltd. v. cc (supra) has taken a view that all the facts and documents are required to be examined by the original authority.further, it observed that it required production of fresh evidence.hence the tribunal has remanded the appeal to original authority. we notice that it for the department to establish and discharge their burden of classification. such an exercise can be done only before the original authority. therefore, all these appeals are required to be remanded to the original authority to redetermine the case in the light of various judgments which have cropped up and which are hold the field. in terms of the orders already passed by this bench in similar mattes, we therefore set aside the impugned order and remand the case to original authority for de novo consideration. the revenue shall establish and discharge its burden of classification . further, they should take into consideration the observations made by the hon'ble apex court judgment in the case of bhor industries ltd. v. cce (supra).the plea of limitation, duty deductions, availability of modvat credit, non-imposition of penalties both under rule 173 (q) and 209 (a) of ce rules should be considered. all issues are get open and both the sides are at liberty to produce evidence to establish their case. the original authority shall reconsider the matter and pass a clear, speaking order after granting full opportunity to the appellants. thus the appeals are allowed by remand.

Judgment:
1. In both these appeals the issue is common and hence is taken up for disposal as per law. By order-in-original No. 33/92 dated 11.11.1992 the Commissioner of Central Excise (Appeals), Madurai has confirmed the duty of Rs. 22,77,871/- under Rule 9(2) of CE Rules read with Section 11A(2) of CE Act, in respect of clearance of structurals of 1396.584 MTs, a penalty of Rs. 1 lakh has also been imposed on M/s. The Coromandal Engineering Company under Rule 173 (Q) of CE Rules besides a penalty of Rs. 50,000/- on M/s. India Cements Ltd under Rule 209(A) of CE Rules. The appellants have taken up a stand that the items cleared by them that is structures like columns, trusses, bracings, purlins and stair cases, etc., appeared to have been fabricated in the factory of M/s. India Cements Ltd are not goods and such an activity is not an activity of manufacture. They are not to be treated as marketable goods and are not known in the market as goods for the purpose of classification under chapter sub-heading 7308.90. They also took a stand that through out the country, such an activity was never considered as activity of manufacture and none paid duty. Therefore, in terms of the bonafide belief held by them, the same has to e considered and it cannot be held that they had an intention to evade duty.

Therefore, duty was not demandable on the allegation of clandestine removal and suppression. They also pleaded that merely because the items was described in the tariff heading by that count itself the test of marketability is not satisfied in terms of the Apex Court judgment rendered in the case of Bhor Industries Ltd. v. CCE as reported in 1989 (40) ELT 280 (SC).

2. They also relied on a large number of Tribunal judgments and High Court judgments which held the view that these items cannot be treated as goods for the purpose of exciseability. However, the Ld.

Commissioner in the impugned order did not accept any of their contentions and confirmed the duty amount. They had also taken a plea that the modvat credit ought to have been granted besides various deductions in the assessable value, for which they are entitled to besides treating the duty as cum duty. They had also pleaded that the authorities treating fabrication charges include profit addition of another 15% towards profit is not warranted.

3. The Revenue took up the matter before the Apex Court in CCE, Raipur v. Man Structural Company Ltd. As reported in 2001 (130) ELT 401. The constitutional Bench comprising of Hon'ble 5 Ld. Judges of the Apex Court has remanded the appeals for de novo consideration with an observation that the Tribunal should take up these matters and re-decide the issue in the light of its earlier rulings rendered in the case Moti Laminates Pvt. Ltd v. CCE as reported in 1995 (76) ELT 241 (SC) and that of Delhi Cloth & General Mills v. CC as reported in 1997 (44) RLT 113 (SC).

4. The Tribunal took up all the appeals for consideration in the case of SAE India Ltd. v. CCE as reported in 2001 (45) RLT 570 and noted that the case required detailed examination of facts and such examination can be properly done only by the original authority.

Therefore, in the light of the observations made by the Bench, the matter has been remanded for de novo consideration to the original authority.

5. In view of this situation, this Bench dealing with similar matters has noted that the burden of classification is on the Revenue and on that the Bench has remanded the cases to the original authority. A similar matter came up for consideration on 4.9.2001 in E/2971/1989 in the case of L&T v. CCE. The Tribunal noted all the submissions and has remanded the matter to the original authority for de novo consideration.

6. We have heard Ld. Counsel Shri R.Raghavan for Coromandal Engineering Company Ltd. along with Shri T.S. Balasubramanian, Adv. And Sri Kuppusamy, Consultant for the India Cement Ltd. and Shri Soundarajan, DR.7. Ld. Counsel and the Consultant contented that they have a strong case both on merits as well as on time bar. They stated that the Apex Court has already held in Bhor Industries Ltd. v. CCE that mere inclusion in the tariff of certain items ipso facto does not make the item marketable. The test of marketability has been laid down in Delhi Cloth & General Mills which require to be applied in de novo consideration. They contend that the items are made to specific drawing and are not sold in the market and just for identification purpose the item have been give some nomenclature. However, it does not specify the test of name, characteristic and use to be called as "goods" in terms of Section 2(f) and Section 3 of CE Act. They further contend that all the assessee through out the country were not paying duty and there were contradictory judgments on this issue and most of the judgments were in assessee's favour. Therefore a clear bonafide belief arose regarding to non-dutiablity. In such a circumstance larger period was not invokeable as held by the Apex Court in the case of CCE v. HMM Ltd as reported in 1995 (76) ELT 497 (SC), CCE, Calcutta v. Eastern Chemofarb Ltd as reported in 1994 (74) ELT 953 (T) and in the case of Pushpam Pharmaceuticals Company v. CCE, Bombay as reported in 1995 (78) ELT 401 (SC).

8. They further relied on the Larger Bench judgments rendered in the case of Srichakra Tyres Ltd. v. CCE, Madras as reported in 1999 (108) ELT 361 (T) to plead that the duty was cum-duty and deductions of duty is required to be granted. They have also referred to the order of the original authority who has rejected the prayer for non-inclusion of profit margin. They further claim various deductions including claim for modvat credit which is required to be granted in terms of Apex Court judgment rendered in the case of Bombay Goods Transport Association v. Union of India as reported in 1995 (77) ELT 521.

9. Ld. DR defended the order and contended that the Apex Court in the case of CC v. Man Structural has clearly indicated that the items are shown in the tariff heading. Therefore, the legislative intend to consider it as goods as been established. Therefore, test of marketability having been established, the items has to be treated as goods. He contends that the appellants had not taken out licence and had not filed declarations. Therefore the larger period was invokeable besides a case made out for imposition of penalty as there existed clear intention to evade duty.

10. On a careful consideration, we notice that the Tribunal in the case of Elicon Engineering Ltd. v. CCE had clearly held that these items are not marketable and they are not goods. However, the Hon'ble Apex Court in the case of CC v. Man Structurals (supra) has set aside the said findings and has remanded the cases for de novo consideration to decide the matter in the light of its observations. The Tribunal in the case of SAE India Ltd. v. CC (Supra) has taken a view that all the facts and documents are required to be examined by the original authority.

Further, it observed that it required production of fresh evidence.

Hence the Tribunal has remanded the appeal to original authority. We notice that it for the department to establish and discharge their burden of classification. Such an exercise can be done only before the original authority. Therefore, all these appeals are required to be remanded to the original authority to redetermine the case in the light of various judgments which have cropped up and which are hold the field. In terms of the orders already passed by this Bench in similar mattes, we therefore set aside the impugned order and remand the case to original authority for de novo consideration. The Revenue shall establish and discharge its burden of classification . Further, they should take into consideration the observations made by the Hon'ble Apex Court judgment in the case of Bhor Industries Ltd. v. CCE (Supra).

The plea of limitation, duty deductions, availability of modvat credit, non-imposition of penalties both under Rule 173 (Q) and 209 (A) of CE Rules should be considered. All issues are get open and both the sides are at liberty to produce evidence to establish their case. The original authority shall reconsider the matter and pass a clear, speaking order after granting full opportunity to the appellants. Thus the appeals are allowed by remand.