| SooperKanoon Citation | sooperkanoon.com/41974 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT |
| Decided On | Feb-27-2006 |
| Judge | J T T.K., S Peeran |
| Reported in | (2006)(107)ECC644 |
| Appellant | Ge Medical Systems X-ray Ltd. and |
| Respondent | The Commissioner of Central |
2. The learned SDR, despite having addressed a letter calling upon the Commissioner to file their reply by 15.02.2006, he has not received the same. He submits that in such a circumstance, he is not in a position to respond to the misc. order.
3. The learned Counsel again argued the matter and files detailed written submission. It is his submission that the allegation in the Show Cause Notice is mis-declaration of the spares of Mobile Image Intensifiers and X-Ray machines. The main allegation is that during manufacturing the said Mobile Image Intensifiers and X-Ray machines, certain interior products come into existence which are dutiable and hence duty has been raised on the intermediary parts. The main submissions made by the appellants in the matter in the written submission is extracted herein below: i. Whether the Appellants made a Declaration under Rule 173B from 1998 onwards in respect of Mobile Image Intensifiers (Mlls)consisting of S - Cat items, viz., Mobile Base Stenoscope, Monitor Cart, Image Intensifier-16 CM/22 CM, DR-4, MD 10, MDA, Memory, Monitor 20", Collimeter, Diaphragms, hand switches, cassette holder, VCR, Printer, Camera, Laser Device, Dose Meter, Remote Control, etc. and whether there was suppression of facts in this regard, to invoke the extended period of limitation under Section 11A(1) and whether the provisions of Section 11AB and 11AC can be invoked.
ii. Whether the S - Cat items have been imported / purchased or whether they were manufactured in the Appellant's Unit at the intermediate stage and captively consumed in the manufacture of Mobile Image Intensifiers.
iii. Whether the Appellants manufactured Mobile Image Intensifiers consisting of the Base Assembly and the Monitor Cart utilizing such S - cat items and the local components.
iv. Whether the Commissioner was correct in demanding duty, ignoring the fact that 90% of the finished products viz., Mobile Image Intensifiers have been exported. Whether the Commissioner was correct in ignoring CBEC Circular No. 229/63/96-Cx. dated 8.7.96 and No. 303/19/97-Cx. dated 11.3.97, relevant to the issue.
v. Whether certain spares of X-ray machines have been misclassified under Ch. S.H. No. 9022.10 of CETA, 85 and whether the Appellants have circumvented the provisions of Ch. Note 2(a) of Ch. 90.
2. The Appellants submit that as far as the first issue is concerned they would like to submit the following: i. The Appellants were engaged in the manufacture / assembly of X-ray Equipment, Components viz., Control Panels, Transformers, Tube Stands, Tables, etc., which are required for an X-ray System.
ii. From Sept 1998 onwards, they were manufacturing / assembling Mobile Image Intensifier Systems, which is popularly called as 'C-Arm', which essentially has the features of an X-ray System, coupled with lot of additional features. This is used to intensify, record and to take printouts of the images. Due to the mobility of C-Arm, it is able to capture the images more efficiently as compared to a Stationary General X-ray System.
iii. C-Arm Mobile Image Intensifier System consists of two main parts viz., a. The C-Arm Buggy as well as Monitor Trolley are so inter-connected / dove tailed into each other that these cannot be used separately as such, on other C-Arm systems.
c. C-Arm System is configured based on the particular requirement of a Hospital / Radiologist / Diagnostic Center / Nursing Home, etc.
Various sub-assemblies / components of C-Arm are identified and can be chosen by the said customers considering their requirement.
All these identified items, mentioned at (b) above, such as Image Intensifier, X-ray control, Mobile Stand, Tube head, Thermal Printer, Memory MDA, TV Monitor, etc., are mentioned in the Sale Catalogue of C-Arm. These items are referred to as "S-Cat items" with an identified number. The customers place an order with the Appellants deciding various items by referring to the sales catalogue.
Thus the configuration of a C-arm, is decided by the customers, depending upon their requirements. In other words, a C-Arm is manufactured and cleared only after receipt of a specific order and not off the shelf.
All these items are imported except the Base Assembly, which is manufactured in India. It includes fabricated, press & welded parts.
It also consists of local components that include column, carriage shaft, break assembly, monitor trolley, welded base and yoke. The Base Assembly is integrated with the imported items and assembled into a C-Arm (Mobile Image Intensified.
1. The Appellants would like to refer to the 173B Declarations dtd.
2.6.98; 1.3.99; & 2.5.99 [Page 395 - 443, Vol. II], in which they have clearly mentioned the goods produced / manufactured by them, viz., Mobile Image Intensifier consisting of Mobile Base Stenoscope (Buggy) Monitor Cart (Trolley), Image Intensifier etc., they have also declared the different types of X-Ray systems manufactured by them.
They would like to refer to three letters dtd. 4.11.98 (Pg. 444-447, Vol. II) & 22.9.98, (Pg. 466 - 484 Vol. II) all addressed to the Superintendent of Central Excise, Range VI, Pune, in which they clearly mentioned the manufacturing process of C-Arm Mobile Image Intensifies manufactured by them. They clearly mentioned that, major Hi-end components except the base assembly are all imported.
Further, in the statements of Girish Wardadkar, G.M., dated 11.10.99 and 12.10.99 [Page Nos. 448 & 449], he clearly mentioned that, the parts required for the manufacture of C-Arm Mobile Image Intensifier are imported from France, Belgium and other countries of Europe.
Certain parts are procured locally from GE BEL. No Modvat credit has been taken on such parts. They would also like to refer to his statement dated 26.7.2001 [Page 212 - 215] in which he has clearly stated that all the hi-end items are bought out / imported from various vendors. Further, M.C. Sudarshan, in his statement, dated 18.7.2001 [Pages 191-194] clearly stated that the S-Cat items, which were declared separately as dutiable products are not manufactured and are not dutiable. However, they have declared in their classification the S-Cat items, which are sold by them.
The Appellants would also like to refer to the order dtd. 30.6.2000 passed by the Dy. Commissioner of Central Excise, Pune VIII, in which he clearly held that the parts of MII cleared for export have been originally imported into India and are not manufactured i.e., they are either not subjected to any processing or process amounting to manufacture. [Pg. Nos. 534 - 538]. This clearly shows that the S-Cat items were in fact imported and wers not manufactured in their factory. This order shows that the Dept. itself was of the opinion that the parts (S-Cat items) have not undergone any process of manufacture [Pg. No. 536; Vol.11].
Under the circumstances, it is not correct to allege that they have not declared the above items in 173B Declarations and failed to determine and discharge the duty on the said goods, in as much as the said goods are imported / procured locally and not manufactured by them. They are assembled into Mobile Image Intensifiers and exported. Therefore, the charge of suppression of facts is thus is not maintainable and the extended period of limitation cannot be invoked. The demand for duty is therefore barred by limitation. In this connection, the Appellants would like to refer to and rely upon the following decisions:Lubri-chem Industries Ltd., v. CCE, Bombay 1997 (73) ELT 257 (S.C.) Under the circumstances, the provisions of Section 11 AC and 11AB also cannot be invoked.
2. The Appellants would like to submit emphatically that the S - Cat items, viz., Image Intensifies X-ray control, Mobile Stand. Tube head, Thermal Printer, Memory MDA, TV Monitor, Hand Switch, Grids, VCR etc., have been imported and not manufactured in their unit. In addition, they purchase locally, such as, Fabricated, Press, Welded parts, which are assembled into the base assembly. These S-Cat items are not manufactured in the Appellant's Unit at the intermediate stage, arid they are captively consumed in the manufacture of Mobile Image Intensifier system (C-Arm) consisting of the Buggy (Base System) and the Monitor Trolley.
This fact that the said S-Cat items are imported, is evident from the three letters dtd. 4.11.98 (Pg. 444-447, Vol. II) & 22.9.98.
(Pg. 466 - 484 Vol. II) all addressed to the Superintendent of Central Excise, Range VI, Pune. The letters further show briefly as to how the said S-Cat items are utilized in the manufacturing process of C-Arm Mobile Image Intensifiers with the help of a Chart.
3. The Appellants submit that the Ld. Commissioner mis-directed himself in demanding duty, ignoring the fact that 90% of the finished products viz., Mobile Image Intensifies have been exported.
Further, the Commissioner totally ignored the CBEC Circular No. 229/63/96-Cx. dated 8.7.96 and No. 303/19/97-Cx. dated 11.3.97, [Pg Nos. 661-663, Vol. II] on the ground that the Appellants have not exported the goods under Rule 13 of the CER, 1944. [Para 28 of OIO; Pg. 370; Vol. I; Kansal Knitwears v. CCE 2001(136) ELT 457 (T) Pg.
664 to 669 ; 4 R Health Care Products v. CCE The Appellants submit that the Ld. Commissioner has not denied the fact that the Appellants have exported 90% of their total production of C-Arm's (Mil), the details of which have been submitted to him [Pg. Nos. 628 - 660; Vol. II]. However, he observes that the Appellants have not exported the goods under Rule 13 of the CER, 1944. The Appellants submit that Mobile Image Intensifiers are liable to 'Nil' rate of duty and as such the question of following the procedure under Rule 13 of the CER, 1944 does not arise. The Appellants also submitted to the Ld. Commissioner specimen copies of Invoices, AR 4s etc., relating to 1998-99 & 1999-2000 under the cover of which they exported Mil's [Pg. Nos. 487- 530A & 595 - 627; Vol. II]. A perusal of these documents would show that Mil's were exported in two packages consisting of C-Arm Buggy (Base System) and Monitor Trolley. These shipments were supervised by the Inspector / Supdt. Of Customs, who countersigned the said documents.
The Appellants would also like to refer to the letter dtd.
6.4.99/7.4.99 from the Asst. Commissioner of Customs, Sahar Air Cargo Complex, Mumbai, addressed to the Asst. Commissioner of Central Excise, Pune, granting permission for examination and stuffing of Export Cargo at the factory premises. He also indicated in the said letter a model 'Examination Order', which is required to be recorded on the duty free Shipping Bill by the Jurisdictional Central Excise Officer [Pg. No. 519; Vol. II]. In pursuance of the said letter dtd. 6.4.99/7.4.99, the Departmental Officers were supervising such shipments.
In the light of the above facts, the Appellants submit that no duty is demandable on the S-Cat Items, originally imported free of duty and utilized in the manufacture of Mil's, which were exported under the AR 4 procedure.
4. Coming to the demand for duty on certain spares of X-ray machines, the Appellants submit that the Ld. Commissioner agrees that the parts, viz., X-Ray Control Assembly, Tube Head Assembly, Generator Assembly, Revealex, Tube Stand Assembly and Collimator, being solely used in X-ray machines and Mil's are classifiable under Ch. S.H. No. 9022.10 of CETA, 85. He further observes that the Appellants have already paid duty at 8% on the said parts and therefore no demand sustains on these goods. [Paras 29 & 30 Order, Pg. Nos. 371-372; Vol. I]. The differential duty demanded on these goods work out to Rs. 57,55,582/- [Pg. Nos. 671 - 689; Vol. II]. As against this an abatement of only Rs. 17,71,660/- has been allowed in the impugned order. However, the basis on which this amount has been arrived at, has not been indicated in the said order.
Without prejudice to the above, as far as the demand for differential duty in respect of other parts of X-ray machines and Mil's and amounting to Rs. 1,28,12,935/- (Rs. 1,85,68,517/- minus Rs. 57,55,582/-), is concerned, the Appellants would like to illustrate some of disputed items, viz., spares of X-Ray Systems, as to why they are required to be classified under Sub Heading No. 9022.10 and not under 8479.19. For example, in the case of X - Ray Table, Tube Stand, Collimator, which are purchased from local vendors, are required to be manufactured in accordance with the specifications given by the Bureau of Indian Standards IS 7620 (Part 2) - 1986. In other words, the said goods are specifically manufactured for being used in the X - Ray Systems. Further, the Chapter Heading 9022 reads as follows: Apparatus based on the use of x-rays or of alpha, beta or gamma radiations, whether or not for medical, surgical, dental or veterinary uses, including radiography or radio - therapy apparatus, x-ray tubes and other x-ray generators, high tension generators, control panels, desks, screens, examination or treatment tables, chairs and the like.
It can be seen from the above, that parts / components which are specifically manufactured for being used in a x-ray system including X-Ray Generators is required to be classified under Chapter Heading 9022 of CETA 1985, not only in terms of Note 2(b) of Chapter 90, but even in terms of the Chapter Heading 9022.
In this connection the Appellants would like to refer to and rely upon the Explanatory Notes given in the HSN for Chapter 90.22, which amohyst other things clearly states that This Group includes (F) Examination or treatment tables, chairs and the like specialized for x-ray work whether designed to be incorporated in the x-ray apparatus or to form separate articles. Provided they are exclusively or primarily designed for use with x-ray apparatus, such tables, chairs, etc., remain classified in this heading even if presented separately; but tables, chairs, etc., not specialized for x-ray work are excluded (usually heading 94.02) [90.22(III)(F)].
5. Without prejudice to the above, the Appellants would like to submit that some of the spares / components, such as, screws, bolts, nuts, pipes, base plates, strips, revealex, lead glass, push buttons, table tops, etc were procured locally from SSI Units. These items were cleared to the Appellant's Customers as spares / components and duty at 5% and 8% was paid as spares / components of X- Ray items, under the heading 9022.10 of CETA, 1985, for the year 1998 - 1999 and 1999 - 2000, respectively. No modvat credit was taken on the said spares / components, since some of the goods were procured from SSI Units. In terms Rule 57F(3), on the inputs cleared from home consumptions duty equal to the amount of credit is availed on such inputs is required to be paid. Since no input credit was taken, no duty is required to be paid. This could be verified with the relevant invoices covering the clearances, which are with the Department.
6. Without prejudice to the above, the Appellants would like to submit that with effect from 1.3.2000, goods falling under Chapter sub-heading 9022.00 (C-Arm / Mobile Image intensifiers and their parts; x-ray systems and their parts) are chargeable to 'Nil' rate of duty. Therefore, the demand for duty on the parts of x-ray systems for the period commencing from 1.3.2000 to 31.3.2001 is, therefore, not sustainable in law.
As far as M. C. Sudarshan, Manager (Finance) is concerned, he is only an employee of the Company and he has not done any act of omission or commission, so as to make him liable for penalty under Rule 209 A of the Central Excise Rules, 1944.
4. The learned SDR refers to the Audit Report as well as the Chartered Accountant's Report relied by the appellants themselves. He also refers to the detailed order given by the Commissioner. He contends that prima facie case is not the criteria for granting full waiver in the matter.
He submits that the non-deposit of the amount would lead hardship to the Revenue. His contention is that the appellants are not pleading financial hardship and, therefore, they should pre-deposit the entire amount.
5. On a careful consideration, we notice that the appellants have filed details of the entire case. The Commissioner was duty bound to comply with the Misc. Order passed in the matter. The Commissioner has not taken any steps to instruct the learned SDR and no response has come on his letter. Therefore, we have to prima facie accept the assessees' plea that the duty liability would not be more than Rs. 2 crores in the matter. The learned Counsel has relied very strongly on the Board's Circular besides technical literature and other submissions. Prima facie, their contention that the duty liability would be only Rs. 2 crores is required to be accepted at this stage in the absence of any response from the Commissioner. The appellants shall pre-deposit this amount of Rs. 2,00,00,000/- (Rupees Two crores only) within a period of three months. On such deposit, the balance of duty and penalty stands waived and recovery stayed. Call on to report compliance on 15th June, 2006. Failure to comply with the terms of the Stay Order will entail dismissal of the Appeal. As the Revenue implication is very high, matter will be taken up for out of turn hearing after the report of compliance on 14th July. 2006. The penalties are waived in the matter.
Both the stay applications are disposed of in the above terms.