Vickers Sperry of India Ltd. Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. the appellants are aggrieved by the two demands of central excise duty for rs. 4,200/- and rs. 26,273/- which have been confirmed against them by the lower authorities.2. on hearing both sides and on perusal of the record, we find that exemption notification no. 167/79-central excises, dated 19-4-1979 as amended by notification no. 187/79, central excises, dated 10-5-1979, fully exempted parts and accessories of motor-vehicles and tractors, including trailers, if intended for use in further manufacture of excisable goods subject to the condition that if such use was in a factory of another manufacturer, the procedure set out in chapter x of the central excise rules, 1944, should be observed. the show cause notices dated 30-8-1979 issued to the appellants stated that they had cleared oil hydraulic pumps to m/s. harsha tractors ltd. and m/s.mahindra & mahindra ltd. (international tractor division) "without payment of duty under the pretext of chapter x procedure". the appellants explained to the assistant collector that they had cleared the said pumps free of duty in terms of the exemption notification and on the authority of the c.t. 2 certificates issued by the superintendent of central excise in favour of m/s. harsha tractors ltd. and m/s. mahindra & mahindra ltd. (international tractor division).c.t. 2 certificates is a part of the chapter x procedure. it is issued by the superintendent having jurisdiction to a manufacturer found entitled to receive goods free of duty for industrial use under chapter x procedure. the said manufacturer is required to take out a special central excise licence in form l-6 and to execute a bond to ensure proper accountal of the duty free goods received by him. the appellants have placed on record photocopies of the two c.t. 2 certificates on the authority of which they cleared the goods. these certificates are duly signed by the jurisdictional superintendent of central excise. they mention the l-6 licence no. of the respective recipient and also give particulars of the bond executed by him. the appellants also state that they cleared the goods on gate passes and a.r. 3 forms which again is a requirement of chapter x procedure. however, without refuting contention of the appellants that they had duly observed the requirements of chapter x procedure, the assistant collector confirmed the demands after holding that the appellants had cleared the goods "without observing chapter x procedure". the assistant collector did not spell out as to which part of chapter x procedure the appellants had not observed. the record shows that the appellants had observed all the essential requirements of chapter x procedure. the order-in-original of the assistant collector, therefore, proceeded on a wrong finding of fact.3. the learned collector (appeals) impliedly accepted that the appellants had fulfilled the requirements of chapter x procedure. he, however, let the duty demands stand against the appellants on an altogether new ground, namely, that the appellants/1 had not claimed in the classification list that they would be clearing the goods free of duty in terms of exemption notification no. 167/79-c.e. "exemption is to be claimed and it is not automatic", observed the learned collector (appeals).4. we do not consider it fair that once it was shown by the appellants that the ground taken in the show cause notice was factually incorrect, the demands should yet have been confirmed against them on a brand new ground against which they had no opportunity to explain their case.even otherwise, we do not consider that any serious lapse has been committed by the appellants for which they deserve to be deprived of the exemption otherwise admissible to them. the notification itself did not require pre-approval of the exemption in the classification list as a condition precedent for entitlement to the notification.classification list is a part of the self-removal procedure and its purpose is to pre-approve the rates of duty applicable so that the assessee could thereafter go on clearing his goods on his own from time to time on payment of duty at the approved rates. though the appellants may not have mentioned the notification in the classification list, the purpose behind the filing and approval of the classification list was substantially fulfilled in the present case since the goods were cleared free of duty on the authority of c.t. 2 certificates issued by the competent central excise authority after due prior scrutiny of entitlement to the exemption. it is not that something happened in this case clandestinely and without the knowledge of the central excise authorities. we hold, that in substance the requirement of pre-scrutiny, which is the essential purpose of the classification list, had also been fulfilled in this case. the lapse, if any, on the part of the appellants was of a procedural and technical nature and not of substance.5. in the result, we set aside both the lower orders and allow this appeal with consequential relief to the appellants.

Judgment:
1. The appellants are aggrieved by the two demands of Central Excise duty for Rs. 4,200/- and Rs. 26,273/- which have been confirmed against them by the lower authorities.

2. On hearing both sides and on perusal of the record, we find that exemption Notification No. 167/79-Central Excises, dated 19-4-1979 as amended by Notification No. 187/79, Central Excises, dated 10-5-1979, fully exempted parts and accessories of motor-vehicles and tractors, including trailers, if intended for use in further manufacture of excisable goods subject to the condition that if such use was in a factory of another manufacturer, the procedure set out in Chapter X of the Central Excise Rules, 1944, should be observed. The show cause notices dated 30-8-1979 issued to the appellants stated that they had cleared oil hydraulic pumps to M/s. Harsha Tractors Ltd. and M/s.

Mahindra & Mahindra Ltd. (International Tractor Division) "without payment of duty under the pretext of Chapter X procedure". The appellants explained to the Assistant Collector that they had cleared the said pumps free of duty in terms of the exemption notification and on the authority of the C.T. 2 certificates issued by the Superintendent of Central Excise in favour of M/s. Harsha Tractors Ltd. and M/s. Mahindra & Mahindra Ltd. (International Tractor Division).

C.T. 2 certificates is a part of the Chapter X procedure. It is issued by the Superintendent having jurisdiction to a manufacturer found entitled to receive goods free of duty for industrial use under Chapter X procedure. The said manufacturer is required to take out a special central excise licence in Form L-6 and to execute a bond to ensure proper accountal of the duty free goods received by him. The appellants have placed on record photocopies of the two C.T. 2 certificates on the authority of which they cleared the goods. These certificates are duly signed by the jurisdictional Superintendent of Central Excise. They mention the L-6 Licence No. of the respective recipient and also give particulars of the bond executed by him. The appellants also state that they cleared the goods on gate passes and A.R. 3 Forms which again is a requirement of Chapter X procedure. However, without refuting contention of the appellants that they had duly observed the requirements of Chapter X procedure, the Assistant Collector confirmed the demands after holding that the appellants had cleared the goods "without observing Chapter X procedure". The Assistant Collector did not spell out as to which part of Chapter X procedure the appellants had not observed. The record shows that the appellants had observed all the essential requirements of Chapter X procedure. The Order-in-Original of the Assistant Collector, therefore, proceeded on a wrong finding of fact.

3. The Learned Collector (Appeals) impliedly accepted that the appellants had fulfilled the requirements of Chapter X procedure. He, however, let the duty demands stand against the appellants on an altogether new ground, namely, that the appellants/1 had not claimed in the classification list that they would be clearing the goods free of duty in terms of exemption Notification No. 167/79-C.E. "Exemption is to be claimed and it is not automatic", observed the Learned Collector (Appeals).

4. We do not consider it fair that once it was shown by the appellants that the ground taken in the show cause notice was factually incorrect, the demands should yet have been confirmed against them on a brand new ground against which they had no opportunity to explain their case.

Even otherwise, we do not consider that any serious lapse has been committed by the appellants for which they deserve to be deprived of the exemption otherwise admissible to them. The notification itself did not require pre-approval of the exemption in the classification list as a condition precedent for entitlement to the notification.

Classification list is a part of the self-removal procedure and its purpose is to pre-approve the rates of duty applicable so that the assessee could thereafter go on clearing his goods on his own from time to time on payment of duty at the approved rates. Though the appellants may not have mentioned the notification in the classification list, the purpose behind the filing and approval of the classification list was substantially fulfilled in the present case since the goods were cleared free of duty on the authority of C.T. 2 certificates issued by the competent central excise authority after due prior scrutiny of entitlement to the exemption. It is not that something happened in this case clandestinely and without the knowledge of the central excise authorities. We hold, that in substance the requirement of pre-scrutiny, which is the essential purpose of the classification list, had also been fulfilled in this case. The lapse, if any, on the part of the appellants was of a procedural and technical nature and not of substance.

5. In the result, we set aside both the lower orders and allow this appeal with consequential relief to the appellants.