| SooperKanoon Citation | sooperkanoon.com/9907 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi |
| Decided On | Aug-20-1996 |
| Reported in | (1996)(88)ELT163TriDel |
| Appellant | Collector of Central Excise |
| Respondent | BomIn (P) Ltd. |
2. The assessee had filed classification List No. 16/79-80 in respect of Electric Motors falling under Tariff Item 30 of Central Excise Tariff with a remark 'Duty on Electric Motor' (used in P.D. Pumps) to be said at the time of clearance of pumps.
3. The Assistant Collector vide his order dated 12-5-1980 held that clearance of electric motors took place when it was taken for captive consumption, hence the assessee should pay duty on the electric motors before these were used for the manufacture of pumps and accordingly approved the classification list. On appeal to Collector (Appeals) by the assessee, the ld. Collector (Appeals) reversed the order of Assistant Collector and held that the electric motors, which are used in the power driven pumps were different from other Electric Motors and it was reasonable to collect duty on Electric Motor used in the power driven pump at the time of clearance of power driven pump. The revenue is aggrieved with this on a sole ground that the amended Rules 9 & 49 of Central Excise Rules, 1944 and by enactment of Section 51 of Finance Act, 1982, duty on electric motor should be paid before it is removed for further use in the manufacture of power driven pumps. Once electric motor comes into existence and the same is fitted with power driven pumps, it has to discharge its duty liability under Rules 9 & 49, before it is cleared for further use in the factory.
4. It is the contention of the assessee that the electric motor used in the pump portion is an integral component part of the pump set and is manufactured simultaneously alongwith the pump set. The motor loses its identity and is inseparable and unidentifiable. It is inbuilt in manufacture of power driven pump. These motors are different from the bare motor, as they differ in form and appearance and their manufacturing process is altogether different. They are not in marketable form and the bare electric motor cannot be used in the pump set. It is also pleaded that Rotors and Stators being component parts of Electric Motors of power driven pumps are not marketable for use in the manufactured electric motor ready for sale in the market as they are manufactured only for the purpose of pumps and not for any other use. The assessee has also relied on the judgment of the Tribunal as reported in 1984 (17) E.L.T. 431 (Tribunal), which is based on the clarification issued by Government of India, that motors are integral parts of power driven pumps. They also rely on the exception Notification No. 57/78, dated 1-3-1978, which exempts this item from levy of duty.
5. The ld. Collector (Appeals) has considered all these pleas and by a detailed and reasoned order upheld the assessee's contentions.
6. We have heard Shri A.T. Usman, ld. JDR and Shri D.G. Kama, ld.Consultant for the respondents.
7. We have carefully considered the submissions made by both the sides and have perused the grounds of appeal made by the revenue in the appeal and the contention of the assessee. There is no merits in this appeal on two grounds. In this first instance, the revenue has not adverted to the detailed findings of the ld. Collectors on the question of the item being not marketable and it becoming integral part of the power driven pump. Therefore, merely to make out a ground that captive consumption would not [absolve] from making payment of duty is not sufficient. The Revenue should in the first instance advert to the plea uphold that the electric motor used as an integral part of power driven pump is not marketable and not goods. As the Revenue has not made out any grounds on this aspect of the matter, the appeal is liable to be rejected solely on this ground alone. Further, the matter is also fully covered on merits in the assessee's favour as per their cited judgment Elmo Engineering Works v. Collector of Customs -1984 (17) E.L.T. 431 (Tribunal), which is based on Government of India's letter dated 4-2-1981. The revenue has not raised any grounds in this findings of the Collector as well.
8. Hence, the appeal is liable to be rejected and we order accordingly.
The cross appeal is in the nature of comments, which is also disposed off accordingly.
With due respect to learned Judicial Member, my views and orders are as follows : 9. I observe that the respondents had filed a classification list regarding electric motors but wanted to pay duty at the time of clearance of the pump. The Assistant Collector did not allow it holding that duty on the electric motors manufactured by the respondents was required to be paid before they are utilized for manufacture of monoblock pumps, since the electric motors used for captive consumption were in fully manufactured state was not denied by the party.
10. At the first appeal stage, the respondents maintained that duty was payable on motors only at the time of clearance of power driven pump(s) incorporating them but altered the tracks of their arguments before the Collector (Appeals) stating that manufacture of electric motor and power driven pump of which they formed a composite part, was taken up simultaneously and at any point of time it cannot be stated that electric motors are manufactured first and the power driven pump manufactured thereafter and they also drew attention towards the Department's instructions issued by the CCE, Baroda which had mentioned, inter alia that in respect of monoblock pumps, as the motor was an integral part of the entire set, the duty on electric motors and stators can be collected at the time of clearance of monoblock pump sets.
11. The Collector (Appeals) has taken note of the respondents' submissions with reference to the Tribunal's orders in the cases reported in 1987 (31) E.L.T. 589 and the Government of India's letter dated 4-2-1981 and observed that the electric motors used in the power driven pumps were different from other electric motors and therefore, it was reasonable to collect duty at the time of clearance of power driven pump.
12. At the Tribunal stage, the respondents have reiterated the submissions made before the Collector (Appeals) whereas the learned DR has drawn attention to the Assistant Collector's order and the procedure for paying duty on items used for captive consumption.
13. I have gone through the impugned order and the above submissions I find that in view of the amended Rules 9 and 49, an excisable item which is manufactured in a factory is required to be accounted for before being cleared for captive consumption and if dutiable the duty is also required to be paid at this stage that is before captive consumption unless and until such payment is deferred and the duty is allowed to be collected subsequently by virtue of some legal provision.
Thus for instance in the case of Cellulose Spin Yarn and Cotton Yarn in respect of which duty could be collected (later) along with duty on cotton fabrics in terms of Rule 49A. The respondents have not drawn attention to any Rule under which the payment of duty in the case of electric motors captively consumed in the manufacture of power driven pumps could be deferred till the time of clearance of the power driven pump themselves. They have referred to Baroda Collectorate Circular dated 1-4-1975. These instructions also show that entry in RG-1 is required to be made before these motors are used for captive consumption. It does not refer to any rate but allows the deferment of collection of duty to the stage of clearance of monoblock pump in the context of exemption Notification No. 83/72 on the ground that the extent of exemption could be determined only after knowing the value of the pump sets.
14. These instructions also show clearly that electric motors which are manufactured even in integrated factories can be of more than one types including those which can be coupled with the pumps. It does mention that where the motor is an integral part of monoblock pump, the entire pump set including motor is liable to duty which could be paid at the time of clearance of the pump. However, in the instant case, the A.C.has recorded that in the proceedings before him it was not denied that electric motors used for consumption were in fully manufactured condition before us and lost their identity only during such use.
15. In the pleadings before the Collector (Appeals), the respondents have claimed that electric motors were integral component manufactured simultaneously along with the pump set and were inseparable and unidentifiable. However, there was no explanation for reversal of the stand. At the Tribunal stage since the stand taken before the A.C. and the one before the Collector (Appeals) were diametrically opposite, the respondents were given time to file the process of manufacture and technical write-up. However, they have not done so.
16. It is well known that the electric motors are of various type and can be manufactured in more than one way. Again, there are more than one type of pumps including those with which fully manufactured motors are coupled within or without the factory (as apparent from the Circular of Collectorate of Baroda) and others in which the electric motor does not come into existence as a distinct commodity and an integrated process results in the manufacture of a single unit incorporating rotors and stators as inseparable parts which are not identifiable as a distinct unit, therefore, one single commodity namely pump set (as a whole) comes into existence (as claimed by the party) but in such a case, no duty was payable on electric motors which did not come into existence separately and the excise is payable only in respect of the final product which emerges as marketable commodity. But the respondents have failed to substantiate their contention in spite of an opportunity given by us.
17. The legal point raised by the Department is correct and in the absence of any rule corresponding to Rule 49A applicable to their commodity, the Collector (Appeals)'s finding does not rest on a sound footing. In view of the above position and particularly in the absence of any evidence to the effect that A.C. was wrong in respect of his finding that the electric motors were in fully manufactured state before use, such motors were required to be accounted for in RG-1 register and cleared on payment of duty whether for the purpose of removal outside the factory or for captive consumption. The Department's appeal is therefore, accepted.Dated: 24-6-1996 Sd/- (S.K. Bhatnagar) In view of difference of opinion between Hon'ble Member (Judicial) and the Vice President, the matter is referred to the Hon'ble President for reference to a third Member on the following point :- Whether in view of the observations and findings of Hon'ble Member 0) as given in Para 7 the appeal was required to be rejected or in view of the observations and findings of the Vice President as given in Para Nos. 13 to 17, the appeal is required to be accepted.
Sd/- Sd/-(S.L. Peeran) (S.K. Bhatnagar) Member (J) Vice President Dated: 25-6-1996 18. Heard Shri Y.R. Kilania, the learned Departmental Representative who submitted that he would support the reasoning for allowing the Departmental appeal as contained in order proposed by the Hon'ble Vice-President. The Respondents are not present but have sent written submissions. They have stated that they had already submitted the Chart of manufacture of electric motor captively used by their letter dated 8-2-1996. They have further submitted that there is no inconsistency in their stand that the duty was payable only at the time of clearance of power driven pump of which the electric motor utilised component parts.
Electric motor used in P.D. pumps is of the special design and is capable of being used only with that pump.
19. On a careful consideration of the submissions made, it is seen that the Hon'ble Member (Judicial) has pointed out that it was for the department to lead evidence to show that the item is marketable. In this context, it is useful to recall the observation of the Supreme Court in the case of J.K. Spinning and Weaving Mills Ltd. and Anr. v.Union of India and Ors., reported in 1987 (32) E.L.T. 234 (SC) regarding Rules 9 & 49 Central Excise Rules and their amendment retrospectively. The Supreme Court held even for levy duty on goods captively consumed the marketability thereof has necessarily to be established. Hon'ble Member (Judicial) has further found that the Tribunal decision in the case of Elmo Engineering Works v. Collector of Customs, reported in 1984 ECR 1089 based on Government of India's letter dated 4-2-1981 also supports the respondents case and the department has not rebutted the finding of the Commissioner (Appeals) based on the above decision. In the circumstances, one is inclined to concur with the order proposed by the Hon'ble Member (Judicial).
20. Thus, the order proposed by Member (Judicial) is concurred with.
Sd/-