Case: M/S. Escorts Ltd Vs. Commnr. Of Central Excise, Faridabad

excise duty due thereon, provided the final product is chargeable to duty. As per this notification, M/s TAFE have paid duty on all the goods falling under Chapter Sub-Heading 87.08, used in the manufacture of Tractors of engine capacity less than 1800cc which are exempted, except the sub-assemblies manufactured and used in the exempted tractors. Therefore, it appears that M/s TAFE are liable to pay duty on all the sub-assemblies manufactured (as per Annexure-I and II), and used in the Tractors which are exempt for the period from April, 1997 to May, 1998.5. M/s. TAFE have not brought to the notice of the manufacture of sub-assemblies to the Department with the intention to evade payment of excise duty. They have willfully suppressed the fact of the manufacture of the sub-assemblies from the knowledge of the Department and cleared the same without payment of duty for use in the manufacture of Tractors, which are exempted. It can be seen from the process of manufacture that the making of the independent, sub-assemblies are inevitable in the Tractor build. But, M/s TAFE chose to declare only the parts constituting these sub-assemblies as factory finished items and not sub-assembly. Whether these factory finished items and bought out, items, when assembled will form a sub-assembly has not been declared by them. M/s. TAFE have chosen not to declare the sub-assemblies willfully in order to evade payment of duty.” 21. In the reply to the show cause notice, the respondents stated that they had never sold transmission assemblies in the market and that their price list does not carry a list price for this item. The only removal ever made was during the warranty period of one tractor and this one removal does not justify the fact that transmission assemblies have a market. It was further stated that had the respondents known that transmission assemblies were excisable, they would have claimed exemption as the finished product was exempt. Further, Transmission Assembly is only recognized as an Assembly line intermediate product and not as a product in itself which is separately identifiable as in the case of other Assemblies such as axel shaft, engine, gear parts, instrument panels, etc. The difference in this case is that vide an order dated 30.4.2004 the authorities found in favour of the respondents on merits holding that there was neither manufacture nor marketability of the Transmission Assemblies in question. This was confirmed in appeal by CESTAT by the impugned judgment dated 12.11.2009. 22. In view of what is stated in Civil Appeal No.6561 of 2004, the part of the order in original and the CESTAT order on merits have to be set aside. However, for the self-same reasons as are contained in Civil Appeal No.6561 of 2004, we hold that the extended period of limitation is not available as we are satisfied that the reply extracted above of the respondent shows that the respondent bona fide believed that Transmission Assemblies were not dutiable. In the circumstances, the appeals of the revenue shall stand dismissed on this ground. C.A. No.457 of 2006 23. The facts in this appeal are as follows. The period involved is April, 1996 to May, 1998 and the show cause notice is dated 1.5.2001. As the impugned judgment in this case by CESTAT merely follows the Escorts case i.e. Civil Appeal No.6561 of 2004, we hold that the finding of the authorities on merits is correct. However, in this case also the extended period of limitation is not available to the revenue. 24. In the order dated 26.12.2001, the Commissioner stated:- “In the present inquiry which was undertaken by the proper officer, it was found that the transmission assembly or chassis assembly which is classifiable under Sub-heading 87.08 of the 1st Schedule to the Central Excise Act was not declared by the noticee in the classification list. Therefore, their plea that they have declared the chassis thereof does not cover transmission assembly or chassis assembly. They themselves in their reply have admitted that the chassis is the main frame that supports the body and the engine has to be so framed as to receive, hold and fasten an engine and other components of the tractors (Para 14 of the reply). Thus, transmission assembly is not the chassis and since the noticee have failed to declare the transmission assembly/ chassis assembly, the suppression of fact is clear.The intention to evade duty is clear from the statement of Shri P.C. Kale dated 12.04.2001 as the noticee was knowing that duty is required to be paid on the goods which go into the assembly of the tractor of engine capacity less than 1800 CC. As such tractors were exempt from duty during the relevant period. Knowing this fact very well and not declaring the transmission assembly or chassis assembly in the classification declaration and clearing such transmission assembly/ chassis assembly without payment of duty without recording their production in the statutory records and without filing the RT-12 returns for the production and clearance of such transmission assembly/ chassis assembly clearly established that this was done with an intention to evade payment of duty.” 25. We find that in successive declarations made by the assessee in this case starting from 16.3.1995 the assessee had declared not merely the tractor but the chassis therefor. The assessee bonafide believed that the declaration of the chassis would suffice as according to them Transmission Assemblies were not taxable goods. The intention to evade duty is according to the Commissioner made out from a statement made by Shri P.C. Kale dated 12.4.2001. It is pointed out by learned counsel appearing on behalf of the appellant that in the memorandum of appeal filed against the order in original, Shri P.C. Kale was never in the employment of the appellant during the relevant period as he joined the appellant only in July, 2000. Apart from this, it is also pointed out that the appellant is a public sector company governed by a Board of Directors consisting of IAS Officers.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]9. Although the definition ofis an inclusive one, it is clear that materials, commodities and articles spoken of in the definition take colour from one another. In order to beit is clear that they should be known to the market as materials, commodities and articles that are capable of being sold.The facts in the present case show that Transmission Assemblies of tractors are commercially known products as has been pointed out above. The fact that not a single sale of such Assembly has been made by the appellants is irrelevant. This being the case, we are of the view that the Transmission Assembly of the tractor on the facts before us is clearly an intermediate product which is a distinct product commercially known to the market as such. On this ground therefore, the appellants are not liable to succeed.Added to this, the appellants have also clearly stated that not a single Transmission Assembly has in fact been sold by them in the market. On these facts, we are of the opinion that the appellants would fall within the test laid down in two judgments of this Court.Judged by this test, it is clear that on facts in the present case there was no suppression on the part of the appellants nor was there any willful attempt to evade duty. As stated by the appellant, the appellant has been manufacturing tractors from 1965 onwards. There has never been any change in the manufacturing process. In the year 1994-95, IC engines were stated by the department to contain Transmission Assemblies, which were dutiable. On receiving a reply from the appellant, the department did not levy any excise duty on such Transmission Assemblies. The show-cause notice itself stated that the issue of manufacture and captive consumption of Transmission Assemblies for tractors is the same as that for IC engines. These facts, coupled with the fact that not a single Transmission Assembly of tractors manufactured by the appellant had been sold makes it clear that there was no suppression or any intent to evade excise duty in the present case. We feel that the show cause notice needs to be quashed on this ground alone. Accordingly, the appeal is allowed, and the judgment dated 27.5.2004 passed by CESTAT is set aside.In view of what is stated in Civil Appeal No.6561 of 2004, the part of the order in original and the CESTAT order on merits have to be set aside. However, for the self-same reasons as are contained in Civil Appeal No.6561 of 2004, we hold that the extended period of limitation is not available as we are satisfied that the reply extracted above of the respondent shows that the respondent bona fide believed that Transmission Assemblies were not dutiable. In the circumstances, the appeals of the revenue shall stand dismissed on this ground.The facts in this appeal are as follows. The period involved is April, 1996 to May, 1998 and the show cause notice is dated 1.5.2001. As the impugned judgment in this case by CESTAT merely follows the Escorts case i.e. Civil Appeal No.6561 of 2004, we hold that the finding of the authorities on merits is correct. However, in this case also the extended period of limitation is not available to theintention to evade duty is clear from the statement of Shri P.C. Kale dated 12.04.2001 as the noticee was knowing that duty is required to be paid on the goods which go into the assembly of the tractor of engine capacity less than 1800 CC. As such tractors were exempt from duty during the relevant period. Knowing this fact very well and not declaring the transmission assembly or chassis assembly in the classification declaration and clearing such transmission assembly/ chassis assembly without payment of duty without recording their production in the statutory records and without filing the RT-12 returns for the production and clearance of such transmission assembly/ chassis assembly clearly established that this was done with an intention to evade payment of duty.We find that in successive declarations made by the assessee in this case starting from 16.3.1995 the assessee had declared not merely the tractor but the chassis therefor. The assessee bonafide believed that the declaration of the chassis would suffice as according to them Transmission Assemblies were not taxable goods. The intention to evade duty is according to the Commissioner made out from a statement made by Shri P.C. Kale dated 12.4.2001. It is pointed out by learned counsel appearing on behalf of the appellant that in the memorandum of appeal filed against the order in original, Shri P.C. Kale was never in the employment of the appellant during the relevant period as he joined the appellant only in July, 2000. Apart from this, it is also pointed out that the appellant is a public sector company governed by a Board of Directors consisting of IAS Officers.