BPL India Ltd. Vs. Co-Commisioner of Central Excise  Insc 255 (7 May 2002)
Hegde & Shivaraj V. Patil Shivaraj V. Patil, J.
appellant imported 100 kits of VTR with colour monitors in disassembled
condition. These items were described in invoices and bills of entry as
"sets of assembly, sub-assembly and other hardware items for assembly of
complete VTR and colour monitors". The said goods were subjected to
countervailing duty @ 8% ad valorem falling under tariff item No. 68. During the
period 2.12.1981 to 26.2.1982, the appellant started assembling these goods
into VTRs and colour monitors at their factory at Palghat and cleared the sets
without payment of duty, without intimation and without observing the Central
Superintendent of Central Excise, Range-II, Palghat, while perusing advice
notes of the factory observed that certain VTRs and colour monitors were
manufactured and cleared by the appellant during the period June, 1982 to
August, 1982 and issued letter dated 12.8.1982 asking the appellant to furnish
details of the sets cleared and to explain why duty should not be demanded on
such sets and why action should not be taken for contravention of Central
the appellant did not furnish the required information. Thereafter, the
Superintendent issued a show cause notice dated 6.12.1982 asking the appellant
why a duty of Rs. 5,58,000/- due on 56 sets of VTRs and colour monitors should
not be demanded under Section 11-A of the Act and another show cause notice
dated 2.4.1983 was issued for Rs. 1,78,500/- due on 17 sets of VTRs and colour
monitors. The appellant in response gave replies by letters dated 31.1.1983 and
9.6.1983, the Central Excise Officers searched the factory of the appellant and
on 14.6.1983 the Offices of the Directorate of Anti-Evasion searched the
factory premises on 20, K.H.
Road, Bangalore. 20 Nos. of VTRs were detained
which were reported to have been brought there from the factory of the appellant
at Palghat. The Manager was not able to produce any document to show that the
Central Excise Duty had been paid on these sets. In subsequent investigations,
it was found that the appellants had manufactured and cleared VTRs and colour
monitors without disclosing details thereof to the Department and without
observing the Central Excise formalities. Evidence to show actual price at
which VTRs and colour monitors were sold to independent wholesale buyers was
also collected during the course of investigation. One more notice was issued
on 20.2.1986 by the Collector, Central Excise, in continuation of show cause
notices dated 6.12.1982 and 2.4.1983 issued earlier giving the detailed facts
asking the appellant why Central Excise duty of Rs. 9,43,884.38 on 100 VTRs and
100 colour monitors cleared without payment of duty should not be demanded. In
reply dated 7.4.1986 given on behalf of the appellant, it was stated that two
show cause notices were already issued and replies were furnished and request
was made to dispose of the earlier show cause notices before deciding the last
one. A further reply dated 14.7.1986 was furnished by the appellants.
stand of the appellant was that assembly of components imported in Semi Knocked
Down (SKD) condition into VTRs/colour monitors did not amount to manufacture
for the purpose of levy of excise duty.
to them, the imported components in SKD condition were only put together by
no manufacturing activity or use of power was involved in the process; the show
cause notice dated 2.4.1983 was hit by limitation in respect of the clearances
effected prior to 3.10.1982. Extended period of limitation under Section 11-A
was not available to the Revenue. The appellant also took up the stand that the
valuation adopted was not correct.
without completing the proceedings pursuant to the two earlier show cause
notices issued, the Collector could not have issued the third notice and
proceeded against the appellant in confirming the demand for Rs. 9,43,884.38
and directing the appellant to pay the said duty and imposing a penalty of Rs. 3,00,000/-.
Collector, after considering all aspects, by his detailed order dated 24.7.1987
rejected all the contentions raised by the appellant and confirmed the demand.
The appeal filed by the appellant before the Tribunal (CEGAT) challenging the
said order of the Collector dated 24.7.1987 was dismissed on 6.3.1997.
application filed by the appellant under Section 35-F of the Act for reference
was also rejected on 1.9.1998. Hence, this appeal.
us, Mr. Raju Ramachandran, learned senior counsel urged that (1) fastening
imported disassembled VTRs with colour monitors did not amount to manufacture
within the meaning of Section 2(f) of Central Excise & Salt Act, 1944; the
fasteners had also been imported alongwith disassembled VTRs and colour
monitors; VTRs with colour monitors were not liable for payment of excise duty
as the countervailing duty applicable to the same at the time of import under
tariff item had been paid; (2) the demand of duty was grossly barred by
limitation; the Commissioner and Assistant Commissioner could not issue
separate show cause notices; the very fact of Assistant Collector issuing
notices earlier clearly shows that the Department was fully aware of the import
of the disassembled VTRs alongwith the colour monitors and assembling of the
same and selling them; there is no averment in the show cause notice of any
willful suppression of any material fact or fraud or misrepresentation. Hence,
the extended period of limitation could not be invoked.
contra, the learned Attorney General supported the impugned order stating that
the Collector as well as the Tribunal have considered all aspects. In the light
of the contentions raised by the appellants, a finding of fact is recorded
looking to the process involved that the appellant manufactured VTRs with colour
monitors and cleared them without intimation to excise authorities and without
payment of duty. He pointed out that all was not well with the appellant in
replying to the show cause notices. They were trying to avoid or delay in
giving reply to show cause notices; when they themselves did not intimate as to
when they manufactured the goods and when they cleared without completing the
Central Excise formalities, they lacked bona fides. The third notice issued by
the Collector on 20.2.1986 was issued only in continuation of the earlier two
notices; merely because earlier notices were issued by the Assistant
Commissioner, it could not be said that the Collector had no jurisdiction to
continue the proceedings and pass adjudicatory order.
have carefully considered the submissions made by the learned counsel for the
parties. According to the appellant the imported kits of VTR and colour monitors
in SKD condition were only assembled by using fasteners and as such no
manufacturing activity was involved in bringing out VTRs/colour monitors so as
to attract the excise duty as demanded. But the contention of the Revenue is to
Court in Union of India vs. Delhi Cloth and General Mills [1977 (1) ELT (J199)]
defined manufacture thus "The word 'Manufacture' used as a verb is
generally understood to mean as 'bringing into existence a new substance' and
does not mean merely 'to produce some change in a substance'." Following
passage from an American Judgment, quoted in Permanent Edition of Words and
Phrases Vol. 26, reads thus: - "Manufacture implies a change but every
change is not manufacture and yet every change of an article is the result of
treatment, labour and manipulation.
something more is necessary and there must be transformation, a new and
different article must emerge having a distinctive name, character or
use." It is well settled that a question as to when a manufacture of
product takes place within the meaning of Section 2(f) of the Act is a mixed
question of law and fact. The nature and the extent of processes may vary from
case to case. When a change takes place and a new and distinct article comes
into existence known to the consumers and the commercial community as a
commercial product, which can be no longer regarded as the original commodity,
such a change constitutes a process of manufacture.
not disputed that the imported kits of components of VTRs and colour monitors
in SKD condition were items falling under Item 68 for levy of countervailing
duty. It is clear from the material placed on record that by the process
undertaken by the appellant a change is brought about facilitating the utility
of the product for which they were meant. In other words, pursuant to the
process, a transformation has taken place at the hands of the technical experts
or skilled persons and not by laymen, which made the product to have a distinct
character and use. Such product of VTR/colour monitor as finished product was
classified under Item 37BB.
Collector as well as the Tribunal recorded a finding of fact based on the
material placed on record that the assembly of imported kits of components into
VTRs/colour monitors by using the fasteners constituted the process of
manufacture and rightly so in our opinion. We have no good reason to take a
contrary view on this finding of fact. The Tribunal in the impugned order has
recorded thus: - "It is seen that the appellant imported component part in
SKD condition and the finished product was VCR with colour monitor. The VCR and
the colour monitor were cleared together. Classifn. of the VTR is u/i 68 of the
after undergoing the process of manufacture for the assembly, the product at
the time of clearance from the factory was classifiable u/i 37BB.
a transformation in the character of the imported goods took place and the new
product is emerged.
therefore, seen that the product kit of VCR at the time of import was trailable
and notionally was classified u/i 68 of the erstwhile tariff and after assembly
and at the time of clearance the resultant product was classified u/item 37BB
and the product therefore, can be removed only on payment of duty.
the kits for colour monitor is also classifiable under item 68 of the erstwhile
tariff whereas after assembly, the product at the time of clearance was
classifiable u/i 33A or 37BB when sold in combination with VCR. The invoices of
the appellant bearing 245s and 246 and 171 and 172 mentioned in the SCN showed
the basis of the value adopted in the case of VCR and colour monitor." The
contention advanced on behalf of the appellant, that once countervailing duty
was paid by them on the same items they were not liable to pay the duty again
on the VTRs/colour monitors, was rejected by the Tribunal relying on the
decision of this Court in Hyderabad [1989 (2) ECR 129 (SC)]. Para 3 of the said judgment reads: - "3. The
appellant's contention before the Tribunal was that it was only preparing a
part and that part is dutiable as a separate part. The appellant, however, did
the work of assembling. As a result of the work of the appellant a new product
known in the market and known under the excise item "weighbridge" comes
into being. The appellant will become a manufacturer of that product and as
such liable to duty.
is precisely what the Tribunal found on the facts of the case. The appellant
seems to have been obsessed by the idea that as a part of machine is liable to
duty then the whole end product should not be dutiable as separate excise
goods. That is mistake, a part may be goods as known in the excise laws and may
be dutiable. The appellant in this case claims to have manufactured only the
indicator system is a separate part and a duty had been paid on it and if the
rules so provide then the appellant may be entitled to abatement under the
rules. But if the end product is a separate product which comes into being as a
result of the endeavour and activity of the appellant then the appellant must
be held to have manufactured the said item. When parts and the end product are
separately dutiable both are taxable." This being the position, in our
view, the Tribunal was right in its conclusion that the appellant was liable to
pay duty on the end product. The decisions cited before us by the learned
counsel for the appellant in support of his stand were considered by the
Tribunal and rightly distinguished on facts. We do not think it necessary to
consider them again.
Collector as well as the Tribunal on detailed examination of facts and looking
to the conduct of the appellant in delaying to give reply to the show cause
notices and not giving necessary intimation to the Department before clearing
the products manufactured by them, have held that the longer period of
limitation was available. In this regard the Collector in his order, in para
11, has stated thus: - "11. The stand taken by the assessee vice their
reply dated 11.2.84 in response to the SCN dt. 2.4.83 was that the clearances effected
prior to 3.10.82 would be hit by time bar, and the basis of value adopted by
the Supdnt. was not correct. I would have accepted the first objection provided
M/s BPL had produced any evidence to show that they had declared to the dept.
either by letter or through the documents (CL returns to be furnished by the assessee
every month (like RT 12/GP) the details of manufacture/clearance. In this
connection, I want to make it clear beyond any shadow of doubt that, an
intimation regarding the total no. of kits imported by M/s. BPL could not be
deemed to be an intimation in this regard as the liability to pay duty arises
only after the manufacture is complete and clearance takes place.
M/s. BPL have not produced any evidence to show that they had furnished the
details of removal to the Supdnt. in time even in spite of specific request
made vide OC No. 2786/82 dt. 17.9.82, M/s. BPL have no right to claim that the
demand notice dt. 2.4.83 is barred by limitation." Agreeing with the
finding of the Collector on the question of limitation the Tribunal also in para
13 of the judgment recorded thus: - "13. The next point of the appellant
is that longer period of limitation is not invokable in this case. It is seen
that the appellant having manufactured the product in question and removed the
same without any intimation to the dept.
clearly goes to show that their action was with intent to evade payment of
duty. There cannot be any bonafide belief on the part of the appellant in this
regard. In these circumstances the contention of the appellant that the removal
of the goods without payment of duty was not with intent to evade payment of
duty cannot be accepted.
the duty demanded by invoking the longer period of limitation is in accordance
with law." Under these circumstances the contention advanced on behalf of
the appellant on the question of limitation is untenable having regard to facts
and circumstances of the case.
contention, that the Collector could not have issued one more notice on the
same set of facts when the proceeding initiated pursuant to the show cause
notices issued by the Superintendent earlier were not completed, is equally
untenable. The notice issued by the Collector subsequent to the issuance of
notices by the Superintendent was only in continuation of the earlier two
notices, which fact is evident from the notice itself. Further even issue of
notice by the Superintendent earlier could not take away the jurisdiction and
authority of the Collector in issuing a notice and passing the order of
adjudication. The Tribunal was right in rejecting this contention also.
we find no merit in this appeal. Hence it is dismissed. No costs.