1990 (12) TMI 209 - AT - Central Excise

Summary

Issues Involved:

1. Whether the order of the Collector traverses beyond the allegations made in the show cause notice.
2. Whether M/s. I.G.E. is the manufacturer of the complete X-ray system.
3. Whether M/s. Elpro is liable to pay duty on the entire X-ray equipment.
4. Whether M/s. I.G.E. is a related person/agent of M/s. Elpro.
5. Whether X-ray equipment is immovable property and thus not excisable.
6. Whether assembling the bought-out items at the customer's site amounts to manufacture.

Summary:

1. Order Traversing Beyond Show Cause Notice:

The Collector's order against M/s. I.G.E. was found to traverse beyond the show cause notice, which only proposed a penalty u/s 9(2) for conspiracy and abetment in evading central excise duty. The Collector's findings that M/s. I.G.E. is the manufacturer and liable to pay duty on the entire X-ray system were not part of the original allegations. Hence, the order against M/s. I.G.E. was set aside.

2. Manufacturer of Complete X-ray System:

The Collector's finding that M/s. I.G.E. is the manufacturer of the complete X-ray system was based on the fact that M/s. I.G.E. assembles the components/parts at the customer's site, which brings into existence a new product, the X-ray machine. This assembly amounts to manufacture as per the Supreme Court's judgment in Narne Tulaman Mfgrs. (P) Ltd. v. CCE, where assembling parts to create a new product known to the market amounts to manufacture.

3. Duty on Entire X-ray Equipment:

M/s. Elpro's liability to pay duty on the entire X-ray equipment depends on whether M/s. I.G.E. is a related person/agent and whether the X-ray equipment is considered goods or immovable property. The Collector's order holding M/s. Elpro liable was remanded for fresh consideration.

4. Related Person/Agent:

The Collector's conclusion that M/s. I.G.E. is a related person of M/s. Elpro was based on the shareholding of General Electric Co. in M/s. Elpro. However, the relationship between M/s. Elpro, M/s. I.G.E., and General Electric Co. was not clearly established. The definition of a related person u/s 4(4)(c) requires mutual interest in the business of each other, which was not sufficiently evidenced. The Collector was directed to re-examine this issue.

5. Immovable Property:

The X-ray equipment was argued to be immovable property as it is fastened to the earth. However, it was determined that the equipment, which can be dismantled and shifted, is not immovable property. The components are fixed to the earth for beneficial enjoyment but do not become part of the earth permanently.

6. Assembly as Manufacture:

The assembly of bought-out items at the customer's site was held to amount to manufacture, as it brings into existence a new product, the X-ray machine, known to the market and excise law. This aligns with the Supreme Court's ruling in Narne Tulaman Mfgrs. (P) Ltd. v. CCE.

Conclusion:

The appeal of M/s. Elpro International was remanded to the Collector for fresh consideration on the issues of related person and agent, and whether the X-ray equipment is excisable. The appeal filed by M/s. I.G.E. (India) Ltd. was allowed, setting aside the Collector's order against them.