TMI Blog1991 (1) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... ipments are tailor-made/custom built for customers viz. P T, Indian Telephone Industries, Bharat Heavy Electricals Limited, Thermal Power Stations, Naval Projects etc. 3. Appellant company manufactures power plants etc. They are custom built items which are manufactured according to the prescribed specifications of respective customers purchase order in hand/orders in pipe line (against those tenders which have already been opened). Hence, the items manufactured by the company are usable only by the particular customer for whom they are manufactured and do not have any alternative user and as such are incapable of being sold to any other party. 4. Each machine/equipment is allotted a separate serial number for purposes of identification of the customer for whom it is being manufactured and for monitoring its completion. After the manufacture is completed, test call letters are issued to the concerned customers, inspectors. 5. On 27-9-1984, the Central Excise Officers of Ghaziabad intercepted the truck hired by the Appellant carrying three wooden boxes and one small wooden case containing one set of 48V, 200 Amps Power Plant bearing S. No. 2935,2510 2728 which were duly cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the achievement of projected targets of production and turnover. Similarly, clearances shown on GPIs dated 2nd July 1984 were also the Spillover of 30th June 1984 and were deemed to be manufactured and despatched during the half year ending 30th June 1984 and these could therefore, be shown in the performance results of the company. Since all these items had been manufactured these were ought to be included in the total turnover as the delay was on account of minor technical reasons like, delay in clearing the same by customers inspecting and testing staff. It was however, asserted that the goods seized on the truck as stated above had paid proper duty on GP-1 No. 54 dated 30-6-1984. Similarly, proper duty had also been paid on other goods listed in the Annexure to the show cause notice which were covered by the gate passes Nos. 55 56 both dated 30-6-1984 and 78 79 both dated 2-7-1984. It was submitted that the Central Excise Department has not adduced even an evidence to the contrary and in support of their allegations. In the absence of the evidence, it was entirely unwarranted to assume that the goods had been cleared without payment of duty. 10. As regards three power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain necessary clarification, appellants had to approach the actual users through the Purchasing Authority. Ultimately the user conveyed his readiness to accept the offered equipments vide their letter dated 3-9-1984. Thereafter, testing authorities carried out testing on 20-9-1984 and 21-9-1984 and issued their test report on 22-9-1984. After giving the finishing touches and carrying out the packing work, the appellants despatched these machines on 27-9-1984 when the departmental officers intercepted them in transit. It will thus, be seen that although, the excise gate pass was made on 30-6-1984, the machines were physically lying in the factory till 27-9-1984. Full documentary evidence in support of the above submission was produced before the lower authorities and again the same is submitted hereto. II. The power plants/equipments seized in the factory: These power plants were serial numbered as 3083,3085 and 3086 and they were lying in the factory s inspection shop and were seized on the ground that they were not accounted in the RG-1 register. It is submitted that these units had not reached the stage of recording in the RG-1 register since the customers inspectors conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Machines covered under Gate Pass Nos. 78 and 79 both dated 2-7-1984 vide S. Nos. 7 to 18 of the chart Annexure-A; These machines consist of 40 Nos. Compressor Drier units supplied to the different exchanges of P T Department against the specific order received from the Asstt. Director General, Ministry of Communication, Sanchar Bhawan, New Delhi. The critical parts and sub-assembly for these units were imported from United Kingdom in April, 1984. The bill of entry and invoices of foreign supplier s would conclusively prove that the imported components could make only 40 Nos. compressor drier units and not more. Besides, these compressor driers are usable exclusively by the P T department, for keeping the moisture level of their underground telegraph cables within the permissible limits and there is no other user in the country for these compressor driers. The manufacture of these 40 units was completed in June 1984 and the formal test call for inspection was issued to the customer s testing authorities on 22-6-1984. The testing authorities inspected the units in two lots of 30 and 10 Nos. each. It was found that the first lot of 30 Nos. was not meeting customer s specifications ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regards the machine and equipments seized from the factory the goods were in completely manufactured stage and therefore were required to be entered in RG-1 but had not been so entered. Hence the violation is clear. 18. Further in view of their own admissions it is evident that the records have not been properly maintained and the Central Excise formalities have not been fully followed. 19. As regards tape recorder the appellants had denied before the adjudicating authority that they had manufactured the goods and emphasised that they had merely imported the items and then sold them. 20. From the submissions now made by the learned counsel it is apparent that their reply to show cause notice and submission during the course of proceedings before the Collector were incorrect and the items had indeed been manufactured in the factory. 21. The appellants are now claiming that they had merely assembled the imported components. But assembling of components also leads to manufacture. Hence it was the department s contention that the tape-recorder had been manufactured in the factory and this fact was required to be declared correctly and the RG1 enteries in respect thereof was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al violations were involved in respect of the goods seized in transit as well as the machines seized in the factory and added that the tape recorder was only assembled and not manufactured. 29. We have considered the submissions of both the sides. 30. We find that all the goods in question can be conveniently grouped under three headings, indicated by the Ld. Counsel. 1. Goods seized from the truck while in transit: In respect of these goods it is observed that admittedly the gate pass was dated 30-6-1984 but the goods were actually transported on 27-9-1984. These facts are not in dispute. The legal position that a gate pass is valid only for the date of issue is also not in dispute. Hence it is obvious that the gate pass dated 30-6-1984 was not valid for transport of the goods on 27-9-1984 and to that extent there was admittedly a violation of the rules. The real question before us therefore is as to whether it is merely a case of mistake (serious or otherwise) committed wittingly or unwittingly or it is a case of deliberate violation of the rules with the intention to evade duty. In this respect it is observed that the goods admittedly consisted of one set of 44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination of the correct RG-1 stage as the goods are required to be entered only when such a stage has been reached. However both the parties have not been able to show that any RG-1 stage has been notified by the board or the Collector. In these circumstances it becomes necessary to look to mainly to two aspects (i) the evidence of completion of manufacture if any and (ii) the conditions of the contract if any. As far as the completion is concerned the appellants have stated that some minor jobs were further required to be carried out and this has not been shown to be incorrect or even denied by the department. Further the appellants have drawn our attention to the contract and to the mandatory clause of inspection included in it. Under the circumstances it cannot be stated that the appellants did not deliberately enter the goods in the RG-1 to evade duty and the matter could appear to be more in the nature of difference of opinion between the appellant and the department regarding the point of time at which entries were required to be made in the RG-1 i.e. RG-1 stage. In view of the fact that the learned counsel has shown us the contract and the mandatory condition of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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