TMI Blog2015 (5) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xistence which is known to the commercial community as such and, therefore, there was neither manufacture nor marketability of the same. In the reply, however, various statements were made which, in fact, amount to admissions, that Transmission Assembly of a tractor is, in fact, known to the market as such. These admissions are set out hereinbelow: 16. It is submitted that transmission assemblies are in fact interchangeable. The Transmission Assembly can be used in both dutiable as well as exempt tractors, for example in Model No.325 (exempt tractor) and Model No.335 (dutiable tractor). Therefore, it serves as a common input for both tractors. Therefore, in terms of provisions of Rule 57CC MODVAT credit is admissible on the common inputs which form part of transmission assemblies in turn used in the manufacture of both types of Tractors. 47.1. The department has relied upon the case of M/s International Tractors Ltd., Hoshiarpur who are supplying transmission assemblies. (a) The Notice contends that M/s. Mahindra Mahindra have not purchased any transmission assemblies for use in tractors from any other unit. Further, they have not supplied or transferred any transmissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansmission assemblies are one identifiable commercial product as already discussed. I also note that the concerned persons of the noticee company themselves have admitted that transmission assemblies do emerge as identifiable goods. Statements of Sh. K.K. Kachroo, Manager Excise, Shri Vinod Ahuja, Plant Head, Sh. Ramesh Kumar Khurana, Chief Manager Production all admit this fact. Even otherwise manufacturing of the tractors in the noticee's factory cannot be accepted as such a continuous process in which raw materials are fed in the machine at one end and final product emerges at another. Only in such a case, can it be believed that there is no independent identifiable intermediate stage of goods. The procedure as adopted by the noticee is basically assembly of various parts components and of course all these parts and accessories which are manufactured by the noticee in their factory as identifiable goods are excisable themselves. Therefore, the emergence of I.C. Engines is excisable and so also the emergence of the transmission assembly is also excisable. In fact in the case of Pratap Rajashtan Copper Foils Vs. CCE -1999(109) ELT 288 (T) it was held that duty is payable on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions of both the sides. The Central Excise duty is leviable on goods manufactured in India. Manufacture as per the judgment of the Supreme Court in the case of Union of India vs. Delhi Cloth and General Mills, 1977 (1) ELT (J 199) implies a change .... and there must be transformation; a new and different article must emerge having a distinctive name, character or use. The Supreme Court, after referring to various judgments on the concept of the manufacture, has laid down a two fold test for deciding whether the process is that of manufacture in Union of India vs. J. G. Glass, 1998 (97) ELT 5(S.C.) as follows, First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; secondly, whether the commodity which was already in existence will serve no purpose but for the said purpose. We find that this two fold tests laid down by the Supreme Court is satisfied in respect of the transmission assembly coming into existence during the course of manufacture of tractors by the Appellants. After assembly of various parts and components a new and different article known as transmissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required. It is only for the period upto August 1996 that would be in dispute. Even for this period, he contends that ultimately the figures would show that it was revenue neutral in that MODVAT credit reversed for this period would amount to 1.71 crores, the duty demand being approximately 2.43 crores out of a total of 9.66 crores for this period of 8 months. He also argued that the duty demand was absurd in that the Transmission Assembly of TAFE which is said to be the same as that of the petitioner s was only 13,000 rupees per piece as opposed to the highly inflated figure of ₹ 53,790/-. If the figure of ₹ 13,000/- is to be taken, it is clear that the reversal of MODVAT credit would amount to much more than the duty demand itself. He further argued that in any case since there was no fraud or willful suppression of facts, invoking the extended period of limitation was not in order and that in any case the show cause notice being beyond one year of the stated period would have to be quashed on this ground alone. 6. Shri Jaideep Gupta, learned senior counsel for the revenue contended that the Transmission Assembly was very much excisable goods known to the market a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modities and articles spoken of in the definition take colour from one another. In order to be goods it is clear that they should be known to the market as materials, commodities and articles that are capable of being sold. 10. In the basic judgment which has been referred to in every excise case for conceptual clarity, namely, Union of India v. Delhi Cloth. General Mills Co. Ltd., 1963 Suppl. 1 SCR 586, this Court held that for excise duty to be chargeable under the constitutional entry read with Section 3 of the Central Excise and Salt Act, two pre-requisites are necessary. First, there must be manufacture which is understood to mean the bringing into existence of a new substance. And secondly, the word goods necessarily means that such manufacture must bring into existence a new substance known to the market as such which brings in the concept of marketability in addition to manufacture. A large number of judgments have explained what is meant by marketability in this context. In A.P. State Electricity Board v. Collector of Central Excise, Hyderabad, (1994) 2 SCC 428, this Court referred to a large number of previous judgments. Firstly, it referred to Union v. Delhi C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The fact that the goods are not in fact marketed is of no relevance. So long as the goods are marketable, they are goods for the purposes of Section 3. It is also not necessary that the goods in question should be generally available in the market. Even if the goods are available from only one source or from a specified market, it makes no difference so long as they are available for purchasers. Now, in the appeals before us, the fact that in Kerala these poles are manufactured by independent contractors who sell them to Kerala State Electricity Board itself shows that such poles do have a market. Even if there is only one purchaser of these articles, it must still be said that there is a market for these articles. The marketability of articles does not depend upon the number of purchasers nor is the market confined to the territorial limits of this country. The appellant's own case before the excise authorities and the CEGAT was that these poles are manufactured by independent contractors from whom it purchased them. This plea itself - though not pressed before us - is adequate to demolish the case of the appellant. In our opinion, therefore, the conclusion arrived at by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCE, Hyderabad [(1994) 2 SCC 428 : JT (1994) 1 SC 545] , one of us (B.P. Jeevan Reddy, J.) speaking for the Bench succinctly stated the law thus at pages 549 and 550: Marketability is an essential ingredient in order to be dutiable under the Schedule to the Act . The marketability is thus essentially a question of fact to be decided in the facts of each case. There can be no generalisation. The fact that the goods are not in fact marketed is of no relevance. So long as the goods were marketable, they are goods for the purposes of Section 3. It is not also necessary that the goods in question should be generally available in the market. Even if the goods are available from only one source or from a specified market, it makes no difference so long as they are available for purchasers . The marketability of articles does not depend upon the number of purchasers nor is the market confined to the territorial limits of this country. (emphasis supplied) Marketability is a decisive test for dutiability. It only means saleable , or suitable for sale . It need not be in fact marketed . The article should be capable of being sold or being sold, to consumers in the market, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (145) E.L.T. 274. In this judgment the question that arose for decision was whether the plastic body of electro mosquito repellent was excisable goods. This Court held: 7 ..The germane question is whether it has marketability. The plastic body is being manufactured to suit the requirements of the EMR of the respondents and is not available in the market for being bought and sold. It is not a standardised item or goods known and generally dealt with in the market. It is being manufactured by the respondents for its captive consumption. It is not a product known in the market with any commercial name. 9. It may be noticed that in the cases referred to in the passage, quoted above, the reasons for holding the articles 'not marketable' are different, however they are not exhaustive. It is difficult to lay down a precise test to determine marketability of articles. Marketability of goods has certain attributes. The essence of marketability is neither in the form nor in the shape or condition in which the manufactured articles are to be found, it is the commercial identity of the articles known to the market for being bought and sold. The fact that the product in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated: 20.2 It is submitted that the noticees have been manufacturing tractors right from 1965 onwards till date. The manufacturing process undertaken by the noticees has been made known to the Department innumerable number of times. Consequent1y the proposal to invoke the extended period of limitation in the present case is incorrect and the same is liable to be set aside. 20.3 The Noticee points out that just like the department raised the issue with regard to the IC engines in the year 1994-95, similarly the department is raising the issue in regard to the transmission assembly by the present Show Cause Notice. Therefore the dept. cannot allege any suppression or fraud on the part of Noticee. 20.4 However, that is not to say that there has been any contumacious conduct or an intent to evade duty on the part of the noticees. In regard to the transmission assemblies which arise on the assembly line, if they are used in the dutiable tractors, they would be exempt under Captive Consumption Exemption Notification No.67/95-CE dated 16.3.95. 20.5 In regard to transmission assembly going into the exempted tractor, the department has now raised the issue that they are dutiab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as done in 1995. 22. That in fact, the Show Cause Notice itself terms the issue of manufacture and captive consumption of transmission assemblies for tractors is the same as that for I.C. Engines. However, knowing fully well that Transmission Assembly comes into existence at the intermediate stage, the department never raised the issue. This implies that in the present proceedings, assuming without admitting duty is payable on the transmission assembly, the same was not being paid due to a bona fide error. The same belief was entertained on the part of the Noticees as well as the Department during the relevant period that transmission assemblies going into the exempted tractor do not attract duty. 17. 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. In Padmini Products v. Collector of Central Excise, Bangalore, 1989 (43) E.L.T. 195, this Court held: 8. Shri V. Lakshmi Kumaran, learned counsel for the appellant drew our attention to the observations of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word wilful , preceding the words misstatement or suppression of facts which means with intent to evade duty.The next set of words contravention of any of the provisions of this Act or Rules are again qualified by the immediately following words with intent to evade payment of duty . Therefore, there cannot be suppression or misstatement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11-A. Misstatement of fact must be wilful. 13. Factual position goes to show that the Revenue relied on the Circulars dated 23-5-1997 and 19-12-1997. The Circular dated 6-1-1998 is the one on which the appellant places reliance. Undisputedly, view expressed by CEGAT in Continental Foundation Joint Venture case [Continental Foundation Joint Venture v. CCE, (2002) 150 ELT 216 (Tri-Del)] was held to be not correct in a subsequent larger Bench judgment. It is, therefore, clear that there was scope for entertaining doubt about the view to be tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowed, and the judgment dated 27.5.2004 passed by CESTAT is set aside. Civil Appeal Nos.9469-9470 of 2010 20. This case has similar facts. We are concerned with the period 1.4.1997 to 31.5.1998. The show cause notice in this case was issued on 1.5.2002, in which the extended period of limitation was invoked as follows:- M/s. TAFE have filed the declaration under Rule 173B of Central Excise Rules, 1944, during the year 2000-2001, for the manufacture of product viz., Transmission Assembly falling under Chapter Sub-heading No.8708.00, and cleared the said product on payment of duty under Invoice No.1120969 dated 21.6.2000. Never before in the past M/s. TAFE have declared this product along with other factory finished products for which duty was paid by them. Hence, necessary verification was conducted in order to know whether any such sub-assemblies were manufactured and cleared by the assessee for use in the exempted tractors. 4. M/s. TAFE have manufactured the sub-assemblies as listed in the Annexure-I and Annexure-II for the tractors Model No. TAFE 25 and TAFE 30 inside the factory for captive use in the production of tractors. The details of process of manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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