TMI Blog1987 (3) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... ISCO as L-4 Licensee for TISCO including Modernisation Plant. Corollary to the orders contained in Annexure-13, the petitioner has prayed for a mandamus commanding the respondents to release 10 E.O.T. (Electric Overhead Travelling) cranes and restraining the respondents from realising the penalty, confiscation and excise duty. 2. The petitioner, pioneer in steel making in the country, is licensed manufacturer of a number of excisable goods. It had steel melting shops No. 1 and No. 2 (hereinafter called "SMS 1 and 2") with production capacity of 1.5 million tonnes of saleable steel. In 1980 or thereabout, the petitioner launched upon a Scheme of replacing the two steel melting shops by two 130 tonnes basic oxygen converters which would produce extra 1.1 million tonnes of crude steel per annum. This replacement was intended to increase the annual production of saleable steel by 190000 tonnes. Installation of a new bar forging machine was contemplated (later on, in fact, installed) to meet the exacting requirements of the Indian engineering industry. The Duplex process of production was 70 years old in SMS No. 1 and 55 years old in SMS No. 2. The Duplex process was replaced by bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its brochure that "the Duplex process was being consigned to its due place in steel making history enabling Tata Steel to enter the modern age of Oxygen tool making". Needs no mention that the due place of the Duplex process was the backyard of anonymity. Three cranes supplied by the Adityapur Machine Shop were used for erecting BOF Converters by 3 Mobile-Crane Method. In all ten such cranes were acquired by the petitioner. The bill for the ten cranes was to the tune of rupees two hundred thirty crores. 4. The Maintenance Shop of M/s. TISCO at Adityapur holds licence (independent of the Plant of the TISCO Steel Factory) authorising it to manufacture components, sub-assemblies and assemblies of equipments in Form L-4. The licence was issued originally in 1977 and was extended to manufacture of components, sub-assemblies and assemblies of equipments from time to time. 5. In June, 1982 the Deputy Controller of Accounts of TISCO requested the superintendent of Central Excise, TISCO Range, Jamshedpur that "they may be granted a licence to obtain without payment of the whole or part of the Central Excise duty leviable thereon on components, sub-assemblies and assemblings of equipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to quote two sentences from paragraph 6 of the Show Cause : "It may be noted that wordings used are 'please arrange to design, manufacture, assemble and supply'. It is no where mentioned in the order that the complete crane will be made in the Maintenance Shop at Adityapur". 6. The Collector, Central Excise heard the petitioner at length on several dates. The petitioner's stand not having found favour, the Collector passed the impugned order (Annexure-13). The petitioner did not choose to move up in appeal, but preferred to move this High Court in its writ jurisdiction. Rule having been issued on 23-8-1985, we do not think it will be right for us to send back the petitioner to pursue its statutory remedy by way of appeal. We have, therefore, heard learned counsel for the petitioner at length. 7. The core questions for consideration are : Whether the crane was assembled and manufactured at Adityapur Unit of the Tatas or was it manufactured in the factory of the petitioner. Secondly, whether the crane was utilised for maintenance of the existing plant of the petitioner or was it a part of a new plant in the Modernisation Project to augment for the purpose of excisable duty. Fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they had been completely assembled, the cranes would be put on "trial run", in the factory at Adityapur in the presence of CE(Mod) - (Chief Engineer Modernisation) and CEE's representatives, of all motions. Annexure-2 leaves no manner of doubt that the entire crane was assembled in the factory at Adityapur. That is what TISCO wanted. Ten such cranes were ordered and were supplied by them to the petitioner. It is another matter that the cranes when fitted in the plant of the petitioner worked on gantry, but it is well known that gantry is no part of a crane. It is something independent of a crane. I have not the least doubt that the whole crane was assembled at Adityapur. 11. Mr. Chatterji for the petitioner submitted that the cranes could not have been installed at Adityapur Unit and, therefore, no crane came into existence there. The submission, with great respect, is fallacious. If the whole thing was not assembled at Adityapur Unit, there could not have been a "trial run" and approval thereof. It is not the petitioner's case that there was no trial run nor any inspection of the crane at Adityapur. The very fact that the cranes were assembled and were supplied to the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther there was gantry or not. For aught one knows the cranes may have been tried and tested on gantries set up in the Machine Shop itself. It is, therefore, not possible to accept the contention advanced on behalf of the petitioner that no crane was assembled at the Adityapur Unit of the petitioner. After they had been assembled at Adityapur unit, they were removed to the petitioner's site. That could have been done only in knocked down condition. 14. Learned counsel for the petitioner placed reliance on a decision of the Supreme Court in Ram Singh and Sons Engineering Works v. Commissioner of Sales Tax, U.P. [1979] 43 STC 195 to establish that the erection of a crane is not complete until it is affixed to a gantry. Special reliance was placed upon the observations at page 202 where it was stated as Follows : "The 3-motion electrical overhead travelling crane comes into existence as a unit only when the component parts are fixed in position and erected at the side, but at that stage it becomes the property of the customer because it is permanently embedded in the land belonging to the customer. The result is that as soon as 3-motion electrical overhead travelling crane comes in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause without it the 3-motion electrical overhead travelling crane cannot operate. Mark the observations of their Lordships at page 202, quoted above, that the transaction is no different than one for fabrication and erection of an open godown or shed with asbestos or tin sheets fixed on columns. Their Lordships laid down that there could be no doubt that the contract was a contract for work and labour and not a contract for sale. That was the ration of that case. Their Lordships were not deciding what is crane and what is not so. Their Lordships were not deciding whether a crane is a crane or not until it is put on a gantry. A decision is only an authority for what it actually decides and not the logical extensions therefrom. In the Regional Manager and Another v. Pawan Kumar Dubey, AIR 1976 S.C. 1766 it was laid down that ratio decidendi is the rule deducible from the application of law to the facts and circumstances of a case and not some conclusion based upon facts which may appear to be similar. So also in C.I.T. Bihar, Patna v. Sheo Kumari Devi, 1986 BLJR 825. It is not necessary to multiply decisions on this aspect of the matter. I am clearly of the view that the case of Ram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to quote the relevant parts thereof. Purchase order dated 11-4-1983 in respect of purchase from Manubhai Engineers Pvt. Ltd., Calcutta reads as follows : "1.0 Design, manufacture, assembly, testing, packing and supply of 1 no. 5 Ton single girder EOT crane heavy wheels as per TISCO standard and group lubrication for wheels including all accessories, commissioning spares, tools and tackles consumable and operating supplies as per the enclosed Order Specification No. TSM/338 and as per general conditions for supply of plant, machinery and equipment (TSM/GC-2) (Copy already available with you.) Ex-works, Calcutta Rs. 2,55,500.00 (Rupees two lakhs fifty five thousand five hundred only). 2.0 BREAK-UP OF EX-WORKS PRICE The break-up of ex-works price indicated above are as follows : Amount (Rs.) Description (a 5-ton capacity single girder EOT crane ) 2,42,000.00 Commissioning spares (b) 4,500.00 Tools and tackles (c) Consumables and operating supplies (d) TOTAL : 6,000.00 3,000.00 2,55,500.00 3.0 PRICE BASIS 3.1 Even through the price stated in the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner's plant by railway. It is not difficult to presume that they were supplied in knocked down condition. In the face of the above documents, the petitioner hardly has any case worth contending that a crane is not a crane until it is affixed on a gantry and that no crane had been manufactured at Adityapur. The observations of the Supreme Court in the case of Ram Singh and Sons (supra) that a crane is chattel and not goods have hardly any relevance to the present situation. 20. Learned counsel for the petitioner submitted that the Collector was not justified in reading the works orders by the petitioner to the Growth Shop as repository of stipulation in a contract. As there was only one party, there could be no contract. I regret, this submission is fallacious. It is not a question of a contract being interpreted, but it only trying to appreciate the facts in proper perspective. We have to see what did the petitioner intend to buy. The works orders are pointer to the idea conveyed by the works orders. No one says that the works order was a contract nor were the contents thereof stipulations in a contract, but the wordings can certainly be read to appreciate what was intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor in regard to the item manufactured cannot be dissected as contended by learned counsel for the petitioner. The entire conclusions of the Collector show in unmistakable terms that complete crane was assembled at Adityapur and despatched to the petitioner's plant. That completes the submission on the first point urged on behalf of the petitioner. 23. The second limb of the submission on behalf of the petitioner was that the acquisition and induction of the cranes were only part of a programme of revamping the old plant and that it was not a new plant. This submission has only got to be stated to be rejected. It is obvious that a new plant had been set up. Previously the petitioner had steel melting shop no. 1 and no. 2 and they were producing steel by Duplex process. SMS nos. 1 and 2 disappeared. They were consigned to the log yard and were replaced by basic oxygen converters. A new bar forging machine was set up. All these were parts of a Modernisation Project. The modernisation was effected by petitioner's consultant M.N. Dastur and Company (P) Ltd. The modernisation programme was accomplished and was celebrated with great fanfare - and justifiably. The new project was locate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Adityapur Machine Shop which is a factory of the TISCO. It was utilised in the factory of the petitioner. Prima facie, therefore, the petitioner would be entitled to the benefit of the exemption. There are, however, two provisos to it. The first proviso is that in order to be entitled to the benefit of the exemption, the manufacturer was required to act in terms of Chapter X of the Central Excise Rules, 1944. The second proviso lays down that the benefit of the exemption will not be available where the goods manufactured is a complete machinery manufactured in a factory and is meant for production or processing any goods, even if the machinery manufactured was intended for the use in the same factory or in any other factory of the same manufacturer. 26. It was contended on behalf of the petitioner that the petitioner having fulfilled the requirements of the first proviso, the main exemption clause remained operative to the benefit of the petitioner. It was contended that the petitioner had observed the procedure set out in Chapter X of the Central Excise Rules, 1944. Our attention was drawn to Annexures-5 and 6 in support of this submission. Annexure-5 is a letter from Directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. 27. The Adityapur Maintenance Shop was manufacturing several items which could form components of machines used in the factory of the petitioner. Even before the Modernisation Project, the Adityapur Unit must be having a licence to manufacture such goods and the TISCO plants must be having licence to receive those goods free of duty. The remarkable aspect is that the petitioner did not give any inkling that what it was applying for was in respect of a crane. Components and assemblies were being manufactured at Adityapur Unit and the petitioner was indenting day in and day out. If the petitioner had disclosed that the components, sub-assemblies and assemblings were parts of a crane, things would have been different. The petitioner could then very well contend that it had made all the necessary declarations to bring out explicitly that it was going to indent components of a crane. Whether exemption could be granted on that basis or not would be the collector's concern. If the Collector granted the exemption even after that declaration, no remissness could have been found on the part of the petitioner. The petitioner, however, made no such declaration. The Superintendent of Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to hold that the cranes were part of the new production pattern. It is obvious, therefore, that they were meant for production and processing of goods. Without those cranes with increased weight bearing capacity, the process of augmenting steel production may not have been fulfilled. In that view of the matter, the second proviso to the exemption clearly stands in the way of the petitioner claiming the exemption. For the aforesaid reasons, I am clearly of the view that the petitioner cannot claim the benefit of the exemption notification (Annexure-4). 30. The next aspect of the matter is whether the steps for realisation of the excise duty were barred by time. Prior to 1980 excise duty was levied by the department on every item of goods produced before they left the factory premises. Since 1980 a self removal scheme was introduced. Commensurate with that scheme Section 11A(1) in the Central Excises and Salt Act, 1944 was enacted. With the introduction of the self removal scheme producers were free to remove goods by assessing themselves. The manufacturer is required to file a classification list. When the classification list is approved, the manufacturer is required to assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and wilful suppression of facts. The petitioner was not entitled to the benefit of the exemption notification. It is not open to the petitioner to take up the position that it could not have conceded what it was contesting, namely, that a crane had been manufactured. The facts are so obvious that the petitioner was required to declare it specially when the department and the assessee work on self assessment scheme. I have not the least doubt that the five-year rule must rule this case. The steps, therefore, for realisation of the duty are obviously within time. The stand of the petitioner in regard to the bar of limitation must be squarely rejected. 32. It only remains to consider whether the petitioner was liable to penalty and the order for confiscation and fine in lieu thereof is legal and justified. Rule 173Q (1)(a) and (d) provide that if any manufacturer removes any excisable goods in contravention of any of the provisions of these rules or contravenes any of the provisions of these rules with intent to evade payment of duty, then all such goods shall be liable to confiscation and the manufacturer shall be liable to pay penalty not exceeding three times the value of the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments themselves or by the manifested intentions of the parties, the relevant transaction is. They are not, under the Westminster doctrine or any other authority, bound to consider individually each separate step in a composite transaction intended to be carried through as a whole." Later again it was observed : "While the techniques of tax avoidance progress and are technically improved, the Courts are not obliged to stand still. Such immobility must result either in loss of tax, to the prejudice of other tax payers, or to Parliamentary congestion or (most likely) to both. To force the Courts to adopt, in relation to closely integrated situations, a step by step dissecting approach which the parties themselves may have negated, would be a denial rather than an affirmation of the true judicial process. In each case the facts must be established, and a legal analysis made : legislation cannot be required or even be desirable to enable the Courts to arrive at a conclusion which corresponds with the parties' own intentions." 36. I bow with respect to the observations of Chinnappa Reddy, J. in McDowell and Co. Ltd. v. Commercial Tax Officer 154 ITR 148 at page 160 which are as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l process may accord its approval to it." 37. A Full Bench of this Court of which I also was a party in Commissioner of Income-tax v. Sheo Kumari Devi [1986] 157 ITR 13, Sandhawalia, C.J. laid down that in India where tax evasion is rampant, the early Victorian approach that the taxing statutes must invariably be tilted in favour of the assessee has to be given a go-by. 38. In view of the law, discussed above, there is no scope for taking a liberal approach to the matter. The petitioner cannot take shelter under the dictum that it was only trying to so arrange its affairs that the excise duty on cranes was avoided. This was not a case of avoidance of duty. It was a clear case of acting with intent to evade duty. It is true that a citizen need not concede and give up his stand on any matter, but there are limitations to it. The petitioner cannot contend for a moment that it was bona fide believing that cranes were not definite commercial items. This was a case of evasion of duty. It requires a great deal of naivete to accept that the company did not know that the cranes were definite commercial items. It has itself been purchasing cranes from different producers and paying excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement and suppression of facts. It removed them without paying duty and thus contravened the provisions of the Excise Act and the Rules. This was done with an intent to evade payment of duty. 41. Large number of cases were cited at the Bar on behalf of the petitioner. This judgment will not be complete without referring to them. The first case cited on behalf of the petitioner was Garware Nylons Ltd. v. Union of India 1980 E.L.T. 249. This was a case where the question was whether nylon twine be considered as specific type of nylon yarn. Nylon yarn fell within Item 18. The revenue contended that nylon twine was specific item distinct from nylon yarn and, therefore, it fell within the mischief of Item No. 68. Their Lordships of the Bombay High Court held that there was no reason why nylon twine should be denied its rightful place and put in the residuary clause. This case has no application for the simple reason that the petitioner claimed that no goods had been delivered to it. Its contention is that there is no commercial item like crane. In my view, this decision can be of no help to the petitioner. 42. In Ashok Griha Udyog Kendra Pvt. Ltd., Kanpur v. Collector of Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X
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