1. M/s. Air Conditioning Corporation, New Delhi has filed a Revision Application dated 27-1-1981 against the order-in-appeal No. 389/Cal of 1979 dated 31-8-79 passed by the Appellate Collector of Central Excise, Calcutta.
2. The appellants are manufacturing amongst other things Cooling Towers which prior to 1-3-75 when the Tariff Item 68 was introduced, was non-excisable. The cooling tower in question was a device to cool water and oil from high temperature to approximately in the Wet Bulb Temperature of the atmospheric air. The Cooling Tower consists of its body, fan blades etc. and for the purpose of making it a complete unit, electric motors are fitted into it before these were cleared from the factory. The appellants had contended that the blade assemblies fitted with the Cooling Towers were 'parts' of the complete unit and, therefore, these parts could not be separately classified under Tariff Item No. 33(2). The appellants say that they declared these items under Sr. No. 5 of the Form-I in the Classification List which was duly approved by the Central Excise officers. From 1-3-75 such goods were assessed under Item 68 and appropriate rate of duty was paid thereon.
The appellants further state that assuming that these blade assemblies are excisable as electric fans under Item 33(2) of the Central Excise Tariff, the demand for duty was time-barred as there was no surreptitious or clandestine removal thereof to warrant application of Rule 9(2) of the Central Excise Rules. The finding of the Appellate Collector that an industrial fan for the purpose of Item 33(2) of the Central Excise Tariff includes the impeller, its shafts and its bearings, the casing, pedestal, and also the motor is not correct since such components must be in assembled condition to be assessable as industrial fans.
3. Shri Gupta for the appellants forcefully argued that the demand for Central Excise duty of Rs. 17,075.40 is time-barred since the Central Excise Officers were fully aware of the components used in the manufacture of the Cooling Towers and had approved the classification list. He cited the following decisions of the Supreme Court and Calcutta High Courts as well as the decisions of the Tribunal :N.B. Sanjana v. Elphinstone Spinning & Weaving Mills, - 1978 E.L.T. 399.
2. Sulekh Ram & Sons. v. Union of India and Ors., 1978 E.L.T. 525 (Del. H.C.)Union Carbide v. Assistant Collector of Central Excise, 1975 E.L.T. 180.Indian Iron & Steel Co., Cal. v. Collector of Central Excise, Calcutta-1984 4. It has been well settled now that Rule 9(2) of Central Excise Rules would be attracted only if there was a 'clandestine' removal of excisable goods from the factory. The burden of proving, that the removal was surreptitious or clandestine, is on the Excise authorities.
5. The Departmental Representative has contended that the demand for the Central Excise duty was not time-barred. He referred to the classification list in which the goods have been described as "Atmospheric forced and induced draft cooling towers and their components." He argued that declaration of these items as "components" of cooling towers amounted to mis-declaration. When questioned he admitted that in case of mis-statement of this type Rule 10 of the Central Excise Rules would be more appropriate rather than in Rule 9(2). He, however, stated that since in this case there has been no assessment, the Assistant Collector of Central Excise rightly invoked Rule 9(2) for demanding the duty referred to above. The Bench notes that neither in the show cause notice nor in the order of the Assistant Collector or the Appellate Collector is there any suggestion that the appellants cleared the goods in a clandestine manner. The Supreme Court decision in Sanjana case (Supra) is clear that for invoking the Rule 9(2) of the Central Excise Rules, there must be clandestine removal.
Repeatedly Shri Rakesh Bhatia, the learned SDR for the respondent was asked how he considered that the goods were cleared by the appellants in a clandestine or surreptitious manner. All that he stated was that the appellants had in their classification list merely described the goods as "components" of cooling towers and not the Electric fans used therein. We do not accept this argument. We do not think that it was absolutely necessary for the appellants to have made a mention of the fans in the cooling towers. The Excise Officer who approved the classification list was expected to do so only after necessary enquiry and after satisfying himself about the components which had gone therein. It may not be possible in every case to give the names of all the individual components. The Excise Officer should take proper care and caution while approving the classification list so that a situation like the present does not arise. Having approved the classification list, it would not be proper for the department after considerable lapse of time to turn round and put the blame on the assessee. Even if we accept Shri Bhatia's argument that there was mis-statement, then also the rule that will be applicable would be Rule 10 read with Rule 173J under which the period of limitation was one year. On the material available we are not satisfied that appellants can be charged with having cleared the goods in a surreptitious or clandestine manner. Rule 9(2) would, therefore, not be attracted in the case.
6. One more question advanced in the arguments was whether Rule 10(a) would be applicable in the case. The show cause notice has specifically referred to Rule 9(2). Whether Rule 10(a) would be applicable in the case would depends on the facts and circumstances of the case. For that we do not think that at this stage we should enter into an enquiry to find out whether the appellants had filed RT returns and whether there was assessment in the case. In fact this aspect of the matter has not been considered at any earlier stage. While it is not a question of law, it is necessary to go into the facts afresh to determine its applicability or otherwise. We are not inclined to enter into this aspect of the case at this stage. The demand for Central Excise duty relates to the period February 1972 to July 1974. The show cause notice demanding a duty for this period was issued on 1st September, 1975 i.e.
after expiry of one year period. The demand was, therefore, clearly time-barred. It is, therefore, not necessary to go into the merits of the classification of the goods in question. The order of the Appellate Collector is set aside and the appeal is allowed.