1.This a revision petition filed before the Central Government which on transfer is being treated as an appeal.
2. The appellant has manufactured at his site at Chibramau Cold Storage, Farrukhabad, diffusers and condensers which are parts of refrigerating and air-conditioning machinery. The appellants did not pay duty for their products. The fact was discovered by the authorities on an inspection of the appellants' Cold Storage on 24-3-1976. The party had manufactured three diffusers each of 2500' length of 1" diametre pipe, three condensers each of 12 pipes of 20" X 2" diameter, and 5 condensers each of 12 pipes of 20" length x 2" diameter. These items had been installed in their cold storage as parts of refrigerating and air-conditioning machinery. A show cause notice was issued demanding duty besides imposition of penalty. The appellants contended that the parts did not attract duty under Tariff Item No.29A(3). The appellants were only arranging the pipes and diffusers in a zig-zag way and that the parts did not form part of refrigerating and air-conditioning machinery. He also relied on the judgment of the Allahabad High Court-Mother India Refrigerating Industries v.Superintendent, Central Excise (1980 E.L.T. 600) in support of his contentions, The Assistant Collector upheld the demand for duty and imposed a penalty of Rs. 250/- for contravention of the provisions of the Act. The appellant preferred an appeal and the Appellate Collector upheld the order of lower authority and rejected the appeal.
3. Shri B.N. Bhattacharya, Advocate for the appellants, argued that the appellants were not manufacturing or offering for sale parts of any refrigerating and air-conditioning machinery and were therefore not liable to pay duty. In support of his arguments, he relied on a judgment of the Allahabad High Court in Messrs U.P. Cold Storage, Farrukhabad v. Superintendent of Central Excise, Farrukhabad and Ors.
(reported as Mother India Refrigerating Industries Pvt. Ltd. in 1980 E.L.T. p. 600).
4. Shri V. Lakshmikumaran, the SDR, argued that the parts manufactured were condensers and diffusers which would amount to parts of air-conditioning and refrigerating machinery. He also submitted that the appellants had removed the goods without any intimation to the authorities or filing the necessary classification lists. In other words, he pointed out that the provisions of Rule 9 with Rule 49 of the Central Excise Rules, 1944 would be attracted. Even if the goods were captively utilised by the appellants, they would be dutiable. On the question of applicability of the Tariff Item 29(A)(3), he pointed out that the latest ruling of the Gujarat High Court reported in the 1984 E.L.T. p. 333 (Anil Ice Factory v. Union of India and Ors.) supported the view of the department, that cooling coils and condensers would squarely fall within the description of Item 29(AX3) of the Central Excise Tariff. He emphasised that this judgment has considered various citations including the ruling of the Hon'ble Allahabad High Court, and being the latest decision should be applicable to the present facts. He also cited the case decided by Punjab & Haryana High Court in the matter of Frick India Ltd. v. Union of India.
5. We have considered all the relevant arguments advanced by the party in order to come to careful consideration of the respective submissions. On the question of excisability of the product, the latest pronouncement of the Hon'ble Gujarat High Court in 1984 E.L.T. 333 is against the appellants. The Hon'ble Gujarat High Court after noting and dissenting from the Allahabad High Court judgment and its own earlier decision has held that the parts of refrigerating and air-conditioning appliances and machinery would attract duty under Item 29A(3).
6. In this connection, it is also pointed out by Shri Lakshmikumaran that a special leave petition against the decision of Hon'ble Allahabad High Court in Mother India Refrigerating Industries Pvt. Lld. has been admitted by the Supreme Court. We also find that after rendering of the decision of the Hon'ble Allahabad High Court, Rule 9 and Rule 49 of the Central Excise Rules have been amended by the Notification of the Government of India in the Ministry of Finance (Department of Revenue) G.S.R. 74(E), dated 20-2-1982. In view of the change in the circumstances and in view of the reasoning set out in the latest judgment, we are inclined to support and follow the reasoning set out in 1984 E.L.T. 333. The learned counsel for the appellants argued that the appellants' factory is situated within the jurisdiction of the Hon'ble Allahabad High Court and that the decision of the Gujarat High Court should not be applied to their factory. He also filed written statements on 22-3-1984 stating that the Tribunal has to follow the ruling of the High Court in the territory of which the cause of action has arisen in preference to the rulings of other High Courts on the same point.
7. We have given our anxious thought on these arguments. The rulings cited by the learned counsel for the appellants in his written submission of 1976 AIR Andhra Pradesh-p. 84 (Andhra Cement Co. v.Government of Andhra Pradesh and Ors.) and 1973 1 Supreme Court Cases 446 (Shri Baradakanta Mishra, Ex-Commissioner of Endowments v. Shri Bhimsen Dixit) have no application there in the cause of action wholly or part arose within the jurisdiction of the respective High Courts exercising jurisdiction. As already observed, the issue involved is one relating to rate of duty and value of the goods for the purpose of assessment. Further, we have already pointed out the circumstances which lead us to apply the ratio of the latest decision. Hence we are unable to accept the contentions of the learned counsel for the appellants.
8. Even considering the matter on the basis of Tariff Entry, the petitioner's contentions cannot be approved. Tariff 29A reads as follows : "29A. Refrigerating and Air-conditioring appliances and Machinery, all sorts, and parts thereof : 1. Refrigerators and other refrigerating appliances which 20% ad are ordinarily sold or offered for sale as ready assemb- valorem. led units, such as ice makers, bottle coolers, display cabinets and water coolers.
2. Air-conditioners and other air-conditioning appliances, 20% ad which are ordinarily sold or offered for sale as ready valorem.
assembled units, including package type air-conditioners and evaporative type of coolers.
3. Parts of refrigerating and air-conditioning appliances 30% ad and machinery, all sorts. valorem.
Item 3 contemplates parts of refrigerating and air-conditioning appliances and macbincy. The appellants had admittedly manufactured the parts intended for refrigeration and air-conditioning appliances and has installed them in their plant. The concept of sale envisaged under Sub-clauses 1 and 2 would not be applicable in respect of Item 3. Even otherwise, Rule 9 has been amended and excisable goods manufactured in any place utilised as such should be deemed to have been removed.
Admittedly, no intimation was given to the concerned authorities before the removal of the goods. The appellants cannot be heard to say that they did not manufacture any refrigerating or air-conditioning parts in the commercial sense. The mere fact that there was no sale as condensers, diffusers or compressors will not help the appellants.
9. The learned counsel for the appellants relied on the decision in Order No. B-l 10/84, Ravi Dughdhalaya, Ahmedabad v. Collector of Central Excise & Customs, Bombay, in which this Bench followed the decision in the Mother India Refrigerating Industries Pvt. Ltd. of the Hon'ble Allahabad High Court. The decision rendered by the Hon'ble Gujarat High Court in 1984 E.L.T. p. 333 cited (supra) has been reported subsequent to that decision. Even otherwise, this court is inclined to follow the later ruling. Further, on facts it is seen that the product concerned in the decision B-110/84 consisted of a secondhand air-compressor with copper tubes soldered in a zig-zag way and connected to the wooden box with a compressor by a milk vendor of small means. Though the department critically considered it as part of the refrigerating machinery, this Bench, on a considerntion of all the facts placed, upheld the case of the assessee. That decision does not apply to the present facts where the appellants have manufactured diffusers and condensers. Mr. Bhattacharya also urged that the amendment of Rule 9 retrospectively would be invalid. He placed reliance on AIR 1970 S.C. p. 1950. But as rightly pointed out by Shri Lakshmikumaran, the amendment of Rule 9 and Rule 49 were approved by Parliament. The retrospective effect of the amendment was pursuant to the Finance Bill of 1982. The Parliament being the rule making authority has unrestricted powers to emend the Rule.
10 The removal was without any information to the department and hence the infringement of Rule 9 has been made out. The show cause notice has been issued on 4-7-1976 prior to the amendment of Rule 10. The restricted shorter period of limitation of six months would not apply.
11 Though the appellants have contravened the provisions of the statute, the circumstances under which the contravention took place, especially in view of the unsettled state of affairs with conflicting decisions should be adverted to This situation definitely calls for interference in respect of the personal penalty Hence while confirming the demand for duty. the penalty imposed is set aside. The order of the lower authorities is modified accordingly and the appeal is allowed in part.