1. The Revision Application dated 6th September, 1981 directed against Order No. V-2 (30) 1447/78/4072 dated 2-5-1981 passed by the Collector of Central Excise (Appeals), Bombay has been transferred to the Tribunal by the Government of India, for disposal as an appeal in terms of Section 35P(2) of the Central Excises and Salt Act, 1944.
2. The appellants manufacture Hoists and Cranes. They also manufacture Micro Speed Attachments which are supplied to customers only when ordered. Micro speed attachment consists of an electric motor and a gear box. It is stated that these are not integral parts but are simply coupled together so that the electric motor can be used along with the hoist for which it is ordered. The fact that the motor and gear box are bolted, does not bring them under Item 30. On 29th September, 1977, the Superintendent of Central Excise issued a show cause under Rule 10A in respect of the period 18th March, 76 to 31st October, 77 for a short levy/nonlevy of Rs. 15,936.12 P on the ground that noninclusion of the cost of micro speed attachment for determining assessable value of the motor under Tariff Item 30 has resulted in under assessment. Before the Assistant Collector, it was agreed that the electric motor and gear box are two different kinds of items which are bolted, coupled together and then attached to the hoist for speed reduction. He held that geared motors as a class are quite different from variable/vertical speed/dual or multispeed motors and even after coupling of the gear unit to the base induction motors, the essential characteristics of the base induction motors are not changed. As such the base motor and geared motor should fall under the same Tariff Item 30-CET. Further, in an integrated factory duty will be charged on the final product i.e.
geared motors. The duty was correctly demandable under Sub-rule (1) of Rule 10 and was confirmed. Since the appellants did not appear in person on the dates proposed, their appeal was decided on the basis of the records. Citing Mc Graw-Hill Dictionary of Scientific and Technical Terms, where a 'Gear Motor' is a motor combined with a set of speed reducing gears and BTU heading 85.01 (II) for electric motors which includes motors equipped with pulleys, gear or gear boxes or flexible shaft for operating hand tools, the Collector said it would be difficult to accept the contention that the product cleared is not a 'Gear Motor'. Since all sorts of motors are covered by CET item 30 and the subject motors are gear motors, he found no justification to interfere with the order appealed against.
3. In this appeal, it is urged that the contention that Rule 10 contains a time limit of six months, whereas the notice received on 21st November, 1977 is for the period 18-3-1976 to 31-10-1977 part of which is beyond this and is timebarred has not been dealt with. They were also not given proper opportunity for personal hearing by the Collector and the order is bad in law. He has not appreciated that the motor is not fitted with micro speed attachment but it is a part of micro speed attachment. Further, an intermediate product cannot be held to be excisable goods vide Everready Flash Light Co. v. Union of India- Civil Misc. Writ No. 5522/70. The micro speed attachment is not something which can readily be bought and sold and is only used in the hoist as an accessory. While the motor is classifiable rightly under T.I. 30, the remaining parts of the hoist are classifiable under T.I.4. Shri Gupta referred to Item 30 as it stood on 31-7-1976 and as amended by the Finance Act of 1982 when Explanation II. "This item includes motors equipped with gears or gear boxes", was added.
Moreover, Tariff Advice No. 84/81, dated 31-8-1981 dealing with Valuation expressly states that the value of the gear mechanism in the case of a hoist need not be included in the value of electric motor for assessment of duty on electric motor, as 'geared motor' cannot be said to have come into existence in an independent and identifiable manner.
The Assistant Collector appears to have relied on an earlier Tariff Advice 14/76, dated 26-3-1976 clarifying that proforma credit would be available for manufacturers of geared motors receiving duty paid electric motors from outside. The present motors were not 'geared motors' as the gear was not integral to the motor. Shri Gupta pleaded that the department is bound by its clarifications given to the trade.
He relied on Guest Keen Williams v. Union of India (1980 E.L.T. 6 (Bom), Union of India v. Anglo Afghan (68 AIR S.C. 718) and Nav Gujarat Paper Industries v. Superintendent, Central Excise (1977 E.L.T. 67).
Since geared motors were specifically included only in 1982, this cannot be applied retrospectively. In any case, no demand can be made for the period before 6-5-1977 as it is time barred.
5. Shri Lakshmikumaran supported the action of the lower authorities.
According to Section 2(f), 'manufacture' applied to the complete product. When the gear is fitted to the motor, a "Motor, all sorts" comes into existence in terms of Item 30. He relied on the cases of Hindustan Gen. Electric Corpn. v. Superintendent of Central Excise, Ranchi (AIR 1966 Patna 248) and Union of India v. Bombay Tyre Industry Ltd., wherein the intention in Section 2(f) to remove any ambiguity as regards the precise stage when manufacture is completed, by including all processes incidental to completion of a manufactured product in the definition of "manufacture", was clarified. As regards the short levy, a Classification List was filed separately for each of the three, namely, motor, gear and hoist; and no indication was given that the motor and gear were being fitted together before clearance. Hence the demand beyond six months was justified. The Tariff Advice 14/76 was in favour of the action by the department and any clarifications or advice in 1981 and 1982 to the contrary, cannot take away the earlier mens rea in incorrectly describing and clearing the goods in question. The appellants were under SRP, and Production Based Control came into operation only in 1979, so the officers could not know the manner of wrong clearance. As regards Explanation III, added in 1982, it was only to avoid discrimination between integrated and nonintegrated factories.
Shri Lakshmikumaran conceded that if the gears, cleared separately and not with the motors, were being assessed as Motors, under Tariff Item 30, this was wrong and they were assessable under T.I. 68 only. In the present case, however, as this was not so, the appeal should be rejected.
6. The point for decision here is whether there was suppression of facts or wilful misstatement on the part of the appellants, which would justify invoking the longer period of limitation beyond six months.
Enough material has been placed before us to show that the department was itself not quite sure as to addition of the value of gears to motors for purposes of assessment during the relevant time. The appellant could not then be blamed if the gear was not treated as part of the motor. The concerned classification Lists approving the classification of the products and the relevant RT 12's on which the assessment was initially done, are not before us. However, under Rule 173-I it was incumbent on the officer approving the classification to make such enquiries as necessary before doing so. Periodic checks and inspection were also prescribed in the interest of revenue. Shri Gupta has produced the gate passes for motors but not for gears. These were cleared under separate gate passes, even though in fact they were coupled together and bolted and cleared together. At the same time, the show cause notice mentions Rule 10A, implying that no assessment ever took place and the Assistant Collector invoked Rule 10, without any allegation or finding whatsoever as to why the duty shortlevied is being demanded beyond the period of six months. The show cause notice as well as the appellate order are conspicuously silent on the question of limitation. In our view, the facts do not justify applying a longer period of limitation of 5 years in this case. We, therefore, set aside the demand so far as it relates to a period beyond six months of the date of the show cause notice i.e. 21-11-1977. On the question of classification of the goods, we agree with the learned Sr. Departmental Representative that the motor fitted with the gear mechanism would be more appropriately covered by the description of Item 30-CET namely, Electric Motors, all sorts. We accordingly uphold the order of assessment under Item 30-CET of the Motor fitted with the gear mechanism.