1. The questions arising for decision in this Appeal by M/s. Hyderabad Race Club, Hyderabad, against order dated 31-12-81 passed by Central Board of Excise and Customs are whether the Totaliser system installed by the appellants in their premises at Hyderabad is liable to central excise duty, if so, its quantum and the period for which it should be made and the legality of show cause notice dated 3-1-1978 which has led to the present demand.
It might be stated that Item No. 9 of Notification No. 51/70-C.E. dated 1-3-1970, as amended by subsequent notifications, specifies Totalisers as one of the office machines and apparatus liable to duty under Tariff Item 33-D of Central Excise Tariff. During arguments it was felt that the Item specifies Totalisers and not Totalizators or Totalizator system and that three might be different. On this doubt being expressed by the Bench, Shri M. Chandrasekharan, learned Counsel for the appellants, stated that this was not one of the grounds he urged against the impugned order. We, therefore, do not examine this question.
3. The present demand is the outcome of visit dated 21-7-77 by the Superintendent (Prev.) to the appellants' premises. The Superintendent saw the Control Panel Boards installed in the premises, namely, Quinella control Panel Boards, Forest control panel boards, Win and place control panel board and Win and place control panel Board (for Rs. 50 tickets). The Panchnama made on the same date by the Supdt.
Central Excise contains a description of these boards and inter alia states that in the opinion of the Supdt. the boards and the punching machines are different parts of Totalizator (Totaliser) and they are dutiable under Central Excise Tariff and that they are said to have been assembled by the appellants in the years 1974 and 1975. The Panchnama further recites that the Supdt. seized the control panel boards with relays etc. and recording panel boards with counters etc.
It is significant that the Panchnama does not refer to ticket issuing machines. This mention becomes necessary because earlier on 19-7-76 the Assistant Collector had visited the appellants' premises and seen ticket issuing machines installed therein which had been cleared by the manufacturer without payment of central excise duty. The central excise duty on these machines, it is claimed by the appellants and not disputed by the other party, had been paid by the appellants in 1976 itself on demand to that effect being raised by the Assistant Collector. After usual investigation, notice dated 3-1-1978 was served on the appellants calling upon them to show cause why penalties be not imposed for breach of various rules of Central Excise Rules, 1944 (hereinafter called Rules), the seized goods be not confiscated and central excise duty be not demanded under Rule 9(2) for goods held to have been removed for home consumption without payment of duty. The appellants filed reply dated 22-1-78 reiterating their earlier contention in another letter dated 27-7-77 that panel boards would not fall under definition of Totalizator, that panel boards had been fabricated by them at their own premises. Earlier, on 19-7-76 the Assistant Collector of Central Excise, Hyderabad, Mr. Prasad and the Superintendent Mr. M.A. Basa had visited the appellants' premises and seen the ticket issuing machines and the panel boards and had demanded duty on ticket issuing machines which had been paid. At that time there was no mention of panel boards being subject to central excise duty.
The same Supdt. Mr. Basa had again visited the premises on 18-7-77, called for certain information and made seizures. It was further urged that during earlier visit on 19-7-76 the demand of duty under Items 8 and 9 on ticket issuing machines and Totalisers was made and duty collected. The same having been done earlier, the panel boards could not be termed as totaliser. It was submitted that some items of expenditure deserve exclusion from assessable value. The Collector of Central Excise, Hyderabad, after granting hearing to the appellants and following the usual procedure negated the appellants' plea, demanded duty on Totalizator and ordered its release on redemption fine of Rs. 2 lakhs. He also imposed a penalty of Rs. one lakh under Rule 173-Q of the Rules for non-declaration. In appeal, the Board of Excise and Customs by order dated 3.1-12-81 partly allowed the appeal by ordering the exclusion from the value of the system the value of civil work and generator motor, in addition to the deduction of the cost of paper rolls and tickets ordered by the Collector of Central Excise. The redemption fine in lieu of confiscation was reduced from Rs. 2 lakhs to Rs. 10,000 and penalty of Rs. one lakh was remitted in full. Aggrieved by the decision, the appellants have filed appeal to the Tribunal.
4. Before us Shri N.N. Reddy, Secretary of the appellant, has filed an affidavit explaining the functions of the system in question. This is pursuant to direction of the Bench.
5. At the hearing of the appeal Shri M. Chandrasekharan argued that the Totalizator system was erected on the appellants' premises from components which had either paid duty or in respect of which there was presumption of duty having been paid. The only components fabricated by the appellants were panel boards which were not by themselves liable to duty under Tariff Item 33-D. The erection of the system was as a result of civil work and a lot of cabling and wiring. It was thus permanently fixed to earth and could not be called goods. It was also urged in respect of panel boards that they bad not been cleared or removed from the place of fabrication, i.e. manufacture and, therefore, no liability for duty arose. That earlier on 19-7-76 the Central Excise officers had visited the appellants' premises when the system was fully installed and demand for duty was made only in respect of the ticket issuing machines. Later on, -the Central Excise authorities could not turn round and demand duty on panel boards, including the value of the ticket issuing machines in the value of Totalizator system. The demand was thus timebarred. The show cause notice did not allege any fraud, collusion, misstatement against the appellants and, therefore, the demand could not be beyond a period of six months and if the demand was restricted to this period, the whole demand of duty against the appellants was time-barred. In support of his arguments Shri Chandrasekharan relied on the following decisions :Indian Record Manufacturing Company Ltd. v. Collector of Central Excise, CalcuttaMotilal and Company, Thane v. Collector of Central Excise, Bombay (1984 (15) E.L.T. 157.Raymond Woollen Mills Ltd. v. Collector of Central Excise, Bombay (1984 (15) E.L.T. 243.Ganga Spinning and Weaving Mills Ludhiana v. Collector of Central Excise, ChandigarhG.D. Industrial Engineering, Faridabad, v. Collector of Customs and Central Excise. ChandigarhRavindra Steel Ltd., Nagpur v. Collector of Central Excise, NagpurTata Yodogwa Ltd. v. Assistant Collector of Central Excise, Jamshedpur and Ors.Sriram Pistons and Rings Ltd. Ghaziabad v. Collector of Central Excise, Meerut 6. On behalf of the respondent Shri H.L. Verma argued that a new article Totalizator system had come into existence as a result of assembly of ticket issuing machines and other components which was different from the components which had gone into the assembly of the system. The Collector was, therefore, justified in demanding duty on the system. As the appellants had not obtained a licence and had not declared the fact of manufacture of the system to the excise authorities, the demand was not time-barred and invoking the higher time-limit of five years was fully justified. He strongly defended the orders passed by the lower authorities.
7. We have carefully considered the arguments advanced by the parties.
We will first deal with the question whether as a result of erection work goods came into existence. The Collector of Central Excise-the man on the spot who had opportunity to himself examine the system-in his order inter alia (para 10 of the order) observes as follows : "I do not agree that the cost of civil works and the cost of the machines like the generator and other machines in the system will not be liable to be included in the assessable value. It is difficult to see why they should not be, because the totalisor or totalizator cannot work would not have come into being as a complete integral item without the civil works and the generator. Without the civil work the different components would not have been assembled and without the generator the completed totalizator cannot work or perform its work." In dealing with another context the Collector's observations are material for decision of the question whether the system is 'goods'.
The observations are extracted below : "This argument is refused by the fact that this adjudicating authority has held that the panels with all their adjuncts like ticket issuing machines and counters etc., form a complete totalizator having been built and constructed as such totalizator for the first time by Hyderabad Race Club from the different parts like ticket machines, panels, cables, fittings, generator erection." The above observation leaves no doubt that without the civil work the completed Totalizator could not work or perform its work. This would show that the system is permanently fixed to earth through civil works.
Besides the above, though the board did not specifically examine this question as to the system being 'goods', from para 15 of its order it is observed that in arriving at the value of the system for the purposes of levy of duty it allowed deduction for the value of civil works. This would further lend support to the appellants' argument that without civil works the system could not have been erected and civil works are an integral part of the system and that the system is permanently fixed to earth through civil works.
8. The above apart, from the findings of the Collector in his order supra which are contained in paras 9 onwards, it is also observed that the Collector nowhere in his findings talks of manufacture. He speaks of a totalizator being created at the Race Course and totalizator having been built and constructed from various components. The effect of the omission of the Collector to describe the assembly as manufacture of totalizator in his order would be dealt with at the appropriate place after we consider what is meant by 'goods'. 'Goods' is not defined in the Central Excises and Salt Act, 1944, bat it has been the subject of interpretation in a number of decisions, to mention only a few- Union of India v. Delhi Cloth Mills - AIR 1963 S.C. 791 and South Bihar Sugar Mills v. Union of India- AIR 1968 S.C. 922. The latter decision followed the earlier. In DCM case the Supreme Court referred to meaning of 'goods' in Words and Phrases Permanent Edition Volume 18, Bailey's Large Dictionary of 1982 and also Johnsons, Webster's definition which defines 'goods' inter alia as movables and then held, "These definitions make it clear that to become 'goods' an article must be something which can ordinarily come to the market to be bought and sold". The above proposition implies that it is only a movable which could fulfil these requirements. The decision more appropriately applicable for decision of the point in the present case would be STC v. M.P. Electricity Board-MR. 1970 S.C, 732 wherein it has been held that to be called goods an article, tangible or intangible, should be movable. In the light of these decisions, the totalizator system which has been erected at site and is permanently fixed to earth and in respect of which the Collector docs not use the word 'manufacture' but describes the same as constructed or erected cannot be called to be movable and hence cannot be held as 'goods'.
9. Section 3 of the Central Excises and Salt Act, 1944, inter alia provides for levy and collection of prescribed duty of excise on all excisable goods other than salt produced or manufactured in India. In view of the foregoing finding that the totalizator system is not 'goods' no central excise duty can be levied on the system. The order, therefore, demanding duty on the totalizator system which, as already said, is permanently fixed to earth through civil works would have to be set aside. We do the same.
10. That, however, is not the end of the matter. The appellants admit that they fabricated panel boards for erection of the totalizator system. They also did not dispute that these panel boards were excisable. There is no good reason why the appellants should not be called upon to pay duty in respect of the panel boards which admittedly were liable to pay central excise duty. As to Shri Chandrasekharan's argument that demand of duty would be time-barred even with respect to the panel boards and the show cause notice suffering from infirmities like not mentioning mis-statement, fraud, suppression of facts and the like and thus the higher time limit of five years being not applicable to the case, it is sufficient to say that these infirmities have not at all prejudiced the appellant, who themselves in reply to the show cause notice and during the hearing before the Collector of Central Excise were willing to pay duty in respect of the panel boards. Besides, the appellants' act of manufacture of panel boards was admittedly without the knowledge of the Department and, therefore, it can be said to be a case of suppression of facts. In the view we take it is not necessary to deal individually with the number of precedents cited by Shri Chandrasekharan in support of the contention that the show cause did not allege mis-statement, suppression of fact, fraud and the like and the higher time limit of live years may not, therefore, be invoked. As to the other argument about the panel boards not having been removed or cleared from the place of manufacture, it is sufficient to say that after retrospective amendment of Rules 9 and 49 of Central Excise Rules, 1944, such a plea is not tenable and has to be rejected. As parties did not address any argument on the proper classification of panel boards under the Central Excise Tariff, that would have to be left for decision, after hearing parties, to the Collector of Central Excise, Hyderabad, who will rework out and determine the same.
11. As a result, the demand of duty on the totalizator system is set aside. Instead, it is ordered that the demand of duty shall be restricted only to the panel boards fabricated by the appellants. The Tariff Item, classification and quantification of duty on the panel boards shall be worked out by the Collector of Central Excise, Hyderabad. Redemption fine of Rs. 10,000 imposed on the system is set aside and instead redemption fine of Rs. 1,000 is imposed on the panel boards. The appeal is thus partly allowed in the foregoing terms.