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Universal Radiators Limited Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu
Decided On
Reported in(1986)(7)LC296Tri(Chennai)
AppellantUniversal Radiators Limited
RespondentCollector of Central Excise
Excerpt:
.....of correlation. the documents produced by the appellant merely indicated that they were getting electric motors from manju electricals on payment of duty ; there is no evidence of correlation for these motors with those fitted in the industrial fans cleared. hence, he did not accept the plea for set-off.sdr relied on the factors as set out in the order of the collector.3. we find that notification no. 124/65 exempts electric fans fitted with electric motors or rotors from the amount of duty that has been paid on the motor. this exemption is obviously available by way of reduction in the quantum of duty payable on electric fans at the time of their clearance. in the present case, no duty was at all paid at the time of clearance which is being demanded now in terms of the collector's.....
Judgment:
1. The Collector of Central Excise, Coimbatore, ordered that duty of Rs. 79,864.96 be paid by Universal Radiators Ltd., Ctr., the appellant herein, in respect of blowers used in the manufacture of transformer oil coolers during the years 1976-77 to 1981-82. The appellants were buying motors from outside and fitted fan blades and converted them into blowers. The blowers themselves were built into ABT Oil cooler and supplied to I.C.F. as air blast transformer oil coolers. The Department's case is that there was no declaration regarding the manufacture of blowers which were captively used in the building of transformer oil cooler. A show cause notice was issued on 29-9-82 invoking the extended period under Rule 9(2) of the Central Excise Rules, 1944 for the above demand. Though the notice also refers to violation of Rules 52A, 53, 173B, 173C, 173F and 173G in the totality of circumstances of the case, the Collector did not impose any penalty under Rule 173Q but confined his order to one of demanding duty. In appeal three points were raised viz.- (i) The assessment of the blower-whether under Tariff Item No. 33(2) ; (iii) The request for set-off of duty paid on the motors obtained from outside and used in the manufacture of the blower.

2. At the time of hearing before us the first point was not pressed. In regard to the second point it was urged that initially the set-off was covered by Notification No. 124/65 which was rescinded by Notification No. 113/80, dated 1-8-80. Under the former notification there was no reference to observance of procedures under Rule 56A for obtaining the set-off. That requirement was prescribed by Notification No. 110/80. It was also stated that the motor was a special one ; only one leading manufacturer manufactures such motors and hence identification and use of the motors by the appellant-factory is not a comparable one. The Collector did not accept the request for set-off as he found that there is a prescribed procedure for purposes of correlation. The documents produced by the appellant merely indicated that they were getting electric motors from Manju Electricals on payment of duty ; there is no evidence of correlation for these motors with those fitted in the industrial fans cleared. Hence, he did not accept the plea for set-off.

SDR relied on the factors as set out in the order of the Collector.

3. We find that Notification No. 124/65 exempts electric fans fitted with electric motors or rotors from the amount of duty that has been paid on the motor. This exemption is obviously available by way of reduction in the quantum of duty payable on electric fans at the time of their clearance. In the present case, no duty was at all paid at the time of clearance which is being demanded now in terms of the Collector's order. Considering the uniqueness of the motors involved and the one to one correspondence between electric motor, electric fan the claim of the party for reduction in calculating the amount of duty payable on the electric fan to the extent of duty paid on the electric motors is a valid one so long as Notification No. 124/65 was in force i.e. upto 31-7-80. However, with effect from 19-6-80 the procedure set out in Rule 56A has to be followed and the amount of duty paid on electric motors brought from outside shall not be granted as a credit when the procedures in terms of Rule 56A have not been followed. The claim for refund may therefore be accepted in part by taking into account the duty paid on the electric motors as evidenced by gate passes that will be submitted for due verification.

4. Point (ii).-The representative of the appellant observed that on 21-9-78 the appellant had written to the Superintendent of Central Excise, Coimbatore MOR V. Coimbatore I Division giving a declaration for exemption from licensing since the value of their total production and consumption of fans for use in ABT coolers was less than Rs. 4 lakhs in a financial year. In the declaration reference was made to Notification Nos. 71/78 and 111/78. By not doing anything about licensing the Department accepted the stand of the appellant. Hence the Department should be treated to be on notice regarding the manufacture of fans (blowers) since September 1978. In March 1979 the scheme of exemption on clearance of goods was revised. The appellant had no knowledge about this changed scheme. They have however filed the classification list on 1-3-79 (which was accepted by the Department on 21-4-79) in which it has been declared that air coolers were being manufactured by the appellants. In the manufacture of air coolers the blowers were also needed. Separate declaration regarding the blowers was not necessary. In support he relied on the decision in the case of Air India Corporation v. Collector of Central Excise, Calcutta-1985 E.L.T. 206. S.D.R., on the other hand, stated that mere intimation regarding manufacture is not sufficient. The provisions of Rule 173 (B), (C), (F) and (G) have not been followed. Hence action under Rule 173Q is maintainable. In regard to set off he urged that the prescribed procedure under Rule 56A has not been followed ; in respect of the past, no correlation is possible.

5. The letter dated 21-9-78 is an intimation regarding total production and consumption of fans for use in ABT coolers being less than Rs. 4 lakhs in a financial year and seeking exemption from licensing. Hence, the Department should be deemed to be under notice regarding the manufacture of fans by the appellant-factory at the relevant time. It cannot, therefore, be said that for the year 1978-79 there was suppression of information regarding manufacture of fans by the manufacturer who claimed it to be in the exempted sector. In so far as the period after 1-3-79 is concerned, a classification list was in fact filed. In it there is no reference to fans the general reference to coolers, as falling under Item 68 is not sufficient. Fans are different from coolers (in fact part of the latter) for the purposes of classification and assessment. Merely declaring that coolers are being produced does not necessarily mean that fans are being manufactured by the appellant-firm (one may take into account that the motors which are claimed to be of special type and intended for use only by the appellant was being manufactured by a different party). The decision of the Tribunal in the case of Air India Corporation referred to supra, is of no assistance, as in that case there was a declaration in respect of components of cooling towers and it was held that electric fans used in cooling towers could be treated as components and hence there was a declaration in respect of such fans. The facts are thus distinguishable. We therefore hold that for the period beginning 1-3-79 there has been no declaration to the Department regarding the manufacture of fans as such. There is consequential violation of Rules 173 (B), (C), (F) and (G) of the Central Excise Rules, 1944. The demand for duty in respect of the period beginning 1-3-79 is maintainable by invoking the extended period under Rule 9(2). In so far as the demand for the year 1976-77 is concerned it falls well beyond the period of five years referable to Rule 9(2), calculating from the date of issue of the show cause notice and hence cannot be sustained. In respect of the year 1977-78 there is no reference to any intimation to the Department as the intimation on record is dated 21-9-78. The demand in respect of that year is sustainable.

6. In the result the order of the Collector is upheld subject to the above modification that set-off of duty in respect of motors claimed as a special one and utilised in the manufacture of blowers during the years 1977-78 and 1978-79, we allow the appeal by applying Notification No. 124/65 and no duty is demandable for the year 1976-77.


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