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National Mechanical Works Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1983)(14)ELT2370TriDel
AppellantNational Mechanical Works
RespondentCollector of Central Excise
Excerpt:
.....they removed 6 condensers and 5 chillers under gate passes no. 8 to 10 at the concessional rate of duty of 40% under notification no. 50/70 dated 1-3-70, instead of 40% ad valorem, specified in notification no. 80/62 dated 24-4-1962, without fulfilling the conditions of chapter x of the central excise rules, 1944, which was a condition of the former notification. after issue of a show-cause notice and grant of a hearing, the assistant collector of central excise, confirmed the demand for differential duty, but did not impose any penalty. the appellate collector found that the l 6 licence was granted to the consignee on 10-6-1970 and the ct 2 certificate was issued to him on 23-6-1970 whereas the goods availed of the concessional rate of duty on 22-5-1970 when they were despatched.....
Judgment:
1. The Revision Application dated 14th November, 1980 against Order-in-Appeal No. 563/CO/78 dated 30-10-1978, passed by the Appellate Collector of Central Excise, Calcutta, has been transferred by the Government of India to the Tribunal for disposal as an appeal in terms of Section 35p (2) of Central Excises & Salt Act, 1944.

2. The appellants are manufacturers of parts of refrigerators falling under item 29(A)(3) of the Central Excise Tariff. On 22-5-1970, they removed 6 condensers and 5 chillers under gate passes No. 8 to 10 at the concessional rate of duty of 40% under Notification No. 50/70 dated 1-3-70, instead of 40% ad valorem, specified in Notification No. 80/62 dated 24-4-1962, without fulfilling the conditions of Chapter X of the Central Excise Rules, 1944, which was a condition of the former notification. After issue of a show-cause notice and grant of a hearing, the Assistant Collector of Central Excise, confirmed the demand for differential duty, but did not impose any penalty. The Appellate Collector found that the L 6 licence was granted to the consignee on 10-6-1970 and the CT 2 Certificate was issued to him on 23-6-1970 whereas the goods availed of the concessional rate of duty on 22-5-1970 when they were despatched to the consignee. Rejecting the plea that the consignee had already applied for the L 6 licence when the goods were despatched by the Appellants, OB the ground that they could not take it for granted that the licence would be issued, he held that the clearance was not legally correct and the demand was maintainable.

3. In the present appeal it is contended that a price-list was filed on 22-5-1970 in regard to supply of the 6 condensers and 5 chillers to M/s. Nirlon Synthetic Fibres & Chemicals Ltd., Bombay, in which full description and claim for concessional rate of duty under Notification No. 50/70 dated 1-3-1970 was filed with the Superintendent and the clearance was effected on his verbal assurance that it would be approved in due course. The show-cause notice dated 14-4-1971 was issued by the Superintendent (Technical) on the ground that the conditions of the Notification were not fulfilled and differential duty was chargeable. The notification prescribes a concessional rate of duty to parts of refrigerators and air-conditioning appliances and machinery, provided these are supplied to any factory and the Chief Executive of the factory gives an undertaking to the Collector to satisfy the proper officer that the parts are actually used in the factory and provided the procedure in Chapter X of the Rules is followed. In this case, on receipt of intimation from the consignee that they had applied for L 6 licence and a CT 2 Certificate, the parts were cleared after due intimation to the Superintendent who raised no objection. Had the L 6 Licence been issued promptly, the CT 2 certificate would have been in possession of the appellants before the despatch of the goods. From the records, there is no dispute as to the use of the parts which are the subject of the demand of duty. The Notification was effective from 1-3-1970 and since the application for a L 6 licence was made prior to the despatch of the goods, the licence should have been given with effect from the date of application. The order-in-original is wrong when it seeks to defer the effective date to the date of the issue of L 6 licence. Further, the consignments were despatched under cover of AR3A and gate passes and the clearance at concessional rate had been shown in the RT 12 returns, so there was no scope to re-open these assessments and the demand is ex-fade illegal and without jurisdiction. Even if it is conceded that differential duty was payable the demand is barred by limitation.

4. Shri N. Mukherjee reiterated these contentions. His main ground was that there are inevitable time lags between the application for licence and its issue. There is no dispute that the parts in question were entitled to the concessional rate provided they were supplied to a factory for installation therein and the Chief Executive gives written undertaking to the Collector that he will satisfy the proper officer within one month or one year from the date of clearance that the parts have been actually used in the refrigerating air-conditioning appliances already installed/to be installed and also that the procedure in Chapter X is followed. By applying for the Licence the consignee had fulfilled the first condition. The parts were cleared with the knowledge of the local officer and they were duly received by the consignee and verified by the Central Excise Officers at that end.

As such, the conditions of the notification have been complied with, especially since the Department has not alleged any diversion of the goods cleared at concessional rate. In fact, if there was any violation, it should have the consignee against whom action should have been taken and not the consignor.

5. Shri Lakshmi Kumaran, SDR stated that the conditions of the exemption notification had not been complied with. There was force in the Appellate Collector's finding that it could not be taken for granted that the L 6 licence would be issued. There was, therefore, an irregularity in clearing the goods at the concessional rate when it was incumbent on the consignee to hold such a licence and for the consignor to avail of the concession only after making sure of this through the medium of CT 2 Certificate. He conceded that there was no question of mis-use of the parts cleared at the concessional rate and that the offence was technical.

6. The Tribunal observes that, on purely technical considerations, the clearance in this case did not attract the concessional rate of duty.

Unless the L 6 licence had been issued and the B8 bond executed by the consignee, he could not fulfil the primary condition of the notification and was not entitled to receive such goods.

Correspondingly, the consignor was not in a position strictly to comply with the Chapter X procedure which forms another condition under the notification. At the same time, when the goods were cleared with the full knowledge of the local Central Excise Officer, and they were received and acknowledged at the destination by the Central Excise Officer, there has as evidenced by the AR3A) forms, been factual compliance with the conditions of the notification and the adjudication proceedings instituted at the technical level have to be viewed in their proper perspective. We do not, in the circumstances, feel that the demand for duty should be sustained on such purely technical considerations. Had there been violation of law, the demand for duty should have been raised promptly and the goods which had not borne the proper rate of duty, should have been seized by the Department for penal action. That this was not done is enough acquiescence on the part of the Departmental Officers to off-set the technical non-compliance.

We are also fortified in taking this view by Government of India decision reported in 1980 ELT 358, relied on by Shri Mukherjee. In these circumstances, we allow the appeal and-set aside the order of the Appellate Collector.


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