1. The Revision Application dated nil (received in the Department of Revenue on 12-5-82) against order in appeal No. 8/82 (Md.) dt. 21-1-82 passed by the Appellate Collector of Customs, Madras has been transferred by the Government of India to the Tribunal for disposal under Section 35P(2) of the Central Excises and Salt Act, 1944.
2. The appellants are manufacturers of Electric Motors as well as Stators and Rotors, both falling under Item 30 of the Central Excise Tariff. During the years 1978-79 and 79-80, stators and rotors to the value of Rs. 1,68,276 and Rs. 1.65,219 respectively had been clearned but were not included in the value computed for purposes of availing of exemption under Notification No. 71/78 in respect of electric motors all sorts and parts thereof. Since electric motors to the value of Rs. 3,99,700 and Rs. 3,99,750 were cleared respectively during 78-79 and 79-80, the total value of goods cleared would work out to Rs. 5,67,975 and 5,64,969 respectively and would exceed the limit of Rs. 5 lakhs for which exemption was granted. A show cause notice was issued on 15-11-80 asking them why duty of Rs, 14,275.06 for the year 78-79 and Rs. 12,993.80 for 79-80 should not be demanded under Rule 10(a) of the Central Excise Rules, 1944. They requested for extension of time as they had approached the Coimbatore District Small Scale Industry Association and in their letter dated 30-3-81 invited reference to a letter dt. 12-12-80 regarding an additional explanation to Notification No. 80/80, dated 19-6-80 by Notification 123/80. dt. 18-7-80 and requested for further time as the matter was being taken up by the Association with the Government of India. Observing that the party failed to reply within 30 days as stipulated in the show cause notice and has failed to reply even after 7 months. As they have no explanation, he decided the case ex-parte and confirmed the demand under Rule 10(a). Before the Appellate Collector it was pleaded that in terms of Explanation VI to Notification No. 80/80 which superseded 71/78, the value of inputs (stators and rotors) that go into the specified goods (selected motors) should be excluded and that though Explanation VI was introduced by Notification 123/80, it should naturally be deemed to be effective from 1-3-78. The Government of India's letter F. No, 147/3/80-CX, 4 dated 4-2-82 orders that since no motor as such exists in power driven pumps, the value of stators and rotors alone should be taken into account, and in the spirit of this order the value of motors for 78-79 and 79-80 should be excluded for calculating the aggregate value of clearances. In which case clearances of stators and rotors to the tune of Rs. 1,68,276 and Rs. 1,65,219 respectively should alone be taken into account thereby conceding their eligibility to exemption under Notification No. 80/80. These points were, reiterated and additional grounds of submission in writing, were also presented. The Appellate Collector held that the law must be applied as it stood at the time of the currency of the issue and anything occurring later shall not have relevance to an earlier event.
The contention that on principles of equity the principle laid down in Explanation VI should be applicable to an earlier period is not lawful as there is neither equity nor "intent in the law. He, therefore, agreed that the lower authority, confirmed the demand and rejected the appeal.
3. In this appeal it is stated that the appellants are manufacturers of Power Driven Pump at Madurai. A notice dated 15-11-80 under Rule 10(a) issue by the Superintendent was in respect of Electric Motors and parts thereof (Stators and Rotors) used in Mono-bloc Pumps and cleared in excess of Rs. 5 lakhs during the two years, after addition of the value of stators and rotors and ignoring that their value was already included in the value of motors. This action was a consequence of Notification 123/80 which clarified that for purposes of computation of value for Notification No, 80/80, the value of inputs need not be taken into account. The Assistant Collector decided the case without giving time and the Appellate Collector rejected the appeal as the law should be applied as it stood. In is submitted that the appellants have been singled out for initiating recovery proceedings as there are a number of units similar to theirs where no such proceedings have been initiated. The appellants rightly feel that no action was initiated since the matter was being discussed with the Government and it culminated in Notification No. 123/80 and Board's letter dated 25-282 which clarified that Notification 123/80 should be deemed to be effective from 1-4-80 and the whole year 79-80 should be taken for exclusion and not.from the period the notification was issued. The appellants feel that this clarification is equally applicable to 78-79 and 79-80 for the following reasons. Exemption under Notification 71/78 was being availed of after necessary declaration and if they failed to include the value of stators and rotors separately, the authorities should have got the defects rectified. They did not do so because they were equally unaware of the position, till issue of Notification 123/80. This is without prejudice to the contention that Explanation VI should be considered effective from the date Notifin. 80/80 was declared effective. In cither case Rule 10(a) would not come into play since there was no collusion, fraud or suppression of facts. Their declaration was accepted by the Department even though the officers were aware that stators and rotors were being manufactured. As such, the Department could at best have demanded duty for the period of six months prior to the date of issue of the show cause notice, namely, 16-5-80 and the demand for the period prior to this date is hit by time bar. The department has not proved any suppression of facts and it cannot take shelter under Rule 10(a). Regarding the contentions of the Appellate Collector that the law must be applied as it stood, the following considerations are urged. Notification 57/78 dated 1-3-78 exempted Mono-block Power Driven Pumps from payment of excise duty. The Electric Motor fitted to such pumps is an integral and inseparable part and this continues to be so. The Government of India confirmed in their letter F. No. 147/3/80-Cx. 4, dated 4-2-81 that the classification of this type of motor under Tariff Item 30 was unwarranted. The appellants rightly feel that Electric Motors so fixed to the pumps are not liable to be taxed and if it was done due to inadvertence it should be rectified and the duty if any paid would also be refundable as the amount is not due to Government lawfully. In this connection, in clarifying Notification No. 119/66, dated 16-7-66, the Government of India held that it was a technological necessity to admit zinc in the manufacture of copper alloy and the use of zinc will not disqualify the said manufacturers from availing the concessional rate of duty. In the same way the electric motor is technologically an integral part of the mono-block power pump and for the simple reason that the clarification sought for cams later, it should not be held that the clarification was. not retrospectively applicable. In their letter F. No. 138/81-Cx.
4, dt. 24-2-82, Government of India had clarified in the case of copper alloy that it was applicable to all cases and not only those arising subsequent to the clarification. It would amount to denial of justice if it is not implemented in respect of cases past and present as Notifn. 57/78 was issued on 1-3-78 itself and is effective from that day. The appellants have cited revisional order No. 256/257-B/81, dated!2-5-81 which held that goods produced and consumed within the factory for further manufacture of excisable goods should not be taken while computing the value of clearances as it will amount to duplication of accounting. For these reasons, the demand is not sustainable. If it is decided that Explanatory Note to Notifn. 80/80 is applicable from the date of the parent notification, there will be no need for the appellants to pay duty. On the other hand, since electric motor fitted to mono-bloc power driven pumps are not dutiable but only the stators and rotors which go into the manufacture, no duty would be payable as the value of rotors and stators did not exceed Rs. 5 lakhs, Apart from this the demand is time barred. They, therefore, request that all these aspects be considered and justice rendered.
4. Shri Govinda Rajan reiterated these contentions. He argued that the department issued the notice as late as 15-11-80 merely because of the clarification to Notfn. 80/80 which was done at the instance of the trade. Hence the appellants wrote to the Assistant Collector on 12-12-80 seeking time to reply but he passed orders on 14-7-80 confirming the demand and ignored the clarification dated 14-2-80 that electric motors do not come into existence in the manufacture of mono-bloc power driven pumps thus denying justice. The order of the Appellate Collector is not correct since the clarification dated 4-2-81 is not statute or notification and the theory of prospective application is unfounded. His order does not discuss this specific submission. Since Government have clarified that motors are not to be included, the question to be decided is whether the clearances of stators and rotors during the said two years exceeded the value of Rs. 5 lakhs. It is quite clear from the show cause notice dt. 15-11-80 that the value was far less. A Xerox copy of an order dated 18-6-82, by the same Appellate Collector, holding that only the value of stators and rotors should have been included for purposes of Notification 71/78 and since it does not exceed this limit, the impugned order is not based on law, has been filed. The present order was passed five months earlier and it is unfortunate that the same ratio has not been extended. In the case of Krishna Engineering Industries, Madurai, the Assistant Collector applied the same principle and dropped the demand in his order dt. 25-3-83 copy enclosed. Similar was the case with M/s. Jothi Engg. Works vide order dated 19-2-83 (copy enclosed). Further, the appellants themselves were paying duty under protest for the period 4-11 -80 to 31-12-80 and based on the clarification of the Government of India, a Refund of Rs. 13,882.96 was sanctioned by the Assistant Collector, who held that it cannot be applicable only from the date on which it was issued. Shri Govinda Rajan cited 1983 ELT 1674 wherein it was held that since there was no material in the show cause notice to justify invoking the proviso to Rule 10(1 )(a), the extended time limit could not be applied and the demand was time barred. In the present case, also the demand for 78-79 and upto 16-5-80 for the year 79-80 is time barred. He, therefore, requested that the order of the Assistant Collector be set aside.
5. Shri Mahesh Kumar supported the orders of the lower authorities. He referred to the declaration dated 5-4-80 which was in respect of "Electric Motors- Item No. 30" and there was no mention of stators and rotors. On this short ground invoking the five years limit by mention of Rule 10(a) in the show cause notice was justified. He also drew attention to the fact that in neither of the orders is there any mention of mono-bloc pumps alone being manufactured and this is being introduced for the first time. Notification No. 71/73 was superseded by No. 80/80 which was amended by 123/80. This gives exemption to small scale manufacturers of certain specified goods among which are power driven pumps (30A) and electric motors, all sorts, and parts thereof (30). The inputs and outputs fall under different items hence the question of excluding the value is of no relevance and since the value of motors plus that of stators and rotors exceeded Rs. 5 lakhs in 78-79 and 79-80, the duty on the excess clearances had been correctly ordered to be paid.
6. In reply, Shri Govinda Rajan pointed out that under Notification No.73/68. dt. 17-4-68, stators and rotors used in the manufacture of electric motors were wholly exempt. The declaration did not give the value of stators and rotors since the department did not ask for it due to this exemption. As regards the manufacture of mono-bloc pumps and not electric motors, in the letter of 22-8-81 mentioned by the Appellate Collector, this fact was made clear in sub- para 2 on page 3 (not before us). Notification No. 57/78, dt. 1-3/78 had granted complete exemption to power driven pumps and no licence was even necessary.
7. We have seen the order of the Assistant Collector dt. 4-8-83, allowing refund of Rs. 13,882.96P being the duty paid on motors used in mono-bloc pumps manufactured and cleared during 4-11-80 to 13-12-80. He agreed to the contents of the Board's letter of 4-2-81 being purely clarificatory and being made applicable to this claim. However, with sanctioning the refund he ordered its adjustment towards the duty of Rs. 27,268.86P which is the subject of the present appeal in what he calls "a similar issue". We are, therefore, unable to find any basis or justification for the department's stand that mono-bloc pumps are not involved in his appeal and only electric motors/stators and rotors as such are involved.
8. On the question of time bar, nothing has been said to refute the contention that the department became wise to inclusion of the value of stators and rotors to that of electric motors, only after the Board clarified that no motor as such comes into being in the manufacture of such pumps. There is also substance in the contention in view of the exemption Notification 73/68 pointed out by the appellant. It cannot, therefore, be said that there has been any wilful mis-statement or suppression to invoke the limit beyond 6 months and to this extent, the demand exceeds jurisdiction. Even on merits, keeping in view the finding of the Assistant Collector allowing refund of duty on motors for a subsequent period, it would be difficult to sustain inclusion of their value for purposes of granting the exemption in respect of earlier years. In any event, the demand is clearly time barred and we, therefore, set aside the order of the Appellate Collector and allow this appeal.