ORDER
V.K. Agrawal, Member (T)
1. These are two stay Applications praying for waiver of pre-deposit of amount of duty and penalty and stay of its recovery as under :
(i) M/s. Sulzer Flovel Hydro Limited
Duty Penalty
Rs. 2,54,33,968.00 Rs. 2,54,33,968.00
Rs. 28,17,062.43 Rs. 28,17,062.00
Rs. 6,47,500.00 Rs. 6,47,500.00
(ii) Shri Maharaj Kar, Managing Director
Penalty: Rs. 25,00,000.00
2. Shri V. Lakshmikumaran, ld. Advocate, submitted that Appellants Company manufacture Turbine for Hydro Electric equipment below 15 M.W.; that they manufacture various sub-assemblies in their factory, a few sub-assemblies are purchased from outside and supplied directly to the site of the Customer; that at the site, these sub-assemblies are used in making the complete Hydro Turbines; that prior to 16-3-1995 they were paying duty on goods cleared by them from their factory under Heading No. 84.10 of the Schedule to the Central Excise Tariff Act if these were cleared for being assembled at site, under Heading No. 84.83 or any other heading applicable if the goods were cleared as spares. Notification No. 205/88, dated 25-5-1988 was amended by Notification No. 57/95, dated 16-3-1995 extending exemption to “Turbines for Hydro Electric equipment of a capacity not exceeding 15 M.W.” and from the date they started availing the exemption in respect of goods cleared from their factory. The Commissioner, Central Excise, under the impugned order dated 24-3-1999, confirmed the demand of duty and imposed penalty on both the Appellants holding that duty is chargeable on parts and components at the time of their clearances from the factory according to the condition in which they are removed; that clearance of parts cannot be considered as the clearance of complete/finished turbine classifiable under sub-heading 8410.10; that these clearances merit classification under sub-heading 8410.90.
3. The ld. Counsel also submitted that the Electricity Board had placed the order with the Appellants for supply of Hydro Turbines and its erection and commissioning at site; that they had supplied the Turbine in unassembled condition from the factory and as such the benefit of exemption is available to them. Reliance was placed on Rule 2(a) of the Interpretative rules according to which any reference in a heading to goods shall include a reference to those goods complete or finished, removed unassembled or disassembled. The ld. Counsel, further, mentioned that the Central Board of Excise and Customs vide Section 37 B order No. 4/92, dated 19-5-1992 clarified, in respect of SI. No. 15 of the Notification pertaining to Agricultural and Municipal waste conversion devices producing energy, that benefit of exemption would also be available in cases where the manufacturers manufacture various sub-assemblies in their factory, purchase some standard items from outside vendors and dispatch them directly to the site of the Customer and fabricate some other items at the premises of sub-contractors and despatch them directly to site or fabricate such items at the site itself; that the exemption was available provided the evidence is produced that goods cleared form part of a complete device and the evidence is also produced for supply of such a device to the buyer; that they had produced completion certificates from their customers. He also relied upon the decision in Vishwa Industrial Co, (P) Ltd. v. C.C.E., Calcutta-II, 1998 (29) RLT 66 (T) wherein it was held that complete conveyor system in CKD/SKD condition, taken to site in piece meal is to be classified and assessed as conveyor system under Heading 84.28 of C.E.T.A. and not as parts of conveyor system. The ld. Counsel also mentioned that no one can assemble a turbine in his factory and if the benefit of notification is to be extended only to turbine fully manufactured in the factory, the Notification will be redundant and as held by the Tribunal in the case of Ellora Paper Mills Ltd. v. C.C.E., 1991 (56) E.L.T. 489 (T) interpretation of the Notification should not be done in such a way as to make the Notification otiose or nugatory. He finally submitted that extended period of limitation is not invokable in their case as they were availing the Notification from 16-3-1995 and this fact was mentioned on the duty paying document and the description was also very clear as parts of Turbine less than 15 M.W.; that they had not made any change in their method of clearance after the amendment of Notification; they had given the cross-reference to the purchase order; that in view of Section 37 B order they had a bona fide belief that the exemption was available to them; that there was no intention to cheat the Government as the contract covered the duty element and the amount of Modvat credit available to them in respect of bought out item would have been more than the duty payable by them. Regarding financial hardship, the ld. Counsel submitted that as per unaudited provisional Balance Sheet as on 31-3-1999, they had suffered a loss of Rs. 1 crore.
4. Shri M.C. Sharma, ld. CDR, submitted that prior to amendment of Notification No. 205/88, the Appellants were clearing the goods as part of Turbines under Heading 84.10; that after amendment of Notification, the said Heading was divided into two sub-headings 8410.10. All goods other than parts and 8410.90 parts; that the Appellants started, treating parts as Turbine itself and in brackets, they would mention parts; that even after amendment of the Tariff Headings they classified their products under Headings 8410.00 and they have not given any reasons for not classifying the impugned products correctly under sub-heading 8410.90. He further submitted as price of every part is indicated in the contract, it is not difficult for the Appellants to mention the individual parts in the classification list; that they were only manufacturing and clearing parts of turbine and not the whole turnbine; that as the parts were cleared outside the factory, they were not exempt from payment of duty under Notification; that mere supply of sub-assemblies cannot be considered as their forming a part of complete Turbine; that nothing specific emerges and no Turbine is made and nothing has been mentioned in RG 1. He also contended that Section 37B order is a commodity specific and is not applicable to each and every goods; the words used in 37B Order are “CKD” and “SKD” conditions which obviously envisages emergence of such goods in unassembled condition or disassembled form, that all parts are required to be available in factory. The ld. CDR also emphasised that no proof has been brought on record in support of ld. Counsel’s contention that Turbine cannot be manufactured in a factory; that the facts in the case of Vishwa Industrial Company are totally different from the present matter as the conveyor system was cleared by the factory in knock down condition on payment of duty thereon under the cover of various gate passes; that no evidence has been brought on record to show that all parts were cleared by them from the factory during the relevant period or to show that all parts cleared by them were sufficient to make a Turbine. Regarding financial condition of the Appellant Company, the ld. CDR mentioned that they have considerable amount available in cash and Bank balances and have reserves and as such payment of duty and penalty would not cause financial hardship.
5. In reply, the ld. Counsel submitted that if the bought-out items are first brought to appellant’s factory and then forwarded to site will amount to sending Turbine in CKD/SKD condition, the fact of sending them directly to the site should not change the position. He emphasised that the Appellants after the amendment of Notification had not changed the description of the goods in the invoice as, e.g., in Invoice No. 57, dated 28-3-1995 they had mentioned Runners for Turbines for Hydro Electric equipment; that they did not mention Turbine; that in revised classification list they mentioned 8410.00 without noticing the change in Tariff and as per the practice since 1986.
6. We have considered the submissions of both the sides. The issue involved whether the clearance of a few parts from the factory in fulfilment of the contract and sending of bought-out items directly to the site would amount to clearance of Turbine in CKD condition is an argueable issue which can be examined only at the time of hearing the main appeal. The Appellants have not made out a primn facie case for waiver of predeposit of entire amount of duty though they have made out a prima facie case on time limit. We have also seen the provisional Balance Sheet tas on 31-3-1999 and are of the view that no hardship will be caused if they are asked to deposit Rs. 50 lakh. We, therefore, direct the Applicants Company to deposit Rs. 50 lakhs within eight weeks from the date of receipt of this order. On complying with this order, there will be waiver of predeposit of remaining amount of duty and penalty by them and predeposit of penalty by the Applicants No. 2. The Recovery of the remaining amount of duty and penalty is also stayed during the pendency of appeals. It is also made clear that if they fail to comply with this order, their appeals will be liable to be dismissed without any further notice. Matter to come up for reporting compliance on 25-11-1999.