ORDER
P.K. Kapoor, Member (T)
1. This is an appeal against the order dated 19-1-1993 passed by the Collector of Central Excise (Appeals), Pune. The appellants who are engaged in the manufacture of Television receiving sets and parts thereof falling under Headings 8528.00 and 8529.00 of the Central Excise Tariff were served with a show cause notice dated 22-1-1992 alleging that they had classified ‘Sub-assemblies’ of Colour TV. Sets meant for being supplied to their customers on payment of duty under Heading 8529.00 whereas they had been clearing similar sub-assemblies meant for captive consumption for the manufacture of Black and White TV. sets without filing any classification list and without payment of duty. On the ground that in respect of the sub-assemblies the benefit of Notification No. 217/86 was not available on account of the final product viz. Black and White TV. sets being exempt from payment of duty, the appellants were asked to show cause as to why duty amounting to Rs. 2,42,608/- on 905 pcs. of sub-assemblies for Black and White TV. sets cleared by them for captive consumption during the period 1-11-1991 to 11-12-1991 should not be recovered. Thereafter, by his order dated 21-7-1991 [sic] the Assistant Collector held that the “Sub-assembly” which emerged during the course of the manufacture of “Black and White TV. sets” prior to the fitment of picture tube was a distinct product classifiable under Heading No. 8529.00. On the grounds that the appellants had themselves classified similar products for colour TV. sets meant for clearance from the factory under Heading 8529.00, he held that the sub-assemblies in question were excisable under Heading 8529.00 he confirmed the demand for Rs. 2,42,608.32 and also imposed a penalty of Rs. 5000/- on the appellants. Being aggrieved by the order passed by the Assistant Collector the appellants preferred an appeal before the Collector (Appeals) who by the impugned order confirmed the order passed by the Assistant Collector.
2. Appearing on behalf of the appellants Shri D.B. Shroff, Ld. Advocate submitted that the Collector (Appeals) had erred in confirming the findings of the Assistant Collector on the grounds that the appellants had themselves classified identical products in respect of colour TV. sets under Heading 8529.00. He referred to the copy of the appeal filed before the Collector (Appeals) at pages 14 to 19 of the paper-book, and pointed out that having regard to the different stages involved in the manufacture of Black and White TV. sets the appellants had pointed out that the sub-assemblies for colour TV. sets meant for clearance from the factory were classified by them under Heading 8529.00 but no similar final marketable product emerges during the course of manufacture of Black and White T.V. sets or before completion of the product after mounting of the picture tube and closing of the back cover of the cabinet. He contended that in passing the order the Collector (Appeals) had not applied his mind since he had failed to deal with the appellants’ contentions that no sub-assembly of the type cleared by them under Heading 8529.00 emerges at any intermediate stage in the manufacture of Black and White T.V. sets. He, therefore, pleaded that the impugned order may be set aside and the matter be remanded to the lower authority with the directions to give his findings after examining the detailed submissions made by the appellants. In support of his contentions he cited the following case law : –
Bhor Industries Ltd. v. C.C.E. -1989 (40) E.L.T. 280 (S.C.)
3. On behalf of the respondents Shri K.K. Jha, ld. SDR reiterated the findings of the Collector (Appeals). He, however, stated that he did not have any objection as regards the appellants’ request for the remand of the matter to the lower authority for re-adjudication after taking into account the various stages involved in the manufacture of Black and White T.V. sets.
4. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that before the lower authorities the appellants’ case was that during the various stages in the course of manufacture of Black and White T.V. sets, no sub-assembly of the type classified by them under Heading 8529.00 for being supplied to other manufacturers of colour T.V. sets emerges. In this regard the following extracts from the appeal filed before the Collector (Appeals) are relevant :-
“To substantiate our arguments we have put forth that there are three parts of T.V. set – (i) Plastic parts (Cabinets and Black covers); (ii) Picture tube and (iii) Chassis (also known as populated circuit board) and the sequential process of manufacture is (i) fitting of control cabinet, (ii) fitting of Picture tube followed by (iii) alignment of chassis and lastly (iv) by fixing back cover. No stage of ‘sub-assembly’ activity comes during the course of manufacture of Black and White T.V. set and therefore question of its use captively during the course of manufacture of Black and White T.V. set does not arise at all.
We have further to state in our reply that there were orders from some of our customers for supply of incomplete version of colour T.V. set and therefore we have supplied the same which consists of Plastic parts and Chassis but does not have a picture tube. Our customer being the manufacturer of T.V. sets while manufacturing colour T.V. set first takes out chassis, puts picture tube, puts back the chassis, aligns it and then fixes back cover. However, this incomplete version of T.V. sets does not come into existence at all during the course of manufacture of Black & White T.V. sets.
We therefore, argued that there was no justification for making an imputation by effecting a comparison of two different sets of activities.
We had further stipulated that we were advised by our legal consultant that our classification of incomplete version of colour T.V. set as ‘sub-assembly’ under Chapter Heading 8529.00 was not correct as the Excise Tariff in regard to ‘sub-assembly’ does not exist. Assembly of two or more parts, if it does not result into an excisable product, cannot be made subject to Excise Tariff by describing it as ‘sub-assembly’ and a part of T.V. set attracting tariff under Chapter Heading 8529.00 or under any other heading.
We, therefore, pleaded that the department should have assisted us in classifying the said item correctly.
We, therefore, denied all the charges levelled against us in the said Show Cause-cum-Demand Notice dated January 22, 1992 and pleaded that the entire show cause notice was based on incorrect facts and bad in law and hence needed to be withdrawn.
We were granted a personal hearing on April 29, 1992, by the Assistant Collector. During its course we reiterated the arguments already made. Moreover, we further argued that after the fitment of Television chassis in the Black & White cabinet there is no process of manufacture left out and therefore the charge that the stage of so-called ‘sub-assembly’ comes next to that of T.V. Chassis is totally baseless and hence, imaginary. Even if we presume, but without admitting, that the said contention of the department is correct, the total duty so calculated and asked us to pay in the Annexure ‘B’ to the said show cause notice becomes absurd as the same is based on total price of T.V. set less price of Picture Tube. We pleaded with the Assistant Collector that the said Show Cause-cum-Demand Notice dated January 22, 1992, be withdrawn.”
4. It is evident that the Assistant Collector and also the Collector (Appeals) failed to take into account the various stages pointed out by the appellants in the manufacture of Black and White T.V. sets pointed out by the appellants before giving their finding and also the contention that no sub-assemblies similar to the ones classified by the appellants under Heading 8529.00 meant for being supplied to other manufacturers of colour T.V. sets emerged as intermediate products during the course of manufacture of Black and White T.V. sets. We, therefore, hold that the impugned order is not reasoned and suffers from non-application of mind.
5. In view of the foregoing, we set aside the impugned order and remand the matter to the Assistant Collector for re-adjudication in accordance with law. We direct that before adjudication the appellants should be given opportunity for personal hearing. Both sides shall have liberty to adduce fresh evidence.
6. The appeal is allowed by way of remand.