Shri S.S. Sekhon
1. The appeal no. E/R-1269/96 had come up for hearing before the Chennai Bench when it was directed to be transferred to Delhi, as the impugned order was authored by Hon’ble Member (T) of the Chennai Bench as Commissioner, Belgaum. At Delhi it was listed on 18.1.2001 before Bench-B, as appeal No. E(1789)96-B, when it was directed to be transferred to Bangalore Bench, on request made by the appellant. Hon’ble President ordered the transfer on 31/1/01 and it has now come before us.
2. A show cause notice at 21.1.95 was issued, alleging that:-
i) the appellant is a manufacturing Alarm Time pieces and parts thereof.
ii) they are alleged to have misused notification 72/86 dt.10.2.86 by supplying ‘parts of one day alarm time pieces’ int he guise of ‘alarm time pieces’ and they evaded duty as it was noticed that all clearance documents mentioned thereon as ‘SKD’. No packaging slips or serial nos. were issued/allocated to such SKD removals and clearances were effected to Ms. Popular Watch Co, Trivandrum, Ms. Weston Watch Co., Nedumangadu M/s. Lectronic Yield System, Goa; these dispatches being arranged in different packages, all containing various parts meant for assembling at the customers premises. The purchasers, being not actual users or sales agents, but are further individual manufacturers of such watches/clocks under their own brand name.
iii) In his statement, Manager (Planning) accepts that ‘SKD’ despatch were in different boxes, without full assembling and such assembly of one day alarm clock was got done at the said purchasers end, who are having manufacturing facility. The rate for such ‘SKD’ despatch was lower than that of fully assembled alarm clocks.
iv) The buyers stated, they were placing orders for SKD as separately listed parts and they assembled clocks after receipt and cleaning, disassembling etc with dial names of their own.
v) Therefore, the ‘SKD’ despatch was nothing but supply of parts and clearance of same under benefit of notification 72/86 was defrauding revenue by contravening the rules 9(1), 57, 52A, 53, 173C, 173 G and duty was demanded for the period 24.11.90 to 31.1.94 and penalty was proposed.
3. The Commissioner after hearing the appellant, confirmed the demand of Rs.3,04,514/- and imposed a composite penalty under rule (9), 52A, 173Q and redemption fine of Rs.25,000/- for confiscation ordered under rule 173Q(2) and the present appeal is against this order.
4. After hearing both sides and considering the submissions we find
a) There is nod dispute that the goods removed were not as completely assembled ‘one day alarm clocks’. The appellants submitted that the removal was in the form of a ‘KIT’ of all the parts required to assemble the ‘clock’ and the SDR drew our attention to the finding of the learned Commissioner that the removals would not be co-related to a particular number of ‘clocks’ removed in the kit form. The facts therefore are required to be established.
b) The learned Advocate for the appellants, submitted and relied upon the decisions of Madras High Court in the T.I. Cycles of India Ambattur (1983) ELT 681 (MAS), Flat Products Equipments (I) Ltd (2000(115)ELT 629(Tribunal), Bharat Heavy Electricals Ltd (1987 (28) ELT 545-1 Tribunal – LB-1 and other decision to submit that removal of goods in the form of ‘KITS’ for assembling at buyers end should be considered as removal of the fully manufactured ‘Alarm clock’ in this case, in light of the decision especially when read with rule 2A of the interpretative rules instead for the schedule to CETA which would be applicable to in terms of notification also. He distinguished the decision in the case of Hawkins Cookers Ltd (1997(96) ELT 507(S.C.)) by submitting that the facts in that case were that no parts were manufactured while in this case almost all parts are manufactured by the appellants. He distinguished the decision in the case of Eureka Forbes Ltd (200(120)ELT 533T Tribunal-LB) by submitting that to be a case assumption supplied and not essential passed in this case. He also submits that the demand are barred by limitation since all documents were filed and the officers had full knowledge of the operation. To a specific question from the Bench, he replied that he is not relying on Narme Tulaman decision of the Supreme Court. He also submits that the assessee also cleared fully assemble ‘one-day alarm clocks’.
c) We find that the Apex Court in the case of Hawkins Cookers Limited 1997 (96) ELT 507 (S.C.) had found that the tribunal in that case had proceeded on the assumption that ‘nothing was done by the PCA except to gather the various tax paid articles and put them in a box themselves and in the facts and circumstances of the case that would constitute manufacture; they did not uphold the Tribunal’s finding and they remanded the case back to the adjudication to determine whether a ‘new product came into existence’. We would also following the same, & remand this matter back.
d) In this case if a finding is arrived that by placing ‘all parts in the box in KIT from’ would constitute a new product, it has to be classified accordingly and the question of discharge of duty on parts coneved.
e) We find, notification 72/86 has two entries in the table viz., "Sl. No. Chapter Heading No. Description of goods Date (1) (2) (3) (4) 3. 91.03 or 91.05 One day alarm time piece Nil 3-A 91.03 or 91.05 Goods other than those 5% ad covered by Sl No. 3 above valorem"
Thus there is a provision viz., ‘3A’ in the notification for providing for a different rate of duty, for goods falling under 91.0-3 and 91.05 which are ‘other than one-day alarm time pieces’ and whether ‘one day alarm time pieces in KIT form’ would come under this Sl. No. 3-A of the notification has not been determined by the Commissioner. We find the ‘one day alarm time pieces LIT’ form is understood by the appellant themselves to be different than ‘one day alarm clocks’ which they remove separately as such. This determination was therefore necessary to be arrived at. The order therefore needs to be remanded back to the adjudication for this determination. Since rate of duty for Sl.No. 3A and components for sl.No. 5 in the table are the same, it has to be decided whether demand are being made under Sl.No. 3A or Sl.No. 5 of the Table to the said notification.
f) Since we are remanding the matter back to the adjudication for denovo adjudication in remand, the other issues are left open.
7. In view of our findings, the appeal is allowed and remanded for de novo adjudication.
(Pronounced in open court on 1/06/2001)