ORDER
V.K. Agrawal, Member (T)
1. The issue involved in these two appeals, arising out of a common order, is whether M/s. National Telecom of India Ltd, Appellant No. 1, were engaged in the manufacture of excisable goods.
2. Shri R. Parthasarathy, learned Advocate, submitted that the appellants stated a manufacturing unit at Nasik in May, 1989; that prior to May, 1989, they were engaged in trading activities at F-16, Commerce Center, Tardeo, Mumbai for which they also obtained a Registration under Bombay Shops and Establishment Act, 1948 and a Sales Tax Registration as dealer; that they also hired premises at 214, Creative Industrial Estate, Byculla, Mumbai for storing of the goods from M/s. Fulchand & Sons; that the present matter pertains to the case made out by the Central Excise Officers after vesting the Creative Industrial Estate on 15-3-90 and subsequent search of their premises of Appellant No. 1 on 17-3-90 at Commerce Center; that at the time of visit of the godown, no activity was going on there; that in fact the premises was closed indicating it was only a godown; that the tools that were found at godown were one tool box consisting of soldering irons, cutters and screw drivers (2 sets each); that no tools were found at Commerce Center Office; that no finished goods or components were found at Office; that the adjudicating authority has confirmed the demand of Central Excise duty and has imposed penalty on the ground that the appellants have assembled telephones, telex machines and EPABX Exchanges. The learned Advocate, further, submitted that the impugned order has been passed on the basis of assumption and presumption; that Creative Industrial Estate premises was taken on rent on 19-3-1989 and, therefore, the question of raising the demand from the year 1986 does not arise as obviously no manufacturing activity took place in the said premises earlier to the said period; that as the show cause notice refers to sale and purchase from 1986 onwards, it is apparent that the appellants did carry out the trading activity from 1986 onwards; that it is presumed by Revenue that all these goods were manufactured by them without any evidence; that the goods cannot be manufactured without the factory premises, without the machinery and without the skilled labour. He also mentioned that the adjudicating authority wants them to produce the duty paying documents for the goods that were in the premises; that in Central Excise, it has to be established that the goods are manufactured and then only the person is liable to pay the duty; that the goods are not notified goods under Section 123 of the Customs Act and as such the onus of proving that they are duty paid is not on the appellants; that on the contrary, the onus of proving that the goods are not duty paid is on the Department; that the Department has arbitrarily asked for purchase bills and wherever purchase bills could not be produced, they were presumed that all those goods were manufactured by them; that the goods cannot be manufactured with the screw drivers and the cutters; that though the Department cannot ask statutorily for the documents in the case of non-notified goods, they from the stock register indicated the various purchases and sales; that they had also
enclosed copies of the invoices; that they were not expected to keep all the documents; that if Department searches any Departmental store and demands gate passes/invoices, the Departmental store will not be in a position to produce the documents; that just because all the invoices could not be produced, it cannot be presumed that the goods were manufactured and cleared by them without payment of Excise duty; that there is no evidence in possession of the Department to indicate that the goods were manufactured and cleared.
3. The learned Advocate also contended that the telephone consists of hand set, base unit, coil cord, line cord and jack box which were independently packed; that these were bought in that condition, kept in godown premises and were removed in the same condition; that before supply, they were cleaned with a casual testing; that in some cases, telephones were modified with sealing it music on hold, message lamp and buyers logo; that this was shown to the adjudicating authority when Mr. Chittanand was cross-examined; that Chittanand also testified that by assembly he meant that they were connected for testing purposes; that telephones are not commercially marketed in an assembled condition and this has been confirmed by Chartered Engineer and Assistant Engineer, MTNL; that hand sets, key board, coil cord and jack box cannot be manufactured without plastic making machine or coil making machine; that similarly base units, key board, monitor, printer and cable for Telex machine cannot be manufactured without the basic raw materials and sophisticated machinery; that EPABX system consists of monitor, power supply, voltage stabilizer, main distributor and printed circuit board and EPABX system is not supplied in an assembled condition and cannot be manufactured with a set of tools found in godown; that all these goods were lying in their godown premises in different packages. He also mentioned that Shri Mahesh Dave, in his very first statement dated 15-3-90, stated that they were trading in telecommunication equipments and gave the names of the manufactures; that Shri Shivaram Devadiga, godown keeper, has also stated in his statement that the materials were received in bin cards at one stage and subsequently they entered in the stock register and they were in fully packed condition. He further, mentions that the adjudicating authority accepts the purchase bills and in many of these purchase bills, there is no indication as to whether excise duty has been paid. Finally, the learned Advocate mentioned that the statement of four girls was not recorded; that the muster roll of said four girls were also not available; that there were only petty cash vouchers for a few days; that if there was a regular assembly and manufacture, there should have been regular labour force, supervisor, and muster rolls; that petty cash vouchers indicate that the same were for casual work done and there have been no petty cash vouchers even for one year let alone for five years of demand; that the cash vouchers were for a few days in the months of January-February, 1990; that at Tardeo Office there was no seizure of any components, raw materials or finished goods; that no statement was recorded with regard to the activity at the Commerce Centre, that the goods were found in “assembled condition”. He relied upon the decision in Hawkins Cookers Ltd. v. CCE, Chandigarh, 1997 (96) E.L.T. 507 (S.C.) wherein it has been held that without a finding as to whether a new product has come into existence because of some activity undertaken by the Appellant, “it could not be held that a manufacturing process had been undertaken by the
appellant and unless, there is a finding of manufacture, excise duty is not attracted.” Reliance has also been placed on the decision in the case of O.R.G. Systems v. CCE, Vadodara, 1998 (102) E.L.T. 3 (S.C.) wherein it was held that value of bought out/imported peripheral devices and other system software which are merely additional devices meant to increase the memory or storage capacity of computers, is not includible in the value of the computers. He also referred to the decision in Shriram Vinyl & Chemical Industries v. C.C., Mumbai, 2001 (129) E.L.T. 278 (S.C.) wherein it was held that “the expression ‘assembly’ in the context and the setting in which it has been used cannot be construed to mean bringing into of a new article”. This expression cannot be equated with the expression ‘manufacture’.
4. Countering the arguments, Shri R.D. Negi, learned Senior Departmental Representative, submitted that on 15-3-90 when the officer visited Creative Industrial Estate, the factory was working; that on the table one mini exchange was found installed for testing goods; that Shri Shivram Devadiga was present at the premises and Shri Mahesh Dave, Accountant, reached there during the course of Panchnama. He further, submitted that the goods in respect of which the appellants had produced bills of entry were released; that the benefit in respect of traded goods has also been exterided to them; that the appellants were manufacturing/assembling computerized telex system in both the premises; that they received orders and quotations for telex system and as specimen copies of the orders from M/s. Standard Tin Works and Saipem, Italian Stock Co. were enclosed; that Uttam Jain, in his statement dated 26-3-90 had deposed that different components of the telex systems were received and telex systems were delivered under regular delivery challan for installation at Customers’ premises; that Shri R.T. Chit-tanand corroborated the same under his statement dated 17-3-90 wherein he stated that for telex system they needed base units, visual display unit, printer and key board and sometime when customers wanted floppy drivers were also supplied; that systems are assembled, packed and cleared from Creative Industrial Estate is further established from packing list, gate passes issued by storekeeper to industrial estate gatekeeper for clearing the systems out of the industrial estate, material requisition issue slips issued by Head Office to storekeeper, delivery challans issued by them and invoices prepared for sale of telex systems; that Chittanand with his qualification and experience would certainly know the difference between ‘assembly’ and ‘connection’; that moreover he did not retract his statement dated 17-3-90; that the four girls, according to his statement, were appointed to assemble the telephones and the version that these girls were merely testing the system is false. The learned Senior Departmental Representative also mentioned that Bin Cards clearly show the assembly and do not reflect the receipt and despatch of telephones; that in respect of telex machines and EPABX systems they received orders from various customers and in order to meet their requirements, the appellants imported parts and components and accessories; that installation at site involved only connecting the system to power supply and P & T lines; that the adjudicating authority had given his specific findings that components and accessories were assembled, packed and then installed at site; that Note 6 to Section XVI of the Tariff provides that conversion of an article which is incomplete or unfinished into complete or finished article shall amount to manufacture.
5. The ld. Senior Departmental Representative relied upon the decision in the case of Majestic Auto Ltd. v. CC£, Meerut, 2001 (130) E.L.T. 551 (T) wherein it has been held that process of assembling motorcycle out of components imported in SKD condition amounts to manufacture. Reliance has also been placed on the decision in Triveni Engineering & Industries Ltd. v. CCE – 2000 (120) E.L.T. 273 (S.C.) wherein the Supreme Court held that fixing of steam turbine, alternator and coupling and aligning them in a specified manner to form a turbo alternator, amounts to manufacture. He also referred to the decision of Punjab and Haryana High Court in Hansa Metallics Ltd. v. UOI – 2001 (133) E.L.T 543 (P & H).
6. In reply, the learned Advocate mentioned that it is evident from Panchnama dated 17-3-90 recorded at Creative Industrial Estate that on 15-3-90, the premises was locked as it is mentioned in Panchnama that the seal of the premises was opened in Panchas’ presence; that M/s. Fulchand & Sons, in their letter dated 9-7-90 addressed to Superintendent had clearly mentioned that the premises was given to the appellants only in 1989 and as such demand of duty, if any, cannot be demanded from them from 1986; that Chittanand, in his cross-examination clearly deposed that “assembly” means connection. He also referred to page 255 of the Paperbook which gives the monthwise figure of purchases made by them in the financial year 1989-1990 (Rs. 3.74 crores) and submitted that on the basis of these figures, Sales Tax Department had considered these goods as re-sale items; that it is for the Department to establish that the manufacturing activity was taking place and these were the goods that were actually assembled and the onus of proving is on the Department.
7. We have considered the submissions of both the sides. The duty of excise is levied and collected on goods produced or manufactured. The adjudicating authority has confirmed the demand of duty and imposed penalty holding that the appellants have manufactured telephones, telex systems and EPABX Systems mainly on the basis of statement of R.T. Chittanand, attendance sheets of four ladies employed and non-production of duty paying documents in support of their receiving the finished goods. After going through the submissions of both the sides, we find substance in the submissions made by the learned Advocate that merely because they could not produce all the evidences, it cannot be presumed that all the impugned goods were manufactured by the appellants. There is nothing on record to show whether the statement of any of the ladies working at the Creative Industrial Estate premises was recorded during the investigation. If the assembly work was being undertaken by these four ladies, there could no other better evidence than their statements. They were in the best position to describe the work undertaken by them. Shri R.T. Chittanand has deposed in his statement that from causal employees on daily wages were employed for assembling two types of telephones (bathroom telephones and futura telephones). Even Chittanand has not mentioned about assembly of Telex System and EPABX. We also observe that in his cross-examination, Shri Chittanand had deposed that at the time of recording the statement he had been working for the appellants only for eight months and that the telephone had key base unit, handset, coil cord, line cord and jack box and these were to be connected for testing purpose. There is no rebuttal by the Revenue. The adjudicating authority has only remarked that Chittanand, being qualified person, would
know the difference between assembly and connection. In our view, the evi
dence/material brought on record is not sufficient to come to the conclusion
that the appellants were manufacturing the impugned goods or were assem
bling the components into finished products as was being done by the as-
sessce in the case of Majestic Auto Ltd. In the said matter, Motorcycle was as
sembled from the components imported in SKD condition and in view of
this, the Tribunal held that “the process of assembly undertaken by them in
their factory premises amount to manufacture as out of components im
ported by them a distinct commercial product with a new name, character
and use emerges”. There is nothing on record in the matter to show that the
process undertaken by the appellants with the help of 3-4 casual workers, a
distinct commercial product with a new name, character and use has been
emerging. Note 6 to Section XVI of the Tariff will only apply when there is
any conversion of an incomplete or unfinished article into complete or fin
ished article. On the other hand, Shri Mahesh Dave, Accountant, in his
statement recorded on 15-3-90 itself has deposed that consignments at
godown were received by Shivram Devadiga, Storekeeper, and trading in
impugned goods which are purchased from various units whose names were
also given by him. We are thus of the view that the Revenue has not succeeded in proving that the impugned goods were manufactured assembled
by the appellants. Accordingly, the impugned order is set aside and both the
appeals are allowed.