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SUPREME COURT OF INDIA
A.K. SIKRI, R.F. NARIMAN, JJ.
M/S. ESCORTS LTD. – APPELLANT
VERSUS
COMMISSIONER OF CENTRAL EXCISE, FARIDABAD – RESPONDENT
Civil Appeal No. 6561 of 2004 with Civil Appeal No. 457 of 2006 with Civil Appeal Nos. 9469-9470 of 2010
Decided On : 29-04-2015
(b) Constitution of India – Seventh Schedule, Entry 84 r/w Article 366(12) and section 3, Central Excise and Salt Act – Goods – A new substance brought into existence by manufacture, known to the market – Ingredients for levy of excise – Manufacture and marketability – Marketability being essential one. (Para 10)
1963 Suppl. 1 SCR 586; (1994) 6 SCC 610 – Relied
(c) Constitution of India – Seventh Schedule, Entry 84 r/w Article 366(12) and section 3, Central Excise and Salt Act – Intermediate goods – Levy of tax – An intermediate product, if not marketable, will not be exigible – Provided it is not commercially known in the market – Whether the product is generally not bought or sold or has no demand in the market, is irrelevant – Transmission Assemblies an intermediate product – Commercially known distinct product – It is exigible. (Para 12, 13, 15)
(1995) 3 SCC 23; 2002 (145) E.L.T. 274 – Relied upon
(d) Constitution of India – Seventh Schedule, Entry 84 r/w Article 366(12) and section 3, Central Excise and Salt Act – Extended period of limitation – Appellant manufacturing tractors since 1965 – No change in manufacturing process – In 1994-95 Department, though holding IC engines dutiable, not levying any excise duty on transmission assembly – Not a single Transmission assembly sold – No suppression of fact or avoidance of tax – Period of limitation cannot be extended – Show cause notice liable to be quashed being time barred. (Para 19, 22, 25)
1989 (43) E.L.T. 195; (2007) 10 SCC 337 – Relied upon
Facts of the case:
The present case raises an interesting question as to whether excise duty is payable on an intermediate product, namely, Transmission Assembly which comes into existence during the manufacture of tractors made by the appellant. The period involved is January 1996 to May 1998.
Finding of the Court;
Extended period of limitation is not available to Revenue.
Result: Civil Appeals No. 6561 of 2004 and 9469-9470 of 2010 allowed. Civil Appeal No. 457 of 2006 dismissed.
JUDGMENT
R.F. Nariman, J.
C.A. NO.6561 OF 2004
1. The present case raises an interesting question as to whether excise duty is payable on an intermediate product, namely, Transmission Assembly which comes into existence during the manufacture of tractors made by the appellant. The period involved is January 1996 to May 1998. The tractors that are manufactured have engines that are below 1800 CC and are covered by an exemption notification 162/1986. We are informed, however, that after 1.6.1998 this exemption has gone and even tractors of an engine capacity of less than 1800 CC now have to bear excise duty.
2. By a show cause notice dated 31.1.2001, the Department for the period aforesaid relied upon evidence in the form of statements made by various officers of the appellant and other documentary evidence to show that Transmission Assemblies of tractors was a commodity known to the market as such and, therefore, came into the category of excisable goods. The respondent by their reply dated 1.10.2001 denied this stating that no separate product known as Transmission Assemblies came into existence which is known to the commercial community as such and, therefore, there was neither manufacture nor marketability of the same. In the reply, however, various statements were made which, in fact, amount to admissions, that Transmission Assembly of a tractor is, in fact, known to the market as such. These admissions are set out hereinbelow:
“16. It is submitted that transmission assemblies are in fact interchangeable. The Transmission Assembly can be used in both dutiable as well as exempt tractors, for example in Model No.325 (exempt tractor) and Model No.335 (dutiable tractor). Therefore, it serves as a common input for both tractors. Therefore, in terms of provisions of Rule 57CC MODVAT credit is admissible on the common inputs which form part of transmission assemblies in turn used in the manufacture of both types of Tractors.
47.1. The department has relied upon the case of M/s International Tractors Ltd., Hoshiarpur who are supplying transmission assemblies.
(a) The Notice contends that M/s. Mahindra & Mahindra have not purchased any transmission assemblies for use in tractors from any other unit. Further, they have not supplied or transferred any transmission assemblies to any other person. However, they have been supplying the transmission assembly to their own units at Nagpur and Rudhrapur for manufacturing tractors.
(b) It is submitted that this letter can at most lead to a conclusion that the transmission assembly made by M & M is marketable.
50. The show cause notice has placed reliance on certain other web site to contend that the Hoovers on-line web site and Carraro web site shows that transmission assemblies are marketed and sold. It is submitted that while there might be mass production of transmission assemblies marketed by Hoovers Carraro, etc., the product specific transmission assemblies of the noticees never come to the market and have never been sold. Hence, there can be no question of demanding duty on the transmission assemblies made on the assembly line and used for assembling the tractors in the noticees factory. These are not marketable and hence, are not goods and there is no removal under Rule 9 and 49.”
3. The Commissioner by an order dated 4.10.2002 held as follows:-
“41. I find that the issue has been well examined in the notice. Noticee's plea that the impugned transmission assemblies are not goods as transmission assemblies do not have independent existence is without merit. Noticee in fact itself clears such goods on payment of duty to ECEL, Transmission assemblies are well known in the commercial world and are very much dealt with as a commercial commodity. The end use as put forth in the notice amply proves it. To reiterate transmission assemblies are cleared by the noticee to ECEL; noticee company's sister concern (Farmtrac Division) imported transmission assemblies from Carraro Spa of Italy and also purchased
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