1986 (8) TMI 190 - AT - Central Excise

Summary

Issues Involved:
1. Classification of dewatering systems/equipment.
2. Allegations of manufacturing and clearing excisable goods without a Central Excise license.
3. Validity of the show-cause notice and findings of the lower authorities.
4. Applicability of exemption notifications to the goods manufactured by the appellants.
5. Imposition of penalties and fines.

Detailed Analysis:

1. Classification of Dewatering Systems/Equipment:
The appellants, Wellpoint Systems (P) Ltd., supplied dewatering equipment used for various construction purposes. The equipment included a centrifugal pump, a prime mover, and numerous accessories. The central issue was whether these constituted a "complete dewatering system" or merely individual components. The appellants argued that "systems" could not be charged to duty as they were not "goods" and that the equipment only came into existence at the site where it was installed, not as a complete readymade article. The Tribunal found substance in the argument that what was supplied was a collection of articles rather than a specific item of goods in a knocked-down condition.

2. Allegations of Manufacturing and Clearing Excisable Goods Without a Central Excise License:
The Delhi Central Excise authorities issued a show-cause notice alleging that the appellants manufactured and cleared excisable goods valued at Rs. 21,54,574.61 without obtaining a Central Excise license and without paying duty. The Collector of Central Excise confiscated the seized goods, imposed a penalty, and demanded excise duty. The Central Board of Excise and Customs upheld the Collector's order regarding classification and duty but remitted the penalty and reduced the fine.

3. Validity of the Show-Cause Notice and Findings of the Lower Authorities:
The show-cause notice alleged the manufacture of "jetting sets and accessories of dewatering sets" and "excisable goods falling under Tariff Item No. 68." However, it did not specifically mention "dewatering systems." The Tribunal noted that the findings of the lower authorities went beyond the show-cause notice. The Collector's order assumed the manufacture of "dewatering systems" without a reasoned finding on what excisable goods were manufactured. The Tribunal held that the finding that the appellants manufactured and cleared "dewatering systems" was not sustainable.

4. Applicability of Exemption Notifications to the Goods Manufactured by the Appellants:
The appellants argued that various articles supplied were either duty-paid or eligible for exemption. They cited exemptions for power-driven pumps primarily designed for handling water and plastic accessories. The Tribunal observed that the lower authorities had not considered these exemptions, as they proceeded on the assumption that the appellants were manufacturing "dewatering systems." The Tribunal directed the Excise authorities to reconsider the liability of the different items manufactured by the appellants, taking into account the relevant exemption notifications.

5. Imposition of Penalties and Fines:
The Collector imposed a penalty of Rs. 50,000 and a fine of Rs. 10,000, which was reduced by the Central Board of Excise and Customs to Rs. 2,500. The Tribunal set aside the reduced fine of Rs. 2,500 in lieu of confiscation of the seized articles, as the finding that the appellants manufactured "dewatering systems" was not sustainable. The duty demand based on the total value of goods cleared, including duty-paid goods, was also set aside.

Conclusion:
The appeal was allowed to the extent that the appellants could not be regarded as manufacturers of "dewatering systems." The Tribunal set aside the duty demand and the reduced fine, directing the Excise authorities to reconsider the duty liability of the different articles manufactured by the appellants, considering the relevant exemption notifications. The appeal was otherwise rejected.