1990 (10) TMI 180 - AT - Central Excise

Issues Involved:
1. Manufacturing Activity and Excise Duty Applicability
2. Limitation Period and Suppression of Facts
3. Financial Hardship and Stay Application

Issue-wise Detailed Analysis:

1. Manufacturing Activity and Excise Duty Applicability:
The appellant, a limited liability company, argued that their activity of designing, installing, erecting, testing, and commissioning of central air-conditioning and refrigeration plants at customers' sites did not constitute manufacturing. They contended that these plants are tailor-made and become permanent fixtures upon installation, thereby losing their character as movable goods and should not be subject to excise duty. They cited several judgments to support their claim, including Tata Robins v. Collector of Central Excise, State of Madras v. Voltas Ltd., Blue Star v. Union of India, and Otis Elevator Company (India) Ltd., which held that assembling parts at the site does not amount to manufacturing.

Conversely, the respondent argued that the appellant's activities clearly involved manufacturing, citing judgments such as Anil Ice Factory and Another v. Union of India, Frick India Ltd. v. Union of India & Ors., and Narne Tulaman Manufacturers Pvt. Ltd. v. Collector of Central Excise. These judgments emphasized that assembling parts into a new product that is commercially distinct constitutes manufacturing. The Tribunal found that whether the appellant's activities amounted to manufacturing was arguable and required further examination.

2. Limitation Period and Suppression of Facts:
The appellant argued that the extended period of limitation could not be invoked as their activities were well within the knowledge of the department, and there was no suppression of facts. They referred to the Assistant Collector's order and a letter dated 2nd June 1982, which was not related to the show cause notice adjudicated upon by the Collector. They contended that the Collector's finding of suppression was perverse and disregarded clear records.

The respondent countered that there was suppression of facts, as the appellant did not show invoices issued from the sale depot at Delhi or the contracts to the authorities. They cited the order-in-original, which discussed various instances of duty evasion by the appellant. The Tribunal noted that the merits of the case regarding limitation and suppression were contentious and arguable.

3. Financial Hardship and Stay Application:
The appellant claimed financial hardship, stating that their unit was a sick unit with substantial net losses and poor liquidity. They argued that paying the disputed duty and penalty would cause undue hardship and potentially crumble their business. They supported their claim with annual reports showing significant losses and argued for a stay on the grounds of undue hardship.

The respondent argued that the appellant's financial position was reasonably good, citing the balance sheet showing substantial sundry debtors and inventories. They contended that the appellant should not be granted a stay based on financial hardship.

The Tribunal considered the financial position of the appellant, noting the substantial losses and poor liquidity. They referred to the Supreme Court's judgment in Spencer & Company v. Union of India, which emphasized considering the liquidity position in stay applications. The Tribunal concluded that requiring the appellant to deposit the full duty and penalty would amount to undue hardship. They ordered the appellant to deposit Rs. 2,00,00,000 in four equal monthly installments and furnish a bank guarantee for Rs. 1,00,00,000. The Tribunal also ordered that the appellant should not alienate or encumber any assets without prior permission during the pendency of the appeal and that the revenue authorities should not pursue recovery proceedings for the balance amount.

Conclusion:
The Tribunal found that the issues of manufacturing activity and limitation were arguable and required further examination. They granted a conditional stay based on the appellant's financial hardship, requiring a partial deposit and a bank guarantee while preventing the alienation of assets and halting recovery proceedings for the balance amount during the appeal's pendency.

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