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TMI Blog1991 (7) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... notice to the appellants demanding Central Excise duty amounting to Rs. 32,330-00 on testing charges recovered for testing the proto-type towers. Three other similar show cause notices dated 18/20-11-1980, 31-8-1981 and 24-3-1982 seeking the recovery of Rs. 2400/-, Rs. 7040, and Rs. 5200/- respectively answerable to the Assistant Collector were also issued. The show cause notices alleged that the test charges recovered from the customers constituted a part of the assessable value of the transmission line towers covered by the relative contracts. It was further alleged that the appellants failed to indicate the testing charges in the invoices prepared for the supply of the goods and they had failed to furnish to the Department the separate invoices prepared by them in respect of the testing charges. In their reply to the show cause notice dated 25-10-1980 the appellants claimed that the goods manufactured by them were not required to be tested since only the prototype ungalvanised towers were tested after clearance from the factory and the test charges recovered on account of the cost of the material and test fee did not represent advance payment towards the cost of the actual goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessable value of the Transmission Towers fabricated by the appellants in terms of the contract. Shri Joshi further contended that the demands for the recovery of duty were time-barred since they were not issued within the period of 6 months stipulated in Rule 10 of the Central Excise Rules, 1944. He denied that there was any suppression of facts by the appellants. In this regard he pointed out that the goods in question were removed from the factory under despatch challans and the contracts as well as the bills mentioning these charges were available for scrutiny by Central Excise Officers and Audit Parties which visited the factory from time to time. He claimed that the appellants had acted under the bona fide belief that the proto-type towers were not chargeable to duty, and not with the intent of evading any duty. In support of the points made, by him, he placed reliance on the following case law: - (i) Hyderabad Race Club v. CCE, Hyderabad -1986 (23) E.L.T. 274 (Tri.) (ii) CCE, Baroda v. M/s. Dodsal Pvt. Ltd. - 1987 (28) E.L.T. 352 (Tri.) = 1987 (11) ECR 692 (CEGAT-SB-I) (iii) SAE (India) Ltd. v. CCE -1988 (36) E.L.T. 613 (Tri.) 3. On behalf of the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessable value of the Power Line Transmission Towers which are fabricated after tests of the proto-type for erection in terms of the contracts. (iii) Whether the demands issued in this case were barred by limitation. 5. It is seen that in this case there is no dispute as regards the dutiability of the Power Line Transmission Towers which are cleared in completely knocked down condition by the appellants for actual assembly and erection at various sites in terms of the contract entered into by the appellants with their customers. The dispute is only in regard to the dutiability of the proto-type towers cleared for tests at sites having facilities for conducting the tests which in terms of the contract between the appellants and their customers have necessarily to precede the fabrication of the transmission towers for actual installation. The appellants case is that proto-type towers not being commercially marketable, cannot be deemed as goods chargeable to Central Excise duty. They have contended that transactions involving fabrication and sale can be only in respect of towers which are manufactured after the approval of the design by the customers on the basis of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise reported in 1989 (40) E.L.T. 280 (S.C) has observed that for any item marketability is an essential ingredient in order to be dutiable under the Schedule to the Central Excise Tariff Act, 1985. It would not be dutiable under the excise law simply because it falls within the schedule if it is not goods known to the market. The relevant extract from the judgment is reproduced below: - It is necessary in this connection to reiterate the basic fundamental principles of excise. The Judicial Committee of the Privy Council in Governor General in Council v. Province of Madras -1978 (2) E.L.T. (J 280) = (1945 F.C.R. 179), this Court observed at page 1287 of the report that excise duty was primarily a duty on the production or manufacture of goods produced or manufactured within the country. This Court again in In Re Tlie Bill to Amend S. 20 of the Sea Customs Act, 1878, and Section 3 of the Central Excises and Salt Act, 1944 [1964 (3) S.CR 787] at page 822 of the report referring to the aforesaid observations of the Judicial Committee reiterated that taxable event in the case of duties of excises is the manufacture of goods and the duty is not directly on the goods b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges cannot form a part of the assessable value of the transmission line towers delivered to the customers since testing of the proto-type is an independent process unconnected with the actual manufacture of the goods and the test charges recovered from the customers are paid to the test bed authorities who provide the necessary facilities for test. However, we are not convinced by the appellants arguments. The tests of the proto-type towers are undeniably carried out in relation to the transmission line towers that are manufactured for actual execution of the contract entered into between the appellants and their customers and the charges incurred for conducting such tests are paid by the customers in terms of the contract. We are, therefore, of the view that all charges recovered by the appellants from their customers on account of the testing of the proto-type towers which in terms of the contract precedes the manufacturing of the transmission towers to be actually delivered would form a part of the assessable value of such towers. We find that this view is supported by the Tribunal s decision in the case of Madhavnagar Cotton Mills Ltd., Sangli v. Collector of Central Excise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir customers. They have claimed that they cannot be accused of any wilful suppression of facts with the intention of evading duty since the test charges recovered by them were mentioned in the Sales Journal and the relevant contracts which were perused during the period 1976 to 1981 by the Central Excise Officers and Audit Parties who visited their factory for the inspection of the records. 10. Having regard to the relevant facts and circumstances, we are inclined to agree with the appellants that they had acted in the bona fide belief that Central Excise duty was not attracted on the proto-type towers cleared by them and also on the test charges recovered by them. In fact we have found ourselves to be in agreement with their contention in regard to the non-dutiability of the proto-type towers. We are, therefore, inclined to accept the appellants contention that non-declaration of the test-charges in the invoices filed by them with the Central Excise authorities was on account of their impression that such test charges would not form a part of the assessable vaiue, of the goods covered by the contract. From the records of the, case we find that Audit Parties of the Accountant Ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terpretation of the provisions of the law that the exempted goods were not required to be included and these did not include the value of the exempted goods, which they manufactured at the relevant time. The Tribunal found that the explanation was plausible, and also noted that the Department had full knowledge of the facts about manufacture of all the goods manufactured by the respondent when the declaration was filed by the respondent. The respondent did not include the value of the product other than those falling under Tariff Item 14E manufactured by the respondent and this was in the knowledge, according to the Tribunal, of the authorities. These findings of the Tribunal have not been challenged before us or before the Tribunal itself as being based on no evidence. 11. In view of the facts outlined above, on the ratio of the decision quoted above, we hold that there was no conscious or deliberate withhold of information by the appellants in regard to the test charges recovered by them with the intention of evading duty. We, therefore, hold that the extended period of beyond six months was not available to the Department for raising demands in this case. 12. In the result ..... X X X X Extracts X X X X X X X X Extracts X X X X
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