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TMI Blog2013 (3) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ITI Ltd. at Bangalore, various other equipments were procured from other units. She has observed that the equipments could not have been entirely manufactured by M/s. Alcatel Network Systems India Ltd. and supplied to the Appellant after payment of appropriate excise duty. The said finding of the adjudicating authority has not been challenged in the present Appeal nor any contrary evidence has been produced thus, it is crystal clear that the Appellant had procured various parts of DLTEE System from different sources including M/s. ITI Ltd., Bangalore, on whom M/s. Alcatel Network Systems India Ltd. had sub-contracted for supply of the said System and the same were assembled at their site by their own engineers. Also, the evidences in the form of statements of the Divisional Engineer and AGM are relevant, as both these employees of the Appellant had clearly agreed/accepted that all these parts were assembled by the engineers of the Appellant at their site resulting into emergence of the said DLTEE. Therefore, the claim of the Appellant that in view of the stipulation in the APO and PO, the DLTEE could not be assembled without necessary training and expertise, being contrary to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise Rules, 2002, as was in force at the material time. Thus as in the instant case, it is not in dispute that after assembly of the said DLTEE by the engineers of the Appellant, the same was tested and handed over for its use on 30.07.2002 also admitted in the statement of Shri Nikhil Kumar Das dated 01.06.2006, an evidence not been contradicted and hence the said DLTEE System could be considered as manufactured and removed on 30.07.2002 and therefore, liable to excise duty on the assessable value determined as per the principles laid down under Sec.4 of CEA,1944. In the present case, there is no doubt that the Exchange had been put to use by the Appellant for rendering telephone lines to the respective customers for their use. Hence, the assessable value is correctly determined under Rule 8 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000. The Appellant have not disputed the cost price adopted for the determination of the value under the said Rule 8 of Valuation Rules,2000. The claim of the Appellant has been found to be incorrect leading to an irresistible inference that the facts were suppressed from the knowledge of the Department, as n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant had placed an Advance Purchase Order(APO) bearing No.IT/APO/034/2001-02 dated 01.11.2001 and a Purchase Order bearing No.ES/079/PHT-OCB dated 14.01.2002 on M/s. Alcatel Network Systems India Ltd. The said material was received by them under Packing Note-cum-Delivery Challan No.P-1-75 being case No.INPDC-65919/1-141 and the required Central Excise duty was paid on the same. He has submitted that from the said APO and the PO, it is crystal clear that the Appellant could not have manufactured the said Digital Local Exchange System, as they did not have necessary expertise to manufacture the same, since in the APO as well as in the PO, it had been specifically stipulated that all technical assistance like training for installation, commissioning and monitoring of the equipment would be provided by the supplier of the said equipment. He has submitted that the present system was an extension of the main system. 4. Further, the Ld. Adv.has submitted that the Central Excise authorities had visited the said premises of the Appellant under a wrong notion that DLTEE is an excisable commodity, and therefore the Appellant should discharge excise duty being manufacturer of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said Rules, which clearly states that if the goods are not sold but used for consumption and for manufacture of other articles, the value shall be the cost price. Finally, these Rules also state that if still the value cannot be determined, then the same sould be ascertained by reasonable means consisting of the principles of these Rules and Section 4 of the Act. He has further submitted that in such circumstances, the principles to explanation to Rule 5 of Central Excise Rules, 2002 would be relevant as to the date of removal and would be the date when the goods were issued for consumption or for manufacture of other articles. It is his submission that in view of the above provisions when the special Digital switching system was not moved out of the premises nor used for further manufacture of other articles, the question of valuation of the same under Central Excise Law does not and cannot arise. In support, he has placed on the following judgments,viz. Anjaleem Enterprises Pvt. Ltd. vs. CE, Ahmedabad 2006(194)ELT 129(SC); CCE, Belgaum vs. Akay Cosmetics Pvt. Ltd. 2005(182)ELT 294 (SC); Indorama Synthetics (I) Ltd. vs. CCE, Nagpur 2005(190)ELT 193(Tri.-Mumbai); Metzeller Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omponent parts of Digital Switching System had been assembled, installed and put to use by the Appellant at Panihati Telephone Exchange on 30.07.2002. 9. The Ld. AR submitted that , explaining the process of assembly of the Digital Switching System, Shri Nikhil Kumar Das revealed that the engineers had inserted PCB (Printed Circuit Board) in different racks viz. common control unit, i.e.SMA, SMT, SMC racks and connection unit, i.e.multi-media unit and non-multi-media unit which were received from different suppliers. Interconnecting Patch Cards were connected as per documents. Cables were laid and connected, Power on to the racks Software loaded. Power is transmitted from rectifier, viz. RMPS or SMPS to DCDB, i.e. Direct Current Distribution Board and from DCDB to rack. Common control unit control the whole Digital Local Telephone Exchange Equipment and connection unit where only subscribers were connected. MDF interconnects between subscriber cable and equipment side cables. MDF means as Iron structure consisting of Tag Block. One side of subscriber cable and other side of Digital Switching System are connected. 10. The ld. AR further submitted that by undertaking the proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective rate of duty had been prescribed by Notification No.73/90CE dt. 20.03.1990 on Rural automatic Telephone exchanges and hence the excisability of telephone exchanges was never under doubt. 14. On the issue of determination of value of the said Digital Switching system, rebutting the argument that it could be done only when the goods are removed, he has submitted that it is not always necessary for determination of the value of the goods, the same is required to be physically removed from the place of its manufacture. It is his argument that even if the manufactured goods are used at the place where it is manufactured, then also, it could be considered to have been removed within the meaning of Section 4 of CEA,1944. Hence, the relevant date for determination of value is 30.07.2002, when the said Digital Switching System was put to use; since the said System was not sold but used, hence, the assessable value of the same had been correctly determined under Section 4(1)(b) of CEA, 1944 read with Rule 8 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000. The Ld. A.R. further submitted that the judgements relied by the ld. Advocate are not applicable be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein it had been stipulated that all technical assistance like training for installing, commissioning and monitoring of the equipment would be provided by the supplier of the equipment. Taking cue from the said condition, it is argued that the said DLTEE System could not be installed and commissioned by the Appellant without necessary expertise and training. But, the evidence gathered by the department, is contrary to the said claim. 17. We find that rebutting to the said claim of the Appellant, the Department has adduced evidence establishing the fact that even though the APO and PO were placed on M/s. Alcatel Network Systems India Ltd., but on the basis of a sub-contract clause in the said APO/PO, the entire equipment was sub-contracted to M/s. ITI Ltd. Further, the Department, on investigation, found that not only the equipments supplied by M/s. ITI Ltd., various other parts were also procured by the Appellant and by employing their own engineers, all these equipments were assembled at their site at Panihati. 18. It has also been brought to our notice by the learned AR that in the impugned Order, the learned Commissioner has recorded a specific finding that besides the equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes immovable and hence cannot be considered as goods , and accordingly, not leviable to excise duty. 22. Answer to the said argument, in our view, could be located in the judgement of the Hon'ble Apex Court in the case of Solid Correct Engineering Works (supra). The Hon'ble Supreme Court in the said case after analyzing the principle of law on the subject, laid down the tests to ascertain in what circumstances the attachment to earth by various means, makes the goods immovable. At para 33 of the said judgement, their Lordships observed as under:- 33.It is noteworthy that in none of the cases relied upon by the assessee referred to above was there any element of installation of the machine for a given period of time as is the position in the instant case. The machines in question were by their very nature intended to be fixed permanently to the structures which were embedded in the earth. The structures were also custom made for the fixing of such machines without which the same could not become functional. The machines thus becoming a part and parcel of the structures in which they were fitted were no longer moveable goods. It was in those peculiar circumstances that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it to the floor is not to make it a permanent structure, but to make it functional. Further, we agree with the learned AR for the Revenue that it is an excisable goods being classifiable under Chapter sub-heading 85.15 of CETA, 1985 and the Appellant did not dispute about the said classification in their Appeal nor at any stage of the proceeding. 24. The next objection raised by the Ld. Advocate for the Appellant that even if it could be considered as an excisable goods , it cannot be subjected to excise levy, as of the twin test prescribed by the Hon'ble Apex Court, the test of marketability has not been satisfied in this case, i.e. the said DLTEE is not bought and sold in the market. The said argument of the Appellant seems to rest on the understanding that the goods would become marketable only if they are bought and sold, in its real sense, in the market. We are not in agreement with the said proposition of the ld. Advocate, in view of the settled principle of law in this regard by the Hon'ble Supreme Court. In the recent case of Medley Pharmaceuticals Ltd. (supra), their Lordships after discussing precedents on the concept of marketability , laid down the principle, at para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of movability and marketability, as laid down in Medley Pharmaceuticals Ltd. case, had been satisfied, we have no hesitation to observe that the product emerged after assembly of various parts at Panihati known as DLTEE, is an excisable goods and leviable to excise duty under Chapter Heading 85.17 of the CETA. 26. We agree with the contention of the ld. A.R. that the judgement of the Hon'ble Apex Court in Board of Trustees case (supra) is not applicable to the facts and circumstances of the present case. In the said case, their Lordships had come to the conclusion, after considering the facts and evidences brought on record, that the department failed to discharge its onus in establishing the test of marketability of the goods and the said aspect was also not considered specifically by the Tribunal, rendering the Order bad in law. In contrast, the marketability of DLTEE has been established by the Department in the present case. 27. The other argument of the Ld. Advocate resisting collection of excise duty on the Digital Local Telephone Exchange Equipment (DLTEE) System rests on the aspect of determination of its value under Section 4 of CEA, 1944. The ld. Advocate emphasized t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Rules, 2002, as was in force at the material time. The said provision acknowledges that manufactured goods could be said to have been removed from the place of its manufacture when the same has been put to use at the place of manufacture and consequently, chargeable to excise duty. In the instant case, it is not in dispute that after assembly of the said DLTEE by the engineers of the Appellant, the same was tested and handed over for its use on 30.07.2002. This fact has been admitted in the statement of Shri Nikhil Kumar Das dated 01.06.2006, an evidence not been contradicted and hence the said DLTEE System could be considered as manufactured and removed on 30.07.2002 and therefore, liable to excise duty on the assessable value determined as per the principles laid down under Sec.4 of CEA,1944. 30. We agree with the submission of the Ld. A.R. that the case laws cited by the ld. Advocate in support of the argument that valuation of goods could be determined only when the manufactured goods are physically removed from the place of its manufacture and accordingly, if not removed, neither valuation of the goods could be ascertained nor excise duty is payable, are not applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use. Hence, the assessable value is correctly determined under Rule 8 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000. The Appellant have not disputed the cost price adopted for the determination of the value under the said Rule 8 of Valuation Rules,2000. 33. The Ld. Advocate for the Appellant did not advance any argument on the point of limitation. However, we find that in their Grounds of Appeal, a feeble argument has been advanced by the Appellant that the show cause notice was issued after a period of four and a half years without justifying that there was suppression or misdeclaration. On perusal of the records, we find that the initial claim of the Appellant in response to the inquiry of the department was that they had procured the duty paid DLTEE System from M/s. Alcatel Network Systems India Ltd., and merely assembled the same. But, later on investigation, it was found that, they had sub-contracted the System in favour of M/s. DLTEE and the ld. Commissioner has recorded a specific finding that necessary equipments were procured from other sources also. From the statement of the Divisional Engineer Shri Nikhil Das, it became clear that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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