9911796707
TMI Blog1984 (2) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... was proved to the satisfaction of the Collector of the Central Excise that they were intended to be used as original equipment parts by manufacturers of motor vehicles and the procedure set out in Chapter-X of the Central Excise Rules, was followed. The appellants applied for a L 6 licence through their application dated 4-6-1971 mentioning that remission of duty was desired on motor vehicle parts under the concession given in Notification 101/71. The Department granted the licence after all the formalities had been complied with. The appellants state that their reading was and is that the duty remission was available to them as manufacturers of motor vehicles as long as they followed the prescribed procedure and used the parts as original equipment parts regardless of whether they were used as original equipment parts of motor vehicles or as original equipment parts of the internal combustion engines manufactured by them. Accordingly their estimated requirements in the application for renewal of their L6 licence included the quantities of parts both for motor vehicles and internal combustion engines. That they were specifically authorised to avail the concession is also evident fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment markets; (ii) they did not keep proper accounts of receipts and issues of parts procured under Chapter-X, did not submit monthly R.T. 12 in respect of I.C. Engines and did not submit correct figures of manufacture of motor vehicles in the R.T. 11 for motor vehicles; and (iii) failed to satisfactorily account for 68459 pieces of motor vehicle parts found short compared to the R.G. 16 balance. They were called upon to show cause why the goods seized should not be confiscated under Rules 196 and 173Q (1), why penalty should not be imposed under Rules 173Q (1) and 210 and why duty at the appropriate rate should not be demanded on 195661 pieces of parts used in internal combustion engines cleared for sale and on 68459 pieces of parts found short compared to the R.G. 1 register. They were also required to show cause why the concession granted under Rule 192 should not be withdrawn and the security deposited should not be forfeited under Rule 196. After due proceedings the Collector, by an order-in-original No. V(34A)15-184/Adj/76/865, dated 14-11-1977 held contravention with intent to evade payment of duty proved and duty was liable to be paid on 195661 motor vehicle parts and the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication 101/71 did not admit of the interpretation that the parts must be used as O.E. parts of motor vehicles alone. A taxing statute must be strictly construed as held by the Supreme Court and no strict construction, the appellants were entitled to and rightly availed of the benefit of Notification 101/71; even if the notification admitted of the interpretation placed on it by the department, it would, at once be seen to be ambiguously worked and the benefit of this ambiguity must be extended to the appellants; Chapter-X is self-contained and Rules 173Q and 213 could not be invoked for imposing penalties; seizure of goods which had not yet been taken into use was mala fide and unlawful being unwarranted by Section 110 of the Customs Act as applied to Central Excise; in the absence of a breach leading to withdrawal of the concession under Chapter-X, confiscation of goods lying in stock was clearly unlawful; and since the appellants were using the parts in the genuine belief that as manufacturers of motor vehicles they could be used in the manufacture of internal combustion engines and since such use was known to and had its tacit approval of the department, the duty allegedly sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear provisions of Section 36 and since the basic allegation that the parts procured for use as O.E. parts in the manufacture of motor vehicles were diverted for a different use, has remained unchanged. In certain notification 101/71 as directed by the Government of India does not amount to levying any new charge and there is no violation of natural justice as claimed; (2) proviso (b) of Rule 10 provides for recovery of duty not levied or not paid within five years for contravention of Rules with intent to evade duty. The show cause notice originally issued was not time-barred and no such objection was raised then. So far as the de-now proceedings are concerned, no fresh notice has been issued; (3) presuming the diversion was known to the officers, it cannot preclude remedial action by Government. At best it could be argued that no penal liability would be attracted but here it is doubtful if the diversion was within the specific knowledge of the officers, as listing of parts for I.C. engines in the AL 6 would not be adequate to inform the officers about diversion as it would not spell out that such engines are intended to be removed as replacement parts. In the RT 11 retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression such a breach appearing in Rule 196 to such breach , trying to create the impression that the breach covers all breaches and not the particular breach culminating in withdrawal of the concession. No confiscation is contemplated in Rule 196 for any breach other than one leading to withdrawal of the concession because the goods would in all other events be either used for the intended purpose or cleared on payment of duty. (C) Further, since the goods had not been removed from the factory, their seizure and confiscation were illegal. Under Section 110 of the Customs Act only goods liable to confiscation can be seized. In its application under Section 12 of the Central Excises and Salt Act, 1944 excisable goods which have been removed in contravention of the provisions of the Central Excise Rules, 1944 are liable to seizure/confiscation. (D) The Collector s finding on limitation is based on misapprehension of Rule 10 as it applied on 31st March/Ist April, 1977 when there was no proviso which was added only on 6-8-1977. Under Rules 10 and 173J, the demand for the period prior to 31st March/lst April, 1976 is barred. (E) Reliance on RT 11 to establish deliberate i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved to be intended to be used as original equipment parts by the manufacturers of motor vehicles falling under Tariff Item 34 and the procedure set out in Chapter X is followed. Notification No. 153/71, dated 26-7-1971 was a parallel notification exempting parts intended to be used in assembled components which are utilised as O.E. parts by manufacturers of motor vehicles. The appellants obtained L 6-34A No. 2/71 and executed a B8 (security) bond for ₹ 10,000 dated 22-6-1971 for availing of Notification No. 101/71 as can be seen from CT 2 certificate dated 23-12-1976 issued by the Superintendent of Central Excise. They did not avail of Notification 153/71 which placed a fetter in that assembled components should also be used as O.E. parts of motor vehicles, which fetter was also removed vide Notification No. 249/72, dated 1-11-1982. From 26-3-1971 to 3-9-1976 as many as 21 inspections and audits were carried out, so the department was fully aware that Notification 101/71 was being availed and the engines containing exempted parts were being cleared as such. It was well-settled that the operation of a notification is to be judged not by the object but by the actual words u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on regarding the particulars of demands in question. He also cited 1957 S.C.R. 370 to support the argument that a Tribunal has power to amend a charge but this cannot be so altered as to make out a fresh case, as has happened here. 7. Shri Lakshmi Kumaran explained that motor vehicle parts N.E.S. were taxed for the first time in 1971. By Notification No. 99/71 exemption was given to all but a few specified parts like circlips, pistons etc. Government had clarified that even these would not be taxed if used as original equipment in motor vehicles. This was the genesis of Notification No. 101/71. He also dwelt on the provisions of Chapter X. In July 1971, Notification No. 153/71 was issued to ensure that parts used in sub-assemblies of motor vehicles do not have to bear duty. Notification No. 242/82 has further liberalised this. As regards the present case, proviso to Notification No. 101/71 states intended to be used as original equipment parts . Original means that which is used from the very beginning. This would not include parts replaced during the Warranty period by a manufacturer of a car. The onus of duty is thus shifted from the manufacturer of the parts to the vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it i.e. sub-assembly manufacturers. Regarding AIR 1962 p. 1764 that was a criminal case, whereas here it is a taxation matter where strict interpretation of the language actually used is imperative. Learned Counsel relied on AIR 1981 S.C. 97 to support his plea that where two expressions could have been used but only one is used, the benefit should be granted. 9. We have given careful thought to the pleas advanced on both sides. The short point here is whether the appellants were entitled to Notification No. 101/71 by virtue of the fact that they were manufacturers of motor vehicles, irrespective of whether or not the parts claiming exemption were used in engines cleared for sale as such. When the notification speaks of use by a manufacturer of motor vehicles it would be stretching things to construe this to mean a manufacturer of engines, ignoring the fact that each has a distinct licence and character. Whether there is ambiguity or not is itself in doubt. In any event, the Notification 153/71 was sufficient to put at rest all doubt as it was made clear that sub-assembly manufacturers, who procured exempted parts, were on a different footing from manufacturers of motor vehicl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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