TaxTMI 
TaxTMI 
1990 (12) TMI 209
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to I.G.E. M/s. I.G.E. in turn sell the low powered X-ray equipment to their customers viz; doctors, clinics and hospitals. Since M/s. Elpro do not have the facility to manufacture high powered X-ray equipment, they manufacture - (i) Floor to Ceiling X-ray rails, (ii) X-ray column/Tube stand, (iii) X-ray tables with a base. 3. The parts and components thus manufactured are sold to M/s. I.G.E. which in turn purchases X-ray tube unit and high voltage cables from BEL, and other non-essential parts from other manufacturers to make it a complete X-ray unit, sells the same to their customers under an agreement. The shareholding of M/s. Elpro is as follows: General Electric Co. of India - 40% Investment Corpn. of India - 6% Nationalised Commercial Banks - 10% Govt. Institutions like Indian Assurance Co. Ltd. - 8% General public - 36% and the total number of shareholders is 1,394/-. 4. After the introduction of Tariff Item No. 68, the deptt. levied Central Excise duty on the items manufactured by M/s. Elpro on the prices at which the parts and components were sold to their customers by M/s. I.G.E. M/s. Elpro paid duty under protest. Till February 10th, 1986 M/s. Elpro file....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hine', that value of essential/integral parts of the said X-ray machine such as X-ray tube unit, high tension cables, have been deliberately excluded from the price submitted to the deptt., in a bid to 'undervalue' the product and thereby evaded the central excise duty; that they have failed to declare the correct pattern of sale through their 'related persons' and have deliberately excluded a part of the advertisement expenses; made the central excise department believe that the product despatched from the factory by M/s. Elpro was incomplete X-ray machine conforming to the description in the classification list, when in fact, an incomplete X-ray machine was despatched from their factory and after fitting the incomplete machine with certain essential components by their 'related persons', the machine was sold to the customers, and that they entered into a conspiracy and a secret understanding with M/s. Elpro. It was proposed in the show cause notice to recover duty for the period from Oct., 82 to June, 87 amounting to Rs. 12,38,863.37. 9. The allegations against M/s. I.G.E. are that they were directed to show cause why a penalty should not be imposed under Section 9(2) for enteri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ro/I.G.E. are entitled for modvat of duty paid on the components wherever admissible. 15. According to the Collector, the assessable value for the purposes of approval of the price-lists is in part-II under the provisions of Sec. 4. He also held that the assessable value should be the contract value minus the actual cost of erection, installation, but, should include all the expenses such as after sale service, marketing and selling organisational expenses, advertisement expenses, incurred by M/s. Elpro and M/s. I.G.E. up to the date of delivery of complete X-ray system at the site on account of storage charges, handling charges, interest on inventory and the value of bought out items. 16. He observed that X-ray equipment is not immovable property but goods assessable under Section 4 of the Act. 17. Challenging the above order Shri Banerjee on behalf of M/s. I.G.E. raised the following contentions: The order of the Collector traverses beyond the allegations made in the show cause notice. It was contended that the show cause notice against M/s. I.G.E. only directed to show cause as to why penalty should not be imposed on them under Section 9(2) of the Central Excises and Salt Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able. Relying on Tata Robins Fraser Ltd. v. CCE - 1990 (46) E.L.T. 562 (Tri.) -1990 (15) ETR page 34, he submitted that mere collection of various components/parts at site partly by manufacture from its own factory, partly getting them from other factories partly buying some from the market will not amount to manufacture within the meaning of Section 2(f) of the Act. He also relied on the following passage of Diamond Clock Mfg. Co. Ltd. v. CCE [1988 (34) E.L.T. page 662] :- "The Anand traders supply bought out items to their customers. These consist of cables and adaptors. It appears that these three are, essential for the operation of the meter but they are not manufactured by the appellants, nor are they fitted into the machines before clearance. If this is the tactual position and only incomplete machines are cleared from Diamond factory the value of such parts supplied to customers by 'Anand Traders' later should not be included." and contended that M/s. I.G.E. purchases some parts from M/s. Elpro and some parts from BEL and non-essential parts from other manufacturers. The essential parts purchased from BEL never entered the factory premises of M/s. Elpro and are stored in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mand of duty by including the value of bought out components by M/s. I.G.E. and installation and other charges is opposed to Section 4 of the Act. In support of this contention he relied on the orders of this Tribunal in Carbon Inds. (P) Ltd. v. CCE [1985 (19) E.L.T. page 435]; Wellpoint Systems case [1986 (26) E.L.T. 1015]. 26. The department sought to recover differential duty from M/s. Elpro being duty worked out on the entire X-ray system less the duty already paid on the components/parts manufactured and cleared. Short levy of duty can be collected only in respect of the same goods, such short levy in the order under appeal is sought to be collected in respect of differential duty alleged goods, i.e. on the one hand duty paid on the clearances of incomplete X-ray system, and duty leviable on complete X-ray machine installed by I.G.E. Such a proceeding is beyond the provision of the Act. 27. It is next contended that the department is sought to recover the duty from M/s. Elpro not only on the value of the goods manufactured and cleared from M/s. Elpro's factory but also on the value of bought out components of M/s. I.G.E. which never entered L-4 premises of Elpro and on insta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....order of the Collector traverses beyond the scope of the show cause notice. 32. In this context it is relevant to extract the allegations against I.G.E. in the show cause notice. They are as follows :- "M/s. I.G.E. (India) Ltd. Bombay-21 and the Directors and employees mentioned at S. Nos. 11 to 20 are also directed to show cause to the Collector of Central Excise and Customs, Pune, P.M.C.'s Commercial Bidg., Hirabagh, Tilak Road, Pune 411002 as to why, penalty should not be imposed on them under Section 9(2) of the Central Excises and Salt Act, 1944 for entering into a "conspiracy" with the assessee and thereby abetting the commission of an offence viz. the evasion of Central Excise duty." 33. In short, the proposal in the show cause notice is to impose penalty under Section 9(2) for entering into conspiracy with the assessee namely, M/s. Elpro and abetting the commission of offence i.e. evasion of central excise duty. 34. We may at the outset point out that Section 9(2) provides for imprisonment for a term which may extend to 7 years and with fine, if any person convicted of an offence under Section 9 is again convicted of an offence under Section 9. It is not clear how Secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....value should be the entire contract value, on which I.G.E. has to pay central excise duty. Therefore, we are of the view that the order of the Collector against M/s. I.G.E. traverses beyond the show cause notice and is, therefore, cannot be sustained. We accordingly set aside the order of the Collector in so far as M/s. I.G.E. is concerned. 38. Now taking up the appeal of M/s. Elpro the main contention is that they supply only components/parts of high rate X-ray machine under the contract namely: (i) X-ray Floor to Ceiling Rail, (ii) X-ray Column, (iii) X-ray table with base and bucky comprising of imported grid, and I.G.E. purchased essential parts from BEL namely, X-ray tube unit, and High voltage cable and from BEL and other non-essential parts from other manufacturers and that I.G.E. is not a related person and it is only at the instance of the department they are filing the price-list under part- IV and paying duty on the prices at which I.G.E. is selling to customers in respect of those components/parts and that X-ray equipment is not goods and immovable property, and therefore, X-ray equipment is not liable to pay any excise duty. 39. The liability of M/s. El....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther words the shares are held by GEC in M/s. Elpro and not by I.G.E. The relationship between I.G.E. and GEC and Elpro are not elaborated, and discussed. 42. We may now refer to the definition of related person under Section 4(4)(c) of the Act. It reads: " 'related person' means a person who is so associated with the assessee that they have interest directly or indirectly in the business of each other and include a holding company, a subsidiary company, a relative and a distributor of the assessee and distributor of such distributor." The first part of the definition speaks of a person who is associated with the assessee that they have interest directly or indirectly in the business of each other. The Collector has not referred to any material as to how M/s. Elpro and I.G.E. are interested in the business of each other. There is no evidence as to the financial or administrative control, or interest of M/s. Elpro in M/s. I.G.E. and vice-a-versa. No inquiry is made to establish mutuality of interest between M/s. Elpro and M/s. I.G.E. Further the share holding of both the companies which were referred to in earlier paragraph does not indicate mutuality of interest between the two.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enerators and other things are fastened to the earth and the X-ray tube units and high voltage cable are fitted the X-ray equipment is immovable property and, therefore not excisable goods. 48. The expression immovable property is not defined under the Central Excises and Salt Act, 1944. Therefore, we have to take recourse to the definition under the General Clauses Act. Sec. 3(26) defines immovable property and it reads as follows :- '"immovable property" shall include land, benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth;' 49. The Madras High Court in K.N. Subramaniam Chattiar v. M. Chidambaram (AIR 1940 Madras 527) while construing the definition of immovable property observed that "a thing is imbedded in earth or attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached, then it is part of the immovable property. If the attachment is merely for the beneficial enjoyment of the chattel itself then it remains a chattel even though fixed for the time being so that it may be enjoyed. The question must in each case be decided according to circumstances". No doubt,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sembled them together so that they can work as one machine as such the appellants manufacture and created weighbridge." Challenging the above order of the Tribunal it was contended before the Supreme Court that the appellants were liable to pay duty only for the indicator system which they have manufactured. Repelling the same it was held that: "The activity of assembling three components, i) plateform, ii) loadcell, and iii) indicating system, amounts to manufacture as it brings into existence weighbridge a new product known to the market and known under the excise item. The mere fact that the appellants bought out two parts and manufactured only indicating system and paid duty thereon will not change the position because parts and end products are separately dutiable". 54. Similarly, in Tata Iron & Steel Co. Ltd. v. U.O.I. [1988 (33) E.L.T. page 297] it was held that where the entire assembly cannot be transported, that can be done only in knocked-down condition. The supply in that condition does not mean that no excisable article has come into existence. Therefore, cranes transported in knocked-down condition are also liable to duty. 55. From the above it follows that if a pe....