AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (8) TMI 1716
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....ment of duty during the period 2002-03 and 2003-04 Financial Year. Consequently, a show-cause notice was issued to them on 22.11.2005 demanding a total amount of Rs. 16.50 crores along with interest and proposal for penalty. On adjudication, the demand was confirmed which was reduced to Rs. 304/- lakhs with interest and penalty of Rs. 25/- lakhs. Aggrieved by the said order, they filed an appeal before this Tribunal and by order dated 03.05.2010, the same was remanded to the adjudicating authority for fresh consideration. In the de novo proceeding, the Ld. Commissioner taking into consideration the submissions and evidences produced, confirmed demand of Rs.189.32 lakhs along with interest and equal amount of penalty. 3. The learned advocate for the appellant, at the outset, has submitted that the R & D Unit of the appellant is located at Bangalore discharging the following functions: ● Develop Transmission, Switching and Terminal Products ● To update knowledge on latest trends on communication technology ● To assist management in selection of technology partner 3.1 After successful development of the products, the results are submi....
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....n essential character for charging duty. Identity of the product and marketability are the twin aspects to decide levy of Excise duty. Thus, the product which is made liable to duty must be marketable in the condition in which it emerges. In support, he has referred to the following decisions: ● Moti Laminates Pvt. Ltd. Vs. Collector of Central Excise, Ahmedabad: 1995 (76) ELT 241 ● UOI vs. Delhi Cloth & General Mills Co. Ltd.: 1997 (92) ELT 315 ● Gujarat, Narmada Valley Fertilizer Co. Ltd. Vs. CE: 2005 (184) ELT 128 (SC) ● Deccan Fibres Glass Ltd. Vs. UOI: 2006 (193) ELT 261 (Del.) ● Texmaco Ltd. Vs. CCE, Kolkata-III: 2008 (221) ELT 535 He has submitted that the department has not placed on record that the product developed by R & D unit of ITI unit are marketable. 3.4 He has further submitted that for the Financial Year 2002-03, the learned Commissioner has dropped the demand in respect of three projects viz., Call Centre, Info-kiosk and HDSL NMS for HDSL, however, confirmed duty on total expenditure of Rs.496.46 lakhs for 14 projects. 3.5 Discussing each of the projects for the Financial Yea....
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.... The production documents (drawings) were transferred to Naini were cleared from ITI, Bangalore. The appellant submit that the duty on plans and drawings falling under CSH 4906 0000 is liable to NIL rate of duty. As such, the demand of duty on this count does not survive. (vi) 2/34 OPTIMUX design: This project was successfully completed, TEC type approval obtained production documents (drawings) were transferred to Naini and no goods as such were cleared from ITI, Bangalore. The appellants submit that the duty on plans and drawings falling under CSH 4906 0000 is liable to NIL rate of duty. As such the demand of duty on this count does not survive. (vii) 16 XKBPS SCG: The product was developed in 2002- 2003, the actual production and clearance of the goods were effected in 2005-2006 on payment of duty. This fact has been admitted by the learned Commissioner. It is therefore submitted that no further duty is demandable in as much as the R & D work done on this product was utilised only after receipt of work order and dispatched to the customer during 2005-2006. Since duty has been paid, demanding duty a second time is not sustainable in law. (viii) 2/8 OPTI....
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.... (vi) Power Group (vii) NMS for CIVICON 3.7 He submits that for the remaining 14 projects, the appellants submitted that: i. ISDN Phone: In the instant case the development of this phone was taken up against TEC specification and was offered for TEC evaluation. The evaluation could not be completed as TEC changed its specification. However, Interface approval was obtained but the same has to be commercially exploited. The observations of the Ld. Commissioner that it is implied that the prototype of the said product was successfully cleared & deployed by ITI, is based on assumptions and not on facts. A product or goods are not liable for duty unless such products are cleared from the place of manufacture. In the instant case, since TEC have changed the specification of ISDN Phone, the same could not be offered for marketing. It is now settled law that unless a product is marketable, the same is not liable to duty. ii. Ku Band IDR Equipment: In the instant case the project was taken up against TEC specification to participate in BSNL tenders as Ku Band Satellite Network was being expanded by BSNL. This was successfully developed and offered for TEC ....
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....ce it is submitted that the demanded for the duty on this item is contrary to accepted the principals of valuation. [ITI in their letter dated 28-9-2011 enclosed Closure Report of Work Order dated 30.8.2005 & 29.12.2005-Pg. 7 & Pg-3 of Closure Reports] vii. Immarsat Secrecy: In the instant case the product was developed for the army but was not commercialized. This position has been admitted by the Ld. Commissioner. The Appellants submit that the project was not commercialized because the same was not marketable. It is settled Law that no duty is liable to be paid when a product is not marketable. It is also submitted that when a product is sent for testing / field trials it is still considered as not fully manufactured. [IT] in their letter dated 28-9-2011 enclosed Closure Report of Work Order dated 28.12.2005 viii. C Band IDR Package: In the instant case this project was successfully completed. They have obtained tender from BSNL also. It is respectfully submitted that the Appellants have cleared the goods against the BSNL tender after payment of appropriate duty in FY 2004-2005/2005-2006. Therefore, duty is not demandable once again, since the value of prototyp....
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....priate duty, submitted that the appellants in their arguments had contended that number of projects were abandoned, though completed could not be commercially exploited or marketed, some were in progress as ongoing projects and later completed; the cost of such R & D was included in the cost of final products on which appropriate duty has been paid; it is also argued that in the absence of evidence, the products are marketable, demand of duty cannot be sustained, he has submitted that there is no denial of the fact that the expenditure were incurred towards R & D resulted in development of new product prototypes. The fact that the manufactured prototypes were removed subjected to field trials and technical evaluation by certain agencies who were competent to issue authorised certification regarding product quality and endurance is also not disputed. The argument of the appellant that these prototypes are not marketable and cost of such off commercial products and also several products either abandoned or in progress has been discussed in detail project-wise by the adjudicating authority. He has submitted that even though the appellant has not challenged the excisability of the prod....
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.... ● Delhi Cloth and General Mills: 1977 (1) ELT J199[S.C.] ● Union Carbide India Ltd.: 1986(24) ELT 169[S.C.] ● Bhor Industries: 1989(40) ELT 280[S.C.] ● Hindustan Polymers: 1989(43) ELT 165[S.C.] ● A.P. State Electricity Board: 1994(70) ELT 3(S.C.) ● Indian Cable Company Ltd.: 1994(74) ELT 22[S.C.] ● Triveni Engineering & Industries Ltd: 2000(120) ELT 273 [S.C.] ● Sonic Electrochem (P) Ltd.: 2002(145) ELT 274 S.C.] ● Cadila Laboratories (P) Ltd.: 2003(152) ELT 262[S.C.] ● Hindustan Zinc Ltd.: 2005(181) ELT 170[S.C.] ● Dharampal Satyapal: 2005(183) ELT 241[S.C.] ● Gujarat Narmada Valley Fertilizer Ltd.: 2005(184) ELT 128[S.C.] ● Moriroku UT India (P) Ltd.: 2008(224) ELT 365[S.C.] ● Medley Pharmaceuticals Ltd. vs. Commissioner of Central Excise & Cus., Daman: 2011(263) ELT 641[S.C.] ● Escorts Ltd.: 2015 (319) E.L.T. 406 [S.C.] 4.2 Further responding to the argument that projects were abandoned though completed could not be commercially accepted or marketed, ong....
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....xcisable. The present impugned order is the de novo order passed by the Commissioner after the case was remanded by this Tribunal setting aside the earlier order where the appellant could not place all the documents before the adjudicating authority and the same was placed for the first time before the Tribunal. In the de novo proceedings, the learned Commissioner analysed the whole issues taking into consideration the detailed submissions advanced by the appellants for all the projects i.e., 14 projects for the year 2002-03 and 21 projects during 2003-04. Thereafter, analysing each and every project, the learned Commissioner dropped three projects for the year Financial Year 2002-03 which were either abandoned or not implemented and seven projects for the year 2003-04. In the remaining projects for the respective Financial Years, the learned Commissioner observed that the projects had been implemented and accordingly, duty ought to be discharged on the said projects. 8. The learned Commissioner on the issue of marketability held that the R & D goods is in the nature of Prototype commercially recognised by the concerned stakeholders for whom the projects are executed by the ITI.....
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.... in the shape or condition in which the manufactured article is found. It is the commercial identity of the article known to the market for being bought and sold. The fact that the product in question is generally not being bought or sold or has no demand in the market, would be irrelevant. [See Indian Cable Co. Ltd. v. CCE, 1994 (74) E.L.T. 22 (S.C.)]. We will now refer to some of the decisions of this Court, which have explained the concept of 'Marketability' for the purpose of the Act." 11. The learned Commissioner in the impugned order has discussed in detail the prototypes cleared on project-wise for the Financial Year 2002-03 and Financial Year 2003-04. For the Financial Year 2002-03, he has discussed all total 14 projects viz., (i) Call Centre; (ii) ISDN phone; (iii) ADSL; (iv) Frequency Agile Digital Radio; (v) Blue Tooth; (vi) INFOKIOSK; (vii) OLTE Redesign; (viii) 2/34 OPTIMUX Redesign; (ix) HDSL NMS for HDSL; (x) 16KBPS SCG; (xi) 2/8 OPTIMUX; (xii) Encryption for Carnation; (xiii) Earth Station for RCPC; and (xiv) MCPC VSAT (10+1) CH. Against each of the project, the learned Commissioner taking note of the written submission furnishing details of projects filed by the....
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.... for the said Financial Years 2002-03 and 2003-04, which, in our opinion, cannot justify the claim of the appellant since the prototypes not commercially exploited cannot be leviable to duty. 13. For the Financial Year 2003-04, the learned Commissioner has discussed 21 R & D projects viz., (i) CTI PABX; (ii) Call Centre; (iii) IPPABX; (iv) ISDN Phone; (v) Ku Band IDR Equipment; (vi) Blue Tooth; (vii) IP Telephone; (viii) Telephone set 5C; (ix) CTI Controller; (x) ISDN PABX & ISPX 2K System; (xi) INFOKIOSK; (xii) Inmarsat Secrecy; (xiii) C Band IDR Package; (xiv) MCPC V SAT; (xv) Power Group; (xvi) NMS For Civicon; (xvii) Ruggedised PCM MUX; (xviii) Satellite Communication; (xix) ASCON Phase III Satellite; (xx) ASCON Phase III NMS and (xxi) ASCON Phase III Switch. Analysing the written submissions filed by the appellant with regard to the findings of the Commissioner more or less, a common argument has been advanced by submitting that since the product could not be commercially exploited, therefore duty cannot be sustained in law. Also, it has been argued by the appellant that the value of prototypes/intellectual property is required to be amortized over a period of time and incl....