Supreme Court of India
M/S. ESCORTS LTD.versusCOMMNR. OF CENTRAL EXCISE, FARIDABAD
- Citation
- 2015 INSC 371
- Decided
- 29 April 2015
- Disposal
- Appeal(s) allowed
- Bench
- A K SIKRI
Holding
Transmission assemblies are distinct, marketable goods and thus liable to excise duty, but the extended limitation period is unavailable as there was no suppression or willful evasion.
Summary
The Supreme Court examined whether the transmission assembly, an intermediate component produced during the manufacture of tractors by M/s. Escorts Ltd., attracted excise duty under the Central Excise and Salt Act. The Court held that transmission assemblies are distinct, commercially known products and therefore qualify as "goods" liable to duty, even though no separate sales of the assemblies occurred. However, the Court found no evidence of suppression, fraud or willful intent to evade duty, and consequently ruled that the Revenue could not invoke the extended limitation period under Section 11‑A. The show‑cause notices were quashed and the CESTAT orders set aside. The appeals of the appellant were allowed and the Revenue’s appeals dismissed.
Issues considered
- Whether a transmission assembly, an intermediate product in tractor manufacturing, is a "good" liable to excise duty under Section 3 of the Central Excise and Salt Act.
- Whether the concept of marketability applies to an intermediate product that is not sold separately.
- Whether the Revenue can invoke the extended period of limitation under Section 11‑A of the Act in the absence of fraud, suppression or willful evasion.
Legislation cited
- Central Excise and Salt Act, 1944s. 11-A, s. 3
- Constitution of Indias. Article 366(12), s. Entry 84 List I
Subjects
excise dutyintermediate productmarketabilitymanufactureSection 11-Aextended limitation periodcaptive consumptiongoods definitionCentral Excise Act
Judgment
[2015] 5 S.C.R. 241 241
M/S. ESCORTS LTD. A
V.
COMMNR. OF CENTRAL EXCISE, FARIDABAD
(Civil Appeal No. 6561OF2004 etc.) B
APRIL29, 2015
[A.K. SIKRI AND R. F. NARIMAN, JJ.]
Central Excise and Salt Act, 1944 - ss. 3 and 11-A - C
Whether excise duty payable on 'Transmission Assembly',
an inte_rmediate product which comes into existence during
manufacture of tractors - Held: Transmission Assemblies
being a distinct commercially known product, is liable to o
excise duty- The fact that such product has not been sold is
irrelevant- However, in view of the facts of the cases showing
that there was no suppression or intent to evade the duty,
extended period of limitation is not available to Revenue -
Constitution of India, 1950 - Art. 366( 12) - Entry 84, List I, E
VII Schedule.
Words and Phrases - "Materials", "Commodities",
"Articles" and "Goods" - Meaning of.
F
Allowing the appeals, the Court
HELD: 1.1 The Transmission Assemblies of
tractors are commercially known products. The fact that
not a single sale of such Assembly has been made by G
the appellants is irrelevant. Therefore, the Transmission
Assembly of the tractor is clearly an intermediate product
which is a distinct product commercially known to the
market as such. [Para 15] [262-F-G]
H
1.2 Forexcise duty to be chargeable under the
241
242 SUPREME COURT REPORTS [2015] 5 S.C.R.
A constitutional entry read with Section 3 of the Central
Excise and Salt Act, two pre-requisites are necessary.
First, there must be "manufacture" which is understood
to mean the bringing into existence of a new substance.
And secondly, the word "goods" necessarily means that
B such manufacture must bring into existence a new
substance known to the market as such which brings in
the concept of marketability in addition to manufacture.
[Para 1O] [255-A-C]
C 1.3 Although the definition under Article 366(12)
of the Constitution of India is an inclusive one, it is clear
that 'materials', 'commodities' and 'articles' spoken of in
the definition take colour from one another. In order to
be "goods" it is clear that they should be known to the
0
market as materials, commodities and articles that are
capable of being sold. [Para 9] [254-G-H]
Union of India v. Delhi Cloth & General Mills Co. Ltd., 1963
Suppl. 1 SCR 586: 1963 Suppl. SCR 586 - relied on.
E
A. P State Electricity Board v. Collector of Central Excise,
Hyderabad, (1994) 2 SCC 428: 1994 (1) SCR 499; South
Bihar Sugar Mills Limited v. Union of India, (1968) 3 SCR
21: 1968 SCR 21; Union Carbide India Limited v. The Union
F of India, (1986) 2 SCC 547: 1986 (2) SCR 162; Bhor
Industries Ltd. II. Collector of Central Excise, Bombay,
(1989) 1 SCC 602: 1989 (1) SCR 382; CCE v. Ambalal
Sarabhai, (1989) 4 SCC 112: 1989 (3) SCR 784; Indian
Cable Co. Ltd. II. Collector of Central Excise, Calcutta &
G
Ors., (1994) 6 SCC 610: 1994 (3) Suppl. SCR 678; Moti
Laminates (P) Ltd. V Collector Central Excise, Ahmadabad,
(1995) 3 SCC 23: 1995 (2) SCR 81; Union of India & Ors.
v. Sonic Electrochem (P) Ltd. &Anr., 2002 (145) E.L.T. 274
H - referred to.
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 243
FARIDABAD
C.A. No. 6561of2004: A
2.1 However, on facts of the present case extended
period of limitatio:i is not available to Revenue. There
was no suppression on the part of the appellants nor
was there any willful attempt to evade duty. The appellant B
has been manufacturing tractors from 1965 onwards.
There has never been any change in the manufacturing
process. In the year 1994-95, IC engines were stated by
the department to contain Transmission Assemblies,
which were dutiable. On receiving a reply from the C
appellant, the department did not levy any excise duty
9n such Transmission Assemblies. The show-cause
notice itself stated that the issue of manufacture and
captive consumption of Transmission Assemblies for
0
tractors is the same as that for IC engines. These facts,
coupled with the fact that not a single Transmission
Assembly of tractors manufactured by the appellant had
been sold, makes it clear that there was no suppression
or any intent to evade excise duty in the present case. E
Thus, the show cause notice needs to be quashed on
this ground alone. [Para 19] [268-G-H; 269-A·C]
Padmini Products v. Collector of Central Excise,
Bangalore, 1989 (43) E.L.T. 195; Continental F
Foundation Joint Venture Holding v. Collector of Central
Excise, Chandigarh - I, (2007) 10 SCC 337: 2007 (9)
SCR 554 - relied on.
C.A. Nos. 9469-9.J70 of 2010:
G
2.2 The extended period of limitation is not
available to the revenue because the respondent bona
fide believed that Transmission Assemblies were not
dutiable. [Para 22] [271-F-G]
H
244 SUPREME COURT REPORTS [2015J 5 S.C.R.
A C.A. No. 457 of 2006
2.3 In this case also the extended period of
limitation is not available to the revenue. In successive
declarations made by the assessee in this case starting
B from 16.3.1995, the assessee had declared not merely
the tractor but the chassis therefor. The assessee bona
fide believed that the declaration of the chassis would
suffice as according to them Transmission Assemblies
were not taxable goods. There was no attempt to evade
c excise duty and in this case also the show cause notice
being beyond the period of limitation of one year would
have to be quashed on this ground. [Para 25] [273-8-F]
Case Law Reference
D
1963 Suppl. SCR 586 relied on Para 10
1994 (1) SCR 499 referred to Para 10
1968 SCR 21 referred to Para 10
E
1986 (2) SCR 162 referred to Para 10
1989 (1) SCR 382 referred to Para 10
1989 (3) SCR 784 referred to Para 10
F
1994 (3) Suppl. SCR 678 referred to Para 11
1995 (2) SCR 81 referred to Para 12
G 2002 (145) E.L.T. 274 referred to Para 13
1989 (43) E.L.T.195 relied on Para 17
2007 (9) SCR 554 relied on Para 18
H CIVIL APPELLATE JURISDICTION : Civil Appeal No.
6561 of 2004 etc.
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 245
FARIDABAD
From the Judgment and Order dated 27 .05.2004 of the A
Customs, Excise & Service TaxAppellate Tribunal, New Delhi
in Appeal Nos. E/24/2003-NB (B)
WITH
B
C. A. Nos. 457 of 2006 & 9469-9470 of 201 O
MeenakshiArora, V. Lakshmikumaran, M. P. Devanath,
Vivek Sharma, L. Charanaya, Aditya Bhattacharya, R.
Ramachandran, Hemant Bajaj, Ambarish Pandey, Anandh K., C
Rajesh Kumar, Rahul Narayan, Mohit Singh for the Appellant.
Jaideep Gupta, Shyam Divan, Nisha Bagchi, Rashmi
Malhotra, Sujeeta Srivastava, Pooja Sharma, B. Krishna
Prasad, E.R. Kumar, Krishna Srinivasan, Sanjana
Ramachandran, Geethi Arya, Abhishek Vinod Deshmukh, D
Udayaditya Banerjee, Sameer Parkh (for M/s. Parekh & Co.)
for the appearing parties.
The Judgment of the Court was delivered by
E
R.F. NARIMAN, J.
C.A. N0.6561OF2004
1. The present case raises an interesting question as F
to whether excise duty is payable on an intermediate product,
namely, Transmission Assembly which comes into existence
during the manufacture of tractors made by the appellant. The
period involved is January 1996 to May 1998. The tractors
that are manufactured have engines that are below 1800 CC G
and are covered by an exemption notification 162/1986. We
are informed, however, that after 1.6.1998 this exemption has
gone and even tractors of an engine capacity of less than 1800
CC now have to bear excise duty.
H
246 SUPREME COURT REPORTS [2015] 5 S.C.R.
A 2. By a show cause notice dated 31.1.2Q01, the
Department for the period aforesaid relied upon evidence in
• the form of statements made by various officers of the appellant
and other documentary evidence to show that Transmission
Assemblies of tractors was a commodity known to the market
B as such and, therefore, came into the category of excisable
goods. The respondent by their reply dated 1.10.2001 denied
this stating that no separate product known as Transmission
Assemblies came into existence which is known to the
C commercial community as such and, therefore, there was
neithe1r manufacture nor marketability of the same. In the reply,
however, various statements were made which, in fact, amount
to admissions, that Transmission Assembly of a tractor is, in
fact, known to the market as such. These admissions are set
o out hereinbelow:
"16. It is submitted that transmission assemblies are in
fact interchangeable. The Transmission Assembly can
be used in both dutiable as well as exempt tractors, for
E example in Model No.325 (exempt tractor) and Model
No.335 (dutiable tractor). Therefore, it serves as a
common input for both tractors. Therefore, in terms of
provisions of Rule 57CC MODVAT credit is admissible
on the common inputs which form part of transmission
F assemblies in tum used in the manufacture of both types
of Tractors.
47.1. The department has relied upon the case of M/s
International Tractors Ltd., Hoshiarpurwho are supplying
G transmission assemblies.
(a) The Notice contends that M/s. Mahindra & Mahindra
have not purchased any transmission assemblies for use
in tractors from any .other unit. Further, they have not
H supplied or transferred any transmission assemblies to
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 247
FARIDABAD [R. F. NARIMAN, J.]
any other person. However, they have been supplying A
the transmission assembly to their own units at Nagpur
and Rudhrapur for manufacturing tractors.
(b) It is submitted that this letter can at most lead to a
conclusion that the transmission assembly made by M & B
Mis marketable.
50. The show cause notice has placed reliance on
certain other web site to contend that the Hoovers on-
Ii ne web site and Carrara web site shows that c
transmission assemblies are marketed and sold. It is
submitted that while there might be mass production of
transmission assemblies marketed by Hoovers Carraro,
etc., the product specific transmission assemblies of the
noticees never come to the market and have never been D
sold. Hence, there can be no question of demanding
duty on the transmission assemblies made on the
assembly line and used for assembling the tractors in
the noticees factory. These are not marketable and
hence, are not goods and there is no removal under Rule E
9 and 49."
3. The Commissioner by an order dated 4.10.2002
held as follows:-
F
"41. I find that the issue has been well examined in the
notice. Noticee's plea that the impugned transmission
assemblies are not goods as transmission assemblies
do not have independent existence is without merit.
Noticee in fact itself clears such goods on payment of G
duty to ECEL, Transmission assemblies are well known
in the commercial world and are very much dealt with as
a commercial commodity. The end use as put forth in the
notice amply proves it. To reiterate transmission
H
248 SUPREME COURT REPORTS [2015] 5 S.C.R.
A assemblies are cleared by the noticee to ECEL; noticee
company's sister concern (Farmtrac Division) imported
transmission assemblies from Carraro Spa of Italy and
also purchased transmission assemblies from Carraro
India Limited, Pune; M/s TAFE, Chennai, International
B Tractors Ltd., Hoshiarpur, Mahindra & Mahindra all deal
in transmission assemblies and furth~ information
regarding transmission assembly availability as such is
also available on internet.
C 42. Noticee's submission that no identifiable transmission
assembly emerges in their production of Tractors is also
incorrect. They are manufacturing transmission
assemblies for their tractors as well as for ECEL. Of
course transmission assemblies meant for different
D models of machines/vehicles will be of slightly different
specifications from each other but as a whole
transmission assemblies are one identifi.able
commercial product as already discussed. I also note
E that the concerned persons of the noticee company
themselves have admitted that transmission assemblies
do emerge as identifiable goods. Statements of Sh. K.K.
Kachroo, Manager Excise, Shri Vi nod Ahuja, Plant Head,
Sh. Ramesh Kumar Khurana, Chief Manager Production
F all admit this fact. Even otherwise manufacturing of the
tractors in the noticee's factory cannot be accepted as
such a continuous process in which raw materials are
fed in the machine at one end and final product emerges
at another. Only in such a case, can it be believed that
G there is no independent identifiable intermediate stage
of goods. The procedure as adopted by the noticee is
basically assembly of various parts & components and
of course all these parts and accessories which are
manufactured by the noticee in their factory as identifiable
H
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 249
FARIDABAD [R. F. NARIMAN, J.]
goods are excisable themselves. Therefore, the A
emergence of l.C. Engines is excisable and so also the
ypemergence of the transmission assembly is also
excisable. In fact in the case of Pratap Rajashtan Copper
Foils Vs. CCE -1999( 109) ELT 288 (T) it was held that
duty is payable on intermediate products even if some 8
minor processes were not carried to make the product
marketable.
43. I also find that the noticee in their reply has laid great
emphasis on their argument that their tractors are c
manufactured as a result of integrated manufacturing
process on the assembly line and therefore there is no
removal of intermediate goods, if any, in terms of Rule 9
or Rule 49. I have to reiterate that noticee's plea is
D
inadmissible. In terms of Rule 9 and 49, intermediate
goods emerging during such integrated assembly line
production would be deemed to have been cleared for
production and therefore liable to Central Excise duty.
Besides facts of the case are entirely different as has E
been stated by the noticee company's concerned
persons in their statements. Assembly of a vehicle or
machine on line or otherwise still remains assembly i.e.
various parts and components are either manufactured
first by the assessee himself or procured from outside F
and then assembled to produce the resulting machine.
All excisable goods emerging during such assembly or
production are themselves excisable as intermediate
goods meant for captive consumption unless or until
specifically exempt. Transmission assembly is one such G
excisable intermediate product and therefore its duty
liability ypis obvious. Therefore, I hold that these are
independent, identifiable, commercial goods capable of
being bought and sold in the market and, therefore, are
H
250 SUPREME COURT REPORTS [2015] 5 S.C.R.
A exc:isable goods leviable to Central Excise duty under
Section 3 of the Central Excise Act, 1944. That impugned
transmission assemblies have been used captively in
production of Tractors cleared at Nil rate of duty is not
denied by the noticee. The captive consumption
B exemption Notification No. 67/95-C E dated 16.3.95, as
amended, debars such intermediate products used in
production of exempt final products, from the duty
exemption under the notification. As the final product i.e.
Tractors were exempt, the impugned transmission
c assemblies did attract Central Excise duty. I hold that all
the observations in the show cause notice regarding
excisability of the impugned goods are correct. I also
note that as far as the classification of the product is
D concerned, the same has not been challenged by the
noticee."
4. By the impugned judgment dated 27.5.2004,
CESTAT dismissed the appeal holding:
E "6. We have considered the submissions of both tile
sides. The Central Excise duty is leviable on goods
manufactured in India. "Manufacture" as per the judgment
of the Supreme Court in the case of Union of India vs.
F Delhi Cloth and General Mills, 1977 (1) ELT (J 199)
"implies a change .... and there must be transformation;
a new and different article must emerge having a
distinctive name, character or use."
The Supreme Court, after referring to various judgments
G
on the concept of the manufacture, has laid down a two
fold test for deciding whether the process is that of
"manufacture" in Union of India vs. J. G. Glass, 1998
(97) ELT 5(S.C.) as follows, "First, whether by the said
H process a different commercial commodity comes into
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 251
FARIDABAD [R. F. NARI MAN, J.]
existence or whether the identity of the original commodity A
ceases to exist; secondly, whether the commodity which
was already in existence will serve no purpose but for
the said purpose." We find that this two fold tests laid
down by the Supreme Court is satisfied in respect of the
transmission assembly coming into existence during the B
course of manufacture of tractors by the Appellants. After
assembly of various parts and components a new and
different article known as transmission assembly
emerges having a distinctive name, character and use
and but for the manipulation undertaken by the
c
Appellants, the parts and components would not have
served the purpose which a transmission assembly
performs. The impugned product is also marketable as
the learned Senior Departmental Representative has D
mentioned the fact of its being imported by the Appellants
themselves (Farmtrac Division); the clearance of the
transmission assembly by the Appellants to their
subsidiary company M/s. Escorts Construction
Equipment Ltd. and the removal of transmission E
assembly by Mis. Tractors and Farm Equipment Ltd. The
mere fact that the impugned product is meant only for
the tractors manufactured by them will not mean that the
impugned product is not capable of being brought to the
market for being bought and sold. The Supreme Court in F
the case of A.P. State Electricity Board vs. CCE,
Hyderabad, 1994 (70) ELT 3 (S.C.) has held that the
marketability is essentially a question of fact to be
decided in the facts of each case. The fact that the goods G
are not, in fact, marketed is of no relevance. So long the
goods arc marketaole, they are goods for the purpose
of Section 3 of the Central Excise Act. It is not necessary
that the goods should be generally available in the market.
We, therefore, uphold the finding in the impugned order H
252 SUPREMECOURTREPORTS [2015] 5 S.C.R.
A that the transmission assembly is an excisable goods
exigible to Central Excise duty."
5. Shri Lakshmikumaran, learned advocate for the
appellant argued that the tractors manufactured by the
B appellant (having engines of a capacity of less than 1800 CC)
had no such thing as a Transmission Assembly. The so-called
Transmission Assembly was only an aggregate of various items
which connected the engine of the tractor with its wheels.
Further, the so-called Transmission Assembly was specifically
C designed for the appellant's tractor and was not saleable in
the market. Also, not a single instance of sale in the market
had ever taken place. In fact, the so-called Transmission
Assembly was not something which came into existence at all
but was part of a continuous process on the assembly line in
0
the appellant's factory of manufacture at the end of which a
complete tractor came into existence. He further submitted
that post 1.6.1998 in any case, the appellant had been paying
8% under Rule 57 CC on the value of the said Transmission
E Assembly as required. It is only for the period upto August
1996 that would be in dispute. Even for this period, he contends
that ultimately the figures would show that it was revenue neutral
in that MODVAT credit reversed for this period would amount
to 1.71 crores, the duty demand being approximately 2.43
F crores out of a total of 9.66 crores for this period of 8 months.
He also argued that the duty demand was absurd in-that the
Transmission Assembly ofTAFE which is said to be the same
as that of the petitioner's was only 13,000 rupees per piece
as opposed to the highly inflated figure of Rs.53,790/-. If the
G figure of Rs. 13, 000/- is to be taken, it is clear that the reversal
of MqDVAT credit would amount to much more than the duty
demand itself. He further argued that in any case since there
was no fraud or willful suppression of facts, invoking the
H extended period of limitation was not in order and that in any
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 253
FARIDABAD [R. F. NARIMAN, J.]
case the show cause notice being beyond one year of the A
stated period would have to be quashed on this ground alone.
6. Shri Jaideep Gupta, learned senior counsel for the
revenue contended that the Transmission Assembly was very
much excisable goods known to the market as such from the B
statements of the appellants themselves. Further, the revenue
had discharged its burden by oral and documentary evidence
which showed beyond doubt that Transmission Assembly of
tractors were excisable goods in that a new commodity came
into existence known to the market as such. It is completely C
irrelevant that no sale actually took place of any such
Transmission Assembly. It is enough to show that the said
goods were capable of being sold which, undoubtedly, they
were. He very fairly stated that on valuation, if necessary, the
0
matter could be remanded. He also stated that the extended
period of limitation was available in the present case as the
appellants on their own showing knew that the intermediate
product ofTransmissionAssemblies was marketable as such
and had suppressed this fact while claiming exemption of excise E
duty on the finished product, namely, the tractor.
We have heard learned counsel for the parties. It is
important in matters like this to begin at the beginning. Entry
84 List I of the 71h Schedule of the Constitution of India reads F
as follows:
"SEVENTH SCHEDULE
[Article 246]
List I - Union List · G
84. Duties of excise on tobacco and other goods
manufactured or produced in India except-
(a) alcoholic liquors for human consumption;
H
254 SUPREME COURT REPORTS [2015] 5 S.C.R.
A (b) opium, Indian hemp and other narcotic drugs and
narcotics,
but including medicinal and toilet preparations containing
alcohol or any substance included in sub-paragraph (b)
8 of this entry."
7. It is clear on a reading of this Entry that a duty of
excise is only leviable on "goods" manufactured or produced
in India. "Goods" has been defined under Article 366 (12) as
follows:
c
"366. Definitions.-ln this Constitution, unless the context
otherwise requires, the following expressions have the
meanings hereby respectively assigned to them, that is
tosay-
D
(12) "goods" includes all materials, commodities and
articles;"
8. Each of these three expressions has been defined
E in thE~ Shorter Oxford English Dictionary as follows:-
"Materials" - the matter of which a thing is or may be
made; the constituent parts of something.
"Commodities" - a thing of use or value; a thing that is
F
an object of trade; a thing one deals in or makes use of.
"Articles" - a particular item of business.
9. Although the definition of "goods" is an inclusive one,
G it is clear that materials, commodities and articles spoken of
in the definition take colour from one another. In order to be
"goods" it is clear that they should be known to the market as
materials, commodities and articles that are capable of being
sold.
H
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 255
FARIDABAD [R. F. NARIMAN, J.]
10. In the basic judgment which has been referred to in A
every excise case for conceptual clarity, namely, Union of
India v. Delhi Cloth. & General Mills Co. Ltd., 1963 Suppl.
1 SCR 586, this Court held that for excise duty to be chargeable
under the constitutional entry read with Section 3 of the Central
Excise and Salt Act, two pre-requisites are necessary. First, B
there must be "manufacture" which is understood to mean the
bringing into existence of a new substance. And secondly, the
word "goods" necessarily means that such manufacture must
bring into existence a new substance known to the market as C
such which brings in the concept of marketability in addition to
manufacture. A large number of judgments have explained
what is meant by marketability in this context. In A.P. State
Electricity Board v. Collector of Central Excise,
Hyderabad, (1994) 2 SCC 428, this Court referred to a large D
number of previous judgments. Firstly, it referred to Union v.
Delhi Cloth and General Mills. It then referred to South Bihar
Sugar Mills Limited V. Union of India, (1968) 3 SCR 21, in
which kiln gas which was a mixture of gases generated during
a process of burning limestone with coke in a lime kiln was E
'held not to be a marketable commodity. Since it was a mixture
of gases and not only carbon dioxide, it was clear that it was
not known to the market as such. Carbon dioxide was only a
component of kiln gas, the content of which ranged from 27 to
36.5%. The Court also referred to the decision in Union F
Carbide India Limited v. the Union of India, (1986) 2 SCC
547, in which aluminum cans in crude form used as a torch
bodies were held to be not capable of sale to a consumer in
their crude and unfinished form. To be made saleable, such G
cans would have to undergo various processes such as,
trimming, threading and re-drawing. The Court also referred
to Bhor Industries Ltd. v. Collector of Central Excise,
Bombay, (1989) 1 sec 602. In that case, it was held that
crude PVC films manufactured as an intermediate product and H
256 SUPREME COURT REPORTS [2015] 5 S.C.R.
A used in captive consumption of other goods was not
marketable, not being known to the market as such. The Court
also referred to CCE v. Ambalal Sarabhai, (1989) 4 SCC
112 in which an intermediate product, namely, starch
hydrolysate was not marketable in that it was highly unstable
B and fragmented quickly losing its character in a couple of days.
After referring to all these judgments, the Court held:
"10. It would be evident from the facts and ratio of the
above decisions that the goods in each case were found
c to be not marketable. Whether it is refined oil (non-
cleodorised) concerned in Delhi Cloth and General
Mills [1963 Supp 1 SCR 586: AIR 1963 SC 791] or kiln
gas in South Bihar Sugar Mills [(1968) 3 SCR 21 : AIR
1968 SC 922] or aluminium cans with rough uneven
D
surface in Union Carbide [(1986) 2 SCC 547 : 1986
SCC (Tax) 443 : (1986) 2 SCR 162] or PVC films in Bhor
lndustries[(1989) 1 SCC 602 : 1989 SCC (Tax) 98 :
(1989) 1 SCR 382] or hydrolysate in Ambalal
E Sarabhai [(1989) 4 SCC 112 : 1989 SCC (Tax) 584 :
(1989) 3 SCR 784] the finding in each case on the basis
of the material before the Court was that the articles in
question were not marketable and were not known to the
market as such. The 'marketability' is thus essentially a
F question of fact to be decided on the facts of each case.
There can be no generalisation. The fact that the goods
are not in fact marketed is of no relevance. So long as
the goods are marketable, they are goods for the
purposes of Section 3. It is also not necessarv that the
G goods in question should be generally available in the
market. Even if the goods are available from only one
source or from a specified market, it makes no difference
so long as they are available for purchasers. Now, in the
appeals before us, the fact that in Kerala these poles
H
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 257
FARIDABAD [R. F. NARIMAN, J.]
are manufactured by independent contractors who sell A
them to Kerala State Electricity Board itself shows that
such poles do have a market. Even if there is only one
purchaser of these articles, it must still be said that there
is a market for these articles. The marketability of articles
does not depend upon the number of purchasers nor is B
the market confined to the territorial limits of this country.
The appellant's own case before the excise authorities
and the CEGATwas that these poles are manufactured
by independent contractors from whom it purchased
them. This plea itself-though not pressed before us-
c
is adequate to demolish the case of the appellant. In our
opinion, therefore, the conclusion arrived at by the Tribunal
is unobjectionable."
D
· 11. In Indian Cable Co. Ltd. v. Collector of Central
Excise, Calcutta & Ors., (1994) 6 SCC 610, this Court held:-
"10. We are of the view that the provisions of the Act
mandate that a finding that the goods are marketable is
E
a prerequisite or sine qua non forthe levy of duty. Section
3 of the Act is the charging section:
"3. Duties, specified in the Schedule to the Central
Excise Tariff Act, 1985 to be levied.- There shall be
levied and collected in such manner as may be prescribed F
duties of excise on all excisable goods other than salt
which are produced or manufactured in India and a duty
on salt manufactured in, or imported by land into, any
part of India as, and at the rates, set forth in the Schedule
G
to the Central Excise Tariff Act, 1985 .... "
Section 2(d) defines "excisable goods". We have quoted
the definition in para 5 supra. The word 'goods' is not
defined in the Act.
H
258 SUPREME COURT REPORTS [2015] 5 S.C.R.
A 11. After adverting to the aforesaid definition of
"excisable goods" and the meaning of the word 'goods',
a Constitution Bench of the Supreme Court in Union of
India v.Delhi Cloth and General Mills [AIR 1963 SC 791
: 1963 Supp (1) SCR 586] stated in paragraph 17 thus:
"These definitions make it clear that to become 'goods'
an article must be something which can ordinarily come
to the market to be bought and sold."
(emphasis supplied)
c
12. In a series of decisions, this Court has held that
'marketability' is an essential ingredient, to hold that an
article is dutiable or exigible to duty of excise. The
important decisions of this Court which have laid down
D the law on this aspect are the following: (1) Union of
India v. Delhi Cloth and General Mills Co. Ltd. [Al R 1963
SC 791 : 1963 Supp (1) SCR 586] (2) South Bihar Sugar
Mills Ltd. v. Union of India [Al R 1968 SC 922 : (1968) 3
SCR21](3) BhorlndustriesLtd. v. CCE[(1989) 1 SCC
E 602 : 1989 SCC (Tax) 98] (4) Hindustan
Polymers v. CCE [( 1989) 4 SCC 323 : 1990 SCC (Tax)
118 : (1989) 43 ELT 165] (5) CCE v. Ambalal Sarabhai
Enterprises (P) Ltd. [(1989) 4SCC112: 1989 SCC (Tax)
F 584: (1989) 43 E.LT 214: JT (1989) 3 SC 341] (6) Union
Carbide India Ltd. v. Union of India [( 1986) 2 SCC 54 7
: 1986 sec (Tax) 443: (1986) 24ELT169: JT 1986 SC
453] (7) A.P State Electricity Board v. CCE [(1994) 2
sec 428: JT (1994) 1 sc 545].
G
13. In the latest decision in AP State Electricity
Board v. CCE, Hyderabad [( 1994) 2 SCC 428 : JT (1994)
1 SC 545], one of us (B.P. Jeevan Reddy, J.) speaking
for the Bench succinctly stated the law thus at pages 549
H and 550:
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 259
FARIDABAD [R. F. NARIMAN, J.]
"Marketability is an essential ingredient in order to be A
dutiable under the Schedule to the Act .... The
'marketability' is thus essentially a question of fact to be
decided in the facts of each case. There can be no
generalisation. The fact that the goods are not in fact
marketed is of no relevance. So long as the goods were B
marketable, they are goods for the purposes of Section
3. It is not also necessary that the goods in question
should be generally available in the market. Even if the
goods are available from only one source or from a
specified market, it makes no difference so long as they
c
are available for purchasers .... The marketability of
articles does not depend upon the number of
purchasers nor is the market confined to the territorial
limits of this country." D
(emphasis supplied)
'Marketability' is a decisive test for dutiability. It only
means 'saleable'. or "suitable for sale". It need not be in
fact 'marketed'. The article should be capable of being E
sold or being sold, to consumers in the market, as it is-
without anything more. The Appellate Tribunal has not
adverted to the above vital aspects nor has it entered a
finding that the PVC compound (granules)is a F
"marketable product" as understood in law. The Appellate
Tribunal was swayed by the fact that the conversion of
PVC resin into PVC compound by the process employed
by the appellants amounts to 'manufacture' within the
meaning of Section 2(f) of the Act and that by itself will G
justify the levy of duty. In our view, this is a palpable error
committed by the Tribunal. In the absence of a finding,
that the goods are 'marketable' i.e. saleable or suitable
for sale, we hold that the order of the Appellate Tribunal
H
260 SUPREME COURT REPORTS [2015) 5 S.C.R.
A is infirm. It should be set aside and we hereby do so. We
order a remit of the matter to the Appellate Tribunal to
consider the appeal afresh and dispose of the same in
accordance with law. There shall be no order as to costs
in this appeal."
B
12. In Moti Laminates (P) Ltd. v. Collector Central
Excise, Ahmadabad, (1995) 3 SCC page 23, this Court held
that an intermediate product, namely, resols, not being
marketable would not be exigible to duty. After referring to
C several earlier judgments, this Court held:
"11. Although the duty of excise is on manufacture or
production of the goods, but the entire concept of bringing
out new commodity etc. is linked with market~bility. An
D article does not become goods in common parlance
unless by production or manufacture something new and
different is brought out which can be bought and sold.
In Union of India v. Delhi Cloth & General Mills Co.
Ltd. [Al R 1963 SC 791) , a Constitution Bench of this
E Court while construing the word 'goods' held as under:
"These definitions make it clear that to become 'goods'
an article must be something which can ordinarily eome
to the market to be bought and sold."
F
Therefore, any goods to attract excise duty must satisfy
the test of marketability. The Tariff Schedule by placing
the goods in specific and general category does not alter
the basic character of leviability. The duty is attracted not
G because an article i's covered in any of the items or it
falls in residuary category but it must further have been
produced or manufactured and it is capable of being
bought and sold."
H 13. A large part of the arguments ranged around the
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 261
FARIDABAD [R. F. NARIMAN, J.]
decision in Union of India (UOI) & Ors. v. Sonic A
Electrochem (P) Ltd. & Anr., 2002 (145) E.L.T. 274. In this
judgment the question that arose for decision was whether the
plastic body of electro mosquito repellent was excisable
goods. This Court held:
B
"7 ..... The germane question is whether it has
marketability. The plastic body is being manufactured to
suit the requirements of the EMR of the respondents and
is not available in the market for being bought and sold.
It is not a standardised item or goods known and generally c
dealt with in the market. It is being manufactured by the
respondents for its captive consumption. It is not a
product known in the market with any commercial name.
9. It may be noticed that in the cases referred to in the D
passage, quoted above, the reasons for holding the
articles 'not marketable' are different, however they are
not exhaustive. It is difficult to lay down a precise test to
determine marketability of articles. Marketability of goods
E
has certain attributes. The essence of marketability is
neither in the form nor in the shape or condition in which
the manufactured articles are to be found, it is the
commercial identity of the articles known to the market
for being bought and sold. The fact that the product in F
question is generally not being bought and sold or has
no demand in the market would be irrelevant. The plastic
body of EMR does not satisfy the aforementioned
criteria. There are some competing manufacturers of
EMR. Each is having a different plastic body to suit its G
design and requirement. If one goes to the market to
purchase plastic body of EMR of the respondents either
for replacement or otherwise one cannot get it in the
market because at present it is not a commercially known
H
262 SUPREME COURT REPORTS [2015) 5 S.C.R.
A product. For these reasons, the plastic body, which is a
part of the EMR of the respondents, is not 'goods' so as
to be liable to duty as parts of EMR under para 5(d) of
the said exemption notification."
B 14. From this judgment, Shri Lakshmikumaran wished
to emphasise that, as in the said judgment, Transmission
Assemblies were not available in the market for being bought
and sold, they were not excisable goods not being marketable.
As has correctly been pointed out by Mr. Gupta, learned senior
C counsel appearing on behalf of the Revenue, what was held in
this judgment is that the product should not be known in the
market with any commercial name. The moment a product is
commercially known in the sense of fulfilling the practical test
of being known to persons in the market who buy and sell, the
0
test is satisfied. The fact that the product is generally not bought
or sold or has no demand in the market is irrelevant. It was
held in the said judgment that the plastic body is not known as .
a commercially distinct product in the market and, therefore, if
E a manufacturer is asked to replace such body, it would not be
replaceable not being a commercially known product.
15. The facts in the present case show that Transmission
Assemblies of tractors are commercially known products as
F has been pointed out above. The fact that not a single sale of
such Assembly has been made by the appellants is irrelevant.
This being the case, we are of the viewthatthe Transmission
Assembly of the tractor on the facts before us is clearly an
intermediate product which is a distinct product commercially
G known to the market as such. On this ground therefore, the
appellants are not liable to succeed.
16. However, the appellants are on firm ground when
they say that the extended period of limitation could not have
H been invoked in the present case. In their reply to the show
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 263
FARIDABAD [R. F. NARIMAN, J.]
cause notice, the appellants stated: A
"20.2 It is submitted that the noticees have been
manufacturing tractors right from 1965 onwards till date.
The manufacturing process undertaken by the noticees
has been made known to the Department innumerable B
number of times. Consequent1 y the proposal to invoke
the extended period of limitation in the present case is
incorrect and the same is liable to be set aside.
20.3 The Noticee points out that just like the department c
raised the issue with regard to the IC engines in the year
1994-95, similarly the department is raising the issue in
regard to the transmission assembly by the present Show
Cause Notice. Therefore the dept. cannot allege any
suppression or fraud on the part of Noticee. D
20.4 However, that is not to say that there has been any
contumacious conduct or an intent to evade duty on the
part of the noticees. In regard to the transmission
assemblies which arise on the assembly line, if they are E
used in the dutiable tractors, they would be exempt under
Captive Consumption Exemption Notification No.67/95-
CE dated 16.3.95.
20.5 In regard to transmission assembly going into the F
exempted tractor, the department has now raised the
issue that they are dutiable and there is no exemption
notification for such transmission assemblies. Further,
that the Noticee had not claimed NIL rate of duty for
transmission assemblies used within the factory for G
manufacture of tractors.
20.6 The Noticee submits that they never entertained a
belief that the transmission assembly would be dutiable
and consequently, when such transmission assemblies H
264 SUPREME COURT REPORTS [2015] 5 S.C.R.
A arose on the assembly line, whether they go into the
exempted tractor or dutiable tractor, Transmission
ypAssembly as an item was not mentioned separately in
the classification list. This shows their bona tides and
does not lead to an inference that there was.non-mention
B of the transmission assemblies in the classification list
with ulterior motive.
20. 7 The Noticees submit that declarations of the term
''Transmission" appearing under Heading No.87.08
c showing that the rate of duty applicable is 15% and the
department knowing fully well that tractors have been
manufactured, should have raised the issue regarding
the transmission assembly at the earliest and not by
invoking the extended period as done in the present Show
D
Cause Notice. The number of Transmission cleared on
payment of duty to ECEL over the entire period from
Jan.1996 to May, 1998 is very meagre as compared to
the total number of tractors (both dutiable and exempted}
E cleared during the period. It is clear that only one
Transmission Assembly is used in one tractor.
Consequently, the Department knew that duty was not
being paid on captively consumed Transmission
Assemblies. Hence, extended period is not invocable.
F Thus, the department was fully aware that the tractors
have been manufactured and a transmission assembly
is made at the intermediate stage. Nothing prevented
the department from raising demands within the
permissible shorter period of limitation under Section
G 11A.
21. The department Cll11WI plead ignorance that they
were not aware that in a tractor a transmission assembly
arises at the intermediate stage. Thus, the noticee
H entertained a bona fide belief that since the transmission
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 265
FARIDABAD [R. F. NARIMAN, J.]
assembly formed a part of the integrated assembly line A
for manufacturing tractors, there was no removal or
exigibility of Transmission Assembly. Nothing prevented
the department from raising a similar issue as to
dutiability of Transmission Assemblies as they raised
in regard to l.C. Engines arising atthe intermediate stage, B
which was done in 1995.
22. That in fact, the Show Cause Notice itself terms the
issue of manufacture and captive consumption of
transmission assembties for tractors is the same as that c
for l.C. Engines. However, knowing fully well that
Transmission Assembly comes into existence at the
intermediate stage, the department never raised the
issue. This implies that in the present proceedings,
D
assuming without admitting duty is payable on the
transmission assembly, the same was not being paid
due to a bona fide error. The same belief was entertained
on the part of the Noticees as well as the Department
during the relevant period that transmission assemblies E
· going into the exempted tractor do not attract duty."
17. Added to this, the appellants have also clearly stated
that not a single Transmission Assembly has in fact been sold
by them in the market. On these facts, we are of the opinion F
that the appellants would fall within the test laid down in two
judgments of this Court. In Padmini Products v. Colle.ctor
of Central Excise, Bangalore, 1989 (43) E.L.T. 195, this Court
held:
G
"8. Shri V. Lakshmi Kumaran, learned counsel for the
appellant drew our attention to the observations of this
Court in CCE v. Chemphar Drugs and Liniments,
Hyderabad [(1989) 2 SCC 127: 1989 SCC (Tax) 245]
where at p. 131 of the report, this Court observed that in H
266 SUPREME COURT REPORTS [2015] 5 S.C.R.
A order to sustain an order of the Tribunal beyond a period
of six months and up to a period of five years in view of
the proviso to sub-section (1) of Section 11-A of the Act,
it had to be established that the duty of excise had not
been levied or paid or short-levied or short-paid, or
B erroneously refunded by reasons of either fraud or
collusion or willful misstatement or suppression of facts
or contravention of any provision of the Act or Rules made
thereunder, with intent to evade payment of duty. It was
observed by this Court that something positive other than
c mere inaction or failure on the part of the manufacturer
or producer of conscious or deliberate withholding of
information when the manufacturer knew otherwise, is
required to be established before it is saddled with any
D liability beyond the period of six months. Whether in a
particular set of facts and circumstances there was any
fraud or collusion or wilful misstatement or suppression
or contravention of any provision of any Act, is a question
of fact depending upon the facts and circumstances of a
E particular case .
.. . . .. .As mentioned herein before, mere failure or
negligence on the part of the producer or manufacturer
either not to take out a licence in case where there was
F scope for doubt as to whether licence was required to
be taken out or where there was scope for doubt whether
goods were dutiable or not, would not attract Section 11-
A of the Act. In the facts and circumstances of this case,
there were materials, as indicated to suggest that there
G was scope for confusion and the appellant believing that
the goods came within the purview of the concept of
handicrafts and as such were exempt. If there was scope
for such a belief or opinion, then failure either to take out
a licence or to pay duty on that behalf, when there was no
H
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 267
FARIDABAD [R. F. NARll\f.AN, J.]
contrary evidence that the producer or the manufacturer A
knew these were excisable or required to be licensed,
would not attract the penal provisions of Section 11-A of
the Act. If the facts are otherwise, then the position would
be different."
B
18. Similarly in Continental Foundation Joint
Venture Holding v. Collector of Central Excise,
Chandigarh-I, (2007) 10 SCC 337, this Court held:
"14. As far as fraud and collusion are concerned, it is c
evident that the intent to evade duty is built into these
very words. So far as misstatement or suppression of
facts are concerned, they are clearly qualified by the word
"wilful", preceding the words "misstatement or
suppression of facts" which means with intent to evade D
duty.The next set of words "contravention of any of the
provisions of this Act or Rules" are again qualified by the
immediately following words "with intent to evade
payment of duty". Therefore, there cannot be suppression
or misstatement of fact, which is not wilful and yet E
constitute a permissible ground for the purpose of the
proviso to Section 11-A. Misstatement of fact must be
wilful.
13. Factual position goes to show that the Revenue relied F
on the Circulars dated 23-5-1997 and 19-12-1997. The
Circular dated 6-1-1998 is the one on which the appellant
places reliance. Undisputedly, view expressed
by CEGAT in Continental Foundation Joint Venture
G
case [Continental Foundation Joint Venture v. CCE,
(2002) 150 ELT 216 (Tri-Del)] was held to be not correct
in a subsequent larger Bench judgment. It is, therefore,
clear that there was scope for entertaining doubt about
the view to be taken. The Tribunal apparently has not H
268 SUPREME COURT REPORTS [2015] 5 S.C.R.
A considered these aspects correctly. Contrary to the
factual position, cEGAT has held that no plea was taken
about there being no intention to evade payment of duty
as the same was to be reimbursed by the buyer. In fact
such a plea was clearly taken. The factual scenario clearly
B goes to show that there was scope for entertaining doubt,
and taking a particular stand which rules out application
of Section 11-A of the Act.
12. The expression "suppression" has been used in the
c proviso to Section 11-AoftheAct accompanied by very
strong words as "fraud" or "collusion" and, therefore, has
to be construed strictly. Mere omission to give correct
information is not suppression of facts unless it was
deliberate to stop (sic evade) the payment of duty.
D Suppression means failure to disclose full information
with the intent to evade payment of duty. When the facts
are known to both the parties, omission by one party to
go what he might have done would not render it
E suppression. When the Revenue invokes the extended
period of limitation under Section 11-A the burden is cast
upon it to prove suppression of fact. An incorrect
statement cannot be equated with a wilful misstatemeAt.
The latter implies making of an incorrect statement with
F the knowledge that the statement was not correct."
19. Judged by this test, it is clear that on facts in the
present case there was no suppression on the part of the
appellants nor was there any willful attempt to evade duty. As
G stated by the appellant, the appellant has been manufacturing
tractors from 1965 onwards. There has never been any change
in the manufacturing process. In the year 1994-95, IC engines
were stated by the department to contain Transmission
Assemblies, which were dutiable. On receiving a reply from
H the appellant, the department did not levy any excise duty on
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 269
FARIDABAD [R. F. NARIMAN, J.]
such Transmission Assemblies. The show-cause notice itself A
stated that the issue of manufacture and captive consumption
of Transmission Assemblies for tractors is the same as that
for IC engines. These facts, coupled with the fact that not a
single Transmission Assembly of tractors manufactured by the
appellant had been sold makes it clear ~hat there was no B
suppression or any intent to evade excise duty in the present
case. We feel thatthe show cause notice needs to be quashed
on this ground alone. Accordingly, the appeal is allowed, and
the judgment dated 27.5.2004 passed by CESTAT is set aside. C
Civil Appeal Nos.9469-9470 of 2010
20. This case has similar facts. We are concerned with
the period 1.4.1997 to 31.5.1998. The show cause notice in
this case was issued on 1.5.2002, in which the extended period D
of limitation was invoked as follows:-
"M/s. TAFE have filed the declaration under Rule 1738
of Central Excise Rules, 1944, during the year 2000-
2001, for the manufacture of product viz., Transmission E
Assembly falling under Chapter Sub-heading
No.8708.00, and cleared the said product on payment
of duty under Invoice No.1120969 dated 21.6.2000.
Never before in the past M/s. TAFE have dec.;icired this
product along with other factory finished products for F
which duty was paid by them. Hence, necessary
verificat!on was conducted in order to know whether any
such sub-assemblies were manufactured and cleared
by the assessee for use in the exempted tractors.
G
4. M/s. TAFE have manufactured the sub-assemblies
as listed in the Annexure-1 and Annexure-11 for the tractors
Model No. TAFE 25 and TAFE 30 inside the factory for
captive use in the production of tractors. The details of
H
process of manufacture of such sub-assemblies are
270 SUPREME COURT REPORTS [2015) 5 S.C.R.
A explained in Annexure-111. As per Clause (ii) to
Notification No.67 /95 dated 16-3-1995 all inputs
specified in column 1 of the Table in the said Notification
which also includes inputs falling under Chapter Heading
87 of Central Excise Tariff Act, 1985, manufactured in a
B factory and used within the factory of production in or in
relation to the manufacture of the final products are
exempt from the whole of the excise duty due thereon,
provided the final product is chargeable to duty. As per
this notification, M/s TAFE have paid duty on all the
c goods falling under Chapter Sub-Heading 87.08, used
in the manufacture of Tractors of engine capacity less
than 1800cc which are exempted, except the sub-
assemblies manufactured and used in the exempted
D tractors. Therefore, it appears that M/s TAFE are liable
to pay duty on all the sub-assemblies manufactured (as
per Annexure-1 and II), and used in the Tractors which
are exempt for the period from April, 1997 to May, 1998.
E 5. M/s. TAFE have not brought to the notice of the
manufacture of sub-assemblies to the Department with
the intention to evade payment of excise duty. They have
willfully suppressed the fact of the manufacture of the
sub-assemblies from the knowledge of the Department
F and cleared the same without payment of duty for use in
the manufacture of Tractors, which are exempted. It can
be seen from the process of manufacture that the making
of the independent, sub-assemblies are inevitable in the
Tractor build. But, M/s TAFE chose to declare only the
G parts constituting these sub-assemblies as factory
finished items and not sub-assembly. Whether these
factory finished items and bought out, items, when
assembled will form a sub-assembly has not been
declared by them. M/s. TAFE have chosen not to declare
H
the sub-assemblies willfully in order to evade payment
ESCORTS LTD. v. COMMNR. OF CENTRAL EXCISE, 271
FARIDABAD [R. F. NARIMAN, J.]
of duty." A
21. In the reply to the show cause notice, the
respondents stated that they had never sold transmission
assemblies in the market and that their price list does not carry
a list price for this item. The only removal ever made was B
during the warranty period of one tractor and this one removal
does not justify the fact that transmission assemblies have a
market. It was further stated that had the respondents known
that transmission assemblies were excisable, they would have
claimed exemption as the finished product was exempt. C
Further, Transmission Assembly is only recognized as an
Assembly line intermediate product and not as a product in
itself which is separately identifiable as in the case of other
Assemblies such as axel shaft, engine, gear parts, instrument
0
panels, etc. The difference in this case is that vide an order
dated 30.4.2004 the authorities found in favour of the
respondents on merits holding that there was neither
manufacture nor marketability of the Transmission Assemblies
in question. This was confirmed in appeal by CESTAT by the E
impugned judgment dated 12.11.2009.
22. In view of what is stated in Civil Appeal No.6561 of
2004, the part of the order in original and the CESTAT order
on merits have to be set aside. However, for the self-same F
reasons as are contained in Civil Appeal No.6561 of 2004,
we hold that the extended period of limitation is not available
as we are satisfied that the reply extracted above of the
respondent shows that the respondent bona fide believed that
Transmission Assemblies were not dutiable. In the G
circumstances, the appeals of the revenue shall stand
dismissed on this ground.
C.A. No.457 of 2006
H
23. The facts in this appeal are as follows. The period
272 SUPREME COURT REPORTS [2015] 5 S.C.R.
A involvE;J is April, 1396 to May, 1998 and the show cause notice
is dated 1.5.2001. As the impugned judgment in this case by
CESTAT merely follows the Escorts case i.e. Civil Appeal
No . 6561 of 2004, we hold thatthe finding of the authorities on
me. its i~ correct. However, in this case also the extended
8 period of limitation is not available to the revenue.
·~' 24. In the order dated 26.12.2001, the Commissioner
stated:- . •
c ::.."In the present inquiry which was undertaken by the proper
. officer, it was found that the transmission assembiy or
chassis assembly which is classifiable under Sub-
, he:c:1ding 87.08 of the 151 Schedule to the Central Excise
Act was not declared by the noticee in the classification
D list. Therefore, their plea that they have declared ,the
chassis thereof does not cover transmission assembly
or chassis assembly. They themselves in their reply have
c;dmined that the chassis is the main frame that supports
the body and the engine has to be so framed as to receive,
E hold and fasten an engine and other components of the
tractors (Para 14 of the reply). Thus, transmission
assembly is not the chas'>is and since the noticee have
failed to declare the transmission assembly/ chassis
F assembly, the suppression of fact is clear.
The intention to evade duty is clear from the
statement of Shri P.C. Kale dated 12.04.2001 as the
noticee was knowing that duty is required to be paid on
the goods which go into the assembly of the tractor of
G
engine capacity less than 1800 CC. As such tractors
were exempt from duty during the relevant period.
Knowing this fact very well and not declaring the
transmission assembly or chassis assembly-in the
H classification declaration and clearing such transmission
ESCORTS LTD. v. CCMMNR. OF CENTRAL EXCISE, 273
FARIDABAD [R. F. NARIMAN, J.]
assembly/ chassis assembly without payment ~f duty A
without recording their production in the statutc:y records
and without filing the RT-12 returns for the production and
clearance of such transmission assembly/ chassif:
assembly clearly established that this was done with a11
intention to evade payment of duty." B
25. We find that in successive declarations made by
the assessee in this case starting from 16.3.1995 the assessee
had declared not merely the tractor but the chassis therefor.
The assessee bonafide believed that the declaration of the C
chassis would suffice as according to them Transmission
Assemblies were not taxable goods. The intention to evade
duty is according to the Commissioner made out from a
statement made by Shri P.C. Kale dated 12.4.2001. It is n
pointed out by learned counsel appearing on behalf of the
appellant that in the memorandum of appeal filed against the
order in original, Shri P.C. Kale was never in the employment
of the appellant during the relevant period as he joined the
appellant only in July, 2000. Apart from this, it is also pointed E
out that the appellant is a public sector company governed by
a Board of Directors consisting of IAS Officers. Be that as it
may, we are satisfied that there was no attempt to evade excise
duty and in this case also the show cause notice being beyond
the period of limitation of one year would have to be quashed F
on this ground. On this ground alone, therefore, the impugned
judgment dated 3.10.2005 is set aside. The appeal is allov•ed
accordingly.
Kalpana K. Tripathy Appeals allowed. G
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