At, Income Tax Settlement Commission
By, S. VENKATARAMAN & MEMBER
The Judgment was delivered by SHRI S. VENKATARAMAN, MEMBER
SHRI S. VENKATARAMAN, MEMBER, C.B.E. & C.- These are three appeals, two filed by Central India Machinery Manufacturing Company Limited (hereinafter "CIMMCO") and one by Man Structural Limited (hereinafter "MAN") against the Order Nos. 10/81 and 11/81, dated 10-12-1981 passed by the Additional Collector of Central Excise, Jaipur.
2.Shri C.L. Sharma, Manager (Accounts) appeared on behalf of CIMMCO at the personal hearing before the Board on 16-4-81. 'Man' sent a written Memorandum and has waived the personal hearing.
3.The three appeals being against Orders on similar issues, passed by the same Adjudicating Authority, the Board has passed this consolidated Order to cover all the three appeals.
4.CIMMCO are licensed to manufacture goods falling under Tariff Item (T.I.) 68. They had entered into a contract with National Thermal Power Corporation Limited (N.T.P.C.L.), New Delhi, for manufacture of hydraulic gates and gadgets for C.W. Pump House for N.T.P & L's Singrauli project. CIMMCO had also entered into a sub-contract with 'Man' (located in Bharatpur, Jaipur and Delhi) for fabrication of some of these items on the basis of job charges.
5.During a visit to the manufacturing premises of 'Man' on 19-10-1981, Central Excise Officers noticed that they were fabricating intake gates on behalf of CIMMCO (on job charges). The intake gates after completion, were being supplied to N.T.P.C.L. by 'Man' directly, on behalf of CIMMCO on payment of Central Excise duty. The duty amount and the job charges were being subsequently recovered by 'Man' from CIMMCO. The Department was of the view that this procedure could only have been followed if both the appellants had opted for permission to work under rule 56C of the Central Excise Rules, 1944 (hereafter 'the Rules'), which was not done. Therefore, both the appellants were charged with the violation of the Rules.
6.The Additional Collector, after considering the submissions made by both the appellants, imposed a penalty of Rs. 2, 000/- in each of his Orders on CTMMCO and a penalty of Rs. 1, 000/- only under the first Order on "Man". The intake gates, which were seized by the Central Excise authorities from "Man" were released on the condition that duty on the appropriate value should be paid at the time of their clearance.
7.The appellants have submitted that the option to work under rule 56C procedure is entirely with the assessee. CIMMCO claims to have been in contact with the Central Excise authorities on this issue, which would be evidenced by the correspondence dated 6-8-81 and 16-9-81 from the Central Excise authorities to them. This correspondence would prove that the Department itself was of the opinion that rule 56-C was not applicable in their case. Otherwise they would have asked CIMMCO and "Man" to immediately start functioning under rule 56-C procedure. Therefore, the imposition of the penalties on the appellants was unwarranted.
8.The Board has carefully got through the records of the case and the submissions made by both the appellants in their written memoranda of appeals and during the course of personal hearing.
9.The Board observes that the Central Excise authorities were themselves not too sure of the application of rule 56-C in this matter. If this was not so they would have immediately taken remedial steps to bring the appellants under the ambit of this rule.
10.Moreover, from a reading of rule 56-C, it is observed that an assessee is provided the option to avail of the benefit under the rule. The applicatio
Please Login To View The Full Judgment!
n of this rule on an assessee cannot, therefore, be made compulsory, and a unilateral decision to this effect cannot be made by the Central Excise Authorities. The appellants were at liberty to pay duty at each stage of the clearances of excisable goods in accordance with the normal procedure prescribed under the Rules.11.The Board, in the circumstances sets aside the Orders of penalty of both the Appellants.