Full Judgment Text
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CASE NO.:
Appeal (civil) 1100-1101 of 2001
PETITIONER:
Commissioner of Central Excise, Delhi
RESPONDENT:
M/s Allied Air-Conditioning Corporation (Regd.)
DATE OF JUDGMENT: 13/09/2006
BENCH:
ARIJIT PASAYAT & S.H. KAPADIA
JUDGMENT:
J U D G M E N T
ARIJIT PASAYAT, J.
These two appeals are directed against a common
judgment of the Central Excise and Gold Control Appellate
Tribunal, New Delhi, (in short the ’CEGAT’). Respondent
(hereinafter referred to as the ’assessee’) preferred the appeals
before the Tribunal against a common order dated 31.3.1997
passed by Commissioner of Central Excise, New Delhi (in short
the ’Commissioner’). The issues involved in the appeals were
(a) the valuation of "packaged type Air Conditioner" and (b)
whether the extended period of limitation is invokable in
demanding duty. The basic facts in a nutshell are as follows:
The respondent is engaged inter alia in the manufacture
of, inter alia, package type Air Conditioners falling under Tariff
Item No. 29-A of the erstwhile Tariff and Chapter heading
No.84.15 of the Central Excise Tariff Act, 1985 (in short the
’Tariff Act’). According to the appellant, the respondent was
selling the air conditioners by assembling the same at site
through orders procured from various authorities by way of
Tenders/Contracts. The Contracts /Tenders entered into by
the assessee are broadly divided into nine components:
1. Compressors
2. Accessories
3. Pumps
4. Cooling Towers
5. Humidification & heating etc.
6. Ducting material
7. Plumbing material
8. Civil Work
9. Electrical material
Undisputedly, the respondent was filing its price list in
respect of compressors and assessories i.e. Item Nos.1 & 2 as
noted above. Premises of the respondent, where activities were
being carried on, was visited by Central Excise Officers on
7.3.1987. Certain records were examined. Concerned officers
were of the view that there was evasion of duty by mis-
declaration. Respondent had cleared the air conditioners
without payment of duty by taking the plea that packaged type
air conditioners were being cleared in a knocked down
condition and were assembled directly at site and were not
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therefore assessable as air conditioners. Show cause notice
was issued on 12.10.1988 for assessment years 1984-85,
1985-86 & 1986-87 (part period).
On 28.3.1989 the officials again visited the premises and
found that the respondent was continuing to clear the goods
and was not correctly working out the duty payable. The
second show cause notice was issued for the period covering
assessment year 1986-87 (residual part), 1987-88 and 1988-
89. The extended period under proviso to Section 11(A) of the
Central Excise Act, 1944 (in short the ’Act’) was invoked. After
considering these submissions made by the respondent, these
two show cause notices were adjudicated and duty demand of
Rs.12,20,936/- was confirmed and penalty of Rs. 1,00,000/-
was imposed in respect of first show cause notice. For the
subsequent show cause notice a duty demand of
Rs.2,79,169/- was confirmed and penalty of Rs.30,000/- was
imposed. Respondent preferred appeals before CEGAT. By a
common order, CEGAT remanded the matter to the
Commissioner for fresh consideration with regard to valuation,
rate of duty and limitation. On fresh adjudication on
31.3.1997 Commissioner noted that the respondent had
wrongly filed the price list in Part I on the issue of valuation.
Out of nine items, in respect of two items there was no
dispute. Commissioner excluded the valuation of the civil
work from the assessable value. Demand of Rs.9,34,179/-for
the consolidated period was confirmed and penalty of
Rs.2,00,000/- was imposed under Rules 9(2), 173 Q and 226
of the Central Excise Rules, 1944 (in short the ’Rules’). The
order was challenged by the respondent before the CEGAT.
Without discussing in respect of the individual items, the
Tribunal allowed respondent’s appeal relying on a decision of
this Court in PSI Data System Ltd. v. CCE [1997(89) ELT 3
SC)]. It however, held that the extended period of limitation
was to be applied. It was noted that in respect of the first
show cause notice dated 12.10.1988 that since the copies of
the contract were not furnished along with price list which
were filed in Form I and not in Form II which is meant for the
contract prices, Department was not aware of the existence of
the contract. In respect of second show cause notice, it was
held that the respondent had not refuted the finding of the
Commissioner to the effect that goods were cleared without the
cover of the excise document and without entering them in the
Statutory records. Therefore, it was held that the extended
period of limitation was available. But since it held that
because of disputed items were not to be included,
adjudicating authority has to work out the assessable value
with a view to determine whether any duty is to be demanded
from the respondent. If any duty was to be demanded, the
amount of penalty was to be worked out at the discretion of
the Collector to be imposed.
In support of the appeals, Mr. A.K. Ganguli, learned Sr.
counsel submitted that PSI’s case (supra) was not applicable
to the facts of the present case. CEGAT even did not analyse
the factual position and there was no discussion as to why the
articles covered under various items were not to be reckoned
to work out the assessable value. It has also not been decided
as to which of the items can be termed as "assessories" and
which can be termed as "components".
Learned counsel for the respondent on the other hand
submitted that the CEGAT had taken into account the broad
features and had rightly decided that the valuation of the
items in question were to be excluded. It was further
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submitted that the CEGAT’s view about limitation is not
correct.
In Black’s Law Dictionary (5th Edn. p. 13) ’accessory’ has
been defined as anything which is joined to another thing as
an ornament, or to render it more perfect, or which
accompanies it, or is connected with it as an incident, or as
subordinate to it, or which belongs to or with it, adjunct or
accompaniment, a thing of subordinate importance. Aiding or
contributing in secondary way of assisting in or contributing
to as a subordinate is the essence on the basis of which it can
be decided whether an article is an accessory or not. Whether
an article or part is an accessory cannot be decided with
reference to its necessity to its effective use of the goods to w
which it is joined as a whole. General adaptability may be
relevant but may not by itself be conclusive. Take for instance
stereo or air-conditioner designed and manufactured for
fitment in a motorcar. It would not be absolutely necessary or
generally adapted. But when they are fitted to the vehicle,
undoubtedly it would add comfort or enjoyment in the use of
the vehicle. Another test may be whether a particular article or
articles or parts, can be said to be available for sale in an
automobile market or shops or places of manufacture; if the
dealer says it to be available certainly such an article or part
would be manufactured or kept for sale only as an accessory
for the use in the motor vehicle, Of course, this may not also
be a conclusive test but it is given by only way of illustration.
It may be noted that some of the parts, in the case of a motor
car like axle, steering, tyres, battery etc. are absolutely
necessary accessories for the effective use of the motor vehicle.
(See Mehra Brothers v. Joint Commercial Officer Madras
(1991) 1 SCC 514).
In the absence of any definition of the term "component
parts" it is permissible to refer to the dictionary meaning of the
word "component". According to the Webster Comprehensive
Dictionary, International Edition the word ’component" inter
alia means a constituent part. (See Star Paper Mills Ltd. v.
Collector of Central Excise (1989) 4 SCC 724).
By way of example, a spare part is a replacement part to
replace a damaged or worn-out component but it is,
nevertheless, a component part. In such cases, "Component"
was the genus and ’spare’ was a species thereof; it was a
component which was used for replacement. (See Hindustan
Sanitaryware & Industries Ltd. & Lakshmi Cement v. Collector
of Customs, Calcutta (2000) 10 SCC 224).
A bare reading of the CEGAT’s order makes the position
clear that it has not analysed each item individually. It has
also not indicated how the ratio in PSI’s case (supra) has any
relevance. The same was rendered in entirely different factual
scenario. A judgment should be understood in the light of
facts of the case and no more should be read into it than what
it actually says. It is neither desirable nor permissible to pick
out a word or a sentence from the judgment divorced from the
context of the question under consideration and treat it to be
complete law decided by this Court. The judgment must be
read as a whole and the observations from the judgment have
to be considered in the light of the questions which were
before this Court. (See Mehboob Dawood Shaikh v. State of
Maharashtra (2004 (2) SCC 362). CEGAT has also been not
analysed the respective stand of the appellant and the
respondent on the issue of limitation elaborately. Various
documents were pressed into service by the parties in support
of their respective stand. The relevance of these documents
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has not been examined in detail by CEGAT.
In the aforesaid circumstances we deem it proper to remit
the matter to CEGAT to consider the stand of the revenue as
regards the disputed items and deal with the items
individually and also examine the rival stand on the question
of limitation. Let the exercise be done at the earliest as the
matter is pending since long.
Appeals are accordingly disposed of with no orders as to
costs.