RICHARDSON AND CRUDDAS (1972) Vs. COLLECTOR OF CENTRAL EXCISE
LAWS(CE)-1991-7-55
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on July 08,1991

Richardson And Cruddas (1972) ... Appellant
VERSUS
COLLECTOR OF CENTRAL EXCISE Respondents

JUDGEMENT

P.K. Kapoor, Member (T) - (1.) THE appellants are engaged in the manufacture of transmission line towers. They enter into contract with various electricity boards for the supply of such towers. Such contracts invariably have a clause for the manufacture and testing of a proto -type at a test bed with reference to various specifications. The manufacturing of the towers covered by any contract is undertaken only after successful completion of such tests. The value of the contract is inclusive of the material, required for the proto -type and the charges for testing outside the appellants' factory which are required to be paid for the use of test beds belonging to certain electricity boards. On 5 -9 -1980 the Superintendent of Central Excise issued a show cause notice to the appellants demanding central excise duty amounting to Rs. 32,330 -00 on testing charges recovered for testing the proto -type towers. Three other similar show cause notices dated 18/20 -11 -1980, 31 -8 -1981 and 24 -3 -1982 seeking the recovery of Rs. 2400/ -, Rs. 7040, and Rs. 5200/ - respectively answerable to the Assistant Collector were also issued. The show cause notices alleged that the test charges recovered from the customers constituted a part of the assessable value of the transmission line towers covered by the relative contracts. It was further alleged that the appellants failed to indicate the testing charges in the invoices prepared for the supply of the goods and they had failed to furnish to the Department the separate invoices prepared by them in respect of the testing charges. In their reply to the show cause notice dated 25 -10 -1980 the appellants claimed that the goods manufactured by them were not required to be tested since only the prototype ungalvanised towers were tested after clearance from the factory and the test charges recovered on account of the cost of the material and test fee did not represent advance payment towards the cost of the actual goods viz. Transmission Line Towers. On the ground that the testing undertaken by them was neither a part of the manufacturing activity nor could it be deemed as an activity incidental or ancillary to the manufacture they claimed that no charges were recoverable from them. However, in the impugned order dated 26 -11 -1982 the Collector held that the Proto -type Transmission Line Towers cleared by the appellants from their factory in knocked -down condition were dutiable goods. He also held that the test charges constituted a part of the assessable value of the Transmission Line Towers, since testing of proto -type towers was essentially linked with the development of the product and as such it could not be treated as separate from the manufacture of the goods under contract. The appellants' contention that the demands were barred by limitation was also rejected by the Collector.
(2.) ON behalf of the appellants we heard learned Advocate Shri H.S. Joshi. He stated that proto -type towers cannot be treated as 'goods' inasmuch as they cannot be bought and sold in the market. He added that the components sent for testing are assembled at the test bed by erecting them on earth for subjecting to them to pressure and other tests in accordance with the 'Indian Standard Code of Practice for Use of Structural Steel in overhead Transmission Line Towers'. He pointed out that the components sent from the factory for the erection of proto -type tower at the test bed site are non -galvanised and they do not enter the market since they become useless after the test. Shri Joshi reiterated his stand that such proto -type towers not being marketable cannot be deemed as 'goods' chargeable to duty. He contended that the Collector's finding that proto -type towers cleared in completely knocked -down condition to facilitate transportation constitute 'goods' chargeable to duty is erroneous since the items cleared are merely angles and the proto -type tower constructed at the site by assembling such angles is fixed to the earth. In regard to the Collector's finding that the test charges form a part of the assessable value of the transmission line tower, Shri Joshi contended that testing of the proto -type towers being a process totally unconnected with the actual manufacturing of the transmission towers covered by the contract the charges incurred on such testing cannot be treated as forming a part of the assessable value of the Transmission Towers fabricated by the appellants in terms of the contract. Shri Joshi further contended that the demands for the recovery of duty were time -barred since they were not issued within the period of 6 months stipulated in Rule 10 of the Central Excise Rules, 1944. He denied that there was any suppression of facts by the appellants. In this regard he pointed out that the goods in question were removed from the factory under despatch challans and the contracts as well as the bills mentioning these charges were available for scrutiny by Central Excise Officers and Audit parties which visited the factory from time to time. He claimed that the appellants had acted under the bonafide belief that the proto -type towers were not chargeable to duty, and not with the intent of evading any duty. In support of the points made, by him, he placed reliance on the following case law: - (i) Hyderabad Race Club v. CCE, Hyderabad -1986 (23) ELT 274 (Tri.) (ii) CCE, Baroda v. Dodsal Pvt. Ltd. - 1987 (28) ELT 352 (Tri.) (iii) SAE (India) Ltd. v. CCE -1988 (36) ELT 613 (Tri. )
(3.) ON behalf of the Department the learned JDR Shri M.S. Arora argued that there was no doubt about the durability of the Transmission Line Towers which are fabricated by the appellants in terms of the contracts entered into with various electricity boards, since they have been regularly paying duty on these products. In regard to the question of dutiability of the proto -type towers, Shri Arora referred to the Collector's finding that complete towers are dismantled for facilitating transport to the test site and such towers are similar to the towers which are manufactured for the execution of the contract. Shri Arora contended that even though at the time of clearance from the factory the proto -type towers are in completely knocked down condition and not galvanised, they have to be deemed as having acquired the essential characteristics of finished towers. He stated that the decision in the case of Collector of Central Excise, Baroda v. Dodsal Pvt. Ltd. does not help the appellants since in that case the goods cleared from the factory were only angles and not complete towers in knocked -down condition. Shri Arora also referred to the decision in the case of Richardson and Cruddas (1972) Ltd. v. Collector of Central Excise reported in 1988 (38) ELT 176, and argued that even proto -type towers cleared by the appellants for test have to be deemed as excisable goods. On the grounds that tests in terms of the relevant Indian Standard Code was an essential condition of such contracts, he argued that the testing activity could not be deemed as separate from the manufacture of the goods covered by the contract and as such test charges had to be deemed as part of the assessable value of towers cleared by the appellants from their factory. In this regard he placed reliance on the following case law : - (i) Madhavnagar Cotton Mills Ltd. v. CCE, Pune -1986 (25) ELT 443 (Tri.) (ii) CCE, Bangalore v. Sunray Computers (P) Ltd. -1985 (33) ELT 787 (Tri. ) We have examined the records of the case and considered the arguments advanced by both sides. It is seen that the following points arise for consideration in this case: - (i) Whether the proto -type towers cleared by the appellants in completely knocked down condition for tests after assembly at test site, can be deemed as excisable goods. (ii) Whether the test charged recovered by the appellants from their customers form a part of the assessable value of the Power Line Transmission Towers which are fabricated after tests of the proto -type for erection in terms of the contracts. (iii) Whether the demands issued in this case were barred by limitation. ;


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