ANDREW YULE AND CO. LTD. Vs. CCE

JUDGEMENT

(1.) The appellants are a Public Sector Undertaking and have the necessary clearance from the committee on Disputes to prosecute this appeal. They care manufactures of power transformers and spares thereof.

(2.) The facts of the case, briefly stated, are as follows: Apart from the manufacture of transformers, the appellants are also engaged in the repair/rectification of transformers. Whenever the Double Paper Coated (DPC) copper coils in the transformers supplied to customers got burnt for any reason, during the relevant period, the appellants replaced the same with fresh DPC copper coils. Whenever such replacements were supplied to the customers, they (appellants) paid duty on the goods treating them as transformer parts under Chapter Heading 85.04 of the Central Excise Tariff Schedule. The department took the view that such copper coils were rightly classifiable under Sub -Heading 8544.90 as insulated wire and not under Heading 85.04 as part of transformer. Accordingly, the department took the stand that differential duty amounting to Rs. 12,75,292/ - was liable to be paid by the appellants on the DPC copper coils removed from their factory to customers during the period 31.1.1985 to 28.2.1999. During the period 30.3.1999 to 26.4.1999, the appellants had cleared, without payment duty, transformers to Indira Gandhi Centre for Atomic Research (IGCAR, for short), Kalpakkam, claiming the benefit of Notification No. 10/97 -CE dt. 1.3.1997, which exempted from payment of excise duty, scientific instruments, apparatus and equipments (including spares and accessories) cleared to research institutions for research purposes. The department took the view that the transformers supplied by the appellant to IGCAR could not be described as scientific instruments, equipments or apparatus and, therefore, the benefit of the notification was not available to them. The amount of duty which, according to the department, was liable to be recovered from the appellants in respect of the transformers supplied to IGCAR during the above period was Rs. 4,78,880/ - A show -cause notice was issued on 10.1.2000 demanding the above duties, invoking the extended period of limitation on the basis of alleged misdeclaration and suppression of facts. The show -cause notice also proposed to levy interest on duty under Section 11AB as well as to impose penalties on the appellants under Section 11AC and Rule 173Q. The proposals were contested. The adjudicating authority justified the invocation of the extended period of limitation and confirmed the demands of duty against the appellants. It also imposed penalties of Rs. 17,54,172/ - and Rs. 2,00,000/ - on them under Section 11AC and Rule 173Q respectively. Interest on duty was also demanded under Section 11AB and the same was directed to be quantified by the Range officer concerned. In the appeal preferred by the assessee against the order of adjudication, the Commissioner (Appeals) upheld the demands of duty with interest, but set aside the penalty under Section 11 AC and reduced the penalty under Rule 173Q to Rs. 1.5 lakhs. Aggrieved by the demands of duty and the penalty under Rule 173Q, the party has filed this appeal.

(3.) Heard both sides. Ld. Chartered Accountant for the appellants has challenged the demands of duty both on merits and on limitation. On merits, he has relied on Punjab State Electricity Boards v. Collector of Central Excise Chandigarh where it was held by this Tribunal that the coils fabricated from aluminium and copper wires were not marketable and hence not excisable. It has been further submitted that the said decision has been affirmed by the Hon'ble Supreme Court vide 1996 (83) ELT A. 106. Reliance has also been placed on CCE, Indore v. Gwalior Electrical Industries 2001 (94) ECR 531 (Tribunal) wherein, following the decision in Punjab State Electricity Board v. CCE, Chandigarh (Supra), the Tribunal held that conversion of DPC wire into LV/HV coil did not amount to 'manufacture'. Therefore, ld. Chartered Accountant contended that the demand of duty on the DPC copper coils cleared by the appellants to their customers during the relevant period dispute was not sustainable.