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. We feel that the 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. 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 of limitation was invoked as follows:- “M/s. TAFE have filed the declaration under Rule 173B of Central Excise Rules, 1944, during the year 2000-2001, for the manufacture of product viz., Transmission 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 declared this product along with other factory finished products for which duty was paid by them. Hence, necessary verification was conducted in order to know whether any such sub-assemblies were manufactured and cleared by the assessee for use in the exempted tractors. 4. M/s. TAFE have manufactured the sub-assemblies as listed in the Annexure-I and Annexure-II for the tractors Model No. TAFE 25 and TAFE 30 inside the factory for captive use in the production of tractors. The details of process of manufacture of such sub-assemblies are explained in Annexure-III. 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 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 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 tractors. Therefore, it appears that M/s TAFE are liable to pay duty on all the sub-assemblies manufactured (as per Annexure-I and II), and used in the Tractors which are exempt for the period from April, 1997 to May, 1998.
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 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 parts constituting these sub-assemblies as factory finished items and not sub-assembly. JUDGMENT 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 the sub-assemblies willfully in order to evade payment of duty.”
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 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. 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 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 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 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 circumstances, the appeals of the revenue shall stand dismissed on this ground. C.A. No.457 of 2006
23.The facts in this appeal are as follows. The period involved is April, 1996 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 that the finding of the authorities on merits is correct. However, in this case also the extended JUDGMENTperiod of limitation is not available to the revenue.
24.In the order dated 26.12.2001, the Commissioner stated:- “In the present inquiry which was undertaken by the proper officer, it was found that the transmission assembly or chassis assembly which is classifiable under Sub-heading 87.08 of the 1st Schedule to the Central Excise Act was not declared by the noticee in the classification 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 admitted that the chassis is the main frame that supports the body and the engine has to be so framed as to receive, hold and fasten an engine and other components of the tractors (Para 14 of the reply). Thus, transmission assembly is not the chassis and since the noticee have failed to declare the transmission assembly/ chassis 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 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 classification declaration and clearing such transmission assembly/ chassis assembly without payment of duty without recording their production in the statutory records and without filing the RT-12 returns for the production and clearance of such transmission assembly/ chassis assembly clearly established that this was done with an intention to evade payment of duty.”
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 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 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 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 on this ground. On this ground alone, therefore, the impugned judgment dated 3.10.2005 is set aside.JUDGMENTThe appeal is allowed accordingly. (A.K. Sikri) (R.F. Nariman) New Delhi; April 29, 2015.