Dismissed

M/S.Vanaz Engineers Ltd. v. Commissioner Central Excise

Bombay HC8 Feb 2007CEA/2/1999

Case brief

AI extract

What is this about?

The Bombay High Court dismissed an application under Section 35G of the Central Excise Act seeking a reference of substantial questions of law. The Court held the matter was purely a question of fact regarding identity of goods and documents, precluding a reference to the High Court.

What did the court decide?

Application for reference under Section 35G dismissed; no reference made.

M/S.Vanaz Engineers Ltd. Vs Commissioner Central Excise — Customs and Excise | Bombay HC (2007)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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ORDINARY ORIGINAL CIVIL JURISDICTION

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CENTRAL EXCISE APPLICATION NO.2 OF 1999

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REFERENCE APPLICATION NO.F/RA/35/98 BOM

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APPEAL NO.E/612/92-BOM

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M/s.Vanaz Engineering Ltd. Unit No.III, Sadavali, (Deorukh), Tal. Sangameshwar, Dist. Ratnagiri.

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..Applicant

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Versus

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The Commissioner of Central Excise, P.M.C.Building, Hirabaug, Tilak Road, Pune - 411 002.

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Union of India,

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Aykar Bhavan, Marine Lines, Bombay-20.

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..Respondents

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Mrs.Sahityalaxmi S.Deshpande for the Applicant. Mr.R.V.Desai, Senior Advocate, with Mr.P.S.Jetly for the Respondents.

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CORAM :- DR.S.RADHAKRISHNAN & J.P.DEVADHAR,JJ.

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DATE : 8TH FEBRUARY,2007

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JUDGMENT (PER : DR.S.RADHAKRISHNAN,J.)

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The Applicant/Petitioner, aggrieved by the

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Judgment	and	O	rder of	the	Customs, Excise		and	Gold
(Control)		Appel	late	Tribunal	(hereinafter		referred	to
as	CEGAT)	dated	12th	May	1998, refusing	to	refer	has
filed	this	Applica	tion	under	Section	35G	of	the
Central	Ex	cise	Act,	1944,	(hereinafter	referr	ed to	as
‘the	Act’)	to	this	Court	requesting this		Court	to

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direct the Tribunal to refer this case with the

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relevant substantial questions of law.

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2.	The facts necessary to decide this application
are	as follows: M/s Vanaz Engineers, the	Petitioner,
is	engaged in the manufacture and repairs of	various
types	of valves. In April 1983, the Petitioner	was
manufactur	ing and supplying click-on gas valves	to
various	Oil Corporations for their LPG cylinders.	The
design	of the click-on gas valves was modified	and
therefore	as per the Works Order, the	Petitioner
received	assignments of old and used gas valves	for
repairs.	The Petitioner had approached the	Collector,
Central	Excise, Pune, for waiving off the condi	tion of
producing	duty paying documents on the ground	that it
was	not possible to co-relate the duty	paying
documents	with the valves, as the valves	re-entering
the	factory for repairs were old and used and	were
coming	from different destinations. The	Collector,
Central	Excise, Pune, waived off the condition	on
being	satisfied with the reasoning tendered.	The
Petitioner	accordingly repaired the old valves	and
returned	them to consignors. On 7th August,19	89, the
Petitioner	received a Show Cause Notice issued	by the
Superinten	dent of Central Excise, on	audit
observation	s requiring an explanation with regard	to
the	non-payment of duty of Rs.6,77,857.13.	The
Petitioner written	replied to the said Show Cause Noti arguments. After considering the	ce with Petitioner’s

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plea, the assistant Collector of Central Excise was pleased to order the withdrawal of the Show Cause Notice. The Assistant Collector of Central Excise filed an appeal under Section 35E of the Central

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Excise Act. The Collector, Central Excise (Appeals)

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was pleased to allow the appeal holding,

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a) the reason, i.e. goods which are brought back for repairs is not covered by Rule 173H, of Central Excise Rules, and

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b) duty paying documents were not produced.

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3.	A	ggrieved t	hereby t	he Peti	tioner ha	d filed an
appeal	before	the	CEG	AT,	Mumbai	.	The		appeal	was
dismissed	on	the	grou	nds	of	non-prod	uction		of	duty
paying	docum	ents.	S	ubseq	uently,	a	refere	nce	was	made
under	Section	35G	of	the	Act	which	was		dismissed	by
the Ho	n’ble Div	ision	Bench	of	the	CEG	AT	by	order	dated

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12th May,1998, hence this application has been filed

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by the Petitioner, seeking a Reference.

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The learned Counsel Mrs.Deshpande on behalf of

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the	petitio	ner submit	ted that	the	CEGAT	ought	to	have
allowed	the	reference	application	to	the	High	Court	on

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the various substantial questions of law on which

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reference was sought.

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. The following are the substantial questions of

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law -

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a) Whether the process of repairing the old, used and rejected valves could be termed as Manufacture within the meaning of Section

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2(F) so as to attract imposition duty under the Central Excise Act, 1944?

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b)	Whether waiver of produ	ction of	duty
paying docu	ments under Rule		51A by	the
Collector,	Central Excise,		Pune	after
considering	the Petitioners	case	under	his
order dated	23rd May,1984	was	proper and	legal
and wheth	er subsequent	questi	oning of	the
non-payment of dut	y by issuance of demand-cum
Show Cause Notice	was legal and proper?

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c) the	Whether i repairs of	n view of the fact that a old, used	fter valves,	no	new
product	emerged and	the valves	within	the	same
tariff	entry, the	ratio laid	down	by	the
Hon’ble	Supreme Cou	rt in Delhi	Cloth	Mills	vs.
Union	of India cas	e ought to	have	been	applied
to	the present	case and whet	her the	levy	of

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excise duty ought to have been held illegal and improper ?

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d)	Whether the Collector, Central Excise,
Pune	was armed with power to waive the
condition	of producing duty paying documents
under	the provisions of Rule 173H in the
peculiar	circumstances of the case as the
defective,	old and used valves were sent to
the	petitioners for repairs from various
sources	such as LPG filing plants/depots and
cylinders	manufacturers of petroleum
corporation	s and it was difficult to co-
relate	and produce in case of old , used
valves	with the duty paying documents? and
whether	in such circumstances marking on the
valves criteria to cleared by t	ought to have been held to be the sole decide whether the goods were he factory?

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e) Whether the condition in the first proviso to Rule 173 as regards the limitation of one year for bringing the goods of which duty is paid to the factory for remake, refining, reconditioning, repairing or subjecting them to similar process could be applied retrospectively as the same proviso came into existence on 11.9.1990?

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f) Whether the levy of duty on valves which could be repaired or which were not subjected to any process of even repairs was justified? g) Whether permission from the Collector under Rule 173H was necessary in view of the fact that the said condition was inserted in September 1990 in the Central Excise Rules,

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for

1944?

h) Whether or not from the D-3 intimations produced by the Petitioner it could be inferred that old, used valves were brought to the factory for repairs? and whether the markings on the valves were sufficient to prove the same?

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i) Whether the case law cited was properly appreciated and applied to the present case?

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j) Whether entire charges modification and repair which included cost of duty paid items , could amount to value of the valves for determining rate of duty?

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k) accorded	by	Whether the benefit under Rule the Collector was	51A cont	inuing	and
the	Petitioner	was entitled	to	enjoy	the
benefit	of	the concession in	view	of the	fact
that	non-pr	oduction of duty	paying	d	ocuments
was	not	supported from the	author	ities at	any
time	and	that the Collector	had	used	his
judicious		discretion	while		granting
concession,	appreciatin	g the reasons put
forward by	the Petition	ers?

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The learned Counsel for the Petitioner

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submitted as under :-

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a) The quantity of valves recei repairs and returned to	ved for the consi	gnor, even
taking Rs.12.25 as assessab	le value	of each
unit for the sake of arg	ument the	assessable
value for quantity of 22,150	duly	repaired and
returned valves works out	to	Rs.25,98,837.50
duty at the rate of 15% ADV	+ 5%	SED comes to
Rs.4,09,316.90 (Basic Excise	Duty	+ Special
Excise Duty) deducting the	duty	paid on
components used for	replac	ements i.e
Rs.1,16,279.13 from the same	it comes	to Rs.
2,93,048.77 and thus the total duty liability could not be in any case be Rs.6,77,857.13.

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b) The unit cost worked out is taken as Rs.12.25 which includes other cost of Rs.5.63 which includes cost of components manufactured and used on which the Petitioner has already paid duty and the cost of components purchased from the market.

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c) In view of the fact that at no stage
of proceeding commencing from the issue of the
Show Cause Notice dt. 7.9.89 till the
Tribunal’s order dt.26.12.1997 vis-a-vis dt.
30.10.98 the Department had any disputes on
the facts that Petitioners brought into their
factory the used and old LPG cylinder valves
for inspection/testing and repairs wherever
warranted in accordance with the permission
which the Collector, Central Excise, Pune
granted to the Petitioners on 28.5.1984 and
with the pre knowledge of the jurisdictional
officers for entry of the said goods into
their factory, the application seeking reference ought to have been allowed. d) In view of the fact that the
Department never disputed that the Petitioners
had manufactured and supplied the LPG cylinder
valve/regulator exclusively to specify Public
Sector Oil Companies and not to any other
buyers, the Learned CEGAT ought to have held
that the goods entering the factory for
repairs were goods on which duty was paid and
ought to have held that the Collector was right in waiving the condition of producing duty paying documents.

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6.		The Petitio	ner’s applic	ation sought r	eferen	ce
to	this	Court	on	the		above	mentio	ned	substantial
questions	of	law	was	dismissed	by	the		CEGAT	(vide
order	dated	12th	May,1	998) as	it	did	not	find	any

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substantial question of law involved in the above, to

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make a reference to this Court.

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The CEGAT stated that questions (a), (c), (d)

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and	(f) proceeded	on	the assumption	that	what	was
brought	in the	Petitioner	’s factory	were old		valves.
The	Tribunal was	of the	view that	as these		questions
were	based on	assump	tions that	could	not	be

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established before the Tribunal, there could be no

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reference made with regards to these questions.

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As regards questions (b), (h) and (k), the

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CEGAT	relied	on Ru	le	51A	w	hich	provides	that	except	as
otherwise	prov	ided	in	the	R	ules,	no duty	paid		goods
shall	be a	llowed	to		enter	or	be retai	ned	in	any
factory.	The	prov	iso	to		that	Rule	empo	wers	the
Collector	or	Board	to	p	ermit	duty	paid	goods	to	enter
or	be	retained	in	any	fac	tory.	The	Tribunal		stated
that	neither	the	Ru	le n	or	the	proviso	specif	ied	or
implied	that	the	B	oard	or	the	Collector	could		waive
the	production	of	d	uty	payin	g	documents.		H	owever,
CEGAT	was	of the	o	pinion	tha	t by	the em	phasis	on	the

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payment of duty it implied that such documents were

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required to be produced.

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The Tribunal held that question (d) was clearly a question of fact, and not a question of law.

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Whereas, question (e) was not pressed by the learned

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Counsel for the Applicant.

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10.		With rela	tion to question	(g) the	Trib	unal
stated	that	sub-r	ule (1)	of	Rul	e 173H	itself		permits
bringing	into	the	factory g	oods	on	which	duty	has	been
paid	and	thus	a basic	cond	ition	inherent	to	go	show
payment	of	duty.	This	w	as	made e	xplicit	by	the
condition		notified	by the	Co	llect	or in	purview	of	the
Rule,	and	hence	it was	held	by	the Tr	ibunal	that	the

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answer to the question was obvious and did not call

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for reference.

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It was further held that question (h) was also

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purely	a	question	of	fact.		The	Tr	ibunal,	while
deciding	on	quest	ion (i)	held	that	it	related	to	a
case	law	whose	decision	did	not	appear	to	have	been

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cited. Further, the CEGAT held that there was nothing

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to show that question (j) was raised at all.

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In light of the abovementioned reasons, the

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Tribunal dismissed the application as it did not find

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any merit in the same.

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After hearing both the sides, and on a perusal

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of	the	original	judgm	ent a	nd	order	of	CEGAT,	dated
10th	No	vember,1997	it	is	ex	plicitly	clear	that	there
are	no	substantial	qu	estion	of	law	involve	d in	the
above,	it	is only	a	case	of	finding	of	fact, as	is

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apparent from the following observation in the above

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order :-

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"As	it is	worded, both	before and am	endment,
it	permits	a manufactu	rer to bring into	his
factory	goods	on which	duty has been	paid.
Therefore	it	is evident	that the rule	both
before	and	after ame	ndment requires that	it
must	be	established that	the goods which	are
coming	in	are those on	which duty has	been
paid.		This condition	has not been	satisfied.
Neither	the	gate passes,	nor other evidence	to
show	that	the goods	have been cleared	on
payment	of	duty has	been produced.	The
contention	that	the goods	were manufactured	by
the	Appellant	and clear	ed by it, as	its
marking	on	the valves	show, and therefore	must
be	considere	d to have	been cleared on	payment
of	duty	clearly assuming	something which	the
rule	requires	must be	established, and is	thus

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unacceptable. Therefore the order of the Collector, finding against the Appellant on this single point in the Appeal has to be upheld." 14. In the above, it is clear that the Petitioner could not produce the duty paid documents and also could not establish the identity of goods wherein duty was paid. 15. Under the aforesaid facts and circumstances, it is clear that the above case involves only finding of fact and there is no substantial question of law involved.

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The above Central Excise Application stands dismissed.

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(DR.S.RADHAKRISHNAN,J.)

M/S.Vanaz Engineers Ltd. v. Commissioner Central Excise

Case brief

What is this about?

What did the court decide?

M/S.Vanaz Engineers Ltd. v. Commissioner Central Excise

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

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