Rohinton Fali Nariman JUDGMENT
Rohinton Fali Nariman, J.
C.A. No. 6561 of 2004
1. The present case raises an interesting question as to whether excise duty is payable on an intermediate product, namely, Transmission Assembly which comes into existence during the manufacture of tractors made by the Appellant. The period involved is January 1996 to May 1998. The tractors that are manufactured have engines that are below 1800 CC and are covered by an exemption notification 162/1986. We are informed, however, that after 1.6.1998 this exemption has gone and even tractors of an engine capacity of less than 1800 CC now have to bear excise duty.
2. By a show cause notice dated 31.1.2001, the Department for the period aforesaid relied upon evidence in the form of statements made by various officers of the Appellant and other documentary evidence to show that Transmission Assemblies of tractors was a commodity known to the market as such and, therefore, came into the category of excisable goods. The Respondent by their reply dated 1.10.2001 denied this stating that no separate product known as Transmission Assemblies came into existence which is known to the commercial community as such and, therefore, there was neither manufacture nor marketability of the same. In the reply, however, various statements were made which, in fact, amount to admissions, that Transmission Assembly of a tractor is, in fact, known to the market as such. These admissions are set out hereinbelow:
16. It is submitted that transmission assemblies are in fact interchangeable. The Transmission Assembly can be used in both dutiable as well as exempt tractors, for example in Model No. 325 (exempt tractor) and Model No. 335 (dutiable tractor). Therefore, it serves as a common input for both tractors. Therefore, in terms of provisions of Rule 57CC MODVAT credit is admissible on the common inputs which form part of transmission assemblies in turn used in the manufacture of both types of Tractors.
47.1. The department has relied upon the case of M/s. International Tractors Ltd., Hoshiarpur who are supplying transmission assemblies.
(a) The Notice contends that M/s. Mahindra & Mahindra have not purchased any transmission assemblies for use in tractors from any other unit. Further, they have not supplied or transferred any transmission assemblies to any other person. However, they have been supplying the transmission assembly to their own units at Nagpur and Rudhrapur for manufacturing tractors.
(b) It is submitted that this letter can at most lead to a conclusion that the transmission assembly made by M & M is marketable.
50. The show cause notice has placed reliance on certain other web site to contend that the Hoovers on-line web site and Carraro web site shows that transmission assemblies are marketed and sold. It is submitted that while there might be mass production of transmission assemblies marketed by Hoovers Carraro, etc., the product specific transmission assemblies of the n........