JAISHRI ENGINEERING CO. (P) LTD.versusCOLLECTOR OF CENTRAL EXCISE, BOMBAY

                  JAISHRI ENGINEERING CO. (P) LID.
A
                                        v.
            ·COLLECTOR OF CENTRAL EXCISE, BOMBAY

                                MARCH 2, 1989

B     [SABYASACHI MUKHARJI ANDS. RANGANA1HAN, JJ.)
                                                                                  -:,
          Central Excises and Salt Act, 1944.-Section 11-A proviso 35L and
    First Schedule Items 52 and 68-Whether goods in question were nuts
    being mere fasteners or end fittings and integral parts of diesel engine      ~
    pipes-Classification of goods manufactured-functional approach to
    identity of goods-Whether there was suppression of facts by the
c   assessee-A question of fact-Tribunal free to fix quantum ofpenalty.

         The appellant-company applied for a requisite central excise             1
  licence .for manufacture of goods falling under Tariff Item 68 and for
  the purpose l\f such goods L-4 licence was also furnished and also the
D requisite ground plans of the factory in which the various goods were
  manufactured. The excise authorities granted L-4 licence. The appel-
  lant claimed benefit of exemption of Notification No. 89/79-CE dated
  March 1, 1979. The classification list submitted by the appellant was
  approved by the Assistant Collector by his letter dated May 25, 1979.
  For the period April 1, 1979 to June 30, 1979 the appellant filed his          ~
E RT-12   for assessment which was also finally assessed without any pro-
  test or objection. As the appellant claimed that his goods were wholly
  exempted by virtue of notification No. 89/79-CE dated March 1, 1979,
  the appellant wrote to the Superintendent asking for dispensation from
  filing RT-12 every month. The Superintendent informed the appellant
  that it need not file RT-12, but should inform the excise authorities
F monthly by means of a simple letter the total clearance effected in the
  month in question.

          Thereafter, the appellant submitted classification list in 1980,
    1981 and 1982 and claimed benefit of exemption under notification
                                                                                 1
    No. 105/80-CE dated June 19, 1980. The Assistant Collector approved
G   the class.ification list.

           The Central Excise Officer attached to the preventive branch         -.;.
    visited the factory in July 1982 and examined the products manufac-
    tured by the appellant. In January 1983, a show-cause notice was issued
    to the appellant asking it to show-cause as why excise duty should not be
H   demanded under Tariff Item 52 in respect of the piece of nuts manu-
                                      870
                       JAISHRI ENGG. v. COLLECTOR OF C.E.                   871

      factored and removed by the appellant during the period April 1, 1981
      to July 19, 1982 without payment of appropriate excise duty thereon,
                                                                                   A
      and also to show-cause why penalty should not be imposed for failure to
      obtain the requisite L-4 licence under Tariff Item 52 and to show cause
      why the material seized on August 26, 1982 should not be confiscated.

            The appellant showed cause and drew the attention of the               B
      authorities to the fact that the goods in question were not nuts but end
      products or connectors for lubricating purposes and as such were
      integral parts of Diesel Engine Pip,es falling under Tariff item 68.

            The Collector of Central Excise passed orders on July 16, 1984
      holding that fittings were nuts classifiable under Tariff Item 52, and C
      that appropriate duty on.the clearance effected by the appellant during
      the period April 1, 1981 to July 19, 1982 should be paid and tbe seized
      goods were liable to confiscation but in lieu thereof a redemption fine of
      Rs.4,000 could be paid. The Collector also imposed a penalty of Rs. 1
      lakh.
                                                                                 D
            The appellant went up in appeal before the Tribunal, which
      partly allowed the appeal and partly upheld the order of the Collector.
      With regard to classification of the different fittings was concerned, it
j..   was held that the classili~ation should have been as nuts under Tariff
      Item 52 of the Central Excise Tariff. It further held that the appellant
      was guilty of suppression and therefore rejected the submission of the E
      appellant that the show-cause notice was barred by time. It, however,
      reduced the amount of Penalty imposed by the Collector from Rs.1 lakh
      to Rs.50,000.

             The appellant appealed to this Court by special leave. In the
      appeal to this Court, on the question whether the goods manufactured         F
      by the appellant were end products or connectors for lubricating
      purposes and as such were integral parts of the Diesel Engine Pipes
      falling under Tariff Item 68 as claimed by the appellant or nuts classifi-
      able under Tariff Item 52.

            Dismissing the appeal,                                                 G

            HELD: 1. The Tribunal was right in classifying the goods under
      Tariff Item 52 of the Central Excise Tariff and in upholding the demand
      of the duty for a period beyond six months as contemplated by s. 11-A of
      the Act. The Tribunal duly gave benefit of the exemption notification in
      respect of the goods which had been exported. [878F)                     H
    872                   SUPREME COURT REPORTS            [1989]- 1 S.C.R.
A         2(a) The Tribunal was right in upholding the demand of duty for
    a period beyond six months as contemplated by section 11-A of the
    Act. [878F)

         2(b) Whether there was any fraud, collusion, wilful mis-state-
B   ment, or suppression of fact, for the department to be justilied to claim
    duty beyond a period of six months under the proviso to section 11-A of     -t
    the Act is a question of fact. [878B]      ·

          2(c) The appellant was both buying and selling these nuts and as      'la
    such there was no conceivable reason why these nuts were described as       ~:~
    end-fittings in the declaration to the Department. In the declaration it
C   was so described. [878C-D]

          2(d) The fact that the officers of the Department visited the
    factory of the appellant and they should have been aware_ of the produc-
    tion of. the goods in question, was no reason for the appellant not to
D   truly and properly describe these goods. [878D-E]

          2(e) Not only did the appellant, as found by the Tribunal,
    not described these goods properly, bot also gave a misleading
    description. [878E]
                                            \
          3. The Tribunal on appraisement of all the materials, held that
E
    these were nuts manufactured by the appellant. Such finding cannot
    be said to be wrong or perverse. It was arrived at after giving oppor-
    tunity to both the parties and considering all relevant materials. There
    is no cogent ground to sustain any challenge to the findings of the

                                                                                -~
    Tribunal. The Tribunal has considered all the relevant evidence,
    and not ignored any relevant piece of evidence. It had applied the
F
    correct principle of law applicable to the determination of the question.          I
    It has also applied the test of commercial identity of the goods and
    examined the matter from the angle of the conduct of the appellant.
    These findings of the Tribunal cannot be assailed in appeal under
    section 35L of the Act. l875E; 877B-C)
G
          4. The Tribunal having come to the conclusion that there was
    deliberate suppression or wrong statement, it follows automatically that    ....
    tlie Tribunal was justilied in upholding the imposition of penalty. The
    quantum of penalty was a matter which the Tribunal was free to fix as it
    iliought fit, as the justice of the case demanded. Nothing has been shown
H   that the conclusion was bad. [878G:H; 879A)
                  JAISHRI ENGG. v. COLLECTOR OF C.E. [MUKHARJI, J.]            873

                CIVIL APPELLATE JURISDICTION: Civil Appeal No. 223
                                                                                      A
          of 1989.
'              From the Judgment and Order dated 31.10.88 of the Customs
          Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal
          No. E. 12068/84 BI (Order No. 432/88-BI).
                                                                                      B
    +          Soli J. Sorabjee, A.N. -Haksar, Ravinder Naraht, P.K. Ram and
          D.N. Misra for the Appellant.

                The Judgment of the Court was delivered by

                SABYASACHI MUKHARJI, J. This is an appeal under section
          35-L of the Central Excises & Salt Act, 1944 (hereinafter referred to as
                                                                                      c
    .~    'the Act'} against the order dated 31.10.1988 passed by the Customs,
          Excise & Gold (Control) Appellate Tribunal (hereinafter referred to
          as 'the Tribunal').

                The issue involved in this appeal mainly relates to the classifica·   D
          tion of the goods, namely, whether the products of the appellant in this
          case were end-fittings or nuts? The question was whether the goods
          were classifiable under Tariff Item 52 or Tariff Item 68 of the erstwhile
    i-    First Schedule to the Act.

                  The appellant applied for requisite central excise licence for      E
          manufacture of goods falling under Tariff Item 68 and for the purpose
          of such goods L-4 licence was also furnished, and also the requisite
          ground plans of the factory showing the requisite sanction of the
          factory in which the various goods were manufactured. The excise
          authorities granted L-4 licence. The appellant contends that the same
          was done after verifying the ground plans. Necessary classification list    F
          was supplied on 22nd March, 1979 for approval by the excise autho-
          rities and the appellant claimed benefit of exemption of notification
          No. 89/79-Central Excise dated 1.3.79. The said classification list sub·
          milted by the appellant was approved by the Assistant Collector of
          Central Excise by his letter dated 25th May, 1979: For the period from
           1.4.79 to 30.6.79, the appellant filed his RT-12 for the assessment,       G
          which was also finally assessed without any protest or objection.
    1--   Inasmuch as, the appellant clahtted that its goods were wholly exemp-
          ted by virtue of the notification No. 89/79CE dated 1.3.79, the appel·
          !ant wrote to the Superintendent of Central Excise asking for dispensa·
          tion from filing RT-12 every month. The Superintendent by his orde'r
          infol'!11ed the appellant that it need not file RT-12, but should info~     H
    874                     SUPREME COURT REPORTS              [1989) 1 S.C.R.

  the Excise Department monthly by means of a simple letter the total
A
  clearanc.e effected in the month in question. Thereafter, the appellant
  submitted classification lists in 1980, 1981 and 1982 in respect of the
  said goods and claimed the benefit of the exemption under notification
  No. 105/80-Central Excise, dated 19.6.80, which was a s)lbsequent
  notification. The Assistant Collector of Central Excise duly approved
B the said classification lists. It is stated that the Central Excise Officers
  attached to the Preventive Branch visited on or around 13.7.82, the
  factory of the appellant and examined the products manufactured by
  the appellant. The excise authorities once again, it is stated, visited the
  factory of the appellant on 20th July, 1982. However, on 17th January,
  1983, a show-cause notice was issued to the appellant asking it to
  show-cause as to why excise duty should· not be demanded under Tariff
c Item 52 in respect of 14,88,838 pieces of nuts manufactured and re-
  moved by the appellant during the period 1st April, 1981 to 19th July,
   1982 without payment of appropriate excise duty thereon. It was
  further stated in the show-cause notice to show cause why penalty
  should not be imposed on the appellant for failing to obtain the
D requisite L-4 licence under Tariff Item 52 in respect of the said goods
  and for failing to file price lists and classification lists in respect thereof
  and further to show-cause why the material seized on 26th August,
   1982 should not be confiscated. The appellant showed cause, and drew
  attention to the Indian Standard Institution publication for specifica-
  tiOn of High Pressure Connection meant for lubricating arrangement
E of oil in Fuel Injection Equipment for Diesel Engines which according
  to the ap_pellant, showed that the goods in question were not nuts but
  end products or connectors for lubricating purposes and as such were
  integral parts of the Diesel Engine Pip~s falling )lnder Tariff Item 68.

           On 16th July, 1984, the Collector of Central Excise passed orders
F    holding that fittings were nuts classifiable under Tariff Item 52 and
     that appropriate duty on the clearances effected by the appellant dur-
     ing the period 1st April, 1981 to 19th July, 1982 should be paid, and
     that the seized goods were liable to confiscation but in lieu thereof a
     redemption fine of Rs.4,000 could be paid within three months, the
     exports effected indirectly by the appellant were not entitled to benefit
G    of Notification No. 89179-CE and, therefore, the differential duty in
     respect of those clearances was payable under Tariff Item 68 and that          ·<+
     the show cause notice was not barred by time. The Collector, accord-
     ingly, imposed a penalty of Rs. 1 lac.

          Aggrieved thereby, the appellant went up in appeal before the
H    Tribunal. The Tribunal partly allowed the appeal of the appellant and
               JAISHRI ENGG. v. COLLECTOR OF C.E. {MUKHARJI, J.]            875

      -partly upheld the order of the Collecfor. So far as the question of A
       classification of the different fittings was concerned, the Tribunal held
       that the classification should have been as nuts under Tariff Item 52 of
       the Central Excise Tariff. The Tribunal also held that the appellant
       was guilty of suppression and therefore rejected the submission of the
       appellant that the show cause notice was barred by time. The conten-
       tion of the appellant in respect of the benefit of exemption being B
       available to the extent of export effected indirectly on the basis of the
       earlie.r decision of the Tribunal, was accepted by the Tribunal and ,the
       order of the Collector was modified to that extent. The Tribunal also
       reduced the amount of penalty imposed by the Collector from Rs.1 lac
       to Rs.50,000.

                 Aggrieved thereby, the appellant is in appeal before this Court. c
   'r The first contention that was agitated before us and which was decided
          agafo.st the appellant in the brder of Tribunal is, whether the goods in
          question involved in this appeal were classifiable under Tariff Item 52
          of the. Central Excise Tariff or whether these goods were classifiable
          under Tariff Item 68. The Tribunal noted that these goods were D
          described as 'nuts' by the Consultant on behalf of the appellant in the
          arguments submitted before the Tribunal. The appellants were
          purchasing nuts, both threaded and unthreaded, and the latter being
          threaded, this was to be taken for captive consumption. Therefore, it
'\ ' j was contended on behalf of the appellant that the function of such nuts
          was not merely fastening but also facilitating the flow of oil under high E


1·
          pressure without leakage. It was emphasised that these nuts were leak
          proof. The Tribunal on appraisement of all the materials, held that
          these were nuts manufactured by the appellant. It was evident from




t
          the Tribunal's judgment that the appellant was itself purchasing, both
       · . threaded and unthreaded nuts as such and the unthreaded nuts were
         threaded by the appellant. Apart from captive consumption, some of F
         these nuts were also sold as nuts to outside parties. These facts were
          found by the Tribunal and recorded in its order. The Tribunal in those
          circumstances was of the view that it was difficult to accept the appel-
          lant's contention. The impugned goods were commercially known and
          bought and sold as nuts. It is true that specification of the Indian
          standard Institution was drawn attention to. But there was evidence, G
          as noted by the Tribunal, about the commercial indentify of these
     -t- goods. If these goods not being defined as such and are commercially
          known as nuts, as found by the Tribunal, then, in our opinion, such
          finding cannot be said to be wrong or perverse. Such finding was
          arrived at after giving opportunity to both the parties and considering
          all relevant materials. Such finding cannot be assailed in this appeal. H.
     876                    SUPREME COURT REPORTS             [1989] 1 S.C.R.

A  The functional approach to the identify of the goods as canvassed by
   the appellant was also duly considered ·by the Tribunal. It was con-
   tended that the function of the nuts was not only to fasten but also to
   enable the flow of oil under high pressure without leakage. But the
   Tribunal noted that the flow of oil is possible only after nuts are
   fastened. To that extent, according to the Tribunal, it can be stated
B that nuts permit the flow of oil without leakage. The question is,
   however, not as to what is the process facilitated JIS a result of the nuts,
   but the question which the Tribunal itself posed is-whether the nuts
   are fasteners or do they have any other 'independent function? The
   Tribunal found that it had not been shown before them that they had            -~
                                                                                  I
   any such independent function. To say that these nuts are leakproof,
   was only to reiterate the fact of their essential character and quality as
c  fasteners and not to substantiate any argument as regards their inde-
   pendent function. In that view of the matter, the Tribunal even taking
   the functional approach to the identity of the goods, 'came to the
   conclusion that the goods in question were properly classifiable as
   nuts. That conclusion of the Tribunal cannot be assailed in appeal in
D view of the evidence on record as noted before. Certain decisions were
   referred to before the Tribunal· by the appellant in support of its
   contention that in certain cases goods of these types had not been
   considered to be nuts. These goods, as the Tribunal noted, were in the
   nature of bolts, nuts and rods of special .type manufactured by a
  ·particular party. Therefore, these were not classifiable as merely bolts
E and nuts under Tariff Item 52 of the Central Excise Tariff, but as
   integral parts of the machine for which they were specifically designed
   with· a distinct and specific function in the operation of the motor-cycle
   of which these were components parts. It was held in those cases that
   the components manufactured solely on the orders of the buyers, as
   per their drawings and specifications, were components of mining and
F project machinery and, therefore, not classifiable under Tariff Item
   52-CET. But the facts involved in these items of goods in the instant
   case, dealt with by the appellant, are different. These goods were not
   manufactured according to any special specifications as integral parts
   of machinery; Some of these nuts required were also purchased from
   market while those being manufactured were also sold to outside
G buyers as nuts.

         Attention of the Tribunal was also drawn to the case of M/s. -J.
    Precision Fasteners Ltd. v. Collector of Central Excise, Bombay-II. In
    that case, however, the Tribunal did not take any final view on the
    product. In view of the type of goods involved in that case, the
H   Tribunal had remanded the matter for re-adjudication. In that view of
                  JAISHRI ENGG. v. COLLECTOR OF C.E. [MUKHARJI, J.]            877

          the matter, the Tribunal was of the view that the commercial identify
                                                                                      A
          of the goods in the instant case, was different from the goods involved
          in the Precision Fasteners Ltd.'s case (supra). In the light of these
·----:    submissions, the Tribunal came to the conclusion that the goods were
          classifiable under Tariff Item 52 of the Central Excise Tariff. It was
          this finding which is assailed before us in appeal.
                                                                                      B
                We find, ·however, as noted hereinbefore, no-cogent ground to
., .. !
          sustain any challenge to the aforesaid finding of the Tribunal. The
          Tribunal has considered all the relevant evidence. The Tribunal has
          not ignored any relevant piece of evidence. It had applied the correct
          principle of law applicable to the determination of this question. It had
          also applied the test of commercial identity of the goods and examined
          the matter from the angle of the conduct of the appellant. In that view     c
          of the matter, we are of the opinion that these findings of the Tribunal
          cannot be assailed.

               The next question that has to be determined is whether the claim
          for duty is only to be confined .to the period of six months because it     D
          was contended, in view of the facts and the circumstances narrated
          hereinbefore, that there was no suppression of any fact. It may be
          relevant in this connection to refer to Section 11-A of the Act, which
          provides as follows:

                      "When any duty of excise has not been levied or paid or has     E
                      been short·levied or short-paid or erroneously refunded, a
                      Central Excise Officer may, within six months from the
                      relevant date, serve notice on the person chargeable with
                      the duty which has not been levied or paid or which has



    J
                      been short-levied or short-paid or to whom the refund has
                      erroneously been made, requiring him to show cause why          F
                      he should not pay the amount specified in the notice:

                      Provided that where any duty of excise has not been levied
                      or paid or has been short-levied or short-paid or errone·
                      ously refunded by reason of fraud, collusion or any wilful
                      _misstatement or suppression of facts, or contravention of      G
                      any of the provisions of this Act or of the rules made there-
                      under with intent to evade payment of duty, by such person
                      or his agent, the provisions of this sub-section shall have
                      effect, as if for the words "Central Excise Officer", the
                      words "Collector of Central Excise", and for the words
                      "six months", the words "five years" were substituted.          H
    878                    SUPREME COURT REPORTS            11989] 1 S.C.R.

                Explanation:- Where the service of the notice is stayed by
A
                an order of a Court, the period of such stay shall be
                excluded in computing the aforesaid period of six months
                or five years, as the case may be."

         Therefore, we have to find out whether there was any fraud,
B collusion,  wilful misstatement or suppression of facts for the Depart-
  ment to be justified to claim duty beyond a period of six months. This         -+
  is a question of fact. It was found by the Tribunal that it was not
  possible for the appellant to contend that the appellant had made a
  correct statement. The Tribunal noted that the appellant could hardly          l-;
  contend that it discharged the onus of making correct declaration if it
  had withheld the description which was commonly used in respect of
c the goods not only by itself, but also by those from whom it bought or
  to whom it sold the products. The appellant itself was both buying and
  selling these nuts and as such there was no conceivable reason why
                                                                                 "i
  these nuts were .described as end-fittings in the declaration to the
  Department. It may be noted that in the declaration it was so des-
D cribed. The Tribunal was of the view, and it cannot be said not without
  justification that these goods should have been described as nuts
  because the appellant itself had treated these as mils. Therefore, from
  this conduct suppression is established. The fact that the Department
  visited the factory of the appellant and they should have been aware of
  the production of the goods in question, was no reason for the appel-         ~
E !ant not to truly and properly to describe these goods. As a matter of
  fact, not only did the appellant, as found by the Tribunal, not
  described these goods properly but also gave a misleading description.               ;

          In the aforesaid view of the matter, we are of the opinion that the
  · Tribunal was right in classifying the goods under Tariff Item 52 of the
F Central Excise Tariff and in upholding the demand of the duty for a
    period beyond six months as contemplated by Section 11-A of the Act.
    The Tribunal duly gave benefit of the exemption notification in respect
    of the goods which had been exported. This part of the order is not
                                                                                i-
    challenged and cannot be challenged: The.Tribunal, however, reduced
    the penalty from Rs. l lac to Rs.50,000. Mr. Sorabji, learned counsel
G   for the appellant, contended that this was not right. There should not
    have been any penalty imposed. We are, however, unable to accept
    that position. Having come to the conclusion that there was deliberate      ....
    suppression of wrong statement, it follows automatically that the
    Tribunal was justified in upholding the imposition of penalty. The
    quantum of penalty, however, was a matter which the Tribunal was
H free to fix as they thought fit, as the justice of the case demanded.
             JAISHRI ENGG. v. COLLECTOR OF C.E. [MUKHARJI, J.J       879

    Nothing has been shown to us that the conclusion of the Tribunal was    A
    bad.                                      /

         In that view of the matter, the order of the Tribunal is upheld.
    The appeal must, therefore, fail and is accordingly dismissed.
                                                                            B
    N.V.K.                                             Appeal dismissed.
t