Assembling of CKD photocopiers in warehouses situated at Hyderabad and Rampur

PJ/Case Laws/2011-12/1340

Assembling of CKD photocopiers in warehouses situated at Hyderabad and Rampur – whether amounts to manufacture

Case: XEROX INDIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT-II

Citation: 2011 (270) E.L.T. 651 (All.)

Issue:- Assembling of CKD photocopiers in warehouses situated at Hyderabad and Rampur – whether amounts to manufacture – Bangalore Tribunal holding that no manufacturing involved - Delhi Tribunal taking different view – whether sustainable.

Brief Facts:- Appellant were importing photocopier machines in Completely knocked down condition (CKD) and where storing the same in their warehouses. The major component called “work centre” and other parts (modules) were received in separate packing. The modules were fitted to the work centre and were dispatched from the warehouses at Hyderabad in original packing. Appellants undertook the process of kitting in the warehouse.

Department issued show cause notice demanding payment of excise duty on the ground that the appellant were undertaking process which amounted to manufacturing activity and excise duty was payable on the same.

In appellant’s own case, the Bangalore Tribunal vacated the demand and penalty on the company vide final order dated 09.11.2009 reported at 2010 (252) ELT 273 (Tri-Bang). It was held that appellant did not carry any activity which amounted to manufacture. The components received in sets were cleared as such and there was no conversion of an incomplete machine into complete machine. The assembly of components into photocopiers took place at the premises of the respective buyers.

For the same period and same activity, show cause notice was issued to the appellant for the warehouse situated at Meerut. The issue came before the Delhi Tribunal. The judgment delivered by the Bangalore Tribunal was placed before the Delhi Tribunal.

By the order dated 30-11-2010 [2011 (270) E.L.T. 395 (Tri. -Del.)], the Tribunal at Delhi for the same period on identical notice and issue, upheld the demand of duty with interest.

Against the judgment of the Delhi Tribunal, appellant filed appeal before the High Court.

Appellant’s Contention:- Appellant submit that on the same facts and notices, the Delhi Tribunal could not have come to different conclusion especially when the opinion expressed by the CESTAT, Bangalore was placed before the CESTAT, New Delhi.

Appellant relied upon decision of the Supreme Court in Gammon India Ltd. v. Commissioner of Customs, Mumbai [2011 (269) E.L.T. 289 (S.C.)], in which similar situation has occurred. The Supreme Court had held that if a bench of a Tribunal, in identical fact situation, is permitted to come to a conclusion directly opposed to the conclusion reached by another Bench of the Tribunal on earlier occasion, that will be destructive of the institutional integrity itself. It was held that if a bench of the Tribunal wishes to take a view different from the one taken by the earlier bench, the propriety demands that it should place the matter before the President of the Tribunal so that the case is referred to a Larger Bench, for which provision exists in the Act itseld.

In the facts and circumstances, in which a similar notices and same facts and evidence was involved, the only course open to CESTAT, New Delhi, if it wanted to disagree with the opinion of CESTAT, Bangalore, was to refer the matter to a Larger Bench.

Respondent’s Contention:- Revenue contended that both the Adjudicating Authorities acted in their own territorial jurisdiction, and that the CESTAT, New Delhi, levied duty and penalty on the facts and evidence, as they were placed and as considered by the adjudicating authority. He submits that there is nothing wrong in the judgement of the CESTAT, New Delhi, where it discarded the contention of the appellant, after considering the reasons given by CESTAT, Bangalore, that the activities of the Company will fall within the meaning of manufacturing.

Reasoning of Judgment:- The High Court found that there are contrary opinions expressed by the Tribunals on the same facts and evidence, which were placed before them. Even if the CESTAT, New Delhi did not agree with the reasoning given by the CESTAT, Bangalore, in similar proceedings on the same facts, it should have followed the practice of referring the matter to a Larger Bench. Apart from institutional integrity, the High Court also find that the same Company, in respect of same period in the same activities, could not be subjected to different opinions expressed by the Tribunal, causing doubts and confusion over the liability. Such, conflicting opinions by different benches of the Tribunal are not conducive to business and trade and can cause adverse effect on the economy of the country.

The Supreme Court in Gammon India Ltd. had relied upon three Judges Bench of the Supreme Court in Sub-Inspector Rooplal and Another v. Lt. Governor & Others [2000 (1) SCC 6441], in which it was held that a Coordinate Bench of a Court cannot pronounce judgment contrary to declaration of law made by another Bench. It can only refer it to a Larger Bench.

For the reasons given above, the High Court set aside the order of the Tribunal, and remitted the matter back to the Tribunal to decide the matter in accordance with law.

Decision:- Appeal allowed by way of remand.
Comment:- The same bench sitting at different places cannot take contrary decisions. If a bench of same strength do not agree with the decision of other bench then option available to the assessee is to remand the matter to larger bench. They cannot take the contrary decision. The High Court has rightly set aside the order and remanded the matter to tribunal once again.

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PJ/Case Laws/2011-12/1340

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