M/S. Bharat Sanchar Nigam Ltd vs C.C.E & S.T. Delhi-V

[Arising out of Order-in-Appeal No. 27/Comm/Rajinder Prakash/2006 dated 31.08.2006 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Rohtak].

For approval and signature:

Honble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s. Bharat Sanchar Nigam Ltd. .Appellants

Vs.

C.C.E & S.T. Delhi-V .Respondent

Appearance:

Shri Sameer Agarwal, Advocate for the Appellant

Shri Govind Dixit, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

Date of Hearing: 10.09.2015

FINAL ORDER NO. 52870/2015-EX(DB)

Per Ashok Jindal:

The appellant is in appeal against the impugned order demanding duty of Rs.2,66,76,512/- along with interest and equivalent amount of penalty. The Revenue has also filed an application for early hearing of appeal.

2. As appeal has been listed today itself, therefore, application for early hearing is dismissed as infructuous.

3. The facts of the case are that the appellant is engaged in manufacture, installing and commissioning digital telephone exchange. Appellant is a public sector undertaking and engaged in providing tele-communication services. During the period 31.03.2001-31.03.2005 the appellant purchased switching equipment and other essential parts of the systems such as power plant required for producing 48V DC power, inverters, etc, and assembled and installed the same at various places to set up telephone exchanges. The Revenue is of the view that this activity of the appellant amounts to manufacture and appellant are required to pay Central Excise Duty on telephone exchanges which has come into existence and same is classifiable under the CTH 8517. Therefore, show cause notice was issued to the appellant for demanding duty along with interest and imposition of equivalent amount of penalty. The matter was adjudicated and demands proposed in the show cause notice were confirmed along with interest and equivalent amount of penalty was imposed. Aggrieved from the said order appellant is before us.

4. The Ld. Counsel for the appellant submits that in their own unit located at Rohtak, Haryana on the identical issue the matter came up before this Tribunal and this Tribunal vide Final order no. 5180-51383/2015-EX(DB) dated 15.04.2015 held that switching systems are commonly called telephone exchanges and hence, on installation of a switching system, no new goods with distinct commercial identity and distinct characteristics or uses have emerged. Therefore, demand was set aside. Therefore, he prayed that impugned order is to be set aside.

5. On the other hand, Ld. AR reiterated the findings of the impugned order.

6. Heard the parties. Considered the submission.

7. On similar issue in appellants own case for Rohtak unit this Tribunal has observed as under:

6. We have considered the submissions from both the sides and perused the records. The activity of the appellant is described in para 24 of the order in original no. 13-14/COMMR/RP/06 dated 31.03.2006 according to which the appellant have purchased the switching equipment and other integral essential parts of the system such as power plant required for producing 48V DC power on which the system is operated, inverter for power break down etc., and assembled these equipments by their own staff at site into a digital local telephone exchange. As stated by Sh. HC Singla, an officer of the appellant company, the telephone exchanges can be shifted from one place to another place, it is in view of the above facts that the Department has alleged that the assembly, installation and commissioning of the switching equipments, power supply, inverter etc., has resulted into emergence of a new goods called digital local telephone exchange. It is on this basis that the Department seeks to charge duty on the digital local telephone exchanges alleged to have been manufactured by the appellant by classifying the same under heading 8517 of the Central Excise Tariff.

6.1 During the period of dispute, heading 8517 cover electrical apparatus for line telephony or line telegraphy including line telephony sets with cordless handsets and telecommunication apparatus for current carrier line systems or for digital line systems; video phones. There is no dispute that the appellant have purchased switching systems. The point of dispute is as to whether assembly installation and commissioning of switching system along with power plant, inverter etc. would amount to manufacture. In our view the main component of a telephone exchange is switching system which is an electrical apparatus for line telephony. The power plant and inverter are only auxiliary equipments. Power plant supplies the 48V DC current for functioning the switching system and inverter is required for standby period in case of power break down. Thus, the goods which have been purchased Switching systems have remained the switching systems only even after installation and in our view no new commodity with distinct commercial identity or character or use has emerged. We find that the same view has been taken by the Tribunal in the case of Fuzitsu Indi Telecom Ltd. vs CCE Chandigarh (supra) wherein the Tribunal has held that the when bought out items of telephone exchanges were brought to the site of telephone exchange and assembled, no telephone exchange was manufactured requiring payment of duty.

Same view has been taken by the Tribunal in the case of CCE Bhubaneswar vs Radiant Electronics (supra) and also in the case of BPL Mobile Telecommunications Ltd. vs CCE (Supra), though the Calcutta Bench of the Tribunal in the appellants own case reported in 2013 (292) ELT 353 (Tri.-Calcutta) has taken a contrary view, this order of the Tribunal, on appeal being filed, has been set aside and the matter has been remanded to the Commissioner for de novo adjudication and hence, this judgment of the Tribunal has no persuasive value. Moreover, from the technical literature produced by the appellant, it is clear that the switching systems are commonly called telephone exchanges and hence, on installation of a switching system, no new goods with distinct commercial identity and distinct characteristics or uses have emerged. The impugned orders, therefore, are not sustainable. The same are set aside. The appeals are allowed. The Miscellaneous applications one filed by the Department for early hearing and the other filed by the Appellant for admission for some additional grounds also stands disposed of.

8. In view of the above we hold that activity undertaken by the appellant does not amount to manufacture. Consequently, appellant are not required to pay duty. In these circumstances, we set aside the impugned order and allow the appeal with consequential relief if any.

(Dictated and pronounced in the open court)

(B. Ravichandran) (Ashok Jindal) Member (Technical) Member (Judicial)

Bhanu

2

E/3811/2006-EX(DB)