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2003 (12) TMI 57 - SC - Central ExciseWhether Water well drilling rigs mounted on motor vehicle Chassis fall under the Tariff Heading 84.30 of the Central Excise Tariff Act, as claimed by the respondent assessee, or under Tariff Heading 87.05 as upheld by the Adjudicating Authority? Held that - the machine with which we are concerned is referred to under Part VIII, namely mobile machinery . In this Part it is said that reference should be made not only to the explanatory note to the Headings for the machines under Chapter 84.25, 84.28, 84.29 and 84.30 but also to the explanatory notes to the chapters and headings of Sec. XVII. That Section includes Chapter 87. We have already noted that the Tariff Heading 8705.20 clearly includes machines of the kind manufactured by the respondent and the Tribunal erred in holding to the contrary. The respondent had, consequent upon the issuance of the exemption notification of 1-3-1988, itself classified the goods under Tariff Heading 87.05 and given a full description of the goods for the first time while claiming the exemption. It is true that subsequent to the amendment Notification dated 14-2-1988, the respondent had reapplied for reclassification under Tariff Heading 84.30. But this will not detract from the initial claim of the respondent that its goods were properly classifiable under Heading 87.05 nor does it explain why the respondent did not describe the goods fully in its application for approval of its classification list for the relevant period. The Tribunal has reduced the quantum of penalty on the view taken by it and which has been found by us to be erroneous. Thus we do not propose to enhance the quantum of penalty as fixed by the Tribunal. The appeals are accordingly allowed to the extent stated above.
Issues Involved:
1. Classification of water well drilling rigs mounted on motor vehicle chassis under the Central Excise Tariff Act. 2. Application of exemption notification. 3. Allegation of misclassification and suppression of facts. 4. Invocation of the extended period of limitation under Section 11A of the Central Excises and Salt Act, 1944. 5. Clubbing of clearances of four units. 6. Imposition of penalties and confiscation of property. Issue-wise Detailed Analysis: 1. Classification of Water Well Drilling Rigs: The primary issue was whether the water well drilling rigs mounted on motor vehicle chassis should be classified under Tariff Heading 84.30, as claimed by the respondent-assessee, or under Tariff Heading 87.05, as upheld by the Adjudicating Authority. The Tribunal initially upheld the respondent's contention, classifying the goods under Heading 84.30. However, upon review, it was determined that the goods should be classified under Heading 87.05. The Supreme Court noted that mobile drilling derricks are specifically included under Tariff Heading 8705.20 of the HSN, which covers special purpose motor vehicles, thus supporting the classification under Heading 87.05. 2. Application of Exemption Notification: The respondent-assessee claimed exemption under a notification dated 1st March 1988, which exempted drilling rigs mounted on motor vehicle chassis falling under Heading No. 87.05. This notification was later amended to include Heading No. 84.30. The respondent filed classification lists under Heading 87.05 to avail the exemption but later reclassified under Heading 84.30 after the amendment. The Supreme Court found that the goods were correctly classifiable under Heading 87.05, thus entitling the respondent to the exemption initially but not under the reclassification. 3. Allegation of Misclassification and Suppression of Facts: The Adjudicating Authority found that the respondent had misclassified the goods and suppressed facts, justifying the invocation of the extended period of limitation under Section 11A. The Tribunal initially disagreed, noting that the manufacturing process included integration with the chassis, making it non-separable, thus classifying under Heading 84.30. However, the Supreme Court found no evidence supporting this integration and concluded that the Tribunal erred in accepting the respondent's statements without evidence, thereby supporting the Adjudicating Authority's findings of misclassification and suppression. 4. Invocation of Extended Period of Limitation: The extended period of limitation was invoked based on the respondent's failure to fully and accurately describe the goods in the classification list as required under Rule 173B. The Supreme Court upheld this invocation, noting that the respondent did not provide a full description of the goods in the C.L.I. Form, which was a clear requirement. The Court distinguished this case from others where misinterpretation of legal provisions was involved, emphasizing the respondent's failure to comply with explicit disclosure requirements. 5. Clubbing of Clearances of Four Units: The Adjudicating Authority's decision to club the clearances of four units, including the respondent, was not challenged before the Supreme Court. Therefore, this aspect of the decision remained upheld. 6. Imposition of Penalties and Confiscation of Property: The Adjudicating Authority imposed penalties on the assessee and its directors, along with the confiscation of land, building, plant, and machinery, with an option to redeem upon payment. The Tribunal reduced the quantum of penalty based on its findings, which were later found erroneous by the Supreme Court. However, the Supreme Court did not propose to enhance the penalty quantum fixed by the Tribunal, despite finding the Tribunal's conclusions incorrect. Conclusion: The Supreme Court allowed the appeals to the extent stated, supporting the classification under Tariff Heading 87.05, upholding the invocation of the extended period of limitation, and recognizing the misclassification and suppression of facts by the respondent. The penalties imposed by the Tribunal were not enhanced, and no order as to costs was made.
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