1993 (10) TMI 243 - AT - Central Excise

Issues Involved:
1. Denial of benefit of Notification No. 162/86-C.E., dated 1-3-1986.
2. Invocation of the extended period for demand under Rule 9(2) read with Section 11 of the Central Excises & Salt Act, 1944.
3. Imposition of penalty.

Detailed Analysis:

1. Denial of Benefit of Notification No. 162/86-C.E., dated 1-3-1986:

The appellants argued that they were entitled to the exemption under Notification No. 162/86-C.E., as they had paid duty on both the chassis and the equipment used in manufacturing special purpose motor vehicles. They contended that they had been filing classification lists since 1986-87, which were approved by the Assistant Collector, and thus were clearing the vehicles at nil duty. They also cited a previous ruling in their favor (1988 (37) E.L.T. 213).

The Collector disagreed, stating that the appellants did not meet the conditions of the notification, as they had not paid duty on the entire equipment. He argued that the equipment had not suffered duty under the relevant tariff entry, and thus the exemption was not applicable. The Collector also held that the appellants' actions amounted to mis-statement and suppression, justifying the invocation of the extended period.

The Tribunal, however, found the Collector's reasoning to be "hair-splitting" and held that the term 'equipment' in the notification referred to all items fitted on the chassis, not just raw materials. The Tribunal concluded that the duty had been paid on the raw materials, and hence the notification was applicable. They relied on the previous ruling in the appellants' own case, which stated that specialized equipment did not come into existence as a separate identifiable article but only as a fixture on the vehicle.

2. Invocation of the Extended Period for Demand:

The appellants argued that there was no suppression or mis-statement, as they had been transparent in their classification lists and had submitted monthly returns. They pointed out that the department had issued show-cause notices in the past, indicating that it was fully aware of their activities.

The Tribunal agreed with the appellants, noting that the classification lists clearly described the vehicles and that the department had been aware of their manufacturing activities through previous show-cause notices and visits by the Assistant Collector. Therefore, the Tribunal held that the invocation of the extended period was not justified.

3. Imposition of Penalty:

The Collector had imposed a penalty of Rs. 1 lakh on the appellants for not clearing their manufacturing activity and mis-stating facts to evade duty.

Given the Tribunal's findings that there was no suppression or mis-statement and that the appellants were entitled to the benefit of the notification, the imposition of the penalty was also set aside.

Separate Judgments:

Member (Judicial):

The Member (Judicial) held that the appellants were entitled to the benefit of the notification and that there was no suppression or mis-statement. The order was set aside, and the appeal was allowed.

Member (Technical):

The Member (Technical) disagreed on the applicability of the notification but concurred that the demand was time-barred due to the absence of suppression or mis-statement. Therefore, the appeal was allowed on the ground of limitation.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal and holding that the appellants were entitled to the benefit of the notification and that the extended period for demand was not justified due to the lack of suppression or mis-statement.

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