2002 (11) TMI 384 - AT - Central Excise

Summary

Issues Involved:
1. Classification and duty liability of bead wire rings (BWRs).
2. Marketability of BWRs.
3. Applicability of the extended period of limitation for demanding duty.
4. Imposition of penalty and demand of interest.

Detailed Analysis:

1. Classification and Duty Liability of Bead Wire Rings (BWRs):
The appellants, M/s. Metro Tyres Ltd., were engaged in manufacturing various types of tyres, including those for animal-driven vehicles (ADVs) and hand carts, which were exempt from duty. They used BWRs captively in the manufacture of these tyres. The department classified these BWRs under CSH 7308.90 and demanded duty on the grounds that these BWRs were used in the manufacture of exempted products. The Commissioner confirmed a duty demand of Rs. 3,37,808/- and imposed an equivalent penalty under Rule 173Q.

2. Marketability of BWRs:
The central issue was whether the BWRs were marketable and thus excisable. The appellants argued that the BWRs had a very short shelf life and were not marketed or marketable, citing affidavits and technical notes. They relied on the Tribunal's decision in the MRF case, which held similar BWRs to be non-marketable due to their short shelf life. The Tribunal found that the BWRs in the present case were similar to those in the MRF case and noted that the shelf life, determined by the rubber compound used, was crucial for marketability. The Tribunal concluded that the BWRs had to be used within 8 to 10 hours, making them non-marketable and non-excisable.

3. Applicability of the Extended Period of Limitation:
The appellants contended that the extended period of limitation under Section 11A(1) was not invokable as there was no suppression of facts or intent to evade duty. They argued that their manufacturing activities were known to the Central Excise officers, and they believed bona fide that BWRs were not excisable goods. The Tribunal did not delve deeply into this issue as it had already concluded that the BWRs were non-marketable and thus non-excisable.

4. Imposition of Penalty and Demand of Interest:
Given the Tribunal's finding that the BWRs were non-marketable and non-excisable, the penalty imposed under Rule 173Q and the demand for interest on duty were not sustainable. The Tribunal set aside the impugned order, allowing the appeal in favor of the appellants.

Conclusion:
The Tribunal held that the bead wire rings manufactured by the appellants and captively consumed in the manufacture of ADV tyres were not marketable and hence not excisable. Consequently, the duty demand, penalty, and interest were set aside, and the appeal was allowed.