2004 (4) TMI 343 - AT - Central Excise

Summary

Issues:
1. Exemption of duty on Power Tillers claimed by the manufacturers.
2. Show cause notice invoking a larger period under Section 11A of the Central Excise Act.
3. Classification of Power Tiller as a Tractor under Chapter Note 2 of Chapter 87.
4. Imposition of penalties on the company, Managing Director, and Senior Manager.
5. Argument on merits and time bar regarding the demand.

Analysis:
1. The manufacturers of Power Tillers claimed exemption of duty on their products dating back to 1966. However, a show cause notice was issued by the Department in 2003 invoking a larger period under Section 11A of the Central Excise Act for the period from June 1998 to October 2002, demanding a significant duty amount.

2. The Department based its demand on treating the Power Tiller as a Tractor as per Chapter Note 2 of Chapter 87, which defines a tractor as a vehicle constructed for hauling or pushing another vehicle or load. The Commissioner noted that the appellants had suppressed facts, justifying the invocation of a larger period. Penalties were imposed on the company, Managing Director, and Senior Manager under Section 38A.

3. The appellants argued against the classification, emphasizing the distinction between a Power Tiller and a Tractor. They contended that a Tractor is positioned on four wheels, driven with a steering, while the Power Tiller is manually handled by a farmer. The Department's changed view in 2003, contrary to previous exemptions granted, was highlighted.

4. The Department supported the classification of the Power Tiller as a Tractor, citing that the Power Tiller had all the features of a Tractor, justifying the correct classification under Chapter 8701. The Department also upheld the duty demand and penalties imposed by the Commissioner.

5. After considering arguments from both sides, the Tribunal found merit in the appellants' contentions regarding the eligibility for exemption and the time bar. Noting the historical treatment of the item as a Power Tiller and the clear distinction between a Tractor and a Power Tiller, the Tribunal allowed the stay application unconditionally, waiving the pre-deposit of duty and penalty until the appeal's disposal. An early hearing was scheduled due to the significant amount involved in the matter.