2004 (9) TMI 497 - AT - Central Excise

Summary

Issues:
Classification of entities as bearings for the purpose of excise duty exemption.

Analysis:
The case involved the classification of certain entities as bearings for the purpose of excise duty exemption. The appellants manufactured Electric Motors and Parts, along with entities like Thrust Support Plate, Thrust Support Segment, Support Segment Carrier, and Ball Retainer Ring, which were used captively. These entities were classified under Chapter sub-heading No. 8503.00 of the Central Excise Tariff. The dispute arose when the department issued a show cause notice alleging misdeclaration of goods to evade excise duty. The impugned order relied on a CBEC Circular and excluded the entities from the exemption, leading to the appeal.

The Circular in question raised doubts regarding the classification of "thrust bearing assembly" used in submersible power driven pumps. It referred the matter to IIT, Delhi for expert advice, which opined that the assembly was not exempt from duty under the relevant notification. The appellants argued that the circular should have prospective effect and that the demand for duty prior to its issuance cannot be recovered. They contended that the entities in question did not qualify as bearings as understood commercially, and mere reduction of friction does not make them bearings. They also highlighted a previous CEGAT decision involving a similar issue.

The Tribunal found merit in the appellants' submissions. It noted that the impugned order did not provide sufficient reasons for classifying the entities as bearings. The appellants' case was compared to a previous decision where a similar assembly was classified differently, benefiting from the exemption. The Tribunal emphasized the importance of the capability of being marketed as bearings to exclude entities from the exemption. Ultimately, the denial of exemption and demands made were not upheld, leading to the allowance of the appeals and granting the appellants the benefit of the exemption under the relevant notifications.

In conclusion, the Tribunal set aside the impugned order, ruling in favor of the appellants and granting them the benefit of the excise duty exemption under Notification Nos. 6/2000 and 3/2001. The entities in question were not considered as bearings for the purpose of the exemption, and the demands made were not upheld, leading to the dismissal of penalties on the assessee or its employees.