2004 (12) TMI 437 - AT - Central Excise

Iron and Steel articles - Other than household - Stainless steel lifters - Manufacture - Demand - Limitation - Classification - Appeal to Appellate Tribunal

Issues Involved:
1. Classification of M.S. Handles and S.S. Lifters.
2. Entitlement to exemption under Notification No. 5/99-C.E.
3. Whether the activity amounts to manufacture under Section 2(f) of the Central Excise Act, 1944.
4. Invocation of the longer period of limitation.
5. Inclusion of exports in the duty demand.
6. Claim for Modvat credit.
7. Treatment of total realization as cum-duty price.
8. Imposition of penalties.

Issue-wise Detailed Analysis:

1. Classification of M.S. Handles and S.S. Lifters:
The appellants classified M.S. Handles and S.S. Lifters under sub-heading 7323.90. However, the Revenue argued that they should be classified under Heading 7326.90. The Tribunal found that M.S. Handles were primarily used for industrial purposes and not as parts of household articles. Thus, they were correctly classifiable under Heading 7326.90. Conversely, S.S. Lifters, used for lifting tiffins (household articles), were correctly classifiable under Heading 7323.90.

2. Entitlement to Exemption under Notification No. 5/99-C.E.:
The appellants claimed exemption under Notification No. 5/99-C.E. The Tribunal noted that the exemption was not applicable as the M.S. Handles were used for industrial purposes, not household articles. Therefore, the exemption was not justified.

3. Whether the Activity Amounts to Manufacture:
The appellants contended that their activity did not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. The Tribunal rejected this argument, stating that the process transformed M.S. Wire into a new product (handles) with a different name, use, and market identity, thus constituting manufacturing.

4. Invocation of the Longer Period of Limitation:
The appellants argued that the show cause notice issued on 2-1-2003 for the period October 1997 to February 2002 was beyond the normal period of limitation. The Tribunal found that the appellants had misdeclared the use of M.S. Handles, which justified the invocation of the longer period of limitation.

5. Inclusion of Exports in the Duty Demand:
The appellants contended that exports were wrongly included in the duty demand due to the non-submission of form 14-B. The Tribunal directed the adjudicating authority to examine the form 14-B and adjust the duty demand accordingly.

6. Claim for Modvat Credit:
The appellants claimed the benefit of Modvat credit for duty paid on inputs. The Tribunal noted that the Commissioner did not dispute the admissibility of the credit but denied it due to a lack of evidence. The Tribunal directed the Commissioner to consider the certificate from the Superintendent of Central Excise and adjust the duty demand after verifying the Modvat credit.

7. Treatment of Total Realization as Cum-Duty Price:
The appellants argued that the total realization should be treated as cum-duty price. The Tribunal upheld this argument based on the Larger Bench decision in the case of Srichakra Tyres Ltd. and directed re-quantification of duty on this basis.

8. Imposition of Penalties:
The Tribunal left the decision on the quantum of penalties to the Commissioner, to be determined after re-quantification of the duty amount.

Conclusion:
The appeal was disposed of with directions for re-quantification of duty considering the Modvat credit, cum-duty price treatment, and inclusion of exports. The classification of M.S. Handles under Heading 7326.90 and S.S. Lifters under Heading 7323.90 was upheld. The longer period of limitation was justified due to misdeclaration by the appellants. Penalties were to be reconsidered post re-quantification.

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