2006 (2) TMI 435 - AT - Central Excise

Issues Involved:
1. Declaration under Rule 173B and suppression of facts.
2. Importation or manufacture of S-Cat items.
3. Manufacture of Mobile Image Intensifiers using S-Cat items and local components.
4. Duty demand considering export of finished products.
5. Misclassification of certain spares of X-ray machines.

Detailed Analysis:

1. Declaration under Rule 173B and Suppression of Facts:
The appellants argued that they had made declarations under Rule 173B from 1998 onwards for Mobile Image Intensifiers (MII) and other components, and there was no suppression of facts to invoke the extended period of limitation under Section 11A(1). They referred to various declarations and letters submitted to the Superintendent of Central Excise, detailing the manufacturing process and the importation of high-end components. They relied on several judicial decisions to support their claim that the charge of suppression of facts was not maintainable and that the demand for duty was barred by limitation. Consequently, the provisions of Sections 11AB and 11AC could not be invoked.

2. Importation or Manufacture of S-Cat Items:
The appellants contended that the S-Cat items, including Image Intensifier, X-ray control, Mobile Stand, and others, were imported and not manufactured in their unit. They emphasized that these items were assembled into the base assembly, which was then used in the manufacture of Mobile Image Intensifiers. They referred to letters addressed to the Superintendent of Central Excise and statements from company officials to substantiate their claim that the S-Cat items were imported and not subject to any manufacturing process in their factory.

3. Manufacture of Mobile Image Intensifiers Using S-Cat Items and Local Components:
The appellants explained that the Mobile Image Intensifier System (C-Arm) consisted of the C-Arm Buggy (Base System) and the Monitor Trolley. These components were integrated with imported items and assembled into a C-Arm. They argued that the configuration of a C-Arm was based on specific customer orders and not manufactured off the shelf. They maintained that the imported S-Cat items were assembled with local components to create the Mobile Image Intensifiers, which were then exported.

4. Duty Demand Considering Export of Finished Products:
The appellants argued that the Commissioner erred in demanding duty, ignoring the fact that 90% of the finished products (Mobile Image Intensifiers) were exported. They cited C.B.E.C. Circulars and judicial decisions to support their claim that no duty was demandable on the S-Cat items used in the manufacture of exported MII's. They provided documents, including invoices and AR 4s, to demonstrate that the MII's were exported under the supervision of Customs officers. They contended that since the MII's were liable to a nil rate of duty, the procedure under Rule 13 of the CER, 1944, did not apply.

5. Misclassification of Certain Spares of X-ray Machines:
The appellants addressed the issue of misclassification of certain spares of X-ray machines. They argued that parts such as X-Ray Control Assembly, Tube Head Assembly, and others were correctly classified under Chapter Sub-Heading 9022.10 of CETA, 1985. They pointed out that the Commissioner agreed with this classification but demanded differential duty on other parts. They provided examples and referred to the HSN Explanatory Notes to support their classification. They also argued that some spares were procured from SSI Units and no Modvat credit was taken, hence no duty was required on these items. They further contended that from 1-3-2000, goods under Chapter Sub-Heading 9022.00 were chargeable to a nil rate of duty, making the demand for duty unsustainable for the period from 1-3-2000 to 31-3-2001.

Conclusion:
The tribunal noted that the Commissioner failed to respond to the Misc. Order and did not instruct the SDR. Consequently, the tribunal accepted the appellants' plea that the duty liability would not exceed Rs. 2 crores. The appellants were directed to pre-deposit Rs. 2 crores within three months, with the balance of duty and penalty waived and recovery stayed. The penalties were waived, and the stay applications were disposed of accordingly. The matter was scheduled for out-of-turn hearing after compliance was reported.

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