2006 (8) TMI 413 - AT - Central Excise

Drilling rigs mounted on motor vehicle chassis - Drilling rigs mounted on motor vehicle chassis - Interest and penalty

Issues Involved:
1. Classification of the impugned goods.
2. Sustainability of the demand of Rs. 11,81,168/- under Section 11A(1) of CE Act, 1944.
3. Confirmation of demand of Rs. 1,30,000/- under Section 11D.
4. Imposition of penalty of Rs. 1,00,000/- under Section 11AC.
5. Demand of interest.

Comprehensive, Issue-wise Detailed Analysis:

1. Classification of the Impugned Goods:
The core issue was whether the "Drilling Rigs mounted on Motor Vehicle Chassis" should be classified under Chapter sub-heading (CSH) 8430.00 or 8705.00 of the Central Excise Tariff Act, 1985. The appellants argued for CSH 8430.00, emphasizing the complete integration of the drilling rig with the chassis, which rendered the chassis unusable for other purposes. They cited the HSN Explanatory Notes and previous Tribunal decisions supporting their classification. The Tribunal agreed with the appellants, noting the extensive modifications made to the chassis, such as altering the gearbox, increasing the length, and enhancing the rear axle, which indicated a high degree of integration. Consequently, the Tribunal held that the impugned goods were rightly classifiable under CSH 8430.00.

2. Sustainability of the Demand of Rs. 11,81,168/- under Section 11A(1) of CE Act, 1944:
The demand was confirmed by invoking the extended period of limitation due to alleged suppression of facts. However, the Tribunal found that during the relevant period, several Tribunal decisions had classified similar goods under CSH 8430.00, including in the appellants' own case. The Supreme Court's decision in the L.M.P. Precision case, which classified such goods under CSH 8705.00, was pronounced only in December 2003. Therefore, the Tribunal concluded that the appellants did not misrepresent facts to evade duty, and the Show Cause Notice issued in October 2001 for the period July 1996 to March 1997 was time-barred. Thus, the demand of Rs. 11,81,168/- was set aside.

3. Confirmation of Demand of Rs. 1,30,000/- under Section 11D:
The appellants did not contest this demand during the hearing. Consequently, the Tribunal upheld the lower authorities' decision to confirm the demand of Rs. 1,30,000/- under Section 11D of the Central Excise Act, 1944.

4. Imposition of Penalty of Rs. 1,00,000/- under Section 11AC:
Since the demand under Section 11A was set aside, the Tribunal also set aside the penalty imposed under Section 11AC. The rationale was that without a valid duty demand, the basis for the penalty did not exist.

5. Demand of Interest:
As the duty demand under Section 11A was set aside, the Tribunal also set aside the demand for interest under Section 11AB. Without the principal duty demand, the interest could not be sustained.

Conclusion:
The Tribunal concluded that:
1. The impugned goods are rightly classifiable under CSH 8430.00.
2. The duty demand of Rs. 11,81,168/- under Section 11A, the demand of interest under Section 11AB, and the penalty under Section 11AC were set aside.
3. The duty demand of Rs. 1,30,000/- under Section 11D was confirmed.

The appeal was disposed of in these terms. The Tribunal did not find it necessary to address additional arguments concerning the non-manufacture of the goods or the valuation method used for the duty demand.

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