2006 (9) TMI 420 - AT - Central Excise

Summary

Issues Involved:
1. Classification of aluminium/copper coils for transformers.
2. Invocation of extended period for demand of duty.
3. Marketability and transformation of coil windings.
4. Allegation of misdeclaration and suppression of facts.

Summary:

1. Classification of Aluminium/Copper Coils for Transformers:
The primary issue in these appeals was the classification of aluminium/copper coils for transformers manufactured by the appellants. The appellants had classified the HV & LV coil windings under Chapter sub-heading 8504.00 of schedule I to CETA, 1985, and this classification had been approved by the department since 1986. The department, however, contended that the coils should be classified under sub-heading 8544.90 as insulated coils (electrical conductor) and not as transformer parts.

2. Invocation of Extended Period for Demand of Duty:
The department issued show cause notices demanding duty for the period 1-12-94 to 25-2-99, invoking the extended period u/s 11A, alleging misdeclaration and suppression of facts by the appellants. The appellants argued that they had consistently declared the goods correctly in the classification lists, which were approved by the department, and hence the invocation of the extended period was not justified.

3. Marketability and Transformation of Coil Windings:
The appellants justified the classification of the coil windings under Heading 8504 by explaining the elaborate process of manufacture, which involved winding wires with specific design and insulating materials to withstand higher KVAs. They argued that the coil windings were distinct from mere wires and had a new name, characteristics, and use. The Tribunal agreed, noting that the coil windings had a commercial name, different applications, and were marketable as goods distinct from electric wires.

4. Allegation of Misdeclaration and Suppression of Facts:
The Commissioner had observed that the appellants had misdeclared the goods as coils instead of wires and had withheld vital information. However, the Tribunal found that the appellants had not suppressed any relevant information and had regularly filed classification lists and returns, which were periodically assessed by the department. The Tribunal also noted that the classification had been approved by the department for several years, and the appellants' activities were known to the department.

Conclusion:
The Tribunal concluded that the demands were time-barred and that the appellants had correctly classified the coil windings under Heading 8504. The appeals were allowed on both merits and limitation grounds. The Tribunal emphasized that the department could not change the approved classification after having accepted it for a long time, citing the Supreme Court's decision in ESPI Industries & Chemicals Pvt Ltd. [1996 (82) E.L.T. 444 (S.C.)].