1983 (5) TMI 230 - AT - Central Excise

Summary

Issues Involved:
1. Classification of products (harrow discs and coal-cutting picks) under the Central Excise Tariff.
2. Applicability of duty exemption under Notification No. 31/76-C.E.
3. Validity of the show cause notice and the demand for duty.
4. Applicability of Rule 9(2) and Rule 10 of the Central Excise Rules.
5. Time-bar objection regarding the show cause notice.

Detailed Analysis:

1. Classification of Products:
The central issue in this case is the classification of harrow discs and coal-cutting picks manufactured by the appellant under the Central Excise Tariff. The appellant contended that these products should be classified under Tariff Entry 26AA as forged products, which are exempt from duty if made from duty-paid semi-finished steel. The Assistant Collector initially classified hammers under T.I. 26AA but classified harrow discs and coal-cutting picks under T.I. 68, making them dutiable. The Tribunal found that the factory, known as Agrico, primarily engaged in forging processes and that the products in question were indeed forged. The Tribunal concluded that the lower authorities erred in changing the classification without providing a cogent basis, especially since the classification lists had been consistently accepted by the department prior to the show cause notice.

2. Applicability of Duty Exemption:
The appellant argued that their products were exempt from duty under Notification No. 31/76-C.E., dated 28-2-1976, which exempted iron and steel products from excise duty. The Assistant Collector had previously informed the appellant that their products were exempt and that excise control was withdrawn. The Tribunal noted that the department had not provided any valid reason for the sudden change in their stance and upheld the appellant's claim for exemption.

3. Validity of the Show Cause Notice and Demand for Duty:
The show cause notice issued on 13-2-1978 alleged that the appellant had removed goods without paying duty, violating Rule 173-Q(1)(a) and Rule 173-PP. The appellant contended that the goods were exempt and that the notice was unwarranted. The Tribunal found that the department had not justified the change in classification and that the appellant had consistently filed classification lists, which were accepted by the department. Consequently, the Tribunal held that the demand for duty was not enforceable.

4. Applicability of Rule 9(2) and Rule 10 of the Central Excise Rules:
The appellant argued that Rule 9(2), which applies to clandestine removal, was not applicable as there was no clandestine removal. The Tribunal agreed, noting that the appellant had been transparent in their dealings with the excise authorities, seeking clarifications and filing classification lists. The Tribunal also found that the demand for duty was barred by the six-month limitation period under Rule 10, as the show cause notice was issued more than six months after the period in question.

5. Time-Bar Objection:
The appellant contended that the demand was time-barred as the show cause notice was issued on 13-2-1978, covering the period from 1-3-1975 to 17-6-1977. The Tribunal upheld this objection, finding that the demand was indeed time-barred under Rule 10.

Conclusion:
The Tribunal allowed the appeal, setting aside the orders of the lower authorities. It held that the products in question were forged products falling under T.I. 26AA, exempt from duty under Notification No. 31/76-C.E. The Tribunal found no justification for the sudden change in classification by the department and concluded that the demand for duty was not enforceable and time-barred. The appellant was entitled to consequential relief.