1983 (12) TMI 285 - AT - Central Excise

Issues Involved:
1. Classification of "GAS-O-FIRE" lighters under Tariff Item No. 39.
2. Applicability of Rule 9(2) of the Central Excise Rules, 1944.
3. Imposition of penalty under Rules 52A and 226 of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Classification of "GAS-O-FIRE" Lighters under Tariff Item No. 39:
The primary issue in this case revolves around whether the "GAS-O-FIRE" lighters manufactured by the appellant fall under Tariff Item No. 39 of the First Schedule to the Central Excises and Salt Act, 1944. The appellant argued that their product was not portable in the common parlance sense and did not have an inbuilt device to put petrol or gas, distinguishing it from typical mechanical lighters. They also contended that in trade parlance, their product was not known as a mechanical lighter and that similar products like battery-operated gas stove lighters were not charged to duty. The Tribunal analyzed the definition of "Mechanical Lighter" under Tariff Item No. 39, which includes any mechanical or chemical contrivance for causing ignition that is portable and operates by producing a spark or flame. The Tribunal found that the "GAS-O-FIRE" Flint Lighter met these criteria as it was a mechanical contrivance for gas ignition and was portable. The Tribunal dismissed the appellant's argument that the product was not known in the market as a mechanical lighter, emphasizing that the product's classification should be based on its characteristics rather than market perception. The Tribunal upheld the lower authority's decision that the "GAS-O-FIRE" Flint Lighter fell within the ambit of Item 39 of the Central Excise Tariff.

2. Applicability of Rule 9(2) of the Central Excise Rules, 1944:
The appellant contended that there was nothing clandestine about their operations and that they were under the bona fide belief that their product was not excisable. They argued that the demand for duty under Rule 9(2) was not tenable as there was no surreptitious removal of the mechanical lighters. The Tribunal referred to the case of N.S. Metal Industries v. Union of India, which established that Rule 9(2) is attracted when no license is obtained for the manufacture of excisable goods and removal is effected without payment of duty. The Tribunal found that the appellant had not informed the excise authorities nor obtained any license, and thus, the demand for duty under Rule 9(2) was justified. The Tribunal also referred to the Bombay High Court case of Devidayal Rolling & Refineries Pvt. Ltd. v. Superintendent of Central Excise, which upheld the applicability of Rule 9(2) when goods are removed without payment of duty. The Tribunal concluded that the plea of time limit could not be accepted, and the Collector was right in demanding duty under Rule 9(2).

3. Imposition of Penalty under Rules 52A and 226 of the Central Excise Rules, 1944:
The appellant challenged the imposition of penalties under Rules 52A and 226, arguing that no penalty should be imposed for a bona fide belief that the product was not excisable. The Tribunal referred to the Supreme Court case of Hindustan Steel Limited v. State of Orissa, which stated that no penalty should be imposed for technical or venial breaches of provisions or where the breach flows from a bona fide belief. The Tribunal noted that the Member of the Central Board of Excise & Customs had already taken a lenient view by reducing the penalty amount to Rs. 1,000 under each of the two Rules. The Tribunal upheld the findings of the lower authority, concluding that the appellant was bound to pay duty on the excisable goods manufactured without compliance with the Central Excise Rules and that the penalties imposed were justified.

Conclusion:
The Tribunal dismissed the appeal, upholding the lower authority's decision that the "GAS-O-FIRE" Flint Lighters were classifiable under Tariff Item No. 39, that the demand for duty under Rule 9(2) was justified, and that the imposition of penalties under Rules 52A and 226 was appropriate.

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