2011 (3) TMI 861 - AT - Central Excise

The classification of Programmable Logic Controllers under heading No.84.71 or under heading No.85.37. - Extended Period of Limitation - Held that - Considering the functions of the product manufactured by the assessee as revealed from the product literature and also as admitted by the department, we are of the considered view that the product is a process control equipment merit classification under heading 90.32. - Decided classification 90.32. Regarding extend period of Limitation. - The appellant had submitted the product catalogue as early as 1985, which gave all the details of the product. Therefore to say that they have misdeclared the description of the product is totally irrelevant. - Decided in favour of Assessee.

Issues Involved:
1. Classification of 'Programmable Logic Controllers' (PLCs)
2. Demand for differential duty
3. Imposition of penalty under Rule 173Q
4. Confiscation of land, building, plant, and machinery
5. Invocation of extended period of time for demand

Issue-wise Detailed Analysis:

1. Classification of 'Programmable Logic Controllers' (PLCs):
The primary issue revolves around the classification of PLCs manufactured by the assessee. The assessee initially classified their PLCs under heading No. 84.71 of the Central Excise Tariff Act, 1985, claiming them to be automatic data processing machines and sought benefits under Notification No. 64/86-CE. The department, however, argued that the PLCs should be classified under heading No. 85.37, which covers control panels incorporating programmable logic controllers. The Commissioner of Central Excise held that only machines with data processing as a main function can be classified under heading No. 84.71 and concluded that the PLCs are used for controlling industrial plants and machinery, thus classifiable under heading No. 85.37. The assessee, in their appeal, gave up their claim for classification under heading No. 84.71 and argued for classification under heading No. 90.32, stating that their PLCs are used for controlling various parameters in industrial applications, thus falling under the category of automatic regulating or controlling instruments.

2. Demand for Differential Duty:
The department issued show-cause notices demanding differential duty of Rs. 53,16,956.60, arguing that the correct classification should be under heading No. 85.37. The Commissioner confirmed this demand, classifying the product under heading No. 85.37 and holding that the PLCs are used in electric control of machines and plant management.

3. Imposition of Penalty under Rule 173Q:
The Commissioner imposed a penalty of Rs. 25.00 lakhs on the assessee under Rule 173Q of the Central Excise Rules, 1944, on the grounds of mis-declaration and suppression of facts. The assessee contended that there was no intention to evade duty and that the classification lists were approved by the competent authorities, thus making the imposition of penalty unwarranted.

4. Confiscation of Land, Building, Plant, and Machinery:
The Commissioner also ordered the confiscation of the assessee's land, building, plant, and machinery but gave an option to redeem the same on payment of a fine of Rs. 10.00 lakhs under Section 34 of the Central Excise Act. The assessee argued that such confiscation was not warranted, citing previous judicial pronouncements.

5. Invocation of Extended Period of Time for Demand:
The department invoked the extended period of time for confirming the demand, alleging suppression of facts by the assessee. The assessee countered this by stating that they had submitted the product catalogue and other details to the department as early as 1985, and there was no mis-declaration or suppression of facts. They cited various judicial precedents to support their claim that the demand was time-barred.

Conclusion:
The Tribunal held that the PLCs manufactured by the assessee are classifiable under heading No. 90.32, as they are process control equipment used for controlling various parameters in industrial applications. The demand for differential duty was found to be time-barred, and the imposition of penalty and confiscation of assets were deemed unwarranted. The order of the Commissioner of Central Excise classifying the product under heading No. 85.37 was set aside.

← Previous Next →