2011 (4) TMI 976 - AT - Central Excise

Classification of Programmable Logic Controllers - 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 the product is a process control equipment meriting classification under Heading 90.32 and not a product falling under Chapter 85.37.

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

Issue-wise Detailed Analysis:

1. Classification of "Programmable Logic Controllers" (PLCs):
The primary issue was whether the PLCs manufactured by the assessee should be classified under Heading No. 84.71 (automatic data processing machine) or Heading No. 85.37 (Control Panels incorporating PLCs) of the Central Excise Tariff Act, 1985. The assessee initially classified the PLCs under Heading No. 84.71 but later claimed that the correct classification should be under Heading No. 90.32 (automatic regulating or controlling instruments and apparatus).

The department contended that the PLCs were Control Panels incorporating PLCs, classifiable under Heading No. 85.37, which covers "Boards, Panels, (including numerical control panels), consoles, desks, cabinets and other bases, equipped with two or more apparatus of Heading No. 85.35 or Heading No. 85.36, for electric control or the distribution of electricity."

The Commissioner of Central Excise concluded that the PLCs did not qualify as automatic data processing machines under Heading No. 84.71 but were used for electric control of machines and plant management, thus classifiable under Heading No. 85.37.

The Tribunal, however, found that the PLCs performed regulatory functions for process control by continuously monitoring and maintaining variables such as pressure, temperature, and fluid levels, aligning with the criteria for "Programmable Process Controllers" under Heading No. 90.32 as per CBEC's 37B Order No. 49/3/97-CX dated 9-5-97. The Tribunal held that the product should be classified under Heading No. 90.32.

2. Demand for Differential Duty:
The department issued show-cause notices demanding differential duty of Rs. 53,16,956.60 under the proviso to sub-section (1) of Section 11A of the Central Excise Act, 1944, read with Rule 9(2) of the Central Excise Rules, 1944, based on the reclassification of the product under Heading No. 85.37.

The Tribunal, however, set aside the demand as it held that the product was classifiable under Heading No. 90.32, making the demand for differential duty unsustainable.

3. Imposition of Penalty:
The Commissioner imposed a penalty of Rs. 25.00 lakhs on the assessee under Rule 173Q of the Central Excise Rules, 1944, for misclassification and alleged suppression of facts.

The Tribunal found that the matter related to the classification of the product, where different views could be held, and there was no willful mis-statement or suppression of facts. Therefore, the imposition of the penalty was not warranted.

4. Confiscation of Land, Building, Plant, and Machinery:
The Commissioner ordered the confiscation of the assessee's land, building, machinery, etc., but provided 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 Tribunal, aligning with its findings on classification and penalty, set aside the confiscation order as well.

5. Invocation of the Extended Period for Demand:
The department invoked the extended period for demand, alleging suppression of facts by the assessee.

The Tribunal found that the assessee had submitted the product catalogue and other relevant details to the department as early as 1985. The department's failure to verify the matter based on the provided information could not be attributed to the assessee. Therefore, the invocation of the extended period was unsustainable, making the demand time-barred.

Conclusion:
The Tribunal held that the programmable controllers manufactured by the assessee were classifiable under Heading No. 90.32 of the Central Excise Tariff Act, 1985. It set aside the order of the Commissioner of Central Excise classifying the product under Heading No. 85.37, along with the demand for differential duty, penalty, and confiscation orders. The Tribunal also ruled that the extended period for demand was not applicable in this case.

← Previous Next →