2015 (1) TMI 850 - AT - Central Excise

Classification of lift machinery - parts of lift - Imposition of penalty - Bar of limitation - whether parts and components manufactured and supplied by the appellant, M/s. Bharat Bijlee Ltd. to their buyers would constitute a lift classifiable under CETH 84.28 or they would merit classification under CETH 84.31 as parts suitable for use solely or principally with the lift machinery - Held that - The installation of a lift is governed by various rules and regulations and the various components of the lift have to satisfy the specifications prescribed in the Indian Standards. In fact, the Bombay Lift Rules, 1958 itself prescribes Standards for landing gates and doors, locking devices, lift cars, lift car frame, counter weights, car guides, buffers, suspension ropes, emergency safety devices, over speed governors, lift machines, controllers, sheaves and drums and so on. Many of these parts comprising a lift, which are essential for the functioning of the lift and for which standards have been laid down, have not been manufactured and supplied by the appellant. Therefore, from the Bombay Lift Rules, 1958, itself, it can be seen that what has been supplied by the appellant does not constitute a lift either in an incomplete form nor does it have the essential character of a lift. They are only components and parts of a lift. Therefore, the contention of the appellant that what they have supplied is a lift in incomplete form having essential character of the lift totally fails. The items supplied do not constitute a lift falling under CETH 84.28 either in an incomplete form or having the essential character. They can only be considered as parts and components falling under CETH 84.31 and we hold accordingly. The concept of essential character can also be seen from certain examples. A motor vehicle chassis may be capable of auto-movement. But can it carry a passenger or goods without the body. The answer would be a clear NO . Therefore, can we say that a motor vehicle chassis can be classified as a motor vehicle. The answer will be in the negative. In fact the tariff itself recognizes this fact and has provided a separate heading for automobile chassis. Let us consider another example. A mono-block pump set consists of an electric motor (the driver) and the pump. Without the motor, the pump cannot function. Therefore, can we say that an electric motor has the essential character of a pump. Here again the answer would be NO . On the same logic, the prime mover, safety gear and over speed governor, car and landing fixtures, by themselves do not have the essential character of a lift without the lift car, car frame, guide rails, counter-weights, cables/ropes, etc., even though they may be essential for the functioning of the lift. Assessments were provisional from 1-9-1990 onwards on account of non-finalisation of price lists. Therefore, the question of time bar would not arise in respect of demands for the period from 1-9-1990 onwards. However, as regards the demand for the period August, 1986 to August, 1990 is concerned, the demand would be time-barred for the reason that the entire issue regarding classification dispute was well known to the department and the department had also approved the classification list classifying the parts under CETH 8428 since 1987 onwards. In these circumstances, the allegation of suppression made in the show cause notice dated 5-4-1991 would not sustain and we hold accordingly. Thus the demand for the period August, 1986 to August, 1990 is clearly time-barred. Whether the impugned demand could be confirmed when the price lists themselves were provisionally approved and had not been finalized. - Held that - The period of provisional assessment starts from 1-9-1990 onwards. The appellant has submitted copies of the price lists of the various goods supplied by them during the period of demand involved. As per the assessment memorandum, it is seen that the price lists were approved provisionally and the goods were also assessed to duty provisionally as per the endorsements made by the jurisdictional Range Officer. From the various correspondence exchanged between the department and the appellant assessee, it is seen that the assessments were provisional, inasmuch as details were sought for from the appellant for finalization of the assessment. Inasmuch as these details were not produced, only classification under CETH 84.31 was finalized. In these circumstances, the adjudicating authority should have confirmed the duty demand only after finalization of the prices by the competent authority. Therefore, there is merit in the appellant s contention that the duty demand should have been confirmed only after the finalization of the price lists. - Matter remanded back. As regards the question of penalty, the same would not arise inasmuch as the issue involved relates to classification of the goods manufactured by the appellant. It is a settled position in law that in respect of classification disputes, where the assessee has classified the product as per his understanding and the department proposes to classify differently, the question of imposing any penalty would not arise. Therefore, imposition of penalty on the appellant is not warranted in the facts of the present case. Parts and components of the lift machinery, supplied by the appellant, merit classification under CETH 84.31 as it stood at the relevant time. The duty demand period for the period August, 1986 to August, 1990 is clearly time-barred and accordingly we set aside the same. For the period from 1-9-1990 onwards, inasmuch as the price lists and the consequent assessments were provisional, the matter is remanded back to the adjudicating authority for finalization of prices and thereafter, quantifying the duty demand liable to be paid by the appellant. Since the matter relates to interpretation of tariff, the imposition of penalty is not warranted. - Decided partly in favour of assessee.

Issues Involved
1. Classification of goods manufactured by the appellant.
2. Time-barred duty demand.
3. Provisional assessment and finalization of prices.
4. Imposition of penalty.

Detailed Analysis

1. Classification of Goods Manufactured by the Appellant
The primary issue was whether the parts and components manufactured and supplied by the appellant constituted a lift classifiable under CETH 84.28 or as parts suitable for use solely or principally with lift machinery under CETH 84.31. The Tribunal analyzed the relevant tariff headings and concluded that the parts manufactured by the appellant did not constitute a lift in an incomplete or unfinished form having the essential character of a lift. The Tribunal noted that the appellant manufactured only certain control, stopping, and safety equipment, but did not manufacture essential components like winch and cable, passenger cage, vertical guide bars, and counter-balance weights. Therefore, the Tribunal held that the parts and components manufactured and supplied by the appellant were classifiable under CETH 84.31 as parts suitable for use solely or principally with lift machinery.

2. Time-Barred Duty Demand
The Tribunal addressed the issue of whether the duty demand for the period August 1986 to August 1990 was time-barred. It was noted that the entire issue regarding classification was well known to the department, and the classification lists had been approved since 1987. Therefore, the Tribunal held that the allegation of suppression made in the show cause notice dated 5-4-1991 would not sustain, and the demand for the period August 1986 to August 1990 was clearly time-barred.

3. Provisional Assessment and Finalization of Prices
The Tribunal examined whether the impugned demand could be confirmed when the price lists themselves were provisionally approved and had not been finalized. It was found that the assessments were provisional from 1-9-1990 onwards due to non-finalization of price lists. The Tribunal remanded the matter back to the adjudicating authority for the limited purpose of finalizing the prices for valuation and thereafter determining the duty demand by classifying the goods under CETH 84.31. The appellant was directed to furnish the relevant details required for finalization of prices without any further delay.

4. Imposition of Penalty
The Tribunal considered whether the imposition of penalty was warranted. It was concluded that since the issue involved related to the classification of goods, and the appellant had classified the product as per its understanding, the imposition of penalty was not justified. Therefore, the Tribunal held that the imposition of penalty on the appellant was not warranted in the facts of the present case.

Conclusion
The Tribunal held that the parts and components of the lift machinery supplied by the appellant merited classification under CETH 84.31. The duty demand for the period August 1986 to August 1990 was set aside as time-barred. For the period from 1-9-1990 onwards, the matter was remanded back to the adjudicating authority for finalization of prices and determination of the duty demand. The imposition of penalty was deemed unwarranted. The appeal was partly allowed in these terms.

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