2015 (7) TMI 545 - AT - Central Excise

Manufacture of Grain Feeder, En-mass Grain Feeder, Grain Discharger, Bins for grain storage, Loaders & Hoppers - These machines are used for transporting of grains - classification under Heading 8437/8436 or under 8428/8479 - appellants had not taken Central Excise registration and were clearing the said machines without payment of duty - Denial of CENVAT Credit - Penalty u/s 11AC - Held that - keeping in view the HSN Explanatory Notes as also the fact that the machines manufactured by the appellants in no way process the grains or even do not do any auxiliary function before processing of grains but are limited to conveying or lifting or storing grains. (The nomenclature feeder used by the appellants is a misleading one). There can be no doubt that the machines would be correctly classifiable under Heading 8428 and not under 8437. Handling machines designed for any goods are covered under Heading 8428 irrespective of the fact that such machines are used in a factory or in mines or in construction and the item being handled is cement or minerals or grains. In view of the above position, we have no hesitation in holding that the machines being manufactured would be correctly classifiable under Heading 8428 and not 8437 as claimed by the appellants and the goods would, therefore, be chargeable to excise duty. - there are few other machines viz. bins, hoppers and Grain Feed Controller which the Revenue has proposed under Heading 8479 and the appellants claim the same would be classifiable under Heading 8437. Again, these goods are not meant for processing of the grains etc. but are machines for storage of grains or their parts. We agree with the Revenue that such machines would fall under the residuary heading of 8479 as these cannot be considered as machinery for milling industry. 8479 covers Machines and mechanical appliances having individual functions, not specified or included elsewhere in Chapter 84. There can be no doubt that the appellants were aware about the dutiability of the said goods and, therefore, they have intentionally not used the generally understood commercial terminology of the said goods and instead used the words green feeder, en-masse feeder etc. to avoid payment of excise duty. In our view, the conduct of the appellants would support the invocation of the extended period of limitation as also imposition of penalty. There can be no doubt as even after knowing that their goods are chargeable to excise duty, the appellants instead of paying the excise duty, chose to describe their goods with different nomenclature. We, therefore, uphold the imposition of penalty under Section 11AC. It is true that the cenvat credit can be taken as per Rule 3 of the Cenvat Credit Rules. However, the peculiar facts in the present case are that the appellants did not pay the duty treating their goods as non-dutiable and hence they were not eligible for availment of cenvat credit. Now since the goods are held to be dutiable, they are eligible for taking the cenvat credit. The appellants, therefore, must be given a chance to provide the copies of various documents like invoices etc. and other records as required to prove that the said inputs or input services were used in the manufacture of the goods and if the appellants are able to satisfy from the documentary evidence then the cenvat credit should be extended to the appellants and the net duty should thereafter be worked out. Penalty will also change accordingly. We, therefore, remand the matter to the Commissioner for the limited purpose of examining the documents to be submitted by the appellants - Decided partly in favour of assessee.

Issues Involved:
1. Classification of the machines.
2. Applicability of extended period of limitation.
3. Eligibility for Cenvat credit.
4. Imposition of penalties.

Issue-wise Detailed Analysis:

1. Classification of the Machines:

The appellants were engaged in the manufacture of various machines used for handling grains and classified them under Heading 8437/8436, treating them as non-dutiable. The Revenue contended that these machines were conveyors and elevators classifiable under Heading 8428, making them liable for excise duty. The Tribunal examined the functions of the machines and the relevant headings in the Customs Tariff Act, 1975. It was noted that Heading 8428 covers machinery for lifting, handling, loading, or unloading, including conveyors and elevators, whereas Heading 8437 pertains to machinery for processing grains. The Tribunal concluded that the machines manufactured by the appellants were for handling, not processing grains, and thus correctly classifiable under Heading 8428, making them dutiable.

2. Applicability of Extended Period of Limitation:

The appellants argued against the invocation of the extended period of limitation, claiming no suppression of facts. However, the Tribunal found evidence of intentional misdescription of the machines to avoid excise duty. Customers' statements and internal communications indicated that the appellants were aware of the dutiability under Heading 8428 but chose to describe their products differently. The Tribunal held that this constituted suppression of facts with intent to evade duty, justifying the extended period of limitation under the proviso to Section 11A.

3. Eligibility for Cenvat Credit:

The appellants sought the benefit of Cenvat credit on inputs and input services used in manufacturing the machines. The Tribunal disagreed with the Commissioner's denial of this benefit, noting that since the goods were now held dutiable, the appellants should be allowed to claim Cenvat credit. The matter was remanded to the Commissioner to examine the appellants' documentation and determine the eligible Cenvat credit, adjusting the net duty liability accordingly.

4. Imposition of Penalties:

A penalty under Section 11AC was imposed on the appellants for evading excise duty. The Tribunal upheld this penalty, finding clear evidence of intentional misdescription and suppression of facts. Additionally, a penalty under Rule 26 was imposed on the Managing Director of the appellant company. The Tribunal acknowledged his role in the misdescription and upheld the penalty but reduced it from Rs. 1,00,00,000/- to Rs. 10,00,000/- considering the reduced duty liability after allowing Cenvat credit and his individual status.

Conclusion:

The Tribunal concluded that the machines were correctly classifiable under Heading 8428, making them liable for excise duty. The extended period of limitation was applicable due to suppression of facts. The appellants were entitled to claim Cenvat credit, and the matter was remanded for verification of documents. Penalties were upheld but adjusted in light of the revised duty liability. The appeals were disposed of accordingly.

← Previous Next →