1993 (9) TMI 368 - AT - Central Excise

Summary

Issues Involved:

1. Misdeclaration of Goods
2. Classification of Goods
3. Demand of Duty
4. Confiscation and Redemption Fine
5. Disallowance of Modvat Credit
6. Penalty Imposition
7. Allegation of Suppression and Wilful Misstatement
8. Applicability of Larger Period for Demand

Issue-wise Detailed Analysis:

1. Misdeclaration of Goods:
The appellants were accused of misdeclaring "Rolled Tyres for MG Wagon for Railways" as "pieces roughly shaped by rolling or forging of iron or steel, not else where specified" under Chapter 72, sub-heading 7208.00. Upon verification, it was found that the goods should have been classified under "Parts of Railways or tram way locomotives or rolling stocks" under Chapter 86, sub-heading 8607.00, attracting a duty rate of 15% Adv.

2. Classification of Goods:
The appellants had their classification lists approved under Chapter 72, sub-heading 7208.00. However, the department argued that the correct classification should be under Chapter 86, sub-heading 8607.00, as the goods were essentially parts of railway or tramway locomotives or rolling stock. The classification dispute was central to the case, with the appellants contending that their product was not in a fully manufactured stage and required substantial processing by the Railways.

3. Demand of Duty:
The Collector confirmed a duty demand under Rule 9(2) of Central Excise Rules, 1944, for the period 1-8-1983 to 24-9-1986 and under sub-heading 8607.00 of Central Excise Tariff Act, 1985, for the period 29-5-1986 to 24-9-1986. The appellants were issued a Show Cause Notice demanding duty of Rs. 23,13,785.50 for the period 29-5-1986 to 24-9-1986, which was later replaced by another Show Cause Notice for a larger period.

4. Confiscation and Redemption Fine:
The Collector ordered the confiscation of 761 rolled metal tyres valued at Rs. 19,98,690.40, seized on 25-9-1986, and imposed a redemption fine of Rs. 2 lakhs. The duty on these seized goods amounted to Rs. 2,99,803.50.

5. Disallowance of Modvat Credit:
The Collector disallowed Modvat credit of Rs. 3,85,507.62 availed by the appellants during the period 29-5-1986 to 24-9-1986 on inputs utilized in the manufacture of rolled metal tyres without following the prescribed procedure under Modvat rules. He also confirmed a duty amount of Rs. 3,85,507.62 said to have been utilized irregularly towards the payment of duty on the rolled metal tyres from out of the Modvat credit availed.

6. Penalty Imposition:
A penalty of Rs. 15 lakhs was imposed under Rule 173Q (1) of CER, 1944, along with penalties of Rs. 25,000 on the Managing Director and Rs. 10,000 on the General Manager of the company.

7. Allegation of Suppression and Wilful Misstatement:
The department alleged that the appellants had deliberately suppressed facts and wilfully mis-stated the classification of their goods to evade payment of Central Excise Duty (CED). The appellants denied these charges, asserting that the product was not in a fully manufactured stage and required substantial finishing processes by the Railways. They relied on various judicial decisions and technical literature to support their claim.

8. Applicability of Larger Period for Demand:
The Collector justified the invocation of the larger period for demand, citing suppression and wilful mis-statement by the appellants. However, the appellants argued that the classification lists had been approved by the department, and there was no intention to evade duty as the pricing was fixed by the Joint Plant Committee (JPC) and the Railways were to pay the Excise Duty.

Conclusion:
The Tribunal, after considering the evidence and arguments, concluded that the goods were not in a fully finished stage and did not merit classification under sub-heading 8607.00. The Tribunal found that the appellants had not wilfully misdeclared or suppressed facts, and the demands were time-barred. The appeal was allowed, and the penalties and duty demands were set aside.