2008 (7) TMI 261 - AT - Central Excise

Lifts whether classifiable as complete lifts or parts of lifts in Excise law goods have to be assessed in form in which they are presented for clearance & cannot be clubbed as a single consignment for the purpose of R. 2 (a) of General Interpretative Rules in the present case, since parts were cleared as individual parts, the same are classifiable u/h 84.31 and not as lifts u/h 84.28 - As regards penalty, since this was a matter of interpretation of classification, penalty is set aside

Issues Involved:
1. Classification of parts and components of lifts for excise duty purposes.
2. Applicability of Interpretative Rule 2(a) of the Rules of Interpretation.
3. Determination of essential character of lifts.
4. Limitation and time-barred demands.
5. Imposition of penalty.

Detailed Analysis:

1. Classification of Parts and Components of Lifts:
The appellants, engaged in manufacturing parts and components of lifts, contended that these should be classified under Chapter Heading 8428 as lifts in unassembled condition. The department argued that since the parts constituted only 50-70% of the total lift value, they should be classified under Chapter Heading 8431 as parts and components. The Tribunal upheld the department's view, confirming that the goods manufactured by the appellants are classifiable under Chapter Heading 8431 as parts.

2. Applicability of Interpretative Rule 2(a):
The appellants argued that the components manufactured by them together had the essential character of a lift and should be classified as such under Rule 2(a) of the Rules of Interpretation. The Tribunal noted that Rule 2(a) allows incomplete or unfinished goods to be classified as finished goods if they have the essential character of the finished goods. However, the Tribunal found that the components did not attain the essential character of a lift, as they were cleared over time and not together in an unassembled condition.

3. Determination of Essential Character of Lifts:
The Tribunal examined whether the parts manufactured by the appellants together had the essential character of a lift. The affidavit by Professor Menon, stating that the components manufactured by the appellants were essential for the lift, was found unconvincing. The Tribunal concluded that essential character cannot be determined solely based on the function of the parts but must consider all parts, including bought-out items. The Tribunal also referenced HSN explanatory notes, which indicated that structural elements like pulleys and counterweights are essential parts of lifts.

4. Limitation and Time-Barred Demands:
The Tribunal addressed the issue of limitation, noting that the second show cause notice issued on 5-4-91 invoked the extended period, whereas a normal period show cause notice was issued on 3-4-91. Citing the Supreme Court decision in Nizam Sugar, the Tribunal held that once a normal period notice is issued, a subsequent notice cannot allege suppression of facts. Consequently, the demand for duty of Rs. 31,80,707.24 as basic and Rs. 82,708.35 as special covered by the show cause notice dated 5-4-91 was deemed time-barred and set aside.

5. Imposition of Penalty:
The Tribunal considered the imposition of penalty and concluded that since the issue involved interpretation and was constantly contested, a penalty was not warranted. Thus, the penalty imposed under Rule 173Q was set aside.

Conclusion:
The Tribunal concluded that the parts and components manufactured by the appellants are classifiable under Chapter Heading 8431 as parts. The demand for duty for the period April '86 to August '90 was set aside as time-barred, and the penalty was also set aside. The appeal was disposed of accordingly.

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