2018 (1) TMI 46 - AT - Central Excise

Whether the goods manufactured and cleared by the appellant is machinery falling under chapter heading 841900 or parts thereof and consequently whether the same is eligible for exemption N/N. 56/95-C.E. either under Sr. No. 14 and 15? - Held that - in the present case the process of assembly was not simple assembly operations of fixing screws, nuts etc. but a complex process requiring engineering skills. Further, Explanatory Notes V with regard to Rule 2(a) of Rules of Interpretation in respect of classification of articles presented unassembled or disassembled provides that complete or finished articles are to be presented unassembled or disassembled. Clearly in the present case complete or finished articles were never presented in unassembled or disassembled conditions. Penalty u/s 173Q - Held that - Merely by not mentioning the sub-clause the penalty cannot be avoided - As regards the bonafide belief entertained by the appellant regarding the claim of exemption entry under notification in respect of machinery falling under 8419.00 we find that the appellant was very much aware about legality of the issue and therefore they have represented to the government via CII to make uniform rate of machine and parts i.e. 10%. Therefore appellant knowingly claimed the wrong exemption - penalty upheld. Appeal dismissed - decided against appellant.

Summary

Issues involved: Determination of whether goods manufactured and cleared by the appellant fall under machinery or parts thereof under chapter heading 841900, and eligibility for exemption under notification no. 56/95-C.E.

Analysis:

1. Issue of Classification and Eligibility for Exemption:
The primary issue in this case revolved around the classification of goods manufactured and cleared by the appellant as machinery or parts thereof under chapter heading 841900, and the eligibility for exemption under notification no. 56/95-C.E. The appellant argued that the show-cause notice lacked specificity and was unsustainable, emphasizing the ambiguity in the classification of the goods. The appellant's representatives cited legal precedents to support their stance, highlighting the lack of clarity in the notice and the absence of a specified sub-clause for the penalty imposed. On the other hand, the revenue authority reiterated the findings of the impugned order and emphasized the nature of contravention committed by the appellant, justifying the penalty imposed under Section 173Q. The revenue authority also pointed out the appellant's awareness of the duty payment rates and their representation to the government regarding the uniform rate for machinery and parts. The Tribunal, considering both arguments, upheld the previous order dated 28.02.2006, which determined that the goods in question did not qualify for exemption under Sr. No. 14 of Notification No. 56/95. Consequently, the demand for duty and interest was deemed sustainable based on the classification and exemption eligibility.

2. Penalty Imposition under Section 173Q:
Another significant issue addressed in the judgment was the imposition of a penalty under Section 173Q. The appellant contested the penalty on the grounds of lack of sub-clause specification and claimed a bonafide belief in the exemption entry under the notification. However, the Tribunal found that the penalty could not be avoided solely due to the absence of a sub-clause, as the contravention nature was discussed in detail by the adjudicating authority and the Commissioner (Appeals). The Tribunal noted the appellant's awareness of the legal aspects and their representation to the government for a uniform duty rate, indicating a deliberate claim of the wrong exemption. Considering the penalty amount imposed in relation to the duty demand, the Tribunal deemed the penalty of ?25 lakhs reasonable and upheld the impugned order, dismissing the appeal.

In conclusion, the judgment addressed the issues of classification, exemption eligibility, and penalty imposition under Section 173Q, providing a detailed analysis of the arguments presented by both parties and the legal basis for the final decision pronounced on 29.12.2017.