2018 (8) TMI 1378 - AT - Central Excise

Classification of goods - various machineries - Department was of opinion that the goods were classifiable under Heading 84729090 and under Heading 85258090 of First Schedule to Central Excise Tariff Act, 1985 - Benefit of N/N. 6/2006 dated 01.03.2006 - Whether the goods are computers or not? - Extended period of limitation - no suppression of facts. Held that - It is quite evident that all the goods under consideration are standalone machines capable of performing a specific function. These machines/ equipments can be installed in remote locations for providing host of services to the users as highlighted in the technical literature. From the description of the products and functions performed it is quite evident that the said machine/ equipments are for performing various functions which are part of ordinary banking functions such currency dispensation, cheque deposits, bill payment etc., from a remote location without any human intervention. Thus in the terms of the submissions made by the Appellant himself their products are quite akin to the ATM machines with a role reversal, i.e. instead of dispensing the cash these machines used for depositing cash/ cheques. Even in terms of HSN Explanatory note for headings 8471 & 8472 the classification of such machines would appropriately be classified under heading 8472. Items mentioned at Sl No 7 & 8 in table 1 namely I-Watch (Digital ATM Surveillance Solution) & Iwatch DVR (Digital Video Recording) - Held that - the item the goods in dispute are nothing but digital cameras, which record the image of transaction being undertaken at the remote location. Once the image is recorded it is embossed with other details and then stored for retrieval and viewing either locally or through LAN/ SYSTEM. Since the prime function of these devices as explained by the Appellant is to record images, it is nothing but a digital camera and needs to be classified accordingly. Thus the classification of the said goods cannot be as Automatic Data Processing Machines under heading 8471, but would necessarily be in Chapter Heading 85258090. In view of discussions made above we are inclined to agree with the classification of goods as has been held by the Adjudicating Authority. Since adjudicating authority has confirmed the demand only for the normal period we do not find any merits in the appeal filed by the Appellant. Extended period of limitation - The adjudicating authority is correct in making the observations to the effect that party had disclosed all the information in respect of the goods manufactured by them to the departments as early as in 2003. There can be no dispute in respect of the disclosure made by them. There can be error in claiming the classification of the products under 8471. Once they had disclosed the entire information about their products onus was on the department to determine the correct classification and determine the duty liability. The Department has failed to discharge it function for determining the correct classification at the appropriate time and demand the duty. For the said failure to determine the correct classification department can subsequently not resort to proviso to the Section 11A(1) for demanding the duty by invoking the extended period of limitation. Appeal disposed off.

Issues Involved:

1. Classification of goods.
2. Demand of duty and interest.
3. Invocation of extended period of limitation.
4. Imposition of penalties.

Detailed Analysis:

1. Classification of Goods:

The appellants classified their products under Chapter Heading 8471, claiming them to be computers and thus eligible for exemption under Notification No. 6/2006 CE. The Commissioner, however, classified the goods under different headings: items 1 to 6 under 84729090 and items 7 & 8 under 85258090. The Tribunal examined the technical literature and concluded that the goods in question were standalone machines performing specific functions such as currency dispensation, cheque deposits, and bill payments, and thus should be classified under 8472 and 8525 respectively, as they did not meet the criteria for automatic data processing machines under 8471.

2. Demand of Duty and Interest:

The Commissioner confirmed the demand of ?23,56,928/- for the period February 2007 to January 2008, as per the second show cause notice dated 05.03.2008. The Tribunal upheld this decision, agreeing with the classification and the resultant duty demand. The interest on this duty was also confirmed under Section 11AB of the Central Excise Act, 1944.

3. Invocation of Extended Period of Limitation:

The Commissioner dropped the demand of ?2,05,25,880/- for the period April 2004 to January 2007, as per the first show cause notice dated 22.05.2008, citing that the extended period of limitation could not be invoked due to the absence of suppression of facts. The Tribunal agreed, noting that the appellants had disclosed all relevant information to the department as early as 2003, and the department had failed to act on this information in a timely manner. The Tribunal referenced the Bombay High Court decision in Commissioner of Central Excise Vs Reliance Industries Ltd. to support this view.

4. Imposition of Penalties:

The Commissioner did not impose penalties under Section 11AC of the Central Excise Act, 1944, or Rule 25 of the Central Excise Rules, 2002, as the appellants had paid the duty before the issuance of the show cause notice. The Tribunal upheld this decision, citing the precedent set in M/s Rashtriya Ispat Nigam Ltd., which held that penalties are not imposable when duty is deposited before the issuance of the show cause notice.

Conclusion:

The Tribunal dismissed both the appeals filed by the appellants and the revenue, finding no merit in either. The cross-objection was also disposed of. The Tribunal's decision was based on a detailed examination of the technical literature, relevant chapter notes, and legal precedents, ensuring that the classification and duty demands were appropriately determined.

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