2019 (6) TMI 860 - AT - Central Excise

Classification of goods - method of Valuation - section 4 or 4A of CEA? - manufacture of Cables - also manufacture of Auto (Annexure A) / Battery (Annexure B) / Ignition Cables, which are specifically used in Automobiles - classification of the goods - Sr. No.97 under Notification No.11/2006-CE/ (NT) dated 29.5.2006 - time Limitation. Appellants contention is that the items manufactured by them fall under Chapter Heading 8544 and the parts and accessories of motor vehicles are classifiable under Chapter Heading 8714; department cannot change the assessment without changing the classification - Revenue on the other hand argued that the cables manufactured by the Appellants are tailor made to be used in the automobiles. HELD THAT - The impugned goods are tailor made to be used in automobiles and the Appellants themselves advertised and packed the products describing the same to be used in automobiles. It is pertinent to note that the retail customers understand the impugned goods to be parts of automobiles. The appellants are manufacturing Auto Cables, Battery Cables and Ignition cables , which have a specific use only in the Automobile Industry and are cleared in retail packages affixed with MRP. They do not increase the efficiency of automobiles and therefore, the whole discussion on accessories is incorrectly placed. It is prudent that the goods are to be understood/ evaluated/classified as per the perception and use of the customers. Therefore, the department s contention is correct that the auto cables and battery/ignition cables manufactured and cleared by the Appellants are to be treated as automobile parts If the impugned goods are automobile parts for the purposes of Packaged Commodity Rules, they need not be necessarily classified as same under Central Excise Tariff Act, 1944. We find that auto/battery/ignition cables manufactured by the Appellants are essential parts of automobiles and are covered as parts, components and assemblies of automobiles , under the notification No.11/2006-CE (NT) dated 29.05.2006, 14/2008 CE(NT) dated 01.03.2008 and 14/2008 CE(NT) dated 24.12.2008. Time Limitation - HELD THAT - It is not open for the department to sit over the RT-12 returns over a period of time and invoke extended period on the completion of investigation. Department was free to raise queries on the returns filed / during the visit of audit parties to obtain necessary information from the Appellants. This having not been done extended period cannot be invoked - extended period cannot be invoked. The demand requires to be restricted to the normal period. In order to conclude the duty payable for the normal period, the issue needs to go back to the original authority. The appeals are partially allowed by way of remand for the purpose of calculation of duty for the normal period.

Summary

Issues Involved:
1. Classification of goods under Central Excise Tariff.
2. Valuation of goods under Section 4A of the Central Excise Act, 1944.
3. Applicability of extended period of limitation for demand.
4. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Classification of Goods under Central Excise Tariff:
The appellants argued that their products, classified under Chapter Heading 8544 as 'Cables,' should not be reclassified as "parts and accessories of automobiles" under Chapter Heading 8714 without a formal change in classification. The Tribunal clarified that classification and valuation are distinct processes. Classification is based on head notes, chapter notes, and the Harmonious System of nomenclature, while valuation under MRP is determined by the Packaged Commodities Rules, 1977. Therefore, the Tribunal did not accept the appellants' contention that a change in classification was necessary for valuation under Section 4A.

2. Valuation of Goods under Section 4A of the Central Excise Act, 1944:
The department contended that the auto cables and battery/ignition cables should be valued under Section 4A as they are parts of automobiles. The Tribunal noted that the cables were specifically designed for automobiles, capable of withstanding high temperatures, and were sold in retail packages with MRP labels. Despite the appellants' argument that the cables were sold in running lengths and required cutting before use, the Tribunal found that the cables were identified by retailers and customers as automobile parts. The Tribunal held that the goods were tailor-made for automobiles and should be assessed under Section 4A, as they were covered under relevant notifications.

3. Applicability of Extended Period of Limitation for Demand:
The appellants argued that the demand beyond the normal period of limitation was not maintainable as they had regularly filed returns and maintained records, and there was no suppression of facts. The Tribunal found that the department was aware of the manufacturing and valuation practices through regular audits and returns. Citing the Supreme Court decision in Pahwa Chemicals Vs. CCE, the Tribunal held that mere failure to disclose does not constitute willful suppression. Consequently, the extended period of limitation could not be invoked, and the demand was restricted to the normal period.

4. Imposition of Penalty under Section 11AC of the Central Excise Act, 1944:
Given that the extended period of limitation was not applicable, the Tribunal ruled that no penalty under Section 11AC could be imposed. The Tribunal remanded the case to the original authority to calculate the duty payable for the normal period, thereby partially allowing the appeals.

Conclusion:
The Tribunal upheld the department's contention that the auto cables and battery/ignition cables should be valued under Section 4A as parts of automobiles. However, it restricted the demand to the normal period, disallowing the extended period of limitation and the associated penalty. The case was remanded for recalculating the duty for the normal period.