1990 (9) TMI 89 - HC - Central Excise

Summary

Issues Involved:
1. Classification of thrust washers, thrust half washers, and wrapped bushes as thin-walled bearings.
2. Validity of demand notice for excise duty from August 7, 1978, versus September 23, 1978.
3. Validity of demand notice under Section 11A of the Central Excises and Salt Act for the period from July 1980 to August 1981.

Issue-Wise Detailed Analysis:

1. Classification of Thrust Washers, Thrust Half Washers, and Wrapped Bushes as Thin-Walled Bearings:

The primary contention raised by the petitioners was that thrust washers, thrust half washers, and wrapped bushes, although bearings, should not be classified as thin-walled bearings. The Assistant Collector and the Appellate Authority based their conclusion on the Indian Standard Specifications (IS: 4774-1968), which indicated that these items fall under the category of thin-walled bearings if they meet certain dimensional criteria. The authorities relied on definitions within the standard, such as "bearing," "journal bearing," and "thin-walled bearing liner," to substantiate their classification.

The court upheld this classification, noting that the burden of proof for classifying goods lies with the Department and that the petitioners failed to provide evidence of how these goods are known in trade parlance. The court found no merit in the argument that the Indian Standard Specifications do not reflect trade understanding, clarifying that these specifications can be considered evidence for classification purposes. The court concluded that the view taken by the authorities was neither perverse nor unreasonable and could not be disturbed under writ jurisdiction.

2. Validity of Demand Notice for Excise Duty from August 7, 1978, versus September 23, 1978:

The petitioners argued that the demand for excise duty should only be valid from September 23, 1978, when the revised classification was communicated to them, rather than from August 7, 1978. The court agreed with this contention, stating that the liability to pay excise duty arises from the date of communication, not from the date of the decision. The court noted that the decision to treat thrust washers and wrapped bushes as thin-walled bearings was communicated to the company on September 23, 1978. Consequently, the demand for the period from August 7, 1978, to September 23, 1978, was set aside.

3. Validity of Demand Notice under Section 11A of the Central Excises and Salt Act for the Period from July 1980 to August 1981:

The petitioners challenged the demand notice dated November 24, 1981, under Section 11A of the Act, arguing that it was invalid as it demanded duty for a period exceeding six months from the date of service of the notice. The court rejected this argument, stating that the demand was a consequence of the adjudication that thrust washers and wrapped bushes are thin-walled bearings. As such, the limitation period did not apply to this demand.

Conclusion:

The court upheld the order of the Collector of Central Excise (Appeals), Bombay, dated December 5, 1981, but clarified that the company's liability to pay excise duty on thrust washers, thrust half washers, and wrapped bushes arises only from September 23, 1978, onwards. The demand for the period from August 7, 1978, to September 23, 1978, was set aside. The petition was partly successful, and no order as to costs was made.