2023 (12) TMI 475 - AT - Central Excise

Classification of goods - Special Purpose Bullet Proof Armoured Vehicles - classified under CETH 8710 0000 or under CETH 8705 9000? - principle of Ejusdem Generis - Penalty - HELD THAT - The issue is no longer res integra having been decided by this Bench in their own case. It is also found strength from the decision of this Bench in the case of Metaltech Motor Bodies Pvt. Ltd. 2023 (11) TMI 413 - CESTAT CHANDIGARH - it is found that that in the above case, the special purpose nature of the vehicles was considered and the fact that VRDE has certified the vehicles to be special purpose vehicles is also taken into account. Therefore, the issue stands decided squarely in favour of the appellants. The impugned vehicles are classifiable under CETH 8705 0000 and thus, eligible for exemption. As the duty is not payable on the impugned goods, discussion on the valuation of the same is of no consequence. Penalty - HELD THAT - When duty is not demandable, the case for imposition of penalty does not arise. The impugned order is set aside and both the appeals are allowed.

Summary

Issues involved: Classification of Special Purpose Bullet Proof Armoured Vehicles under CETH 8710 0000 as against CETH 8705 9000, application of Rule 10A of Valuation Rules, and imposition of penalty.

Classification Issue:
The appellants argued that the issue of classification of the vehicles had been settled in their favor in a previous case, citing relevant case law and a certificate from VRDE. They contended that the vehicles should be classified under CETH 8705 9000 based on specific features and the principle of Ejusdem Generis. The appellants also highlighted the requirement for firing from inside the vehicle, supporting their classification argument with HSN Explanatory Notes and the principle of preferential classification based on specific descriptions. The Tribunal agreed with the appellants, holding that the vehicles are correctly classifiable under CETH 8705 0000, making them eligible for exemption.

Rule 10A Application:
The appellants challenged the application of Rule 10A of Valuation Rules, arguing that the appellant No.1 was an independent job-worker and not working on behalf of appellant No.2. They emphasized that the duty, interest, and penalty should not be sustainable if the duty is not payable. Citing relevant case law and a Board Circular, the appellants contended that the penalty should not be imposed on appellant No.2. The Department, however, maintained that the vehicles should be classified under CETH 8710 0000 and that Rule 10A applied due to the relationship between the appellants. The Tribunal sided with the appellants, finding that Rule 10A was not applicable as the goods were not manufactured on behalf of appellant No.2, leading to the conclusion that the duty, interest, and penalty were not demandable.

Penalty Imposition:
Given the Tribunal's decision on the classification issue and the inapplicability of Rule 10A, it was held that the case for imposition of penalty did not arise since the duty was not payable on the impugned goods. Consequently, the impugned order was set aside, and both appeals were allowed, with the Tribunal pronouncing the decision in favor of the appellants.