2023 (12) TMI 562 - AT - Central Excise

Classification of goods - OEM delivery vans - merit classification as delivery vans falling under Excise Tariff Item ETI 8704 21 90 or as ambulance under ETI 8703 33 92 of the Central Excise Tariff Act 1985? - penalty - HELD THAT - It needs to be noted that the effective rate of central excise duty on Traveller Van is lesser then Traveller Ambulance Van and it is for this reason that the department alleges that Force Motors with an intent to evade payment of duty connived with GVK Research Institute and mis-classified the vehicles as Traveller Delivery vans instead of ambulance vans - On the basis of the tenders received and after the tender Committee scrutinized the bids, Bafna Healthcare Pvt. Ltd., Faridabad was found to be the lowest bidder and accordingly purchase orders dated 30.03.2009, 04.05.2009, 12.08.2009 and 17.09.2009 were placed on them. Copies of the purchase orders placed on Bafna Healthcare for conversion of Force Traveller Van No. 3350 mm WB into Emergency Response Van have been enclosed. The Commissioner, after noticing that though the vehicles at the time of delivery could not be used as ambulances and they had been modified subsequently, proceeded to hold that the vehicles supplied by Force Motors were incomplete or unfinished vehicles having the essential characters of complete or finished ambulance and thus would be classifiable under ETI 8703 33 92 in view of the provisions of rule 2(a) of the General Rules of Interpretation. The Commissioner was not justified in drawing such a conclusion. As observed earlier, the goods have to be assessed in the form in which they are presented at the time of clearance and not in the form they may ultimately take. The vehicles at the time of clearance did not have the essential character of an ambulance. What was purchased were bare delivery vans without any fittings. It cannot, therefore, be said that the vans had the essential character of an ambulance. Rule 2(a) of the General Rules for Interpretation would not come to the aid of the department. The order passed by the Commissioner classifying the vehicles under ETI 8703 33 92 of the First Schedule to the Tariff Act cannot, therefore, be sustained. Penalty - HELD THAT - The penalty imposed upon the other appellants also cannot be sustained. It would not be necessary to examine the contention raised by the learned counsel for the appellant that the extended period of limitation could not have been invoked in the facts and circumstances of the case The order dated 28.06.2021 passed by the Commissioner is set aside - Appeal allowed.

Summary

Issues Involved:
1. Classification of vans supplied by Force Motors.
2. Invocation of the extended period of limitation.
3. Imposition of penalties on GVK Emergency Management and Research Institute.

Summary:

1. Classification of Vans Supplied by Force Motors:
The core issue was whether the vans supplied by Force Motors should be classified as delivery vans under ETI 8704 21 90 or as ambulances under ETI 8703 33 92. The Commissioner classified the vehicles as ambulances under ETI 8703 33 92, directing Force Motors to pay differential duty with penalty and interest. The show cause notice alleged that the vehicles had the essential character of ambulances and were misclassified as delivery vans to evade proper excise duty. Force Motors contended that the vehicles were delivery vans at the time of clearance and were only converted into ambulances by GVK Research Institute post-clearance. The Tribunal concluded that the vehicles did not have the essential character of ambulances at the time of clearance and should be classified as delivery vans under ETI 8704 21 90. Thus, the Commissioner's order was set aside.

2. Invocation of the Extended Period of Limitation:
The show cause notice invoked the extended period of limitation under Section 11A(4) of the Central Excise Act, 1944, alleging suppression of facts and willful misstatement by Force Motors. The appellant argued that there was no suppression or intent to evade duty, and the vehicles were correctly classified based on their status at the time of clearance. The Tribunal, having set aside the classification of the vehicles as ambulances, did not find it necessary to examine the invocation of the extended period of limitation.

3. Imposition of Penalties on GVK Emergency Management and Research Institute:
Penalties were imposed on GVK Emergency Management and Research Institute entities for allegedly abetting Force Motors in misclassifying the vehicles. The Tribunal, having concluded that the vehicles were correctly classified as delivery vans, also set aside the penalties imposed on the appellants.

Conclusion:
The Tribunal set aside the Commissioner's order dated 28.06.2021, ruling that the vehicles supplied by Force Motors were correctly classified as delivery vans under ETI 8704 21 90, and allowed the five appeals. The penalties imposed on GVK Emergency Management and Research Institute entities were also set aside.