2003 (7) TMI 90 - HC - Central Excise

Words and phrases - Job work - Evidence - Statement - Manufacture - Assembly - Demand - Limitation

Issues Involved:
1. Whether the cold room for walk-in-coolers erected by the Petitioners is a cabinet falling under Tariff Item 29A(3) of the erstwhile Central Excise Tariff.
2. Whether the claim for recovery of excise duty is barred by limitation under Section 11A of the Central Excises and Salt Act, 1944.
3. Whether the Petitioners suppressed facts with the intention to evade payment of excise duty.

Detailed Analysis:

1. Classification of Cold Room as a Cabinet:
The primary issue is whether the cold room for walk-in-coolers can be classified as a cabinet under Tariff Item 29A(3) of the Central Excise Tariff. The cold room is described as an enclosed container or room with insulated panels, a wooden floor, and a cooling system fixed to one of the ceiling panels. It is used to store perishable items and has a door for entry. The Court concluded that the cold room fits the definition of a cabinet as it is enclosed from all sides and used for storage, thereby falling under Tariff Item 29A(3).

2. Manufacturing Activities and Job Work:
The Petitioners contended that until 1985, insulated panels were manufactured by independent contractors on a job work basis and sent directly to the site, and that no cold room was assembled in their factory. However, evidence including statements from the contractor and high-ranking officials of the Petitioners' company indicated that insulated panels and cold rooms were manufactured and assembled in the Petitioners' factory. The Court found that the contractor was essentially a hired laborer working under the Petitioners' supervision, and the cold rooms were indeed manufactured in the factory and dismantled for transportation.

3. Suppression of Facts and Extended Limitation Period:
The Petitioners argued that the claim for excise duty was barred by the six-month limitation period under Section 11A of the Act and that the extended period could not be invoked as there was no suppression of facts. The Court held that the Petitioners had suppressed material facts by falsely claiming that insulated panels were manufactured by an independent job worker and were directly sent to the site. It was established that the Petitioners were manufacturing insulated panels and assembling them into cold rooms in their factory, thereby justifying the invocation of the extended limitation period under Section 11A due to willful suppression of facts.

4. Judicial Precedents and Bona Fide Belief:
The Petitioners relied on previous judicial decisions to argue that they were under a bona fide belief that the cold rooms were not excisable. The Court rejected this argument, stating that the Petitioners' conduct, including the false claim about job work, indicated an intention to evade excise duty. The Court also noted that the judicial decisions cited did not support the Petitioners' case as they pertained to different factual contexts.

5. Interest on Unpaid Duty and Penalty:
Given that the Petitioners had obtained a stay on the payment of duty and penalty, the Court directed them to pay the amount with interest at 12% per annum from 1-4-1989. If the payment was not made within four weeks, the interest rate would increase to 18% per annum from 1-8-2003 till payment.

Conclusion:
The Court dismissed the petition, upholding the order of the Collector of Central Excise, which demanded the recovery of excise duty and imposed a penalty on the Petitioners. The judgment emphasized the Petitioners' suppression of facts and the correctness of classifying the cold room as a cabinet under the relevant tariff item.

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