2003 (7) TMI 155 - AT - Central Excise

Issues Involved:
1. Liability of M/s. Interscape to pay excise duty on furniture items.
2. Classification of furniture items under the Central Excise Tariff Schedule.
3. Applicability of exemption under Notification No. 76/86-C.E. for handicrafts.
4. Allegations of suppression of facts and invocation of the extended period of limitation.
5. Imposition of penalties on M/s. Interscape, Shri Vinoo K. Naik, and M/s. Hotel Rajputana Palace Sheraton.
6. Confiscation of goods and quantum of redemption fine.
7. Applicability of interest under Section 11AB of the Central Excise Act.

Detailed Analysis:

1. Liability of M/s. Interscape to Pay Excise Duty:
The Tribunal upheld the Commissioner's finding that M/s. Interscape was liable to pay excise duty on the furniture items manufactured for M/s. ITC and M/s. Umaid Bhawan Palace (U.B. Palace). Despite claims that the work was done by sub-contractors on a principal-to-principal basis, the Tribunal found no evidence to support this. M/s. Interscape was deemed the manufacturer as they had control over the raw materials and the work was executed as per specifications provided by M/s. ITC.

2. Classification of Furniture Items:
The Tribunal confirmed the classification of the furniture items under Heading 94.03 of the Central Excise Tariff Schedule, which covers "other furniture and parts thereof." The items were designed to be placed on the floor or ground, fitting the description under Note (2) of Chapter 94. The Tribunal agreed with the Commissioner's classification and found no merit in the appellants' arguments to classify the items under different headings.

3. Exemption for Handicrafts:
The appellants argued that the furniture items should be considered handicrafts and thus exempt under Notification No. 76/86-C.E. However, the Tribunal, referencing the Supreme Court's decision in CCE v. Louis Shoppe, found that the items did not meet the criteria for handicrafts. The items lacked substantial ornamentation or special visual appeal necessary to qualify as handicrafts.

4. Suppression of Facts and Limitation:
The Tribunal upheld the invocation of the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act. It was found that M/s. Interscape had suppressed material facts with intent to evade payment of duty. The claim of bona fide belief in exemption was rejected due to lack of evidence and inconsistency in the appellants' arguments.

5. Imposition of Penalties:
- M/s. Interscape: The penalty under Rule 173Q was sustained but reduced to Rs. 8 lakhs.
- Shri Vinoo K. Naik: The penalty under Rule 209A was set aside due to lack of evidence that he dealt with the goods knowing they were liable to confiscation.
- M/s. Hotel Rajputana Palace Sheraton: The penalty and demand of duty were set aside as they were not the manufacturers, and there was no proposal in the show cause notice to impose such penalties.

6. Confiscation of Goods and Redemption Fine:
The confiscation of the goods under Rule 173Q was upheld. However, the redemption fine imposed on M/s. Hotel Rajputana Palace Sheraton was reduced from Rs. 6.5 lakhs to Rs. 3.5 lakhs.

7. Applicability of Interest:
The demand for interest under Section 11AB was set aside as this provision was not in force during the period of dispute (1992-93).

Final Orders:
1. The demand of duty on M/s. Interscape was upheld; interest demand under Section 11AB was set aside; penalty under Rule 173Q was reduced to Rs. 8 lakhs.
2. Penalty on Shri Vinoo K. Naik under Rule 209A was set aside.
3. Penalty and demand of duty on M/s. Hotel Rajputana Palace Sheraton were set aside; confiscation of goods was upheld with a reduced redemption fine of Rs. 3.5 lakhs.
4. The Commissioner's order was modified accordingly.
5. In the appeal concerning U.B. Palace, the demand of duty was upheld; penalty was reduced to Rs. 1 lakh.

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