2003 (9) TMI 145 - AT - Central Excise

Summary

Issues Involved:
1. Classification of "heater control lever" and "panel heater control."
2. Demand of differential duty and penalty.
3. Inclusion of the cost of free supply items in the assessable value.
4. Invocation of the extended period of limitation under Section 11A of the Act.

Detailed Analysis:

1. Classification of "Heater Control Lever" and "Panel Heater Control":
The appellant contested the classification of the impugned goods under sub-heading No. 8415.00, arguing they should be classified under Heading No. 84.14 or alternatively under Heading No. 84.79. The goods are used in both AC and non-AC models of Maruti cars to control and regulate air flow, having no direct connection with the car air-conditioner. The Tribunal noted that the principal function of these goods is to control air flow, and they are not exclusive to air-conditioned cars. The Tribunal concluded that the goods do not fit under Heading No. 84.15, as they are not solely or principally used with air-conditioners. Instead, they should be classified under Heading No. 84.79, which covers machinery not specified in Headings 84.01 to 84.78.

2. Demand of Differential Duty and Penalty:
The Commissioner of Central Excise had confirmed the demand for differential duty and imposed penalties under Section 11AC of the Act. The Tribunal, however, rejected the classification under Heading No. 84.15 and thus found no grounds for differential duty demand. Consequently, the penalties imposed under Section 11AC were set aside.

3. Inclusion of Cost of Free Supply Items in Assessable Value:
The issue of under-valuation due to non-inclusion of the value of free-of-cost items supplied by the customers was addressed. The appellant had already paid the amount of Rs. 61,09,650/- before the issuance of the show cause notice. The Tribunal noted that the short payment arose from non-disclosure of information regarding free supplies but found no intention to evade duty, as the additional duty paid was available as credit to the customer. Therefore, the penalty related to this issue was also set aside.

4. Invocation of Extended Period of Limitation:
The show cause notice invoked the extended period of limitation under Section 11A, alleging suppression of facts. The Tribunal, having overruled the classification under Heading No. 84.15, found it unnecessary to examine the limitation aspect, as there were no grounds for demanding duty due to misclassification.

Conclusion:
The appeal was allowed with consequential relief. The Tribunal concluded that the impugned goods should be classified under Heading No. 84.79 and not under Heading No. 84.15. The demand for differential duty and penalties were set aside, and the issue of under-valuation due to free supply items was resolved in favor of the appellant.