2004 (6) TMI 95 - AT - Central Excise

Classification of goods - Goods Rocker, Slide, Swing, and Fun Fliers - manufacture of various types of toys for children - Whether 3 way rocker, slide, swings and fun flier manufactured are to be classified under Heading 9503 as toys or under 9506 as articles and equipments for general physical exercise, sports, etc.? - Whether the demand of duty u/s show cause notice dated 4-11-97 is barred by limitation - Penalty - Appropriateness of duty quantification. Classification of Rocker, Slide, Swing and Fun Fliers - HELD THAT - Merely because the schools are purchasing these subject goods, it cannot be assumed that they are meant for outdoor use. The Commissioner has gone wrong in observing that since the subject goods are traded by its name, namely, rockers, slides and swings and not as toys, it cannot be classified under 9503. The reasoning of the Commissioner that the subject goods are meant not only for outdoor games but also meant for general physical exercise and other sports for the children is totally unacceptable. The appellant-assessee had pointed out that the products of M/s. Arihant are of much larger size and used in playgrounds and therefore, they are classified under 9506. It cannot be compared to the subject goods produced by the appellant. On the other hand, they have made out a point in their favour referring to the Bill of Entry dated 11-3-2004. Taking into consideration the entire materials produced before us by the assessee-appellant including certificates issued by Toys Association of India, Sports Goods Export Promotion Council and other documents referring to the trade understanding of the goods as toys, we are inclined to take the view that the above subject goods are to be classified under 9503 and not under 9506. In order dated 6-2-2004 passed by the Commissioner (Appeals) in relation to a different period of demand relating to identical goods classification of the above subject items was made under 9503. We agree with the above view taken by the Commissioner (Appeals). Classification of Play Table, Tables, Chairs and Activity Desk We are inclined to agree with the Revenue and the finding of the learned Commissioner that the children/baby chairs, desks and play tables are to be classified under 94.01/94.03. Notes Heading 95.03 and 94.01 of HSN would also support the above view. Even if they are traded through toy shops, we are not able to accept the contention of the appellant they would come within the definition of 'toy'. These are not play things. They are not objects with which the children can play. Children can use them for sitting or writing. But they do not play with them. We follow the ratio of Supreme Industries Ltd. 1999 (1) TMI 109 - CEGAT, NEW DELHI . Therefore, we reject the contention of the assessee in respect of the subject goods both in Appeal Classification of Play Pool We are of the view that the Note would exclude only those articles which are covered under specific Headings of Chapter 95. Since we have come to the conclusion that the play pool would not come under Heading 9503 or 9506, the Note will not be applicable. As mentioned earlier it was contended on behalf of the assessee that the Tribunal cannot sustain the duty liability by classifying the goods under a different Heading not covered by the show cause notice. We find no merit in this contention in the light of the ratio of the decision of the Supreme Court in Voltas Ltd. v. CC, Bombay 1996 (12) TMI 64 - SUPREME COURT . The assessee submits that the goods were described by their true respective names. Apart from the above there is no dispute that these items are designed for the use of babies and small children. They are known in the trade as toys. Therefore, there is no justification in contending that the appellant had misdeclared the description of the items in the classification list and got them approved in a deceptive manner with the intention to evade duty. After going through the records regarding the classification lists submitted by the assessee and the trade understanding of the goods, we are of the view that the allegation of suppression of the relevant facts with intention to evade payment of duty, cannot be sustained. All the relevant features of the goods manufactured were available with the department. It was for the officers of the department to conduct further examination to see whether the classification given by the assessee was correct or not. We, therefore, hold that the Revenue has wrongly invoked the larger period of limitation in this case. On that ground, the duty demand which is under challenge in Appeal No. E/1221/2004 will not survive. Since the demand is not sustainable, direction for confiscation of land, plant and machinery proposed under Rule 173Q also is not maintainable. We also hold that in the above circumstances demand of interest under Section 11AB also fails. In the order dated 20-4-2004 the Commissioner has quantified duty due on the moulding powder as well as on the final products. In the light of the view taken by us in E/1221/2004 that the demand of duty on final products is barred by limitation the duty demand confirmed in the order dated 20-4-2004 to the extent it relates to final products, is set aside. Imposition of penalty and demand of interest on the above products are also set aside. Confirmation of demand of duty, imposition of penalty and demand of interest relating to moulding powder in the above order is on the basis of the findings in the remand order dated 18-7-2000. In the above order Tribunal had held that invoking larger period in the case of moulding powder was justified. We, therefore, do not interfere with this part of the order dated 20-4-2004. It is relevant to note that the order dated 18-7-2000 is before the Hon'ble Supreme Court in the appeal filed by the assessee, but there is no order of stay. We also affirm the view taken by the Commissioner (Appeals) on the issue of classification of rockers etc. and the play table, activity desk and chair, but we disagree with his view on the classification of play pool under 9503. We, therefore, modify the order impugned to the above extent and direct the original authority to recompute the duty liability of the assessee arising under five show cause notices by classifying rockers, slides, swings, fun fliers etc. under 9503, activity desks, chairs, tables and play tables under 9401/9403 and play pool under 3926. While thus recomputing the duty the authority will examine the claim made by the assessee for deduction of cash discounts and other discounts, freight, excise duty and other taxes. Assessee's claim for Modvat credit will be allowed on its producing relevant documents before the authority. The issue relating to benefit of SSI exemption will also be considered. Final order will be issued within a period of three months from the date of receipt of copy of this order. The appeals filed by the assessee and filed by the Revenue are disposed of as above. Appeal filed by the assessee is allowed on the ground of limitation. Appeal is allowed to the extent it relates to challenge against the demand of duty, penalty and the interest in respect of the final products.

Summary

Issues Involved:
1. Classification of 3 way rocker, slide, swings, and fun flier.
2. Classification of play pool.
3. Classification of play table, activity desk, and chair.
4. Limitation on duty demand under show cause notice dated 4-11-97.
5. Justification of mandatory penalty and interest demand.
6. Appropriateness of duty quantification.

Summary:

1. Classification of 3 Way Rocker, Slide, Swings, and Fun Flier:
The Tribunal examined whether these items should be classified under Heading 9503 as toys or under 9506 as articles for general physical exercise. The assessee argued that these items provide amusement to children and should be classified as toys. The Commissioner had previously classified them under 9506, reasoning they are used for physical exercise. However, the Tribunal found that these items are primarily for small children's indoor play and should be classified under 9503 as toys, agreeing with the Commissioner (Appeals).

2. Classification of Play Pool:
The Tribunal considered whether the play pool should be classified under Heading 9503 as toys or under 3922 as a bath tub. The Commissioner had classified it under 3922.10 as a bath tub. The Tribunal disagreed, stating that the play pool is not a bath tub but also not a toy. Instead, it should be classified under 3926 as other articles of plastics. The Tribunal rejected the argument that classification under a different heading not covered by the show cause notice is impermissible, citing the Supreme Court's decision in Voltas Ltd. v. CC, Bombay.

3. Classification of Play Table, Activity Desk, and Chair:
The Tribunal reviewed whether these items should be classified under Heading 9503 as toys or under Headings 9401 and 9403 as furniture. The assessee contended these items are designed for children's amusement and should be classified as toys. The Commissioner classified them under 9401/9403, reasoning they are smaller versions of adult furniture. The Tribunal agreed with the Commissioner, following the precedent set in Supreme Industries Ltd. v. CCE, Mumbai, and held that these items are not toys but furniture.

4. Limitation on Duty Demand Under Show Cause Notice Dated 4-11-97:
The Tribunal considered whether the demand of duty under the show cause notice dated 4-11-97 is barred by limitation. The assessee argued that they had correctly declared the goods in the classification list, and there was no misdeclaration. The Tribunal found that the allegation of suppression of facts with intent to evade duty could not be sustained. It held that the extended period of limitation was wrongly invoked by the Revenue, and the duty demand under this notice would not survive.

5. Justification of Mandatory Penalty and Interest Demand:
The Tribunal reviewed the imposition of mandatory penalty and demand of interest. Since the duty demand on final products was found to be barred by limitation, the related penalties and interest were also set aside. The Tribunal upheld the Commissioner (Appeals)'s view on the non-maintainability of interest demand under Section 11AB and penalty under Rule 173Q for the items in question.

6. Appropriateness of Duty Quantification:
The Tribunal examined the quantification of duty in the Commissioner's order dated 20-4-2004. It found that the Tribunal's earlier order did not justify invoking the extended period for final products. Therefore, the duty demand on final products was set aside. However, the Tribunal upheld the duty demand on moulding powder as per its previous order, which was under appeal before the Supreme Court without a stay.

Final Directions:
The Tribunal directed the original authority to recompute the duty liability by classifying rockers, slides, swings, fun fliers, etc., under 9503, activity desks, chairs, tables, and play tables under 9401/9403, and play pool under 3926. The authority was instructed to consider deductions, Modvat credit, and SSI exemption claims. Appeals E/1210/2004 and E/2360/2004 were disposed of accordingly. Appeal No. E/1221/2004 was allowed on the ground of limitation, and Appeal No. E/1944/2004 was allowed concerning the final products.