2004 (5) TMI 163 - AT - Central Excise

Classification of DPC copper coils, demand of duty on transformers supplied to IGCAR - Manufacture -invocation of extended period of limitation - Dutiability - Transformers - imposition of penalties under Section 11AC and Rule 173Q - HELD THAT - The Revenue has contended that the DPC copper coils are classifiable under sub-heading 8544.90 as insulated wires. But it has been held by this Tribunal in the case of CCE, Indore v. Gwalior Electrical Industries 2002 (4) TMI 983 - SC ORDER that conversion of DPC wires into coils will not amount to 'manufacture' within the meaning of Section 2(f) of the Central Excise Act, 1944. In that case, M/s. Gwalior Electrical Industries were manufacturing power transformers and parts thereof and were also undertaking repairs of old transformers, for which they were using coils made from DPC wires. Following Punjab State Electricity Board 1996 (3) TMI 533 - SC ORDER and East India Transformers Switch Gears Pvt. Ltd. v. CCE 1989 (5) TMI 185 - CEGAT, NEW DELHI , the Tribunal held that neither the conversion of DPC wires into coils nor the repair of transformer amounted to 'manufacture'. Demand of duty on transformers supplied to IGCAR during the material period is concerned, we have to examine the relevant Notification. Notification No. 10/97-C.E. ibid granted exemption to scientific equipments, instruments and apparatus used by research institutions working under the Atomic Energy Department, Government of India. The Revenue has no case that IGCAR is not a research institution under the AED or that the said institution did not use the transformers in question for research purposes. The transformers were actually cleared to IGCAR only on the basis of the requisite certificate issued by the Dy. Secretary to Government of India, AED, which certified that the transformers were to be used for research purposes by IGCAR, Kalpakkam. A transformer working on scientific, principles must squarely fall in the category of scientific equipments, apparatus, instruments, etc. The transformers in question, therefore, satisfied the conditions of the Notification. The benefit of exemption under the Notification was, therefore, clearly admissible to them. We have found that both the demands of duly are unsustainable. No other issue survives. Therefore, we set aside the impugned order and allow this appeal.

Summary

Issues involved: Classification of DPC copper coils, demand of duty on transformers supplied to IGCAR, invocation of extended period of limitation, imposition of penalties under Section 11AC and Rule 173Q.

Classification of DPC copper coils: The appellants replaced burnt DPC copper coils in transformers and paid duty treating them as transformer parts under Chapter Heading 85.04. The department argued that the coils should be classified under sub-heading 8544.90 as insulated wire, leading to a demand of Rs. 12,75,292. Tribunal held that conversion of DPC wires into coils did not amount to 'manufacture' and coils were not chargeable to duty, citing relevant case laws.

Demand of duty on transformers supplied to IGCAR: The appellants cleared transformers to IGCAR under a duty exemption notification for scientific instruments. The department contended that the transformers did not qualify as scientific instruments, demanding Rs. 4,78,880. Tribunal found that transformers supplied to IGCAR for research purposes fell under the category of scientific equipment as per the notification, making them eligible for the exemption.

Invocation of extended period of limitation: The department invoked the extended period of limitation based on alleged misdeclaration and suppression of facts, issuing a show cause notice demanding duties, interest under Section 11AB, and penalties under Section 11AC and Rule 173Q. The appellants argued that all clearances were made after filing necessary declarations, and no facts were concealed, thus challenging the invocation of the extended period.

Penalties under Section 11AC and Rule 173Q: The adjudicating authority imposed penalties of Rs. 17,54,172 and Rs. 2,00,000 under Section 11AC and Rule 173Q, respectively. The Commissioner (Appeals) upheld the duty demands but reduced the penalties. The appellants contested the penalties, stating they had no intention to evade duty. The Tribunal found the demands of duty unsustainable and set aside the penalties, allowing the appeal.