2005 (7) TMI 163 - AT - Central Excise

Summary

Issues Involved:

1. Classification of Static Convertors.
2. Demand for differential duty.
3. Imposition of interest and penalty.

Issue-wise Detailed Analysis:

1. Classification of Static Convertors:

The appellants are engaged in the manufacture of Static Convertors, claimed to fall under Chapter Heading 85.04 of the Central Excise Tariff Act, 1985. The primary function of these goods is to convert electrical energy, such as AC to DC or vice versa. The dispute revolves around whether these goods should be classified under Chapter Heading 85.04 (Electrical transformers, static converters, and inductors) or under Chapter Heading 85.37 (Boards, panels, consoles, desks, cabinets, and other bases equipped with two or more apparatus for electric control and distribution of electricity).

The Commissioner classified the goods under Chapter Heading 85.37, arguing that the products are not merely Static Convertors but control panels, as they incorporate multiple apparatus falling under Heading 8537.00. However, the Tribunal found that the Commissioner's findings were factually incorrect and did not consider the Tribunal's previous decisions, which require that the purpose of the entity under Heading 85.37 should be for control and distribution of electricity, not merely control by electrical energy.

The Tribunal also criticized the Commissioner for disregarding expert opinions and certificates from recognized government agencies, which supported the classification under Heading 85.04. The Tribunal held that the classification should be under Heading 85.04, following the precedent set in the case of C.C.Ex. v. Siemens Ltd and the law laid down by the Apex Court in Damodar J. Malpani.

2. Demand for Differential Duty:

The Commissioner confirmed the demand for differential duty amounting to Rs. 5,91,41,879/- based on the classification under Heading 85.37. This demand was made pursuant to 17 show cause notices issued to the appellants. However, since the Tribunal found the correct classification to be under Heading 85.04, the demand for differential duty under Heading 85.37 was not upheld.

3. Imposition of Interest and Penalty:

The Commissioner imposed a penalty of Rs. 5,00,000/- on the appellants under Rule 173Q/210 of the Central Excise Rules, 1944, and ordered payment of interest at 20% under Section 11AA of the Central Excise Act, 1944. Given the Tribunal's finding that the correct classification is under Heading 85.04, the imposition of interest and penalty based on the incorrect classification under Heading 85.37 was also set aside.

Conclusion:

The Tribunal set aside the Commissioner's order, allowing the appeal and holding that the correct classification of the Static Convertors is under Heading 85.04. Consequently, the demands for differential duty, interest, and penalty based on the classification under Heading 85.37 were not upheld.