1986 (1) TMI 223 - AT - Central Excise

Summary

Issues Involved:
1. Classification of Hastelloys B & C under the correct Tariff Item.
2. Applicability of the time limit for raising demands for differential duty.
3. Legality of the penalty imposed.

Issue-wise Detailed Analysis:

1. Classification of Hastelloys B & C under the correct Tariff Item:
The appellants initially classified Hastelloys B & C under Tariff Item 26-AA(v) applicable to steel castings. However, during the appeal hearing, the appellants did not dispute the classification of Hastelloys B & C under Tariff Item 68, in light of the Tribunal decision in Messrs Precision Tools and Castings Pvt. Ltd., Lucknow v. C.C. Bombay - 1983 ECR 1024-D (CEGAT). Thus, it was accepted that Hastelloys B & C should be classified under Tariff Item 68.

2. Applicability of the time limit for raising demands for differential duty:
The central issue was whether the demand for differential duty should be limited to six months or extended to five years. The appellants argued that their manufacturing activities, including the production of Hastelloys B & C, were well-known to the Excise Department, as evidenced by various documents and inspections. They contended that since their classification lists and records were regularly scrutinized by the Excise authorities, the shorter time limit of six months should apply. They also argued that they were not aware of Trade Notice No. 170/79, dated 3-8-1979, which required them to classify Hastelloys B & C under Tariff Item 68.

The respondents, represented by Shri H.L. Verma, SDR, argued that the appellants had omitted essential details in their classification lists, justifying the application of the five-year time limit for raising demands. The Tribunal examined whether the ingredients of the proviso to Section 11A of the Central Excises and Salt Act, 1944, which allows a five-year time limit in cases of fraud, collusion, wilful mis-statement, or suppression of facts, were met.

The Tribunal found that the appellants had not wilfully misstated or suppressed facts, as their manufacturing activities were known to the Department. The Collector's reliance on the Trade Notice as a basis for invoking the five-year time limit was deemed inappropriate, as Trade Notices do not have statutory force and cannot be used to establish liability for extended periods. Consequently, the Tribunal concluded that the six-month time limit should apply, rendering the demand for duty time-barred.

3. Legality of the penalty imposed:
The appellants did not address arguments regarding the penalty imposed. The Tribunal noted that Hastelloys B & C fell under Tariff Item 68 and required a license under Rule 174 of the Central Excise Rules, 1944, read with Section 6 of the Central Excises and Salt Act, 1944. The penalty of Rs. 250 was considered modest and upheld by the Tribunal.

Conclusion:
The Tribunal set aside the demand for differential duty as time-barred, applying the six-month time limit. The penalty imposed on the appellants was upheld. The appeal was thus partly allowed.