1987 (3) TMI 214 - AT - Central Excise

Issues Involved:
1. Classification of MAX I, II, and III systems as intercom devices or telephones.
2. Applicability of Rule 472 of the Indian Telephone Rules, 1961 and Section 7 of the Indian Telegraphs Act, 1885.
3. Timeliness of the duty demand.
4. Admissibility of additional evidence.

Issue-Wise Detailed Analysis:

1. Classification of MAX I, II, and III Systems:
The primary issue revolves around whether the MAX I, II, and III systems should be classified as intercom devices under Tariff Item 33-D of the Central Excise Tariff or as telephones. The respondents manufacture telephone systems named MAX I, II, and III, used by both the Indian Posts and Telegraphs Department and private parties. The Central Board of Excise and Customs had previously ruled that these systems, which include a central exchange and selection-cum-switching facility, should not be classified as intercom devices because they provide secrecy of communication and operate through a central point, unlike intercoms which provide point-to-point communication without such features. The Department argued that these systems should be classified as intercom devices at the point of clearance from the factory, regardless of their end-use. However, the Tribunal found no basis for the Department's claim that additional items are fitted to these systems after factory clearance, rejecting this ground of appeal.

2. Applicability of Rule 472 and Section 7:
The Department's show cause notice referenced Rule 472 of the Indian Telephone Rules, 1961, and Section 7 of the Indian Telegraphs Act, 1885, to argue that the systems should be classified as intercom devices. Rule 472 allows for the establishment of a telegraph within a single building without a license, provided no telegraph line passes over or under a public road. The Tribunal found no elaboration in the show cause notice on how this rule supports the classification of the systems as intercom devices. The Tribunal noted that the Collector had used Rule 472 to differentiate between equipment used by private parties without a license and equipment supplied to the P&T Department, which requires authorization. This ground of appeal was also rejected.

3. Timeliness of Duty Demand:
The Department argued that the demand for duty was not time-barred because the respondents had not informed the Department about the manufacture of intercom-like goods from 1970 to 1975. The Tribunal noted that the Collector had admitted there was no clandestine manufacture or removal and no mala fides. Therefore, even if the duty demand were justified based on classification, it could not extend beyond six months. This point was not elaborated further in the judgment.

4. Admissibility of Additional Evidence:
The Department sought to introduce additional evidence, including literature on MAX II equipment, intercoms manufactured by M/s. Usha Electronics, and correspondence with Karnataka Power Corporation Limited. The Tribunal rejected the submission of literature on intercoms by M/s. Usha Electronics and the correspondence with Karnataka Power Corporation Limited, as they were introduced late and lacked relevance. However, the Tribunal admitted the literature on MAX III equipment, as it was essentially a catalogue and not objected to by the respondents. The Tribunal emphasized that additional evidence should not be introduced at a late stage unless it serves the interest of justice.

Conclusion:
The Tribunal upheld the orders of the Central Board of Excise and Customs, which classified the MAX I, II, and III systems as telephones rather than intercom devices. The show cause notice issued by the Central Government was discharged, and the appeal was dismissed. The Tribunal found no basis for the Department's claims regarding additional items fitted after factory clearance and rejected the applicability of Rule 472 and Section 7 for reclassifying the systems. The request for additional evidence was partially admitted, but the key documents were rejected for being irrelevant and introduced late.

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