1988 (8) TMI 196 - AT - Central Excise

Issues Involved:
1. Classification of the impugned goods under Central Excise Tariff Item 40.
2. Use of power in the manufacturing process.
3. Confiscation and penalty imposed by the Collector.
4. Applicability of common parlance test and commercial understanding.
5. Relevance of case law and previous judgments.

Detailed Analysis:

1. Classification of the Impugned Goods under Central Excise Tariff Item 40:
The appellants argued that the goods in question, such as head bows, bedsheets, instrument trolleys, upper bow for foot end, invalid wheel chair, instrument and dressing trolley, and lower bow for foot end, were hospital equipment and not furniture. They relied on the judgment of the Allahabad High Court in Imperial Surgical Industries v. The Commissioner of Sales Tax, which held that hospital furniture is not considered furniture. The Collector, however, classified these goods as steel furniture under Tariff Item 40-CET, referring to a Ministry of Finance letter that defined furniture broadly to include movable articles used in various establishments, including hospitals.

2. Use of Power in the Manufacturing Process:
The appellants contended that power was not ordinarily used in their manufacturing process, except for a solitary instance observed by the Central Excise Officer. The Collector found that power was indeed used on 9-1-1973 but gave the appellants the benefit of doubt for the period prior to this date, based on the statement of a partner and the use of gas welding sets. The Collector upheld the seizure of electric machines used on 9-1-1973 but did not accept the department's allegation of regular use of power in previous years.

3. Confiscation and Penalty Imposed by the Collector:
The Collector ordered the confiscation of the seized steel furniture and machinery used for manufacturing, with an option for the appellants to redeem the goods on payment of a redemption fine of Rs. 2,500/-. A personal penalty of Rs. 20,000/- was also imposed under Rule 173Q of Central Excise Rules, 1944. The appellants argued that the redemption fine and penalty were excessive. The Tribunal upheld the confiscation and redemption fine but reduced the personal penalty to Rs. 5,000/-.

4. Applicability of Common Parlance Test and Commercial Understanding:
The Tribunal referred to the common parlance test and commercial understanding to determine whether the goods were classified as furniture. The Supreme Court in Elpro International Ltd. held that high-cost, sophisticated medical equipment like operation tables and orthopaedic tables were not classifiable as steel furniture under Item 40-CET. The Tribunal considered the nature, design, and use of the impugned goods and concluded that they were hospital furniture but not sophisticated medical equipment, thus falling under Item 40-CET.

5. Relevance of Case Law and Previous Judgments:
The Tribunal relied on the Supreme Court's decision in Elpro International Ltd. and the Bombay High Court's interpretation of the Central Excise Tariff Item 40. The Tribunal emphasized that hospital furniture is not excluded from Item 40-CET, and each case must be decided on its merits. The Tribunal also considered the Allahabad High Court's judgment in Imperial Surgical Industries, which held that the test for classification should be based on ordinary use and acceptance by the mercantile community and consumer public.

Separate Judgments:
- Order by K. Prakash Anand: Upheld the classification of the goods under Item 40-CET, confirmed the confiscation and redemption fine, and reduced the personal penalty.
- Order by G. Sankaran: Disagreed with the classification under Item 40-CET, proposed setting aside the impugned order, and allowing the appeal.
- Order by V.T. Raghavachari: Agreed with G. Sankaran's reasoning and conclusion, provided additional viewpoints on the Collector's findings, and supported setting aside the impugned order and allowing the appeal.

Conclusion:
The appeal was allowed, and the impugned order was set aside with consequential relief, as per the majority view of the Tribunal members.

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