1988 (11) TMI 224 - AT - Central Excise

Issues Involved:

1. Classification of "Nylon Rubber Transmission Belting" under Central Excise Tariff Schedule.
2. Eligibility for exemption under Notification 71/78 based on clearance values.
3. Applicability of the six-month limitation period for the demand of Rs. 1,58,484.25.

Detailed Analysis:

1. Classification of "Nylon Rubber Transmission Belting"

The primary issue was whether the "Nylon Rubber Transmission Belting" (T.R. Belts) manufactured by the assessee should be classified under Item 16A (Rubber Products) or under the residuary Item 68 of the Central Excise Tariff Schedule (CET). The Assistant Collector originally classified the T.R. Belts under Item 16A(4), CET, rejecting the assessee's claim for classification under Item 68. The Collector (Appeals) remanded the case for determining whether the rubber content was predominant in the product, which would influence its classification. However, the Assistant Collector, in the remand proceedings, did not send a sample for testing and held that the predominance of rubber content was irrelevant. The Collector (Appeals), in the impugned order, upheld this view, stating that rubber products are those where rubber is an essential ingredient due to its qualities such as elasticity. The Tribunal found that the Assistant Collector acted beyond the parameters set by the remand order and that the Collector (Appeals) erred in revising his views on the relevance of the predominance test. The matter was remanded back to the Assistant Collector for de novo determination, with directions to test the sample or ascertain the rubber content through other evidence.

2. Eligibility for Exemption under Notification 71/78

The second issue was whether the assessee was entitled to exemption under Notification 71/78, given that the clearances of the product under Item 16A did not exceed Rs. 5 lakhs, but the total clearances of all excisable goods, including exempted goods, exceeded Rs. 20 lakhs. The Collector (Appeals) had previously found against the assessee on this issue. The Tribunal upheld this view, referencing its decision in Coaltar Chemicals Manufacturing Co. v. Collector of Central Excise, Baroda, which held that excisable goods do not cease to be excisable when exempted from duty by a Rule 8(1) notification, and their value should be included in computing the aggregate clearances for determining eligibility for small-scale exemption.

3. Applicability of Six-Month Limitation Period for Demand

The third issue was whether the demand of Rs. 1,58,484.25 for the period from 1-4-1979 to 4-6-1980 was barred by the six-month limitation period specified in Central Excise Rule 10, given that the show cause notice was served on 11-9-1980. The Collector (Appeals) held that the demand was enforceable only for the normal period of six months. The Tribunal agreed with this finding, stating that the extended period of limitation of five years would not apply as there was no material suppression by the assessee with a view to evade duty.

Other Relevant Points:

- Appeal No. 867/84-D: The Tribunal dismissed the contention that the proceedings could not continue after the deletion of Central Excise Rule 10, referencing its decision in Atma Steels Pvt. Ltd. & Ors. v. Collector of Central Excise, Chandigarh & Ors., which held that proceedings initiated with reference to a validly subsisting rule can continue despite its repeal.

- Appeal Nos. 980 to 986/84-D: These appeals were against the Superintendent's orders on RT 12 Returns for seven months. The Tribunal did not express an opinion on the contentions raised, as they were not raised before the lower authorities. The matter was remanded to the Assistant Collector for a decision after giving both sides an opportunity to present their cases.

- Cross Objection 41.1/84-D: The cross objection sought the dismissal of the Collector's appeal, which the Tribunal dismissed, thus disposing of the cross objection.

Conclusion:

The Tribunal remanded the matter to the Assistant Collector for de novo determination of the classification issue, upholding the six-month limitation for the demand and rejecting the contention regarding the inclusion of exempted goods in the aggregate clearances. The appeals and cross objections were disposed of accordingly.

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