2009 (12) TMI 131 - AT - Central Excise

Classification- Suppression- The issue in the present appeal is the classification of Commander range of vehicle manufactured by the appellants at Kandivali and Nashik. The appellants claim classification under Heading 8702 of the Schedule to the Central Excise Tariff Act, 1985. The department s contention is that the vehicle is classifiable under Heading 8703. the Collector of Central Excise discharged the Show Cause Notice. The collector accepted the contention of the Appellant that the provisions of the Motor Vehicle Act were not relevant and could not be taken into consideration in interpreting the Heading under the Central Excise Tariff Act. In the present appeal issue of suppression also involved. Held that- We find that the Commissioner has taken a very fair view that in respect of the 20 show cause notices issued by the Superintendent within the stipulated period of six months, in respect of the subsequent period, provisions of Section 11A(1) could not have been invoked. Therefore, he has rightly held the proviso could not have been invoked in respect of these show cause notices.We also take note of the fact that penalty equal to duty demand has been imposed by the Commissioner under Rule 173Q of the Central Excise Rules, 1944 in respect of Nasik factory and penalty of Rs.31,37,57,745/- has been imposed on Kandivli factory. Therefore, we find that the penalty imposed in this case is not excessive taking into account the gravity of the omissions and commissions on the part of the company reasonable. In view of the above discussion, the appeal filed by the appellants is rejected.

Issues Involved:
1. Classification of the "Commander" range of vehicles under the Central Excise Tariff Act, 1985.
2. Validity of the duty demands and penalties imposed.
3. Applicability of Motor Vehicles Act and Rules for determining classification.
4. Allegations of suppression and misdeclaration by the appellants.
5. Admissibility of certificates from Automotive Research Association of India (ARAI) and Transport Commissioners.
6. Invocation of extended period for demand under Section 11A of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Classification of the "Commander" Range of Vehicles:
The central issue was whether the "Commander" range of vehicles should be classified under Heading 8702 (public transport type passenger motor vehicle) or Heading 8703 (motor cars and other motor vehicles principally designed for the transport of persons). The appellants claimed classification under Heading 8702, while the department contended it should be under Heading 8703. The Tribunal analyzed the seating capacity and design of the vehicles, referencing the Central Excise Tariff Act and relevant chapter notes. The Tribunal concluded that the vehicles did not meet the specifications for classification under Heading 8702 as they were not designed to transport ten persons or more, including the driver, per the statutory requirements.

2. Validity of Duty Demands and Penalties:
The Commissioner confirmed duty demands of Rs. 216,02,50,404/- and imposed penalties of Rs. 88,07,57,277/- based on the classification dispute. The Tribunal upheld these demands and penalties, finding that the appellants had misclassified the vehicles, leading to short payment of duties. The penalties were deemed reasonable given the gravity of the omissions and commissions by the appellants.

3. Applicability of Motor Vehicles Act and Rules:
The appellants argued that the classification should not reference the Motor Vehicles Act (MVA) and Rules. However, the Tribunal found that it was necessary to refer to these provisions to determine the seating capacity and design specifications, as the Central Excise Tariff Act did not provide specific guidelines for this. The Tribunal held that while the MVA and Central Excise Tariff Act serve different purposes, the standards and definitions in the MVA were relevant for determining the vehicle's classification under the Central Excise Tariff.

4. Allegations of Suppression and Misdeclaration:
The Tribunal found that the appellants had suppressed material facts and made misdeclarations regarding the seating capacity and design of the vehicles. The internal notes and correspondence indicated that the appellants were aware that the vehicles did not meet the statutory requirements for a ten-seater vehicle. This led to the approval of the classification list under false pretenses, justifying the invocation of the extended period for demand and the imposition of penalties.

5. Admissibility of Certificates from ARAI and Transport Commissioners:
The appellants relied on certificates from ARAI and various Transport Commissioners to support their classification claim. However, the Tribunal found these certificates insufficient as they did not verify the seating capacity per the statutory requirements. Both ARAI and the Transport Commissioner admitted that they did not rigorously verify the seating capacity as per the standards required for public transport vehicles. Thus, these certificates could not be solely relied upon for determining the classification under the Central Excise Tariff.

6. Invocation of Extended Period for Demand:
The Tribunal upheld the invocation of the extended period under Section 11A of the Central Excise Act, 1944, given the appellants' suppression of facts and misdeclaration. The detailed investigation revealed that the appellants had intentionally misrepresented the seating capacity and design of the vehicles to benefit from a lower duty rate, justifying the extended period for demand.

Conclusion:
The Tribunal rejected the appeal filed by the appellants, upholding the classification under Heading 8703, the duty demands, and penalties imposed by the Commissioner. The Tribunal found that the appellants had misclassified the vehicles, suppressed material facts, and made misdeclarations, justifying the extended period for demand and the penalties imposed. The reliance on certificates from ARAI and Transport Commissioners was found insufficient for determining the correct classification under the Central Excise Tariff Act.

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