1993 (11) TMI 129 - AT - Central Excise

Summary

Issues Involved:
1. Classification of water well drilling rigs.
2. Time bar on the demand of duty.
3. Clubbing of clearances of associated manufacturers.
4. Availability of MODVAT Credit.
5. Imposition of penalties.
6. Evasion of duty on specific clearances.

Summary:

Issue 1: Classification of Water Well Drilling Rigs
The primary issue was whether water well drilling rigs mounted on motor vehicle chassis should be classified under Tariff Heading 84.30 or 87.05. The adjudicating authority classified them u/s 87.05, leading to a higher duty rate. However, the Tribunal found that the manufacturing process integrated the chassis and drilling rig, rendering the chassis unusable as a motor vehicle. Thus, the rigs were correctly classifiable u/s 84.30.

Issue 2: Time Bar on Demand of Duty
The demand of duty amounting to Rs. 92,12,477/- for the period 1-3-1986 to 30-6-1988 was found to be time-barred. The adjudicating authority's claim of wilful suppression was not upheld, as full descriptions were available in other documents like gate passes and contracts.

Issue 3: Clubbing of Clearances
The Tribunal rejected the adjudicating authority's decision to club the clearances of LMP Drilling & Mining Equipment (P) Ltd., Bharat Iron Works, and Kisan Enterprises with LMP Precision Engineering Co. Pvt. Ltd. It was held that normal commercial transactions and shared directors/partners do not justify clubbing. There was no evidence of dummy operations or control by LMP Precision over the other units.

Issue 4: Availability of MODVAT Credit
Since the clearances of the associated units were not clubbed, LMP Precision Engg. Co. was entitled to avail of the MODVAT Credit on duty-paid inputs from the other three units. The demand of Rs. 37,24,743.20 for wrongful MODVAT Credit was not recoverable.

Issue 5: Imposition of Penalties
Penalties on LMP Precision Engg. Co. and LMP Drilling & Mining Equipment were reduced to Rs. 1,00,000/- and Rs. 25,000/- respectively. Penalties on Bharat Iron Works, Kisan Enterprises, and the four individuals were set aside.

Issue 6: Evasion of Duty on Specific Clearances
The Tribunal upheld the findings of evasion of duty by not including the value of truck chassis and assembly charges, confirming differential duties of Rs. 4,14,122.05 and Rs. 3,32,459.00 against LMP Precision Engg. Co. Additionally, the demand of Rs. 4,77,402.00 for modification of chassis was confirmed. However, demands related to clubbing of clearances were set aside.

Final Orders:
- Classification under Heading 84.30 upheld.
- Demand of Rs. 92,12,477/- set aside.
- Clubbing of clearances and related demands set aside.
- MODVAT Credit entitlement confirmed.
- Penalties reduced/set aside.
- Confiscation orders and redemption fines set aside.

Appeals disposed of accordingly.