1994 (11) TMI 211 - AT - Customs

Summary

Issues Involved:
1. Classification of imported machinery under the appropriate Customs Tariff Heading.
2. Eligibility for benefit under Notification No. 125/86-Cus.
3. Invocation of the extended period of limitation.
4. Financial hardship and pre-deposit requirements for stay of duty and penalty.

Detailed Analysis:

1. Classification of Imported Machinery:
The appellants imported Biscuit Cream Sandwiching and Wrapping Machines, claiming assessment under Heading 8422.40 as "Packing & Wrapping Machine composite unit," while the Revenue assessed it under Heading 8438.80 as "Other machinery." The appellants argued that the principal function of the machine is packing, thus qualifying for Heading 8422.40. The Tribunal noted that the product in dispute is a composite unit, and the appellants' claim for assessment under Heading 8422.40 was based on the principal function being packing.

2. Eligibility for Benefit under Notification No. 125/86-Cus:
The appellants claimed the benefit of Notification No. 125/86-Cus., which exempts certain food processing and packing machines from a portion of customs duty. The notification specifies that high-speed automatic wrappers, other than cigarette pack wrappers, are eligible for this exemption. The Tribunal referenced the case of Modern Food Industries (India) Ltd. v. Collector of Customs, where it was held that machines performing additional operations incidental to packing are eligible for the benefit. The Tribunal observed that the appellants' machines, being composite units, should be eligible for the exemption if they meet the criteria.

3. Invocation of the Extended Period of Limitation:
The Revenue invoked the extended period of limitation, alleging suppression of facts by the appellants. The Show Cause Notice highlighted discrepancies in the invoice values and statements by the appellants, suggesting manipulation to claim undue benefits. The Tribunal noted that the Show Cause Notice was issued beyond the standard limitation period but within the extended period allowed for cases involving suppression of facts.

4. Financial Hardship and Pre-Deposit Requirements:
The appellants argued that the demand for duty and penalties would cause financial hardship, affecting their liquidity. They presented Profit & Loss Accounts and Balance Sheets to support their claim. The Tribunal acknowledged the financial impact but noted that the appellants had already made partial payments and furnished bank guarantees. The Tribunal decided to partially allow the stay application, requiring the appellants to deposit Rs. 20 lakhs in cash within four months, while dispensing with the pre-deposit of the remaining amounts. The Tribunal directed the appellants to report compliance and kept the bank guarantees and personal bonds alive during the appeal's pendency.

Conclusion:
The Tribunal provided a detailed analysis of the classification of the imported machinery, eligibility for customs duty exemption, invocation of the extended period of limitation, and financial hardship claims. The stay application was partially allowed with specific conditions for pre-deposit and compliance, ensuring that the appellants' financial position was considered while safeguarding the Revenue's interests. The matter was listed for mention on 27th April 1995, with directions to maintain the status quo on recovery proceedings during the appeal's pendency.