1995 (4) TMI 150 - AT - Central Excise

Summary

Issues Involved:
1. Classification of goods u/s 8428.00 or 8431.00.
2. Applicability of Rule 2(a) of the Interpretative Rules.
3. Limitation period for demand of duty u/s 11A of Central Excises and Salt Act, 1944.
4. Imposition of penalty.

Summary:

1. Classification of Goods:
The appellants manufacture conveyors, stackers/reclaimers, and parts thereof, and filed a classification list w.e.f. 1-3-1986 under sub-heading 8428.00 at 15% ad valorem. The Department argued that the appellants only manufacture certain components like idlers, pulleys, and structurals, which should be classified under Heading 8431.00. The Collector concluded that the appellants are not manufacturing complete machinery but only components, confirming the demand of duty for Rs. 9,37,944.64 u/r 9(2) read with Section 11A of Central Excises and Salt Act, 1944, and imposed a penalty of Rs. 1 lakh.

2. Applicability of Rule 2(a):
The appellants contended that the parts should be classified under 84.28 as they contribute to the function of material handling equipment when assembled at the site. They argued that Rule 2(a) includes goods removed in unassembled or disassembled condition if they have the essential characteristics of finished goods. The Department countered that Rule 2(a) is not applicable as the appellants only cleared component parts, not complete machinery. The Tribunal held that the parts cleared by the appellants do not have the essential character of conveyors, stackers/reclaimers, and thus, Rule 2(a) does not apply. The classification under Heading 8431.00 was upheld.

3. Limitation Period for Demand of Duty:
The appellants argued that the demand is hit by limitation as the show cause notice covered more than six months, and there was no suppression of facts. The Tribunal found that the appellants had filed classification lists, RT-12 Returns, and issued Gate Passes with full descriptions, indicating no deliberate withholding of information. Therefore, the demand for the extended period under Section 11A was not sustainable.

4. Imposition of Penalty:
Considering the early days of the HSN-based Central Excise Tariff Act, 1985, and the lack of deliberate suppression of facts, the Tribunal found the penalty harsh and set it aside. The appeals were disposed of accordingly.