1996 (3) TMI 263 - AT - Central Excise

Summary

Issues:
1. Demand of duty under Notification 175/86 for appellants M/s. Crescent Tools Engineering.
2. Eligibility for exemption under Notification 175/86 for Control Linkage system and Brake band.
3. Classification of Brake band under Tariff Heading 6806.
4. Allegations of suppression and intention to evade duty by the appellants.
5. Imposition of penalties on the firm and the Proprietor.

Analysis:

1. The appeals before the Appellate Tribunal arose from an impugned order of the Collector of Central Excise, Bangalore, demanding duty of Rs. 1,74,242.23 from M/s. Crescent Tools Engineering under Notification 175/86. Additionally, penalties of Rs. 15,000 and Rs. 10,000 were levied on the appellants and the Proprietor, respectively.

2. The appellants contended that they manufactured Control Linkage system under Heading 8431 and Brake band under Tariff Heading 6806, claiming exemption under Notification 175/86 for both items. However, the Tribunal observed that both items fell under Heading 8431, limiting the benefit of the notification to one heading. The Tribunal found the appellants exceeded the exemption limit due to misclassification of Brake band.

3. The Departmental Representative argued that Brake linings and Brake Bands are distinct, with the former being parts of machinery and the latter used for steering vehicles. The Tribunal noted the misinterpretation by the appellants regarding the classification of Brake band under Tariff Heading 6806, emphasizing the clear description of friction material under this heading.

4. The Tribunal found the appellants failed to provide information on the manufacturing process of Brake band, indicating an intention to evade duty. The failure to seek clarification before availing the exemption and not disclosing details upon crossing the limit of Rs. 10 lakhs supported the conclusion of intentional evasion. The Tribunal upheld the longer limitation period for duty demand.

5. Regarding penalties, the Tribunal set aside the penalty on the firm but upheld it on the Proprietor. In the interest of justice, the penalty on the Proprietor was reduced to Rs. 5,000. Despite this modification, the appeals were dismissed, affirming the duty demand and penalties on the Proprietor.

This judgment highlights the importance of accurate classification for availing exemptions, the consequences of non-disclosure and intention to evade duty, and the discretion of tribunals in penalty imposition.