1997 (6) TMI 119 - AT - Central Excise

Summary

Issues Involved:
1. Classification of mild steel galvanized wire under the Central Excise Tariff.
2. Applicability of exemption notifications.
3. Validity of the demand for duty and imposition of penalty.
4. Limitation period for raising the demand.

Detailed Analysis:

1. Classification of Mild Steel Galvanized Wire:
The primary issue was whether the mild steel galvanized wire should be classified under Tariff Item (T.I.) 33B or T.I. 25 of the erstwhile Excise Tariff. The appellants contended that their product should be classified under T.I. 26AA(IA), which covered iron or steel products, including wires, and claimed that their product conformed to ISI specifications 280/1978 and 4826/1968 for general engineering purposes, not telecommunication. The Department argued that the product fell under T.I. 33B as electric wires and cables since it was used for telecommunication and could transmit current. The Tribunal upheld the Department's classification under T.I. 33B, noting that the product was used for telecommunication and could carry electric current, thus fitting the description of electric wires and cables under T.I. 33B.

2. Applicability of Exemption Notifications:
The appellants claimed exemption under Notification No. 201/63, arguing that their product was exempt from duty. However, the Tribunal found that once the product was classified under T.I. 33B, the exemption under Notification No. 197/79, which covered goods under T.I. 26AA, was not applicable. The Tribunal rejected the reliance on ISI specifications for classification purposes, stating that the commercial understanding of the product as telecommunication wire was more relevant.

3. Validity of the Demand for Duty and Imposition of Penalty:
The Collector's order demanded Rs. 23,66,863.41 in duty and imposed a penalty of Rs. 1 lakh on the appellants. The Tribunal upheld this demand and penalty, noting the appellants' contractual obligations to supply "telephone wires" to the Posts and Telegraph Department, which indicated their awareness of the product's classification and duty liability. The Tribunal referenced the case of Satellite Engineering Limited v. Union of India, which supported the imposition of penalties for defiance of the law.

4. Limitation Period for Raising the Demand:
The appellants argued that the demand was barred by limitation, citing that the Department had full knowledge of their production activities. However, the Tribunal held that the extended period of limitation was applicable due to the appellants' failure to obtain a Central Excise license and comply with excise rules, which constituted grounds for invoking the extended period under Section 11A(1) of the Central Excises and Salt Act, 1944. The Tribunal referenced the case of Viswakarma Steel Indus. v. C.C.E., which supported the use of the extended period in cases of non-compliance with excise regulations.

Conclusion:
The Tribunal upheld the Collector's order, confirming the classification of the product under T.I. 33B, denying the exemption claimed under Notification No. 201/63, and validating the demand for duty and the imposition of the penalty. The appeal was rejected, affirming the Department's actions and the Collector's findings.