1997 (5) TMI 159 - AT - Central Excise

Summary

Issues: Classification of goods under T.I. No. 67, Limitation on demand

In the judgment delivered by the Appellate Tribunal CEGAT, New Delhi, the case involved the classification of goods under T.I. No. 67 and the issue of limitation on demand. The appellants manufactured Graphite Electrodes through a specific process involving various stages of production. Wastes were generated during the manufacturing process, and samples cut from the electrodes were cleared under different Tariff Items. The dispute arose when officers alleged that the samples cut from electrodes for testing should be classified under T.I. No. 67 instead of T.I. No. 68, leading to a duty short levy amounting to Rs. 8,57,111.07 for a specific period. The Collector confirmed the duty short levied, prompting the appellants to appeal the decision.

Regarding the classification issue, the appellants argued that the samples cut from electrodes, with an average length of 24 mm, were not suitable for use as electrodes due to their short length. They contended that the specifications and quality standards set by the Indian Standards Institution (I.S.I.) were irrelevant for classification purposes. The appellants emphasized that the short pieces were not marketable as electrodes and could not fulfill the basic function of conducting electricity. The Tribunal agreed with the appellants, stating that the department's charge was not sustainable on merit due to the inability of the short pieces to serve as electrodes effectively.

On the issue of limitation on demand, the appellants defended themselves by asserting that they had been clearing graphitized waste as scrap under T.I. 68, thereby informing the department about the various types of waste generated during production. The appellants argued that since they believed the samples were waste and not usable electrodes, there was no suppression of facts. The Tribunal concurred with the appellants, noting that once the appellants had informed the department about the generation of waste and classified it under the appropriate Tariff Item, the department could not accuse them of suppressing information to evade duty. The Tribunal found substantial merit in the appellants' argument regarding the limitation on demand.

In conclusion, the Appellate Tribunal allowed the appeal, set aside the Collector's order confirming the duty short levied, and directed any consequential relief. The cross objections were also disposed of accordingly, bringing a resolution to the classification issue and the limitation on demand raised by the appellants.