1997 (7) TMI 320 - AT - Central Excise

Summary

Issues:
Prayer for dispensation of pre-deposit of duty and penalty on the grounds of classification of goods as cone winding machines in CKD form and subsequent modifications.

Analysis:
The appellants sought dispensation of pre-deposit of duty and penalty amounting to Rs. 9,09,917/- and Rs. 90,000/- respectively, contending that they had purchased cone winding machines in CKD condition locally. The appellants argued that the goods, treated as cone winding machines in CKD form under Tariff Heading 8455, had additional attachments such as Cams, Porcelain Guides, Endless Belts, and Aluminium Reel Wheels valued at Rs. 8,000/-. They maintained that even after these additions, the goods retained their original classification as cone winding machines. The appellants claimed that the goods had already been subjected to duty as a machine in CKD form and that the subsequent modifications did not change the essential character of the product. They argued that there was a bona fide belief that no additional duty could be levied on the same machine due to the add-ons made in their factory.

The department, represented by the learned SDR, contended that the machines purchased by the appellants were non-functional without the motor and starter, and by adding these components, a new functional machine emerged. The department relied on a previous Tribunal judgment which stated that items resulting from fabricated parts and bought-out items should be considered as manufactured products. The department's position was that the additions made by the appellants resulted in the creation of a new machine, warranting a fresh assessment of duty.

After considering the arguments presented by both parties, the Tribunal noted that the goods were initially purchased as cone winding machines in CKD form and were assessed to duty under Tariff Heading 8445. The Tribunal observed that the Central Excise Tariff's interpretative Rule 2A governs the levy of duty, indicating that duty cannot be imposed again on the same item if it continues to conform to the original description after modifications. The Tribunal emphasized that any minor enhancements to the machine's capabilities should not trigger a reassessment of duty. It was held that if a machine retains its original form after additions, no further duty can be charged. Consequently, the Tribunal found merit in the appellants' argument that duty should not be levied a second time over, and thus allowed their plea for dispensation of the pre-deposit of duty and penalty.

As a result of the above analysis, the Tribunal granted the appellants' request for dispensation of the pre-deposit of duty and penalty, concluding that the case should proceed in its normal course as per the Registry.