1985 (1) TMI 225 - AT - Central Excise

Issues Involved:
1. Classification of the seized goods under the Central Excise Tariff.
2. Applicability of Central Excise duty on the seized goods.
3. Validity of the penalties imposed on M/s. Goodyear India Limited and M/s. Vijaya Traders.
4. Interpretation of the interim order from the Delhi High Court.
5. Liability for the payment of duty on the seized goods.

Detailed Analysis:

1. Classification of the Seized Goods under the Central Excise Tariff:
The primary issue was whether the seized goods, described as "tyres with tread removed in two places," could be classified as tyres under Tariff Item No. 16. The appellants contended that these goods were "waste" or "scrap" and not commercially known as tyres. They argued that the goods should not attract duty under Tariff Item No. 16. The Tribunal considered affidavits from various industry experts, which stated that tyres with tread removed were considered waste and not commercially known as tyres. However, the Tribunal noted that the goods were described in invoices as "scrap auto tyres without bead cut" and were being sold for retreading, indicating that they were still considered tyres. The Tribunal concluded that the goods retained the character of tyres and fell under Tariff Item No. 16.

2. Applicability of Central Excise Duty on the Seized Goods:
The Tribunal examined whether the goods were liable for excise duty. The appellants argued that the goods were waste and not excisable. The Tribunal referred to the Supreme Court judgment in P.C. Cherian v. Burfi Devi, which held that retreading an old tyre does not create a new entity. The Tribunal concluded that the goods, even with tread removed, were still tyres and were excisable under Tariff Item No. 16. The Tribunal also referred to the decision in Collector of Central Excise v. Titagur Paper Mills Co., which held that defective manufactured products are still excisable. Therefore, the Tribunal held that the goods were liable for excise duty.

3. Validity of the Penalties Imposed on M/s. Goodyear India Limited and M/s. Vijaya Traders:
M/s. Goodyear India Limited argued that they acted under a bona fide belief that the goods were waste and could be removed without duty. The Tribunal, however, found that M/s. Goodyear initially adhered to the requirement of cutting or punching tyres to render them scrap but later changed their method after obtaining an interim order from the High Court. The Tribunal concluded that M/s. Goodyear wilfully contravened the excise provisions and upheld the penalty of Rs. 75,000/- imposed on them. For M/s. Vijaya Traders, the Tribunal upheld the fines of Rs. 7,500/- for the seized goods and Rs. 5,000/- for the truck used in their unauthorized removal, finding no excessiveness in the penalties.

4. Interpretation of the Interim Order from the Delhi High Court:
The appellants claimed that the removal of the goods was covered by an interim order from the Delhi High Court, which allowed the removal of "waste rubber compound and other waste" on execution of a bond. The Tribunal noted that the interim order pertained to waste rubber compound and similar waste, not to fully manufactured tyres. The Tribunal found that M/s. Goodyear misinterpreted the interim order to remove tyres without bead cut under the guise of waste, which was not covered by the High Court's order.

5. Liability for the Payment of Duty on the Seized Goods:
M/s. Vijaya Traders paid the duty on the seized goods to secure their release. The Tribunal held that duty was rightly payable on the goods. The question of reimbursement of duty paid by M/s. Vijaya Traders to M/s. Goodyear was left to be settled between the parties. The Tribunal noted that duty on tractor tyres, if any, among the confiscated goods should be calculated at the appropriate lower rate.

Conclusion:
The Tribunal upheld the Collector's order, confirming the classification of the seized goods as tyres under Tariff Item No. 16 and the applicability of excise duty. The penalties imposed on M/s. Goodyear India Limited and M/s. Vijaya Traders were also upheld. The Tribunal dismissed both appeals, except for the relief granted regarding the calculation of duty on tractor tyres.

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