1999 (8) TMI 416 - AT - Central Excise

Brake linings in roll form - not eligible to exemption in Notification Nos. 96/86-C.E. and 59/90-C.E.

Summary

Issues:
Eligibility of brake linings in roll form for concessional rate of duty under Notifications No. 96/86 and 59/90; Whether brake linings in roll form are considered "other than those used in vehicles of Chapter 87"; Imposition of penalty and demand of duty; Time-barred demand.

Eligibility of Brake Linings in Roll Form:
The dispute centered around whether brake linings in roll form were eligible for the concessional rate of duty under specific notifications. The appellants argued that these brake linings were not directly usable in motor vehicles and had various industrial applications beyond vehicles of Chapter 87. They cited a previous judgment by the Madras High Court to support their claim that the processes involved in converting these brake linings amounted to manufacturing. However, the impugned order noted that the goods were sold to motor vehicle companies and used in motor vehicles, leading to a conclusion that they were indeed used in vehicles of Chapter 87.

Interpretation of Exemption Notifications:
The Revenue contended that the actual use of the goods in motor vehicles was crucial for classification, regardless of further manufacturing processes required. They argued that the goods being used in motor vehicles satisfied the requirement, citing a previous CEGAT decision in support. The Tribunal observed that the exemption was based on the use of goods, whether in vehicles of Chapter 87 or not. Despite the Revenue's approach being questioned, evidence showed that the brake linings were predominantly used in motor vehicles, leading to a decision that they were not eligible for the exemption.

Time-Barred Demand and Penalty:
The appellants claimed that most of the demand was time-barred as they had disclosed relevant information to the Central Excise authorities earlier. The Tribunal accepted this argument for a specific period, setting aside the demand for that duration. However, the remaining duty demand within the time limit was confirmed. The penalty imposed on the appellants for wilful suppression of facts was also set aside due to the time-barred nature of the show cause notice for the extended period.

In conclusion, the Tribunal upheld that brake linings in roll form were not eligible for the concessional rate of duty as they were predominantly used in motor vehicles. While the demand for a specific period was set aside as time-barred, the remaining duty demand within the time limit was confirmed. The penalty imposed on the appellants was also revoked due to the time-barred nature of the show cause notice.