2000 (4) TMI 339 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the product manufactured by M/s. Escorts Ltd.
2. Eligibility to take credit of duty paid in excess.
3. Applicability of the extended period of limitation for the demand of central excise duty.

Issue-Wise Detailed Analysis:

1. Classification of the Product:
The primary issue was whether the product manufactured by M/s. Escorts Ltd. should be classified under heading 85.14 as a heating element or under heading 85.16 as an electric heating resistor. M/s. Escorts Ltd. argued that their product, used in industrial ovens and furnaces, should be classified under heading 85.14, which covers "Industrial or laboratory electric (including induction or dielectric) furnaces and ovens; other industrial or laboratory induction or dielectric heating equipment." They contended that heading 85.14 is a specific entry and should be preferred over the general entry 85.16, which applies to electric heating resistors used in domestic appliances.

The respondent countered that heading 85.16 applies to all electric heating resistors regardless of their use in domestic or industrial equipment. The Tribunal agreed with the respondent, noting that heading 85.16 includes electric heating resistors of all types and is not limited to domestic appliances. The Tribunal emphasized that the Explanatory Notes of the Harmonized System of Nomenclature (HSN) indicate that electric heating resistors remain classified under heading 85.16 even if specialized for a particular machine. Consequently, the Tribunal upheld the classification of the product under heading 85.16.

2. Eligibility to Take Credit of Duty Paid in Excess:
M/s. Escorts Ltd. also appealed against the rejection of their claim to take credit of duty paid in excess in their Personal Ledger Account (PLA). They had deposited duty amounts in compliance with adjudication orders but later took credit of these amounts, arguing that the initial deposit was coerced and that the Tribunal's stay order justified their action. The Tribunal found that M/s. Escorts Ltd. had deposited the duty amounts before filing the appeal and had not informed the Tribunal about these deposits in their stay applications. The Tribunal held that stay orders are not final orders and do not authorize taking credit of duty without following the prescribed refund procedures. Therefore, the Tribunal found no infirmity in the Commissioner's order rejecting the suo moto credit taken by M/s. Escorts Ltd.

3. Applicability of the Extended Period of Limitation:
In one of the appeals, M/s. Escorts Ltd. challenged the demand of central excise duty as being time-barred. They argued that the show cause notice was issued beyond the six-month limitation period. The respondent contended that the extended period of limitation was applicable due to the appellants' failure to correctly describe their product in the classification list and gate passes. The Tribunal agreed with the respondent, noting that the appellants had described their product differently in various sale documents, which amounted to suppression of facts. Consequently, the Tribunal upheld the applicability of the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act.

Conclusion:
The Tribunal upheld the classification of the product under heading 85.16, rejected the claim for taking credit of duty paid in excess without following refund procedures, and confirmed the applicability of the extended period of limitation for the demand of central excise duty. The Tribunal also reduced the penalties imposed on M/s. Escorts Ltd. and Shri W.R. Sehgal. The appeals were disposed of accordingly.