2001 (1) TMI 543 - AT - Central Excise

Summary

Issues:
1. Whether duty is payable on the conversion of shovel equipment into a crane.
2. Validity of the duty demand and penalty imposed by the Commissioner.
3. Interpretation of Central Excise rules regarding duty payment.

Issue 1: Duty on Conversion of Shovel Equipment into Crane
The case involved the conversion of a shovel into a crane by attaching crane accessories, which were purchased with duty paid. The department alleged that a new product emerged subject to duty. However, the appellants argued that no new product emerged as the crane attachments were used only for lifting loads. The Tribunal accepted the appellant's contention, noting that the Commissioner did not classify the new product under any tariff heading. It was concluded that no new product emerged, and thus, no Central Excise duty was payable on the conversion.

Issue 2: Validity of Duty Demand and Penalty
The Commissioner had demanded duty of Rs. 2,82,172 and imposed a penalty of Rs. 50,000 on the appellants. The Tribunal found that since the Modvat credit available to the appellants was more than the duty confirmed, there was no intent to evade duty. Citing the Supreme Court's decision in Cosmic Dye Chemical case, it was held that wilful intent is necessary to invoke an extended period for duty demand. As there was no wilful intent to evade duty, the demand was considered time-barred, and the penalty was unjustified.

Issue 3: Interpretation of Central Excise Rules
The Tribunal analyzed the facts and legal provisions to determine that the duty demand was not justified. It emphasized that the appellants had paid duty on the crane attachments, which were used for lifting purposes without creating a new dutiable product. The Tribunal held that the appellants were not liable to pay duty on the conversion and that the duty demand was unwarranted. Consequently, the appeal was allowed, setting aside the Commissioner's order and ruling in favor of the appellants.