2001 (9) TMI 417 - AT - Central Excise

Summary

Issues:
1. Confirmation of Central Excise duty under Section 11A
2. Imposition of penalty under Rule 173Q of Central Excise Rules
3. Confiscation of Land & Building under Rule 173Q
4. Classification of grinding of unground tool tips as manufacture
5. Entitlement to benefit of Circular dated 3-8-1973
6. Time limitation for duty demand

Confirmation of Central Excise Duty:
The appeal was filed against the order confirming Central Excise duty under Section 11A of the Central Excise Act, 1944, amounting to Rs. 3,55,179.63. The penalty was imposed under Rule 173Q of Central Excise Rules, and the adjudicating authority also ordered the confiscation of Land & Building under the same rule, with an option to redeem upon payment of a fine of Rs. 30,000.

Classification of Grinding as Manufacture:
The main issue was whether the grinding of unground tool tips amounts to manufacture. The Technical literature produced by the appellants explained the grinding process, highlighting the transformation of unground tool tips into new and distinct articles through grinding on Silicon Carbide Wheel and Diamond Wheel. The Tribunal concluded that the process undertaken by the appellants indeed amounted to manufacture as it resulted in new articles with distinct characteristics and uses.

Entitlement to Circular Benefit:
The appellants claimed the benefit of a Circular dated 3-8-1973, which allowed grinding of unground tool tips by actual users in their own factories before mounting them on tools without attracting excise duty. However, it was found that the appellants were not actual users of the tool tips in question and were clearing them after grinding for home consumption. Therefore, they were not entitled to the Circular's benefit in this case.

Time Limitation for Duty Demand:
The duty demand covered the period from December 1986 to June 1990, with two show cause notices issued in April 1991 and November 1991. The demand was confirmed under Section 11A based on alleged suppression to evade duty. However, as the appellants consistently filed classification lists claiming the Circular's benefit, mentioning no duty to be paid as per the Circular, the Tribunal found no suppression could be alleged against them. Consequently, the demand was deemed time-barred and set aside.

In conclusion, the Tribunal upheld the confirmation of Central Excise duty but set aside the penalty and confiscation orders. It determined that the grinding of unground tool tips constituted manufacture, denied the Circular benefit to the appellants, and ruled the duty demand to be time-barred due to the consistent declarations made by the appellants in their classification lists.