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2005 (7) TMI 271
Issues: 1. Confirmation of demand of duty against M/s. Vinati Organics Ltd. 2. Imposition of personal penalties on the appellants under Rule 209A of the Central Excise Rules, 1944. 3. Classification of waste gases as excisable items. 4. Dispute regarding supply of waste gases to a neighbouring unit without consideration.
Analysis:
1. The judgment addresses the confirmation of a duty demand against M/s. Vinati Organics Ltd. and the imposition of personal penalties on the appellants. The impugned order confirmed a duty of Rs. 4,68,608 against M/s. Vinati Organics Ltd., along with identical personal penalties on other appellants. The Tribunal considered the facts on record, where the appellants were manufacturing Isobutyl Benzene IBB and its by-products using propylene and toluene as raw materials. The waste gases generated during the manufacturing process were the subject of dispute. The appellant argued that the gases were hazardous and needed to be flared or used for fuel, not classified as excisable items. The Tribunal found that the demand of duty on these waste gases for a longer period was not justified, especially considering the gases were either flared or used as fuel, not treated as excisable.
2. Regarding the personal penalties imposed under Rule 209A of the Central Excise Rules, 1944, the Tribunal noted the appellant's contention that the waste gases were not marketable and were supplied to the neighbouring unit solely for disposal purposes. The Tribunal considered precedent decisions and found that unless a requisite market for the waste gases was shown, they could not be classified as excisable items. The major portion of the waste gases was being flared or used by the appellants themselves, with only the surplus supplied to the neighbouring unit. The Tribunal concluded that the waste gases did not qualify as excisable items, leading to the setting aside of the impugned order and allowing all the appeals with consequential relief to the appellants.
3. The classification of waste gases as excisable items was a crucial issue in the judgment. The appellant argued that the waste gases were not excisable as they were hazardous and not intended for commercial use. The Tribunal considered the CBEC Circular and precedent cases, emphasizing that waste gases allowed to escape in the atmosphere were not considered excisable. The Tribunal found that the waste gases supplied to the neighbouring unit without consideration did not become excisable merely due to this act, especially when most of the gases were being flared or used as fuel, not for commercial purposes.
4. Lastly, the dispute regarding the supply of waste gases to a neighbouring unit without consideration was examined. The Tribunal highlighted that the waste gases were being disposed of or used as fuel, with only the excess supplied to the neighbouring unit. The Tribunal referenced a case where waste gases used for generating heat were not considered excisable. The act of supplying surplus waste gases without any commercial consideration did not render the gases excisable. Therefore, the Tribunal set aside the impugned order and granted relief to the appellants based on the non-excisability of the waste gases supplied to the neighbouring unit.
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2005 (7) TMI 270
Issues Involved: 1. Whether the capital goods used in the mines are entitled to CENVAT Credit under the relevant Rules. 2. Restriction of Credit to 75%. 3. Availment of credit on imported goods assessed under Heading 98.01. 4. Credit availed on non-production of duty-paying documents. 5. Credit for cables used outside the factory, technological structures, and GC sheets. 6. Credit for calcium silicate in blocks. 7. Credit for goods with declarations filed beyond three months under Rule 57T. 8. Credit taken on Xerox/original copy of duty-paying documents.
Issue-wise Detailed Analysis:
1. Capital Goods Used in Mines: The common issue in all appeals was whether capital goods used in the mines qualify for CENVAT Credit. The tribunal noted that limestone, an essential raw material for cement, is extracted from mines often situated away from the cement factories. The appellants argued that the mines should be considered part of the factory under Section 2(e) of the Central Excise Act, 1944. They cited various cases and departmental instructions to support their claim. However, the tribunal referred to the Supreme Court's decision in CCE v. J.K. Udaipur Udyog Ltd., which held that mines do not qualify as part of the factory since no manufacturing process occurs there. Consequently, the tribunal ruled that capital goods/inputs used in mines are not entitled to CENVAT Credit, as mines cannot be considered part of the factory.
2. Restriction of Credit to 75%: The appellant contended that the capital goods received in 1996 should not be subject to the 75% credit restriction imposed from 1-3-1997. The tribunal agreed, citing the case of CCE v. Raj Cement, and held that the restriction is not applicable to goods received before the effective date. Therefore, the tribunal set aside the Commissioner (Appeals)'s decision and allowed the appellant's contention.
3. Availment of Credit on Imported Goods Assessed under Heading 98.01: The appellant argued that all goods imported under Customs Tariff Heading 98.01 are entitled to Modvat credit. The tribunal upheld the Commissioner's decision, stating that not all goods under this heading qualify for Modvat as Capital Goods, based on the nature of the goods.
4. Credit Availed on Non-production of Duty-paying Documents: The Commissioner (Appeals) disallowed credit due to non-production of duty-paying documents. The appellants produced these documents before the tribunal, which remanded the matter to the original authority for examination and decision as per law.
5. Credit for Cables Used Outside the Factory, Technological Structures, and GC Sheets: The tribunal upheld the Commissioner (Appeals)'s decision that these items are not entitled to credit as they are not used within the factory.
6. Credit for Calcium Silicate in Blocks: The tribunal allowed credit for calcium silicate in blocks, referencing the High Court's judgment in Escorts Ltd. v. CCE, which was upheld by the Supreme Court.
7. Credit for Goods with Declarations Filed Beyond Three Months under Rule 57T: The tribunal set aside the Commissioner (Appeals)'s order and allowed credit, citing the Tribunal's decision in JBM Tools Ltd. v. CCE, which supports the appellant's position.
8. Credit Taken on Xerox/Original Copy of Duty-paying Documents: The tribunal upheld the Commissioner (Appeals)'s decision, following the larger bench decision in M/s. Avis Electronics Ltd., which requires the manufacturer to take credit only on the duplicate copy of the invoice or the original copy if the duplicate is lost and the loss is satisfactorily explained to the Assistant Collector.
Summing Up: 1. Mines do not form part of cement factories, and CENVAT credit on inputs/capital goods used in mines is not admissible. 2. Other points raised in appeals E/757/2002 & E/777/2002 are disposed of per the decisions in paragraphs 11 to 16. The issue in paragraph 12 is remanded to the original authority. 3. Departmental appeals E/8/2005 and E/126/2005 are allowed, setting aside OIA No. 106/2004 and OIA No. 28/2004.
(Pronounced in open Court on 5th July, 2005)
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2005 (7) TMI 269
Issues: Demand of duty on M.S. Scrap, Aluminium/copper scrap, used grinding wheels, and empty M.S. drums/plastic containers sold by the assessee from its factory.
Analysis: The Commissioner (Appeals) confirmed the demands related to different items: 1. M.S. Scrap: The Commissioner classified metal waste as waste and scrap under chapter sub-heading 72.04 of the Central Excise Schedule, even though Modvat credit was not obtained on the goods. However, the Tribunal held that dutiability on scrap would only arise if it emerges from the skilful manipulation of raw material, citing the law laid down by the Apex Court. As there was no evidence that the machinery from which the scrap was cut was Capital goods on which credit was availed, duty on M.S. Scrap was not applicable.
2. Aluminium/copper scrap: The Tribunal noted that the scrap was recovered from machining activity in the workshop, contrary to the belief that it was recovered from construction activity. The Tribunal agreed with the appellant's submission that the scrap was described clearly in the invoice and challan, and no duty could be recovered on such scrap arising from old and used cables.
3. Grinding Wheel: The Tribunal held that no duty could be demanded on used grinding wheels, citing previous decisions. It was noted that duty cannot be demanded when evidence of credit availed of duty paid when they were brought into use is not on record.
4. M.S. drums/plastic container: The Tribunal referred to a Supreme Court decision and held that no duty could be demanded on M.S. drums and plastic containers obtained from emptying the inputs material in the appellant's unit unless they were sold as scrap of M.S. or another identifiable item came into existence in the appellant's unit.
The Tribunal concluded that based on the findings above, no penalty could be sustained, and consequently, the appeal was allowed.
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2005 (7) TMI 268
Issues: - Capacity determination under Section 3A of the Central Excise Act - Review of Commissioner's order - Multiple adjudication on the same set of facts - Ignoring verification reports - Penalty under Rule 209A on directors of the Company
Capacity determination under Section 3A of the Central Excise Act: The case involved an appeal against the Commissioner's order regarding the capacity determination of a unit manufacturing man-made fabrics. The unit's capacity was assessed based on the Hot Air Stenter Annual Capacity Determination Rules 1998. The appellant contested a re-determination of the unit's capacity from three chambers to five chambers, invoking the extended period. The Tribunal noted the previous dismissal of the Revenue's appeal by the CESTAT, establishing finality on the matter. The Tribunal emphasized that it is the final fact-finding authority, and the bar of res judicata applied, leading to the setting aside of the impugned order and allowing the appeals with consequential relief.
Review of Commissioner's order: The appellant argued that the Commissioner lacked the power to review his own order, citing precedents where it was held that a detailed verification before the final duty determination order precludes the Commissioner from recalling or reviewing the order. The appellant also referenced a case where it was established that a quasi-judicial authority cannot review its own order unless expressly conferred by the statute. The Tribunal considered these arguments and ultimately set aside the impugned order based on the finality established by the previous CESTAT order.
Multiple adjudication on the same set of facts: The appellant contended that multiple adjudications on the same set of facts were not justified, especially since the CESTAT had already dismissed the departmental appeal based on a verification report. The Tribunal agreed with this argument, emphasizing that the issue had reached finality with the previous CESTAT order, and the impugned order had no merits due to the principle of res judicata.
Ignoring verification reports: The appellant raised concerns about the Commissioner ignoring verification reports and relying on retracted statements to pass the impugned order. The Tribunal noted the verification reports indicating the dismantling of chambers in the unit, which had been considered in previous proceedings. The Tribunal found that the Commissioner's reliance on the retracted statement was not justified, and the impugned order was deemed unsustainable due to the disregard of crucial verification reports.
Penalty under Rule 209A on directors of the Company: The appellant argued that the penalty under Rule 209A on the directors of the company was not sustainable, as mis-declaration was not a valid ground for imposing such a penalty. Case laws were cited to support this argument. The Tribunal did not delve deeply into this issue in the judgment provided but focused more on the capacity determination and review of the Commissioner's order.
In conclusion, the Tribunal set aside the impugned order based on finality established by a previous CESTAT order, emphasizing the principle of res judicata and the Commissioner's lack of power to review his own order after a detailed verification process. The concerns raised by the appellant regarding multiple adjudications, ignoring verification reports, and the sustainability of penalties under Rule 209A were also addressed to varying extents in the judgment.
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2005 (7) TMI 267
Issues: 1. Interpretation of whether processed fabrics can be considered fully manufactured goods. 2. Determination of the status of goods stored in Bonded Store Room (BSR) under Central Excise Rules. 3. Evaluation of the marketability of goods based on the entry in the finishing room register.
Analysis: 1. The appeals filed by Revenue were disposed of collectively as the issue was the same across all cases. The Commissioner of Central Excise (Appeals) upheld the plea of the Respondents regarding the status of processed fabrics, stating that the Dy. Commissioner did not provide sufficient reasons for considering them fully manufactured goods. The mention of 'finishing room' in the RG1 register indicated that the goods were not 'finished goods,' leading to the proceedings being set aside. The Revenue argued that goods stored in the BSR should be deemed fully manufactured based on the entry, even if in a loose form. However, the Tribunal rejected this argument, emphasizing that the relevant date lacked the concept of BSR under Central Excise Rules. The absence of marketability and readiness for delivery rendered the goods non-excisable, and a mere entry in the finishing room register did not establish marketability. Consequently, the Tribunal upheld the decision of the Commissioner of Central Excise (Appeals) and rejected the appeals by Revenue.
2. The key contention revolved around the interpretation of goods stored in the BSR and their classification as fully manufactured. The Revenue's argument hinged on the entry in the BSR, indicating finished goods. However, the Tribunal highlighted the absence of the BSR concept on the relevant date and stressed that excisable goods must be marketable and ready for delivery. The lack of evidence regarding marketability rendered the goods ineligible for classification as fully manufactured, despite the entry in the finishing room register. This analysis led to the rejection of the Revenue's appeal and the affirmation of the Commissioner of Central Excise (Appeals) decision.
3. The Tribunal's decision underscored the importance of marketability in determining the status of goods for excise classification. The mere presence of an entry in the finishing room register was deemed insufficient to establish marketability and readiness for delivery. The Tribunal emphasized that excisable goods must be in a marketable condition, which was not demonstrated in this case. As a result, the Tribunal rejected the Revenue's appeal, as there was no compelling evidence to overturn the findings of the Commissioner of Central Excise (Appeals) regarding the marketability of the goods in question.
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2005 (7) TMI 266
Issues: - Demand of Central Excise duty on discounts passed on to customers - Imposition of penalties under relevant sections - Time-barred demand for the period from December 1996 to June 2000 - Duty on the amount received from the Insurance Company
Analysis:
1. Demand of Central Excise Duty on Discounts Passed on to Customers: - The appellants manufactured polyester film in filament yarn and provided various discounts to customers, passing them on through credit notes. - The Commissioner demanded an amount under Proviso to Section 11A(1) of the Central Excise Act, alleging duty on the portion of discount not passed on to customers. - The appellants argued that discounts are admissible deductions as per relevant case laws and that even if a small percentage of customers did not avail discounts, they are entitled to the entire discounts. - The Tribunal found that the appellants informed the department about the discounts offered and kept them updated on the practice of passing on discounts. - The Tribunal concluded that the demand of duty on discounts not passed on is not sustainable, especially considering the substantial excess discounts passed on by the appellants.
2. Imposition of Penalties under Relevant Sections: - The Commissioner imposed penalties under Section 11AC of the Act and Rules 173Q and 210 of the Central Excise Act, 1944. - The appellants argued that penalties and demand of interest are not sustainable, citing various case laws supporting their contention. - The Tribunal, after reviewing the submissions and case laws, found that the penalties imposed were not justified, considering the facts of the case and the appellants' compliance with the department's requirements regarding discounts.
3. Time-Barred Demand for the Period from December 1996 to June 2000: - The appellants contended that the demand for the period in question was time-barred as the show cause notice was issued after the relevant period. - They argued that the longer period under Proviso to Section 11A was not sustainable due to various reasons, including the department's awareness of the discounts offered and the appellants' compliance with filing declarations. - The Tribunal agreed with the appellants, stating that the demand for the period was time-barred, considering the facts presented and the absence of intention to evade duty.
4. Duty on the Amount Received from the Insurance Company: - The demand also included duty on the amount received from the Insurance Company for damaged goods, refund of excess premium paid, and survey fees. - The appellants argued that the department failed to establish the relationship of the amount received to specific clearances or customers. - The Tribunal found that the demand on the amount received from the Insurance Company was not sustainable as it lacked proper substantiation and legal basis under the Central Excise Act.
In conclusion, the Appellate Tribunal CESTAT, Bangalore, allowed the appeal with consequential relief, ruling in favor of the appellants on all issues raised, including the demand of Central Excise duty on discounts, imposition of penalties, time-barred demand, and duty on the amount received from the Insurance Company.
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2005 (7) TMI 265
Issues involved: Interpretation of Rule 57S(1) and Rule 57F(12), utilization of credit of duty paid on inputs for payment of duty on capital goods, time-barred demand, validity of proceedings under Rule 57U.
Interpretation of Rule 57S(1): The appellants cleared capital goods in accordance with Rule 57S(1) by debiting duty in RG 23A Part II Account. Rule 57S(1) allows removal of capital goods for home consumption on payment of appropriate duty as if they were manufactured in the factory.
Utilization of credit of duty on inputs: The Commissioner held that credit of duty on inputs could be used for payment of duty on final products, waste arising during manufacture, or on inputs themselves. The credit used for duty on capital goods was deemed valid under the proviso to Rule 57F(12).
Time-barred demand: The demand was considered time-barred as there was no willful misstatement or suppression of facts, thus penalty was not warranted.
Validity of proceedings under Rule 57U: The submission that proceedings under Rule 57U were not valid due to substitution without a saving clause was supported by precedents, leading to the appeal being allowed and the order set aside.
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2005 (7) TMI 264
Issues: 1. Duty liability for goods found without Central Excise documents. 2. Confiscation of seized goods. 3. Imposition of penalty under Section 11AC of Central Excise Act, 1944.
Analysis: 1. The case involved the confirmation of duty liability against the appellants for goods found without Central Excise documents. The officers found finished dyed MMF (P) packed in plastic bags/bales at the transporter's premises without any Central Excise coverage. The transporter agent and the appellant's Director admitted that the goods were cleared without payment of duty and dispatched to traders without Central Excise invoices. Despite the appellant's claim of clearance based on invoices dated earlier, subsequent investigation revealed discrepancies, leading to the confirmation of duty amounting to Rs. 94,961/- against the appellants.
2. The order also dealt with the confiscation of the seized goods and the appellants' contention that there was no proposal for confiscation in the show cause notice. The appellate authority agreed with the appellants, stating that confiscation cannot be ordered without specific notice, thereby setting aside the confiscation of the goods in question.
3. Regarding the penalty imposed under Section 11AC of the Central Excise Act, 1944, the penalty amount equivalent to the duty was reduced to Rs. 50,000/- considering the facts and circumstances of the case. The appeal was rejected except for the modifications made in reducing the penalty and setting aside the confiscation of goods. The judgment was pronounced on 1-7-2005 by Smt. Archana Wadhwa, Member (J) of the Appellate Tribunal CESTAT, Mumbai.
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2005 (7) TMI 263
Issues Involved: 1. Provisional Assessment 2. Requirement of Show Cause Notice under Section 11A 3. Compliance with Rule 9B of the Central Excise Rules, 1944 4. Legality of Differential Duty Demand
Issue-wise Detailed Analysis:
1. Provisional Assessment: The primary issue was whether the assessments during the period May 1981 to May 1984 were provisional. The appellants had filed a writ petition challenging the levy of excise duty on yarn captively consumed. The Delhi High Court stayed the recovery of the disputed duty, subject to the appellants furnishing a bond and a bank guarantee for 50% of the duty. The appellants executed a bond in Form B-13, which is prescribed for provisional assessments. The bond was accepted, and provisional assessments were made on RT-12 returns filed by the appellants. The Commissioner (Appeals) and Member (Technical) both held that the assessments were provisional, relying on the fact that the appellants had opted for provisional assessment by executing the bond and not objecting to the Superintendent's endorsement on the RT-12 returns. The Member (Judicial), however, disagreed, stating that there should be a specific provisional assessment order in terms of Rule 9B to constitute assessments as provisional.
2. Requirement of Show Cause Notice under Section 11A: The appellants contended that the differential duty demand was invalid as no show cause notice under Section 11A of the Central Excise Act, 1944, was issued. The Commissioner (Appeals) and Member (Technical) held that since the assessments were provisional, the requirement of issuing a show cause notice under Section 11A did not arise. They relied on the Supreme Court's decision in J.K. Cotton Spinning & Weaving Mills and other relevant case laws, which stated that in cases of provisional assessment, the demands are not required to be raised under Section 11A. The Member (Judicial) disagreed, stating that the present case could not be treated as one of provisional assessment and, therefore, the issue of a show cause notice was necessary.
3. Compliance with Rule 9B of the Central Excise Rules, 1944: The appellants argued that there was no specific order from the proper officer directing provisional assessment as required under Rule 9B. They relied on various judicial decisions and Board's Circular No. 13/90-CX dated 25-5-1990. The Member (Technical) and the third Member (T) held that the execution of the B-13 bond and the endorsement on the RT-12 returns constituted compliance with Rule 9B. They stated that the requirement of an order for provisional assessment was satisfied in this case, as the appellants had themselves requested provisional assessment and executed the bond accordingly.
4. Legality of Differential Duty Demand: The differential duty demand of Rs. 63,57,102.76 was upheld by the Commissioner (Appeals) on the grounds that the assessments were provisional and the duty was rightly demanded upon finalization of the assessments. The Member (Technical) agreed with this view, stating that the assessments were provisional, and hence, no show cause notice under Section 11A was necessary. The Member (Judicial) disagreed, stating that the present case could not be treated as one of provisional assessment and, therefore, the differential duty demand without a show cause notice was bad in law.
Majority Decision: The majority decision, including the opinion of the third Member (T), concluded that the assessments during the period in dispute were provisional, and no notice under Section 11A of the Central Excise Act, 1944, was required to be issued to the appellants. Consequently, the impugned order was upheld, and the appeal was rejected.
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2005 (7) TMI 262
Issues Involved: 1. Diversion of imported components and substitution by old and used ones. 2. Under-valuation of goods at the time of import. 3. Smuggling of computer components into India by concealing them inside cabinets. 4. Exporting incomplete systems and over-invoicing exports. 5. Inflated and false value addition under the Exim Policy resulting in excess DTA sales. 6. Non-repatriation of foreign exchange for certain export consignments.
Detailed Analysis:
1. Diversion of Imported Components and Substitution by Old and Used Ones: The adjudicating authority found that the appellants had removed some motherboards, PSUs, etc., from the VEPZ and sold them in the local market, replacing them with defective parts. This conclusion was based on the inculpatory statements of the Managing Director and other directors. The stock verification also revealed defective components in the outhouse. The conditions of Notification 133/94 were violated, making the goods liable for confiscation under Section 111(d) and (o) of the Customs Act, 1962. The Tribunal upheld this finding.
2. Under-valuation of Goods at the Time of Import: The adjudicating authority relied on contemporaneous imports and the statement of the Managing Director, who admitted to under-valuing the goods by 20% below the international market price as per an understanding with the supplier. The profit from these under-valued imports was shared between the Managing Director and the supplier. The Tribunal upheld the enhancement of the value of the remaining components by 25% of the declared value, based on the voluntary statement of the Managing Director.
3. Smuggling of Computer Components by Concealing Them Inside Cabinets: This allegation was supported by the statement of the Managing Director and corroborative evidence. The Managing Director admitted that certain consignments included undeclared CPU chips concealed inside cabinets. The adjudicating authority noted discrepancies in the weights of similar consignments, suggesting concealed components. The Tribunal upheld the finding of smuggling.
4. Exporting Incomplete Systems and Over-invoicing Exports: The Tribunal found insufficient evidence to support the allegation of exporting incomplete systems and over-invoicing exports. The goods were not available for verification, and the documents alone were deemed inadequate. Consequently, the charge of over-invoicing and false value addition under the Exim Policy was dropped.
5. Inflated and False Value Addition Under the Exim Policy: This issue was linked to the over-invoicing of exports, which the Tribunal did not find substantiated. Therefore, the charge of inflated and false value addition was also dropped.
6. Non-repatriation of Foreign Exchange: The Tribunal agreed with the appellants that the customs officer is not competent to adjudicate cases of non-realization of export proceeds, as per the decision in Chinku Exports v. CC, Calcutta. The duty demanded for non-repatriation of foreign exchange was set aside.
Judgment Summary: - The imported goods were liable for confiscation under Section 111(d)(l), (m), and (o) of the Customs Act. - The redemption fine was reduced from Rs. 5 lakhs to Rs. 2 lakhs. - The duty demand was restricted to Rs. 38,65,588/-. - The penalty on M/s. HCPL was reduced to Rs. 4,00,000/- under Section 112(a) of the Customs Act, and the penalty under Section 114(i) was set aside. - The penalty on the Managing Director was reduced to Rs. 1,00,000/-, and the penalties on the other directors were reduced to Rs. 50,000/- each. Penalties under Section 114(i) on all individuals were set aside. - The issue of non-achievement of value addition was remanded to the jurisdictional commissioner for necessary action in consultation with the Development Commissioner or Commerce Ministry.
Disposition: The appeals were disposed of in the above manner, with the judgment pronounced in open court on 14-7-2005.
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2005 (7) TMI 261
Issues: Correct classification of motor vehicle for transport of 10 or more persons including driver under Heading 87.02 or 87.03.
Analysis: The dispute in the present appeal revolves around the correct classification of a motor vehicle for the transport of 10 or more persons including the driver. While the authorities below accepted the assessee's claim of classification under Heading 87.02, the revenue contends that the vehicle should be classified under Heading 87.03. The revenue supported their stance by referring to the Maharashtra Motor Vehicle Rules, 1988, specifically Rule 171, which sets parameters for the seating capacity of transport vehicles. The revenue argued that the dimensions of the seats in the vehicle did not meet the requirements specified in the rules for seating capacity, thus challenging the claim of the vehicle being a public transport type ten-seater. Additionally, the weight-carrying capacity of the vehicle was also brought into question based on the rules governing transport vehicles in Maharashtra.
Commissioner (Appeals) held that at the relevant time, Heading 87.02 covered motor vehicles for the transport of 10 or more persons including the driver without any additional conditions. On the other hand, Heading 87.03 excluded vehicles covered under 87.02 and was specifically for motor cars and other vehicles designed for the transport of persons. The Commissioner emphasized that the provisions of the Motor Vehicle Act could not be applied to the classification issue. The Commissioner found merit in the respondent's argument and rejected the revenue's appeal based on the facts and evidence favoring the respondent's classification.
Upon hearing both sides, the Tribunal found no flaw in the view taken by the authorities below. The Tribunal highlighted that Heading 87.02 specifically covered vehicles meant for the transport of 10 or more persons, including the driver, while 87.03 encompassed vehicles not falling under 87.02. The Tribunal agreed with the Commissioner that there was no requirement in Heading 87.02 to interpret the provisions in line with the Motor Vehicles Act. As the vehicle in question was intended for the transport of 10 or more persons, it fell under Heading 87.02, and Heading 87.03 applied to vehicles not covered by 87.02. Therefore, the Tribunal rejected the revenue's appeal, concluding that the vehicle should be classified under Heading 87.02.
In conclusion, the Tribunal upheld the classification of the motor vehicle under Heading 87.02 for the transport of 10 or more persons, including the driver, based on a thorough analysis of the relevant provisions and arguments presented by both parties. The decision was made considering the specific descriptions and distinctions between Heading 87.02 and 87.03, ultimately rejecting the revenue's appeal and affirming the classification under Heading 87.02.
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2005 (7) TMI 260
Penalty - Misdeclaration in the quantity of the fabrics - Confiscation of goods used for concealing - deposit of duty before the show cause notice - demand duty - HELD THAT:- The intention on the part of the appellant to evade can be inferred without any hesitation from the fact that there was mis-declaration in the quantity of the fabrics, which fact also stands accepted by Shri Ratan Goel. In such a situation they are required to be met with penalty and cannot be allowed to go scot-free on the mere ground that, on being pointed out they deposited the duty. The ratio of the Allahabad High Court decision in the case of Pee Aar Steels (P) Ltd.[2004 (4) TMI 85 - HIGH COURT OF JUDICATURE AT ALLAHABAD] is that imposition of penalty has nothing to do with the timing of the show cause notice. As such, we are of the view that penalty has been rightly imposed upon M/s. Saheli Synthetics Pvt. Ltd. However, keeping in view the fact of deposit of duty before the show cause notice and considering the same as a mitigating factor, we reduce the penalty from Rs. 15 lakhs to Rs. 7.5 lakhs.
As regards confiscation of the excess found goods, the appellant have not contested their liability to confiscation. Accordingly, we uphold the same. However in the facts and circumstances of the case, we reduce the redemption fine from Rs. 20 lakhs to Rs. 7.5 lakhs. As regards confiscation of the declared quantity of fabrics, we take note of the Tribunal's decision in the case of Ashoka Traders v. Collector of Customs [1988 (7) TMI 287 - CEGAT, BOMBAY]. The facts in the above decision are parallel to the facts in the present case. Thus, we uphold the confiscation of the declared quantity under the provisions of Section 119 of the Act, but reduce the redemption fine to Rs. 5 lakhs.
Personal penalties on Shri Ratan Goel, it is seen that he was the person actively involved in importation of the excess quantity and was a ware of the said fact. He has also deposed in his statement that he was aware of the fact that it is an offence under the Customs Act. Thus, we are of the view that a separate penalty on Shri Ratan Goel should be upheld. However keeping in view, the overall facts and circumstances of the case we reduce the penalty from Rs. 5 lakhs to Rs. 2 lakhs.
Penalty of Rs. 50,000/- on Shri Santraj Singh Megaj Singh Tanwar, we do not find any justifiable reason to impose penalty upon him inasmuch as in his very first statement he has deposed his unawareness about excess quantity. Even Shri Ratan Goel has admitted that apart from him no other person for their company was aware of the fact of excess importation. Thus, we set aside the personal penalty to Rs. 50,000/- upon Shri Santraj Singh Megaj Singh Tanwar.
In a nutshell all the appeals are disposed of in the following manner :- i) Duty of Rs. 42,31,027/- is confirmed against M/s. Saheli Synthetics Pvt. Ltd., as not contested.
(ii) Penalty of Rs. 15 lakhs imposed on M/s. Saheli Synthetics Pvt. Ltd. is reduced to Rs. 7.5 lakhs.
(iii) Confiscation of excess found non-declared goods is upheld but redemption fine is reduced to Rs. 7.5 lakhs.
(iv) Confiscation of declared fabrics is upheld under the provisions of Section 119 of the Customs Act, but redemption fine is reduced to Rs. 5 lakhs.
(v) Penalty of Rs. 5 lakhs on Shri Ratan Kumar Ramvilas Goel is reduced to Rs. 2 lakhs.
(vi) Penalty of Rs. 50,000/- on Shri Santraj Singh Megaj Singh Tanwar is set aside.
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2005 (7) TMI 259
Issues involved: Imposition of penalty based on the statement of a co-accused without corroborative evidence and the validity of the penalty imposed.
Summary: the present case, the penalty was imposed on the appellants solely based on the statement of a co-accused, Shri Birendra Rai, whose identity was unknown and provided a fake address. The appellants argued that no corroborative evidence was presented, and Shri Birendra Rai did not participate in the proceedings. The appellants relied on precedents like Jaswinder Singh v. Collector of Customs, New Delhi for setting aside the penalty. On the other hand, the respondent supported the impugned order.
Upon hearing both sides, it was observed that the contraband silk was allegedly recovered from Shri Birendra Rai, who did not appear during the proceedings and provided a false address. Despite a search of the appellants' premises yielding no incriminating evidence, the penalty was solely based on the uncorroborated statement of the absent co-accused. The Tribunal cited previous cases like Jaswinder Singh and Mehmood Khan v. Commissioner of Customs, NER, Shillong to emphasize the importance of independent corroboration in such cases.
Consequently, the Tribunal found the penalty unjustifiable due to the lack of evidence against the appellants and set aside the impugned order, allowing the appeal in favor of the appellants.
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2005 (7) TMI 258
Issues Involved: 1. Disallowance of Modvat credit on inputs during the period 1996-97. 2. Allegations of misuse of Modvat credit by the assessee. 3. Imposition of penalties under Rule 209A of the Central Excise Rules on the assessee, directors, and dealers. 4. Reversal of credit as per Annexure A and Annexure B. 5. Redetermination of penalties and interest.
Detailed Analysis:
1. Disallowance of Modvat Credit on Inputs: The assessee, engaged in the manufacture of Iron & Steel Products, availed Modvat credit on inputs such as M.S. Scrap obtained from manufacturers and dealers. A notice dated 3-5-2001 proposed disallowing the credit availed during 1996-97 under Rule 57-I(ii). The notice included Annexure A, listing 17 invoices with vehicle numbers that could not have transported the scrap, and Annexure B, listing demands on credits availed based on investigations revealing discrepancies.
2. Allegations of Misuse of Modvat Credit: The notice alleged that the assessee indulged in misuse of Modvat credit by receiving goods different from those specified in the invoices, as corroborated by dealer statements. It was claimed that the assessee had full knowledge of this and availed credit illegally, without producing evidence of transportation. The dealers also failed to produce documents of truck movements, with some vehicles being tankers or delivery vans incapable of transporting the scrap quantities mentioned.
3. Imposition of Penalties: The Commissioner confirmed the charges and ordered recovery of credit with interest, imposing penalties on the assessee, directors, and dealers under Rule 209A. The assessee, director, and certain dealers appealed against these penalties.
4. Reversal of Credit as per Annexure A and Annexure B: - Annexure A: The assessee did not seriously challenge the reversal of credits listed in Annexure A, except for the finding of non-receipt of inputs. The Tribunal found no merits in the plea regarding incorrect vehicle registration numbers and confirmed the reversal of credit. - Annexure B: The Tribunal examined the Revenue's case based on dealer statements and found no allegations of non-duty paid scrap or short quantities received. It was noted that sorting of scrap by dealers is permissible, and credit cannot be denied if the duty paid scrap is supplied. The Tribunal found that the dealers' statements did not support the allegations of non-supply or supply of non-duty paid scrap.
5. Redetermination of Penalties and Interest: The Tribunal concluded that the penalties imposed for both Annexure A and Annexure B liabilities required reconsideration. Penalties on dealers not connected with the 17 invoices in Annexure A were set aside. The appeals were remanded for redetermination of penalties on the assessee, directors, and dealers concerning Annexure A invoices. The Tribunal also directed that the question of demands under Rule 57-I(ii) and interest be determined afresh, considering the substitution of Modvat rules and relevant Tribunal decisions.
Conclusion: The appeals were partially allowed, and the case was remanded for redetermination of penalties and interest in accordance with the Tribunal's findings. The Tribunal upheld the reversal of credit for Annexure A but found no case for denial of credit for Annexure B. The penalties on certain dealers were set aside, and the matter was remanded for reconsideration of penalties on the assessee, directors, and other dealers related to Annexure A invoices.
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2005 (7) TMI 256
The Appellate Tribunal CESTAT, Mumbai upheld the classification of large sized crystals obtained from ordinary sugar crystals under heading 1701.39, rejecting the Revenue's argument to classify them under 1704. The chemists reports and slow crystallization process supported this classification, distinguishing them from sugar candy under 1704. The Tribunal found no merit in the Revenue's appeal and rejected it. Cross Objection filed was disposed accordingly.
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2005 (7) TMI 255
The Appellate Tribunal CESTAT, Mumbai upheld the Assistant Commissioner's decision that "Insulated Wires & Cables" are not eligible for a specific benefit. The Tribunal ruled that the wires and cables should be classified under Heading 85.44 and not as parts of a system. The Revenue's appeal was allowed, setting aside the Commissioner's order and restoring the Assistant Commissioner's decision.
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2005 (7) TMI 254
The case involved the classification of "JABKUSUM AYURVEDIC HAIR PACK" under different headings. The entity claimed to cure dandruff and hair fall, following Ayurvedic practices. The Appellate Tribunal upheld the Assistant Collector's order classifying it under Chapter 30 as a medicament, setting aside the CCE (A) order. The appeal was allowed in favor of the assessee.
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2005 (7) TMI 253
Valuation (Customs) - Imports Ethyl Benzene - Raw material - seeking addition of royalty under Rule 9(1)(c) and Rule 9(1)(d) - HELD THAT:- In the instant case, the payment of royalty is not related to imports of Ethyl Benzene and Styrene Monomer. It appears, the respondents do not have any obligation to import these goods only from their collaborators abroad. It has been noted by the lower authorities that they have in fact imported these goods from non-related suppliers at comparable prices. As such, it cannot be said that the royalties have been paid as a condition of sale of the imported goods. On the other hand, the agreement between the collaborators abroad and the respondents requires payment of royalty on finished goods manufactured and sold in India. The amount of royalty specified under the agreement relates to sale price of the goods less certain deductions. The applicant Commissioner himself has stated in the grounds of appeal that in effect the royalties are being paid on manufacturing cost plus profit plus the value of raw materials. Just because a particular formula has been designed to calculate the royalty amount which also includes the raw material cost, it cannot be said that the royalty payment is related to the imported goods.
In fact, the royalty is payable on the "Net Selling Price" of all "Agreement Products" under the agreement and such products have been defined to mean "polystyrene polymers manufactured in whole or in part according to existing technology or improvement." Such payment of royalty is not therefore restricted to polystyrene polymers manufactured using impugned goods imported from the related suppliers only. We find that the impugned agreement provides for payment of running royalty under the know-how agreement and relates to goods manufactured and sold indigenously. Such payment of royalty to BASF, Germany is for using BASF technology and has also been approved by the R.B.I. Thus, we are of the view that the amount of royalty in question cannot be added to the declared value under the said sub-rule (c) either.
Revenue's contention seeking addition of royalty under Rule 9(1)(c) and Rule 9(1)(d) fails in view of our findings above. As such, we dismiss the appeals filed by the department. The cross objection filed by the respondents also stands disposed off.
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2005 (7) TMI 252
Issues: Classification of goods under Central Excise Tariff - Heading 8501 or 8503
Analysis: The case involves the classification of goods under the Central Excise Tariff, specifically whether the brushless alternator and its components should be classified under Heading 8501 or 8503. The dispute arose when the Dy. Commissioner and Commissioner (Appeals) classified the goods under Heading 8503, leading to a demand for differential duty. Upon appeal, the matter was remanded to the Dy. Commissioner for reconsideration in light of Note 4 of Section XVI of the Central Excise Tariff Act, 1985. The Dy. Commissioner, in the subsequent adjudication, concluded that when the alternator is cleared along with its components, it should be classified under Heading 8501. This decision was based on the essential nature of the components for the alternator to function independently in railway coaches. The Dy. Commissioner also highlighted that when the components are cleared separately, they should be classified under sub-heading 8503. However, the Commissioner (Appeals) set aside this decision and demanded a differential duty, leading the appellants to appeal to the Tribunal for relief.
Legal Arguments: During the proceedings, the learned Advocate for the appellants argued that the Dy. Commissioner's classification under Heading 8501 was correct, emphasizing that the Commissioner (Appeals) had erred in his findings, which were inconsistent, erroneous, and against the facts of the case. The Advocate also pointed out that the end use of the goods should have been a crucial criterion, citing the opinions of the end user railways and various decisions supporting the classification under Heading 8501. On the other hand, the Commissioner (Appeals) failed to consider these aspects adequately and incorrectly classified the goods under Heading 8503 based on their independent function, which was disputed by the appellants.
Tribunal Decision: After careful examination of the case records, the Tribunal noted that the components cleared along with the brushless alternators, including items like Axle Pulley, Alternator Pulley, and Rectifier-cum-regulator, were tailor-made for the specific requirements of the Indian railways. The appellants argued that these components were strictly necessary for the integrated purpose of generating electricity for lighting and air conditioning in railway coaches. In line with Note 4 to Section XVI of the Central Excise Tariff, which considers components essential for integrated functions, the Tribunal upheld the Dy. Commissioner's classification under Heading 8501. The Tribunal found the Original Authority's decision legally sound, leading to the allowance of the appeal with consequential relief for the appellants.
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2005 (7) TMI 251
Issues: Waiver of pre-deposit of duty amount and penalty under Rule 6(2) of Cenvat Credit Rules for failure to maintain separate records of inputs used in manufacturing exempted and dutiable goods.
Analysis: The appellants sought waiver of pre-deposit of duty amount and penalty as confirmed against them for not maintaining separate records of inputs used in manufacturing exempted and dutiable goods. The counsel argued that the appellants did maintain records for inputs on which credit was availed and for those on which credit was not availed. It was also highlighted that even for inputs initially credited but later used in exempted goods, the credit was reversed. On the contrary, the SDR contended that lack of separate records for some inputs did not exempt the appellants from paying 8% of the value of clearances of exempted goods under Rule 6 of the Cenvat Credit Rules, 2002.
Upon reviewing the impugned order and Rules 6(2) and (3) of Credit Rules, 2002, it was observed that while there was no specific condition for separate stock/storage of common inputs, maintaining separate accounts was deemed necessary. The adjudicating authority noted discrepancies in maintaining separate accounts for certain inputs like felts, wires, oil, and greases. However, the Asstt. Commissioner's report confirmed that the assessee did maintain separate records of inputs used in manufacturing exempted goods and reversed the credit for inputs used in such goods, as observed by the learned Commissioner.
Considering the facts and the reversal of Modvat credit by the appellants for inputs used in exempted goods, it was concluded that the appellants had a strong case on merits. Consequently, the stay application was allowed, and the appeal was scheduled for regular hearing in due course.
The judgment was delivered and pronounced in open court on 8-7-2005 by the Appellate Tribunal CESTAT, New Delhi, with the order being dictated by Member (J) P.S. Bajaj.
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