2016 (3) TMI 563 - AT - Central Excise

Extended Period of limitation invoked - Duty demand - department was not aware whether the products in question is for use in the manufacture of Air Conditioners, therefore there is suppression of fact on the part of the Appellant - Held that - Show cause notice dated 09.09.98 was issued for the period 14.09.93 to 31.03.97 i.e. entire demand raised is for the period before one year of the issue of show cause notice. Hence the total demand is covered under extended period as provided in the first proviso to Section 11A of Central Excise Act, 1944. From the records, it is revealed that the goods in question manufactured by the Appellants are solely supplied to Voltas Ltd to their Aircondioning manufacturing unit. We find that the Appellant were submitting their Classification List during the aforesaid period from time to time in respect of the goods manufactured by them which were supplied to Voltas Ltd. We also observed that alongwith the Classification Lists, the appellant were also filing drawings of the products supplied by Voltas Ltd. to the department. On careful perusal of the drawings, we have seen that the drawing clearly indicates Air-condition and it s model, for example 1.5 T RAC , 1.5 TON NEW SPLIT RAC , 1.5 TON RAC HI-TECH . From the said details given in the drawings submitted alongwith classification list, it can be known that the parts being manufactured by the appellant is meant for use in the manufacture of Air Conditioners. However from the above discussed facts, it is clear that the drawings of the parts was showing the description of Air Conditioners for which these parts were being supplied by the appellant. Moreover, the appellant is a manufacturer of the various sheet metal parts for different buyers and not only to Voltas Ltd. therefore from their point of view they are of bonafide belief that all the items such as washers, springs and other articles of steel manufactured by them are classifiable in the specific tariff entry given therefor. We find that the bonafide belief of the appellant for classification of the goods can not be doubted in view of the above undisputed facts. The Ld. Adjudicating Authority should not have invoked the extended period as there is no suppression of the facts on the part of the appellants. The entire demand, therefore, is hit by limitation. - Decided in favour of assessee

Summary

Issues:
1. Duty demand confirmation and penalty imposition under Section 11AC of CEA, 1944.
2. Personal penalty imposition under Rule 209A of Central Excise Rules, 1944.
3. Recovery of interest under Section 11AB.
4. Classification of goods manufactured by the appellants.
5. Time bar issue regarding the Show Cause Notice.
6. Bonafide belief of the appellants in classification of goods.

Analysis:

1. Duty Demand Confirmation and Penalty Imposition:
The Commissioner confirmed a duty demand of Rs. 21,52,314 and imposed a penalty of Rs. 16,16,210 under Section 11AC of CEA, 1944. Additionally, a personal penalty of Rs. 2,00,000 was imposed on Shri. Sharad B. Shah under Rule 209A of Central Excise Rules, 1944.

2. Recovery of Interest:
The order also included the recovery of appropriate interest under Section 11AB of the Central Excise Act, 1944.

3. Classification of Goods:
The issue revolved around the classification of goods manufactured by the appellants. The products, including Grill Assembly and Black Grill Assembly, were supplied to M/s. Voltas Ltd. Thane for use in the manufacture of Air Conditioning Machinery or Compressor for Room Air Conditioners. The classification under Chapter sub-heading 8415.00/8414.91/8414.92 was disputed.

4. Time Bar Issue:
The appellants argued that the demand was time-barred as the Show Cause Notice was issued after four years from the first classification list filing. They contended that the demand for the period from 14/9/1993 to 31/3/1997 was beyond the permissible time limit.

5. Bonafide Belief in Classification:
The appellants maintained a bonafide belief in the classification of goods based on the drawings supplied by M/s. Voltas Ltd. and the approvals received from the department regarding the classification of their products under specific tariff entries. They argued that the extended period invoked by the Adjudicating Authority was unwarranted due to the absence of suppression of facts on their part.

6. Judgment and Disposition:
The Tribunal found that the demand was hit by limitation as the entire demand was covered under the extended period without any suppression of facts by the appellants. The bonafide belief of the appellants in the classification of goods was upheld, and the extended period was deemed inapplicable. Consequently, the impugned order was set aside, and the appeals were allowed. The personal penalty imposed on Shri. Sharad B. Shah was also deemed unsustainable in light of the findings.

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