9911796707
TMI Blog1994 (3) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... y in as much as it is alleged that : (i) The appellants were engaged in the manufacture of various parts of Audio Cassette Housing viz. (1) Shell (2) Hub and Hub Pin (3) Roller (4) Black Paper/paper file (5) Shield/Patti (6) Screw (7) Pressure Pad and (8) Stickers in their factory premises and out of these parts, they were further manufacturing and assembling the said `Audio Cassette Housing' which in addition to being consumed in their factory in the further manufacture of Audio Cassettes (blank and recorded) was also being sold to outside parties. 2. It is also stated that they manufacture various parts of audio cassette housing in the following manner : 1. Shell - The two sides of the shell are manufactured by moulding plastic granules on plastic moulding machines. 2. Hubs and Hub-pin The two Hubs and Hub-pins are also manufactured by moulding plastic granules on plastic moulding machines. 3. Roller - The two rollers are also manufactured by moulding plastic granules on plastic moulding machines. 4. Black Paper/paper file - Sheets of black paper are imported/procured and then are cut to size. 5. Shield/patti - Sheets of Patti are imported/procured and then cut to siz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cushion to the magnetic tape and thus facilitates the reproduction of coherent sound. (vii) Screws : These keep all the parts of the audio cassette at their respective places, thus facilitating the audio cassette to function normally by screwing the two sides of the shell. 6. It is alleged that all the said parts of the `Audio Cassette Housing' are solely and principally designed to function as essential and integral part of the `audio cassette'. These goods have got no other use at all except to be used as essential and integral parts of the audio cassette. 7. It is further stated that said `Audio Cassette Housing' and parts thereof are not articles of general use but are articles specifically made to work for specific purpose i.e. to take the precut tape. Thus, essentially the said `Audio Cassette Housing' and parts thereof are parts of the principal item as they are specific and distinguishable parts of an Audio Cassette, which simply emerges when a `cut' is put inside an `Audio Cassette Housing'. 8. For the purpose of classification of Audio Cassette Housing, the department has referred to the relevant section notes and chapter notes in Central Excise Tariff Act, 1985 viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Central Excise Tariff Act, 1985 is an Act in itself and so the notes, rules of interpretation and explanations appearing in the present tariff are solely to be taken into account for deciding the classifiability of any product. 13. It is further stated that the Heading 85.23 covers alike both `Audio Cassette (Blank) and Video Cassettes (Blank) so also the `Audio Magnetic Tape' and Video Magnetic Tape and so the same yardstick should be applied while classifying the `Audio Cassette Housing' and parts thereof and Video Cassette Housing and parts thereof. 14. Therefore, it is alleged that the `Audio Cassette Housing and parts thereof would merit classification under Heading 85.23 w.e.f. 1-3-1986 with introduction of Central Excise Tariff Act, 1985 and not under Chapter 39 which deals with articles of plastics of general use. It is further stated that `Audio Cassette Housing and parts thereof' is an intermediate product, which is further used in the manufacture of final product Audio Cassette (Blank as well as recorded) and as the final product Audio Cassette (blank) and Audio Cassette (recorded) are not chargeable to duty therefore this intermediate product, would be char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,63,738 nos. of the said product, firms had by their letter dated 26-5-1988 for the period 1-3-1986 to 13-10-1987, the department has valued the same at Rs. 1,65,63,464.00 and demanded duty @ 25% ad valorem of Rs. 41,40,866.00. 16. The appellants filed their reply dated 13-12-1991 to the show cause notice. Inter alia, they submitted that `Audio Cassette Housing' (ACH) consists of 2 panels and it is itself a part of "Audio Cassette Tape" and the said ACH does not have any parts as stated in the show cause notice. They say that it is so because the various parts like Hubs and Hub-pins, rollers, black paper/paper file, shield/patti and pressure pad are "housed" in the "Audit Cassette Housing" i.e. in the aforesaid two panels, the said two panels put together are called as "Audio Cassette Housing". They submit that `Audit Cassette Housing' `shell' and `casing' are one and the same. They state that they are not manufacturing black paper, shield, patti, pressure pad and screws and the same were purchased as such by them from the market. They state that alongwith the plastic component parts manufactured by them, they are simultaneously assembled in the housing and thereafter the two pan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exceeding Rs. 75 lakhs but not exceeding Rs. 1.5 crores. They state that on the reverse of the said classification list, they had declared that the plastic cassette components i.e. housing, I/C `International Cover', Hubs, stopper and roller and claimed nil rate of duty in respect of the aforesaid plastic Cassette Components by classifying the same under sub-heading No. 3923.00 of the said schedule. They state that the said Plastic Cassette Components are exempted from duty under S. No. 38 of the Table annexed to Notification No. 132/86-C.E., dated 1-3-1986. They state that the said classification list was verified by the Jurisdictional Superintendent of Central Excise on 18-3-1986 and thereafter the same was forwarded to the jurisdictional Assistant Collector for approval. They state that before the aforesaid Assistant Collector could approve the said classification list they had submitted a revised classification list effective from 2-4-1986 whereunder they had showed the following products : "i. Audio Cassette Tape (blank) - Type C. 60 and C. 90 ii. Sound recorded cassette Tape - Type C-60, C-45, C-36 and articles of plastic i.e. housing, I/C (International Cover), hubs, stopp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of duty paid on the various raw materials used in, or in relation to the manufacture of "Audio Cassette housing and parts thereof", which they did not manufacture, will have to be taken into consideration as Modvat credit of duty and adjusted against the Central Excise duty held to be payable to them." 18. The ld. Collector on a careful consideration of their reply rejected their pleas and confirmed the demands/raised in the impugned show cause notice besides imposing personal penalty of Rs. 10 lakhs under Rule 173Q of Central Excise Rules, 1944. The ld. Collector has held that the two penals and other parts are designed in such a fashion that when the Audio Cassette Tape come into existence ipso-facto Audio Cassette Housing, comes into existence. He has further held that Audio Cassette Housing is an essential and integral part of Audio Cassette Tape and is meant solely and principally to be used in the manufacture of Audio Cassette Tape. He has further held that the application for licence for manufacture of Audio Cassette Tape was made without giving the details of manufacturing process. And after making further discussions on this point the ld. Collector has concluded that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t article of plastic intended for use in the manufacture of goods falling under Heading 85.23. It is thus excluded from Heading 85.23 as per the said Explanatory Note. He, further, argued that the Section 2(a) or (b) of Section XVI cannot be applied in the present case. The counsel argued that as per this Section Notes, parts which are suitable to use solely and principally with a particular kind of machine are to be classified with that particular kind of machine. He submitted that the appellant had manufactured sound recorded cassette tape falling under Chapter 85.24 which is exempted from whole of duty vide Notification No. 68/86 dated 10-2-1986 vide Serial No. 12 to the table annexed therein. Therefore, arguing further the ld. counsel submitted that even if Section Note 2(b) is applied even then the expression "sound recording cassette tape" would cover even the parts which are suitable for use solely or principally with sound recorded cassette tapes. Even going by the department's own case, the audio cassette would fall under Heading 85.24 and thus were exempted under Serial No. 12 of Notification No. 68/86. Further, he contended that there is no entry for audio cassette housi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce invoking of larger period is fully justified. 21. Ld. Counsel further pointed out that Note 1(c) of Section XVI which reads with as follows : Bobbins, Spools, Cops, Cones, Cores, Reels or similar supports of any material (for example Chapter 39, 40, 44 or 48 of Section XV). Ld. Counsel pointing out to the above note submitted that items which are acting as support of any material in the nature of item described in Note 1(c) are excluded from Section XVI. Therefore, Chapter 85 is excluded for the purpose of classification. The item is also not an apparatus or a machinery and, therefore, Note 2(a) and 2(b) refer to parts of machine and hence the item cannot be classified under sub-heading 85.23 and sub-heading 85.24 and hence the departments classification is not correct. 22. The questions that arises for our consideration is : (i) as to whether the impugned products are marketable and whether they can be treated as goods for the purpose of classification. (ii) if so the correct classification ? (iii) whether the applicants are entitled for MODVAT credit ? (iv) whether the demands are time barred ? As can be seen from show cause notice the appellants are alleged to have man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht parts have been marketed by the appellants. Even if they emerge in the intermediate stage, the department has to show that the said product emerging at that stage is independent goods, which are marketable and duty is imposable thereof. This burden has not been discharged by the department. It is for the department to have shown that in the trade and commercial parlance, they are goods with a name, character and use of "Audio Cassette Housing". The allegation itself discloses that only three of the parts are manufactured by the appellants, while rest of the other items are procured from outside. The three items which are manufactured are essential items for the final product, and, therefore, the appellant's contention that the tape is required to be fitted and assembled by them along with other items and what emerges is final goods itself, is a submission which has not been controverted by the department. There is also no tariff entry specifying audio cassette housing, as goods. The first three items Shell, Hub and Hub Pins and Roller are undoubtedly made out of moulding plastic granules on plastic moulding machine. They are in the nature of plastic articles. But even to conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s-declared and suppressed the manufacture of the goods is totally without any basis and therefore, demands are barred by time and not recoverable. In that view of the matter, the appellants succeeded and appeal is allowed. 25. [Order per : P.C. Jain, Member (T)]. - I have perused the order proposed by my learned brother, Shri S.L. Peeran, Judicial Member. 26. Learned Judicial Member has held that the Audio Cassette Housing (CO) which is the subject matter of the dispute in the present case has not been proved to be marketable by the department the burden of which lies on the Revenue. Hence the impugned goods are not liable to duty. I agree with the conclusion of non-duty liability of the Audio Cassette Housing (CO) on different grounds, as set out below without recording my views on the plea of marketability taken by the appellants. 26.1 I feel that on the basis of manufacturing process undertaken by the appellants and the finding thereon recorded in the impugned order itself, I am of the view that no product which can be described as Audio Cassette Housing (CO) has come into existence in the course of manufacturing process before coming into existence of Audio Cassette Tape whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ousing and parts thereof' does not arise." [Emphasis supplied by the advocate] 26.2 Findings recorded on this plea by the adjudicating authority in the impugned order is also reproduced below :- "In so far as only the component parts can make the whole. The `Whole' in the case is the Audio Cassette Housing whereas the component parts are `Shell' `Hub' `Hub Pins' etc. Audio Cassette Housing as per the argument of the noticee itself is an independent goods commonly known as Co. But it has been contended that this Audio Cassette Housing does not come into existence in the process of manufacture of Audio Cassette Tape. The two panels of Housing alongwith other parts and magnetic tape are screwed together with 5 screws and the resultant product is Audio Cassette Tape. It has been declared so by the noticee while taking out the L-4 licence. Thus as per contention of the noticee in the course of manufacture of Audio Cassette Tape, Audio Cassette Housing does not come into existence and so it has been contended that Audio Cassette Housing is not manufactured at all. But the fact remains two panels and other parts are designed in such a fashion that when the Audio Cassette Tapes came in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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