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TMI Blog2004 (1) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... 00. On verification, it was noticed by the Department that the goods are actually used in the manufacture of Internal Combustion Engines by their customers M/s. Kerala Agro Machinery Corporation Limited, Angamally, Ernakulam district. Since parts of IC Engines are classifiable under sub-heading 8409.00 of the Central Excise Tariff Act, 1985, therefore, a Show Cause Notice was issued to the appellants for demanding duty/differential duty involved under Rule 9(2) of Central Excise Rules, 1944 read with Section 11A of Central Excise Act, 1944. The Show Cause Notice was adjudicated by the Commissioner of Central Excise, Bangalore-II Commissionerate under Order No. 2/98, dated 30-4-1998 where he confirmed the differential duty of Rs. 30,42,131/- and imposed mandatory penalty of equal amount under Section 11AC of Central Excise Act, 1944. He also imposed a penalty of Rs. 5,00,000/- on the appellants under Rule 173Q of the Central Excise Rules, 1944. Against this Order-in-Original No. 2/98, dated 30-4-1998, the appellants had filed an appeal before the CEGAT, Chennai. The Tribunal vide its Final Order No. 2913/99, dated 16-11-1999 had remanded the entire matter to the adjudicating authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l parts as per Section Note 2(b) of Section XVI. He relied on the following decisions. (1) Diesel Components Works, Patiala v. CCE - 2000 (120) E.L.T. 648 (T) = 2000 (40) RLT 641 (2) CCE v. Bansal Industrial Corporation - 2000 (118) E.L.T. 119 (T) = 1997 (23) RLT 379 (E.R.) (3) CCE v. M.P. (I) Ltd., v. CCE, Pune - 1990 (46) E.L.T. 68 (Special Bench) (4) Bajaj Auto Ltd. v. CCE, Pune - 1994 (74) E.L.T. 599 (Tribunal) (sic) (5) CCE v. Mahendra Engineering Works - 1993 (67) E.L.T. 134 (Special Bench) (6) Kirloskar Oil Engineers Ltd. v. CCE, Pune - 1998 (27) RLT 334 6.Regarding time-bar issue, Shri Sampath pleaded that duty was being paid on the said goods under the very same sub-heading 8432.00 and in all the classification lists, they have classified the goods which were approved under sub-heading 8432.00. From 1-3-1994, they claimed the exemption after the issuance of Notification No. 46/94. In the 1st classification list dated 12-5-1992 approved on 28-5-1992 they claimed benefit of SSI exemption No. 175/86. The classification list from 1-4-1993 was approved on 14-5-1993. Classification list from 1-3-1994 where they claimed be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise, New Delhi, reported in 2002 (149) E.L.T. 596. She pleaded that in the case of Sree Ganesh Gears Pvt. Ltd. v. The Commissioner of Central Excise, Bangalore, the cases relied upon by the appellants have been distinguished. She pleaded that part of the part cannot be considered as part of the whole in all the situations. In the present case, the parts are specially designed for the IC engines. Therefore, they are correctly classified under 8409.00. She conceded that penalty under Section 11AC is not imposable for the period prior to 28-9-1996. Regarding the time-bar issue, she pleaded that the classification lists were approved on the basis of declaration made by the appellants. Only on investigation, it was found that the parts in dispute are of IC Engines and not of Power tillers and this fact was known to the appellants which was concealed by them. Then the Show Cause Notice was issued by applying the extended period. Therefore, the application of extended period for demanding duty is correct. 10.We have carefully considered the submissions made by both the sides. 11.We find that for classifying the products, recourse is to be taken to Note 2 to Section XVI, which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case, there was no specific entry for these parts, hence these were taken as parts of the main machine/item. However, in the present case, there is no dispute that the parts in dispute are used in the IC engine. Therefore, the ratio of the decision relied upon by the appellants is not applicable. We find that in this case, the appellants are selling the parts to M/s. Kerala Agro Machinery Corporation Limited, Angamally, Ernakulam district who are partly using these IC engines in Power Tillers and some of the IC Engines are sold by them, as is evident from Final Order No. 1522/2003 passed in the case of Commissioner of Central Excise, Cochin v. Kerala Agro Machinery Corporation Limited dated 28-11-2003. Therefore, the question of going to Note 2(b) or 2(c) of Section XVI does not arise. 12.Now coming to the question of time-bar issue, we find that the appellants in their classification lists were classifying the disputed parts as parts of Power Tiller even though, they were knowing that these were going in the IC engines. It is evident from the Order-in-Original No. 2/98/Bang-II, dated 30-4-1998 passed by the Commissioner of Central Excise, Bangalore on the Show Cause Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to evade payment of duty. In his another attempt to convince the authorities that there was no intention on the part of the assessee to evade payment of duty, the whatever duty that became payable and paid by the assessee would have been taken as Modvat credit by the customer and thereby there would be revenue neutralization. In support of his argument, the Counsel has cited the letter dated 7-4-1997 of the Superintendent of Central Excise, Angamally Range II, Kerala addressed to the Superintendent, Range-l, Tumkur, wherein the former had stated that the duty liability would have been neutralized by Modvat credit. I find on perusal of the said letter that the version of the Counsel in this regard was correct. However, for the sake of arguments, if the contention of the Counsel of the assessee is taken as correct, what would happen, when the customer choose to opt out of the Modvat scheme and the manufacturer pays a lesser rate of duty by classifying the products under a different heading than the correct one. In such circumstances, the department is bound to lose its legitimate revenue. Here, I would like to mention again that the Superintendent of Central Excise Angamally Range ..... X X X X Extracts X X X X X X X X Extracts X X X X
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