Customs, Excise and Gold Tribunal - Delhi
D.S.M. Industries vs Collector Of Central Excise on 20 June, 1997
Equivalent citations: 1997ECR316(TRI.-DELHI), 1997ECR649(TRI.-DELHI), 1997(94)ELT588(TRI-DEL)
ORDER
U.L. Bhat, J. (President)
1. This appeal is directed against the order dated 31-5-1989 passed by the Additional Collector of Central Excise, Madurai confirming demand to the extent of Rs. 1,61,389.59, directing seized goods to be treated as confiscated with redemption fine of Rs. 6,000/- and imposing penalty of Rs. 5,000/-.
2. The appellant has two units, one at Tiruchirapally and the other at Karur. Railway brake blocks (iron casting) were being manufactured at the Karur factory, while certain other products were under manufacture at the Tiruchirapally factory/Appellant had not taken excise licence for Karur factory and brake blocks were being cleared without payment of duty. Excise officers visited the Karur factory on 2-9-1988 and finding the above state-of-affairs seized the manufactured goods available in the factory. Show cause notice dated 27-2-1989 was issued alleging that brake blocks fall under Heading 86.07 and duty was payable and proposing demand of duty in respect of clearances made without payment of duty during the years 1986 to 1988 and proposing confiscation of the seized goods and proposing imposition of penalty. It was found that no duty was payable in regard to clearances in 1988-89 on account of SSI exemption being available. Appellant contended that brake blocks are nothing but iron castings falling under Heading 73.07 and are wholly exempt from payment of duty under Notification 208/83 and therefore there was no liability to take out licence or to pay duty.
3. The Assistant Collector overruled the contentions of the appellant and held that brake blocks manufactured and cleared by the appellant attracted tariff Heading 86.07 and the goods were therefore dutiable and did not enjoy the benefit of exemption under Notification 208/83. It was on the basis of this finding that the impugned order was passed. Hence the appeal.
4. Learned Counsel for the appellant conceded that the impugned order is correct in regard to classification going by the decision of the Tribunal in Nagpur Engineering Co. v. COCE - 1993 (63) E.L.T. 699. However, he contended that the show cause notice was barred by time inasmuch as the allegation of suppression could not be true and the appellant had acted bona fide throughout. This contention is strenuously resisted by Shri M. Jayaraman, JDR.
5. Appellant pointed out that iron castings or brake blocks were not covered by any tariff entry prior to 1964 and the residuary item T.I. 68 was introduced only in 1975. Iron castings were for the first time incorporated in the tariff under T.I. 25 only in 1964. New Tariff Heading 73.07 deals with iron castings and new tariff Heading 86.07 deals with parts of railway rolling stocks. It was further pointed out appellant bona fide believed that since brake blocks are essentially iron castings and iron castings are specifically covered by Heading 73.07, appellant was under bona fide belief that the goods in question attracted Heading 73.07 and not 86.07. It was for this reason that declaration was not filed before the Superintendent having jurisdiction over Karur factory and classification list was not filed and licence was not taken out. It was also pointed out that duty was not paid since iron castings falling under Heading 73.07 would enjoy the benefit of full exemption under Notification 208/83. In answer, it was pointed out for the Department that there may be justification for not filing classification list or even for non-payment of duty, but the failure to file declaration before the jurisdictional Superintendent at Karur would go against the plea of bonafide belief now raised. This was met with the reply that if the appellant had the intention to suppress the manufacture of brake blocks from the Department, the matter could not have been disclosed even to the Superintendent at Tiruchirapally and, as a matter of fact/in the declaration filed in respect of Tiruchirapally factory it was specifically shown that iron castings were being manufactured at Karur factory but enjoyed the benefit of exemption in Notification 208/83.
6. In the above connection, learned Counsel for the appellant placed reliance on three decisions of the Tribunal. In Nagpur Engg. Co. Ltd. case 1993 (63) E.L.T. 699 declaration had been filed showing manufacture of particular goods but duty was not being paid even after change of classification. The Tribunal held that in view of the past history in regard to classification and circular dated 8-2-1987 of the Department of Revenue to the effect that castings not subjected to processes other than the six processes enumerated therein should be classifiable under Heading 73.07, assessee can be said to have been under a bonafide belief that the subject goods even after change of tariff were classifiable as iron castings under Heading 73.07 and consequently the failure to apply for licence cannot amount to suppression, specially in the absence of any conscious or deliberate withholding of information. This decision has been followed by the Tribunal in Bakshi Steels Ltd. v. COCE, Jaipur - 1994 (71) E.L.T. 1013 (Tribunal), in which case also declaration had been filed. According to Shri Jayaraman, JDR these decisions are distinguishable inasmuch as in those cases the assessee had filed declaration.
7. The third decision placed before us in Final Order E/5/95-B1 in Appeal No. E/490/88-B of the Tribunal. Appellant in that case M/s. Nagpur Alloy Castings Ltd. were manufacturing 'inserts' which are cast iron products embedded in concrete railway sleepers. Appellant had not obtained central excise licence nor paid duty. In this case no declaration had been filed. The Bench held as follows:-
"...We note that castings were exempted from duty in terms of notification cited above for a long period before the tariff was changed in March, 1986. The exemption to castings not elsewhere specified continued even after this stage. It is evident that the Central Excise Department itself was unsure about the classification of the castings for quite some time under the new tariff. It was only in June, 1987 that relying upon the clarification from the Central Board of Excise & Customs, the doubt as to classification of the insert was resolved by issue of Trade Notices by various Collectors.... In the light of these facts, it is reasonable to accept the appellants claim that it was under the bona fide belief that goods continued to enjoy exemption and no licence or declaration was necessary. This plea is fortified by the fact that the sole user of the goods is Indian Railways which, by its various contracts with the appellant for the supply of the goods, have indicated the excise duty to be nil but have accepted the liability for payment of such duty if it became leviable."
Facts of the present case are more or less similar to the facts of the case of Nagpur Alloy Castings Ltd. as indicated above. The reasons which weighed with the Tribunal in holding that the appellant entertained,a bona fide belief as indicated above and, therefore, larger period of limitation under the proviso to Section 11A of the Central Excise Act, 1944 would, with equal force, apply to the situation arising in the appeal under consideration. We, therefore, hold that the larger period of limitation would not be available and the claim for demand fails. Consequently, other actions initiated in the show cause notice and finalisation thereof must fail.
8. For the reasons indicated above, we set aside the impugned order and allow the appeal.