1996 (1) TMI 372 - AT - Central Excise

Tribunal upholds reclassification of goods as aluminum wire, penalty reduced

The Tribunal upheld the reclassification of the goods as aluminium wire under Chapter Heading 76.05, applying relevant duty rates. The demand was deemed ... Demand - Limitation - Suppression - Penalty - Imposition of Issues Involved:1. Classification of the goods in question (wire rods/properzi rods or aluminium wire).2. Applicability of Notification No. 150/86 for statutory supply and Notification No. 101/88 for non-statutory supply.3. Whether the demand is hit by limitation.4. Imposition of penalty.Issue-wise Detailed Analysis:1. Classification of the Goods:The appellants argued that the product in question, known as 'wire rods' in the market, should be classified under Chapter Heading 7604.10. They referenced the Supreme Court decision in Indian Aluminium Cables Limited v. Union of India and the 'Indian Standard Glossary of Terms' to support their claim that properzi rods are known as wire rods. However, the Tribunal noted that Chapter Note 1(a) of Chapter 76, introduced by the Finance Bill of 1988, clearly defined 'Bars and Rods' as products not in coils, while 'Wire' is defined as products in coils. The Tribunal concluded that since the properzi rods were in coil form, they should be classified as aluminium wire under Chapter Heading 76.05. This reclassification led to an increase in duty, effective from 1-3-88 as per Section 3 of the Provisional Collection of Taxes Act, 1931.2. Applicability of Notifications No. 150/86 and No. 101/88:The appellants contended that they were entitled to the benefits under Notification No. 150/86 for statutory supply and Notification No. 101/88 for non-statutory supply. They argued that the duty applicable should be 13% under Serial No. 4 of Notification No. 150/86, as their product conformed to ISI-5484-1978 specifications. The Tribunal, however, held that since the product was classified as aluminium wire under Chapter Heading 76.05, the rates applicable to aluminium wire in the respective notifications would apply. Therefore, the appellants were not entitled to the benefits under the claimed notifications for wire rods.3. Limitation:The Department alleged suppression of facts, stating that the appellants did not declare that the properzi rods were in coil form. The appellants countered that their gate passes and invoices, which were submitted with RT 12 returns, clearly indicated the goods were in coil form. The Tribunal found that the Department was aware of the coil form from the gate passes and invoices, and thus, there was no suppression or misstatement. Consequently, the demand was deemed to be hit by limitation.4. Imposition of Penalty:The Tribunal acknowledged that the appellants were manufacturing wire rods, which, under the new definition effective from 1-3-88, were classified as aluminium wire. The appellants should have submitted a revised classification list reflecting this change. Given the circumstances, the Tribunal held that a penalty was imposable but considered the original penalty of Rs. 35,00,000/- to be harsh. Therefore, the penalty was reduced to Rs. 10,00,000/-.Conclusion:The Tribunal upheld the impugned order with modifications, confirming the reclassification of the goods as aluminium wire under Chapter Heading 76.05, applying the relevant duty rates, recognizing the demand as hit by limitation, and reducing the penalty to Rs. 10,00,000/-. The appeal was disposed of accordingly.