1984 (9) TMI 283 - AT - Central Excise

Appellants not liable for differential duty as they didn't manufacture complete cells, highlighting importance of accurate classification.

CARBON INDUSTRIES PVT. LTD., MADRAS Versus COLLECTOR OF CENTRAL EXCISE, MADRAS

The Tribunal held that the appellants did not manufacture complete cells, as they only produced carbon and zinc elements, not the entire cells. Therefore, ... - Issues Involved:1. Classification of A.D. wet cells and their components under the Central Excise Tariff.2. Applicability of duty on unassembled A.D. wet cells.3. Allegations of suppression of facts and limitation period for duty demand.4. Use of power in the manufacturing process and its impact on duty exemption.5. Validity of the demand issued by the Assistant Collector.Detailed Analysis:1. Classification of A.D. Wet Cells and Their Components:The appellants are manufacturers of Carbon/Zinc elements under Item No. 68 of the Central Excise Tariff Schedule (C.E.T.). They supplied complete sets of A.D. Cells type AW4 and AW C with accessories in an unassembled condition to the Railways. The Assistant Collector issued a notice alleging that the appellants were required to pay duty on the complete cells, not just the carbon/zinc elements. The Appellate Tribunal held that the unassembled cells did not constitute complete cells manufactured by the appellants, as they only manufactured the carbon and zinc elements and procured other components from the market.2. Applicability of Duty on Unassembled A.D. Wet Cells:The Assistant Collector and Appellate Collector argued that unassembled cells should be treated as complete cells for duty purposes. The Tribunal, however, concluded that the appellants did not assemble the complete cells at their premises, and therefore, the supply of unassembled components did not amount to the manufacture of complete cells. The Tribunal referenced the Madras High Court decision in T.I. Cycles of India, which was not applicable in this case as the appellants did not manufacture all parts of the cells.3. Allegations of Suppression of Facts and Limitation Period for Duty Demand:The Assistant Collector rejected the appellants' contention regarding the limitation period, citing suppression of facts, thus applying a longer period of five years for duty demand. The Appellate Collector found that there was no clandestine removal or suppression of facts, limiting the demand to six months from the date of receipt of the show cause notice. The Tribunal agreed with the Appellate Collector, noting that the department was aware of the appellants' activities.4. Use of Power in the Manufacturing Process and Its Impact on Duty Exemption:The appellants argued that no power was used in the manufacture of the complete cells, except for the carbon and zinc elements, and claimed exemption under Central Excise Notification No. 179/77. The Tribunal held that since power was used in manufacturing the carbon and zinc elements, which are necessary components of the cells, the exemption was not applicable. However, the Tribunal ultimately concluded that the appellants did not manufacture complete cells, thus rendering the exemption argument moot.5. Validity of the Demand Issued by the Assistant Collector:The Assistant Collector's demand was based on the assumption that the complete cells were assessable under Item 68, but there was no clear specification of the appropriate rate of duty or tariff item for complete cells. The Tribunal found a serious flaw in the proceedings, noting that a complete electric battery should be assessed under Item 31, not Item 68. The Tribunal set aside the demand, stating that duty cannot be charged again on purchased parts that had already paid duty unless it was shown that they had not paid the appropriate duty initially.Conclusion:The Tribunal concluded that the appellants did not manufacture complete cells and allowed the appeal, setting aside the demand for differential duty. The decision emphasized the importance of accurate classification and the proper application of duty based on the actual manufacturing activities carried out by the appellants.