2013 (12) TMI 345 - AT - Central Excise

Tribunal Upholds Denial of Exemption for Ultra-Sound Scanner Sub-Assemblies

The Tribunal upheld the Commissioner's decision denying exemption under Notification No.6/2002-CE for manufacturing sub-assemblies of Ultra-Sound ... Eligibility for the Exemption Notification - Revenue was of the view that what was being manufactured by the appellant was not sub-assembly of scanners but in reality was Ultra-Sound Scanner system – Held that:- Software CD cannot be considered as a part in the present technological regime - the scanner can be said to consist of only two main parts as received in the hands i.e. scanner assembly and the probe - the scanner has to be considered as the main item and the 'probe', a part of the scanner and a necessary part - the appellant/assessee has not been able to make out a case and what is cleared by them is not a part of scanner and thus is not eligible for the benefit of exemption notification – Decided against Assessee. Invocation of Extended Period of Limitation – Held that:- It is a settled principle that merely because an assesee chooses an interpretation beneficial to him, there can be an allegation of suppression or misdeclaration - Appellant cannot be found fault with for coming up with an interpretation and availing the benefit which was not available to them - the order of the Commissioner limiting the demand to the normal period and not imposing the penalty was an order which rendered justice to the appellant/assessee without being unfair to the Revenue – Decided against Revenue. Issues Involved:1. Interpretation of Exemption Notification No.6/2002-CE regarding the classification of manufactured items.2. Whether the manufactured product qualifies as a sub-assembly or a complete Ultra-Sound Scanner system.3. Application of extended period for demand and imposition of penalty under Section 11AC of Central Excise Act 1944.Analysis:Issue 1: Interpretation of Exemption NotificationThe appellants claimed exemption under Notification No.6/2002-CE for manufacturing sub-assemblies of Ultra-Sound Scanners. The notification covered parts and accessories of medical equipment with duty rates set at 'nil'. The Revenue contended that the manufactured items were actually complete Ultra-Sound Scanners, not parts or accessories, leading to the denial of the exemption. The Commissioner upheld this view, resulting in the demand confirmation. The primary dispute revolved around whether the items manufactured qualified as parts or the complete system.Issue 2: Classification of Manufactured ProductThe manufacturing process involved assembling various components to create sub-assemblies of scanners. The Revenue argued that the assembled product was a fully functional Ultra-Sound Scanner system, not just parts or accessories. The appellants relied on previous tribunal decisions to support their claim that the items constituted essential parts of scanners. The debate centered on whether the probes, monitor, and keyboard assemblies supplied by the appellants were integral components of the scanner system or standalone parts.Issue 3: Application of Extended Period and PenaltyThe Revenue contested the Commissioner's decision not to apply the extended period for demand and to forego penalty imposition. The appellants argued that there was no intent to evade duty, emphasizing that any duty liability would be minimal due to available exemptions. They highlighted the Revenue-neutrality of the transactions and the absence of sales to third parties. The absence of clear evidence of intention to evade duty or misdeclaration was a crucial point in this issue.The Tribunal analyzed the technical aspects of the manufacturing process, emphasizing the necessity of probes and the software CD for the scanner's functionality. Ultimately, the Tribunal rejected the appeals from both the Revenue and the appellants, affirming the Commissioner's decision. The judgment highlighted the complexity of interpreting technological items and the importance of considering all aspects, including intent and technical interpretations, in excise duty cases.