2001 (10) TMI 204 - AT - Central Excise

Tribunal rules in favor of appellants on decoration costs & duty classification, granting concessional rate

The Tribunal ruled in favor of the appellants in a case involving the inclusion of decoration costs in the assessable value of glassware, classification ... Manufacture - Valuation (Central Excise) - Vessels - Exemption - Demand - Limitation Issues Involved:1. Inclusion of the cost of decoration in the assessable value of decorated glassware.2. Classification of single neck spherical vessels and multi neck vessels of 50 litres capacity.3. Classification of buttress ends.4. Benefit of Notification No. 5/98, dated 2-6-1998.5. Limitation period for the demand of duty.Detailed Analysis:Issue No. 1 - Inclusion of the cost of decoration in the assessable value of decorated glassware:The appellants argued that the process of decorating plain glasses did not amount to manufacture, referencing the Supreme Court's judgment in Union of India v. J.G. Glass Industries Ltd., which established a two-fold test to determine whether a process amounts to manufacture. The Tribunal found that the identity of the original commodity (plain glasses) continued to exist and that the decorated glasses served the same purpose as plain glasses. The department's argument hinged on the amended definition of 'place of removal' in Section 4(4)(b) of the Central Excise Act, which included depots. However, the Tribunal noted that the 'time of removal' must be ascertained from the factory gate, not the depot, as per the Castrol India Ltd. v. CCE case. The Tribunal concluded that the cost of decoration was not required to be included in the value of plain glasses.Issue No. 2 - Classification of single neck spherical vessels and multi neck vessels of 50 litres capacity:The department classified these items under Heading 70.07, considering them glass containers for packing liquids or solids. The appellants provided evidence, including customer letters and brochures, showing these items were used for chemical reactions, not for packing. The Tribunal agreed with the appellants, noting that the vessels were open and unsuitable for packing, thus classifying them under Heading 70.15, which covers other articles of glass.Issue No. 3 - Classification of buttress ends:The appellants argued that buttress ends were not unworked rods or tubes and detailed their manufacturing process. The Tribunal found no rebuttal from the Revenue and agreed with the appellants that buttress ends were worked products, not unworked rods or tubes. Consequently, the Tribunal classified buttress ends under Heading 70.15, rejecting the department's classification under Heading 70.01.Issue No. 4 - Benefit of Notification No. 5/98, dated 2-6-1998:The appellants claimed that even if the vessels and cylinders were classifiable under Heading 70.07, they were eligible for a concessional duty rate of 8% under Notification 5/98, as they were produced by the mouth-blown process. The Tribunal noted that the Revenue did not dispute this claim and upheld the appellants' entitlement to the concessional rate.Issue No. 5 - Limitation period for the demand of duty:The appellants contended that the demand for Rs. 8,01,132.85 on decorated glassware was time-barred, as it covered the period from 28-9-1996 to 30-6-1998, beyond the six-month limit from the show cause notice dated 31-3-1999. The Tribunal noted that Section 110 of the Finance Act allowed demands beyond six months only if mis-declaration or fraud was established. Since the department was aware of the appellants' practices, the Tribunal found no suppression or mis-statement. Consequently, the demand on decorated glassware was barred by limitation. Similarly, the Tribunal found the demand on other items partly time-barred in the absence of any allegation of suppression.Conclusion:The Tribunal set aside the impugned order, holding that the cost of decoration was not to be included in the assessable value, reclassified the disputed items under Heading 70.15, granted the benefit of the concessional duty rate, and found the demand time-barred. The appeal was allowed.