1989 (11) TMI 183 - AT - Central Excise

Tribunal rules forged product classified as hand tools, no duty levied. Confiscation & penalty overturned.

The Tribunal determined that the forged product, after the process of fettling, falls under Tariff Item 51A CET as hand tools and is not marketable in its ... Forged blanks for manufacture of Hand Tools Issues Involved:(i) Classification of tool blanks or blank tools under Central Excise Tariff.(ii) Liability of the seized goods for confiscation under Rule 173Q of Central Excise Rules, 1944.(iii) Recoverability of duty amounting to Rs. 12,28,460.24 on forged products removed from 1-8-1980 to 27-5-1984 under Rule 9(2) of Central Excise Rules, 1944.(iv) Liability of the party to penal action under Rule 173Q of Central Excise Rules, 1944.Detailed Analysis:(i) Classification of Tool Blanks or Blank Tools:The adjudicating authority determined that the so-called tool blanks and blank tools are forged products attracting duty under Tariff Item 26AA(ia) CET as it existed prior to 1-8-1983 and under Item 25(8) post 1-8-1983. The appellants contended that the forged product sought to be levied to duty by the department is a crude product not capable of being marketed. They argued that after the process of fettling, the product acquires the shape of hand tools classifiable under Tariff Item 51A. The Tribunal agreed with the appellants, noting that the product fulfills the description of hand tools under T.I. 51A after the process of fettling and is not marketable in its intermediate stage. The Tribunal emphasized that no evidence was provided by the department to prove the marketability of the product.(ii) Liability of Seized Goods for Confiscation:The adjudicating authority confiscated the seized blank tools or tool blanks under Rule 173Q of the Central Excise Rules, 1944. The appellants argued that the product is captively consumed for finishing into hand tools and is not sold or saleable. The Tribunal found that the product, after the process of fettling, no longer remains a product covered under T.I. 26AA(ia) or 25(8) but rather falls under T.I. 51A CET as hand tools. Consequently, the confiscation of the goods under Rule 173Q was not upheld.(iii) Recoverability of Duty:The adjudicating authority demanded duty of Rs. 12,28,460.24 on the forged products removed without payment of duty during the period 1-8-1980 to 27-5-1984. The appellants contended that the process of manufacture was fully known to the department, and nothing was concealed, making the invocation of the five-year demand period unwarranted. They also argued that hand tools were manufactured out of duty-paid flats, and set off of duty paid on such flats would be permissible under Rule 56A. The Tribunal agreed with the appellants, noting that no duty could be levied on the product at the intermediate stage as it is not marketable. Consequently, the demand for duty was set aside.(iv) Liability to Penal Action:The adjudicating authority imposed a penalty of Rs. 2 lakhs on the appellants for contravention of various provisions of the Central Excise Rules, 1944. Given the Tribunal's finding that no duty could be levied on the product at the intermediate stage and the product falls under T.I. 51A CET as hand tools, the penalty imposed was also set aside.Conclusion:The Tribunal concluded that the forged product after the process of fettling falls under T.I. 51A CET as hand tools and is not marketable in its intermediate stage. Consequently, no duty could be levied on the product, and the confiscation and penalty imposed were set aside. The appeal was allowed in toto, and the impugned order was set aside, with consequential relief to be granted to the appellants.