1990 (7) TMI 223 - AT - Central Excise

Tribunal Upholds Elastic Rail Clips Classification, Imposes Penalty

The Tribunal upheld the classification of elastic rail clips under Tariff Item 68, invoked the extended period of limitation due to suppression, and ... Process of manufacture Issues Involved:1. Classification of Elastic Rail Clips2. Invocation of Extended Period of Limitation3. Imposition and Quantum of PenaltySummary:1. Classification of Elastic Rail Clips:The primary issue was whether the elastic rail clips manufactured by the appellants should be classified under Tariff Item (T.I.) 68 or T.I. 25(11) of the Central Excise Tariff. The appellants contended that their product was classifiable under T.I. 25(11) as 'Angles, shapes and sections of iron or steel,' arguing that the process of tempering and heating treatment does not amount to manufacture. The Collector, however, classified the goods under T.I. 68, stating that the elastic rail clip was a distinct and identifiable finished product. The Tribunal upheld the Collector's classification under T.I. 68, referencing a similar case, Paxma Axle & Springs P. Ltd. v. Collector of Central Excise, and concluded that the manufacturing process involved a series of operations that resulted in a new product with its own identity.2. Invocation of Extended Period of Limitation:The appellants argued that the extended period of limitation could not be invoked as they had an honest belief, based on a decision by the Collector (Appeals) in the case of Guest Keen Williams Ltd., that their goods were not excisable. The Tribunal, however, found no merit in this contention, noting that the appellants had been clearing goods without payment of duty and without obtaining a central excise license. The Tribunal cited the Supreme Court's decision in M/s. Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise, which held that extended period of limitation was applicable in cases of suppression and concealment. Thus, the Tribunal upheld the invocation of the extended period of limitation.3. Imposition and Quantum of Penalty:The appellants contended that no penalty should be imposed due to the absence of mens rea and that any duty payable should have been paid by the Railways. The Tribunal, however, found justification for the levy of penalty, noting that the appellants had cleared goods without payment of duty and without obtaining a central excise license. The Tribunal referenced the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, which stated that penalties should be commensurate with the gravity of the offense. While the Tribunal agreed with the imposition of a penalty, it found the original penalty of Rs. 20,00,000.00 to be excessive and reduced it to Rs. 10,00,000.00.Conclusion:The appeal was largely rejected, with the Tribunal upholding the classification of the goods under T.I. 68, the invocation of the extended period of limitation, and the imposition of a penalty, albeit reducing the quantum of the penalty to Rs. 10,00,000.00.