1999 (6) TMI 106 - AT - Central Excise

Tribunal nullifies duty demand on unassembled goods, ruling components not finished products.

GANPATI ROPEWAYS PVT. LTD. Versus COLLECTOR OF C. EX., CHANDIGARH

The Tribunal nullified the duty demand imposed on a company for unassembled Aerial Passage Ropeway System, ruling that the components did not constitute ... Classification Issues Involved:1. Duty demand on unassembled/knocked down Aerial Passage Ropeway System.2. Applicability of Rule 2(a) of the General Rules for Interpretation of the Tariff.3. Classification under CET sub-heading 8428.90.4. Penalty imposition under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules.5. Penalty imposition under Rule 209A.6. Interest payment under Section 11AD of the Act.7. Extended period of limitation under Section 11A.Issue-wise Detailed Analysis:1. Duty Demand on Unassembled/Knocked Down Aerial Passage Ropeway System:The Commissioner of Central Excise, Chandigarh, confirmed a duty demand of Rs. 27,55,480/- on Damodar Ropeways & Construction Co. (P) Ltd., applying the extended period of limitation on the Aerial Passage Ropeway System in unassembled/knocked down condition. The Tribunal examined whether the goods had attained the essential characteristics of the finished goods at the pre-erection/installation stage. It was found that the various components were received at the site over several months and were assembled and erected at the site, thus not constituting an aerial passenger ropeway system in unassembled or disassembled form.2. Applicability of Rule 2(a) of the General Rules for Interpretation of the Tariff:Rule 2(a) was invoked by the adjudicating authority, which states that 'a reference in a Heading to goods shall be taken to include a reference to those goods removed in unassembled or dis-assembled condition when they have the essential characteristics of the finished goods.' The Tribunal found that the parts at the site did not constitute an aerial passenger ropeway system in unassembled or disassembled form, as the assembly and erection involved complex operations beyond simple fixing devices or riveting or welding.3. Classification under CET Sub-heading 8428.90:The Commissioner classified the Ropeway System under CET sub-heading 8428.90 as a teleferic. However, the Tribunal held that the item on which duty was levied did not constitute an aerial passenger ropeway system in unassembled/disassembled form and thus, the classification under CET sub-heading 8428.90 was not sustainable.4. Penalty Imposition under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules:A penalty of Rs. 28 lakhs was imposed on the second appellant under Section 11AC of the Central Excise Act read with Rule 173Q of the Central Excise Rules. The Tribunal set aside the penalty, concluding that the duty demand itself was unsustainable.5. Penalty Imposition under Rule 209A:A penalty of an equal amount was imposed on the first appellant under Rule 209A. The Tribunal set aside this penalty as well, noting that the Revenue had not established that the first appellant had knowledge or reason to believe that the goods supplied were liable to confiscation, a vital ingredient under Rule 209A.6. Interest Payment under Section 11AD of the Act:The Commissioner directed the second appellant to pay interest at 20% per annum on the duty amount under Section 11AD of the Act read with Notification 34/96-C.E., dated 9-10-1996. With the setting aside of the duty demand, the interest payment directive was also nullified.7. Extended Period of Limitation under Section 11A:The Tribunal addressed the contention that the demand was barred by limitation, as the show cause notice was dated 31-7-1997 while the last supply of parts/components was in October 1996. The Tribunal found that the non-filing of the classification list was due to a bona fide belief based on existing circulars, and thus, the extended period of limitation was not applicable.Conclusion:The Tribunal set aside the impugned order, concluding that the duty demand was not sustainable, the penalties imposed were unjustified, and the extended period of limitation was not applicable. The appeals were allowed, and the entire order of the Commissioner was nullified.