2000 (5) TMI 634 - AT - Central Excise

Appeal denied in excise duty case for pump parts classification

The appeal challenging the central excise duty demand on rotors and stators used in the manufacture of exempted power driven pumps was rejected. The ... Valuation Issues:Duty liability on rotors and stators captively used in the manufacture of exempted power driven pumps under the Central Excise Tariff.Analysis:The appeal pertains to M/s Polar Indus. Ltd. regarding duty liability on rotors and stators used in the manufacture of exempted power driven pumps. Prior to June 1985, the appellant paid central excise duty on these components even when used captively but ceased payment thereafter. A show cause notice was issued in 1989 demanding duty for the period of February 1985 to February 1986, alleging suppression of facts. The adjudicating authority confirmed the demand and imposed a penalty.During the hearing, the appellant argued that rotors and stators were integral parts of the exempted pumps and that they had paid duty until May 1985, which was within the Department's knowledge. The appellant contested the correctness of the costing method used to determine the demand and claimed the duty non-payment was due to a genuine mistake. The respondent contended that the appellant had not declared the use of rotors and stators in the pumps, maintained no relevant accounts, and had suppressed facts from the Department.Upon careful consideration, it was observed that the appellant had not submitted a classification list for the captively used rotors and stators in the manufacture of the exempted pumps. The quantity of components on which duty was evaded was calculated based on the number of pumps manufactured. The Tribunal noted that rotors and stators were distinct commodities, not built in situ in the pumps, and were separately manufactured before assembly. The costing method used by the adjudicating authority was found to be appropriate.The Tribunal referenced previous decisions confirming that rotors and stators used in monoblock pumps were classifiable as parts of electric motors. The Supreme Court upheld this classification in a related case, emphasizing that once manufactured, rotors and stators were considered goods available for clearance. The Tribunal's decision in this matter aligned with established legal principles.In light of the above analysis, the appeal challenging the central excise duty demand was found to lack merit. However, considering the circumstances, the penalty imposed was reduced from Rs. 50,000 to Rs. 20,000. The appeal was rejected except for the penalty reduction, which was ordered accordingly.