1998 (6) TMI 421 - AT - Central Excise

Tribunal rules stems in GLS lamps not dutiable, emphasizes marketability proof

The Appellate Tribunal CEGAT, Mumbai, ruled in favor of the appellants in a case concerning the classification and dutiability of stems produced in the ... 'Stem’ coming into existence during manufacture of GLS lamps Issues:1. Whether the stems produced by the appellants are classifiable as parts of GLS lamps and bulbs under the Central Excise Tariff Act, 1985.2. Whether the stems are marketable and excisable goods subject to duty.3. Whether the longer period for demanding duty under Section 11A of the Central Excise Act, 1944 is justified.4. Whether the penalty under Section 11AC and interest under Section 11AB are chargeable during the relevant period.Issue 1: Classification of StemsThe appellants manufacture GLS Lamps and Bulbs, and the stems produced during this process were alleged to be identifiable parts of bulbs and classifiable under sub-heading 8539.00 CETA. The Commissioner invoked the longer period under Section 11A and demanded duty, penalties, and interest. The appellants argued that the stems were not marketable and cited relevant case law emphasizing the necessity of establishing marketability for dutiability. They presented evidence that the stems were not stored, handled mechanically, and not known in the market. The Department contended that the stems were commercial products known to the market, citing HSN Explanatory Note and Notification 67/83. The Tribunal observed that the duty is attracted only if the goods are marketable or capable of being marketed, and the Commissioner failed to substantiate that the stems were marketable. The Tribunal referred to a Delhi High Court judgment supporting the appellants' contention and set aside the impugned order.Issue 2: Marketability of StemsThe central issue was whether the stems, captively consumed in manufacturing GLS lamps, were excisable goods chargeable to duty. The Supreme Court's precedent highlighted the importance of marketability for dutiability. The appellants provided evidence that the stems were not marketable, while the Department argued that the stems were known in the market. The Tribunal emphasized the need to prove marketability for dutiability and noted that the Department failed to establish that the stems were marketable. The Tribunal referred to a Delhi High Court judgment supporting the appellants' position and allowed the appeals.Issue 3: Justification for Longer PeriodThe Department justified invoking the longer period under Section 11A due to the appellants' lack of disclosure regarding the manufacturing process of stems. The appellants contended that the longer period was unjustified as the stems were visible during production. The Tribunal emphasized that intent to evade duty must be proven for invoking the longer period and noted that the Department did not provide sufficient evidence to support this. The Tribunal referred to relevant case law and held that the longer period was not justified in this case.Issue 4: Chargeability of Penalty and InterestThe appellants argued that penalties under Section 11AC and interest under Section 11AB were not applicable during the relevant period when these provisions were not in force. They relied on a Tribunal judgment to support their contention. The Tribunal noted the appellants' argument and held that the penalty and interest were not chargeable during the period before these provisions came into effect. The Tribunal considered the relevant legal provisions and decided in favor of the appellants on this issue.This detailed analysis of the judgment from the Appellate Tribunal CEGAT, Mumbai, highlights the key issues involved, the arguments presented by both parties, and the Tribunal's findings and conclusions on each issue.