2000 (10) TMI 148

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....res for trailer or tyres for tractor front. In the order impugned in the appeal, the Commissioner has confirmed the proposal in the notice to show cause that the appellant cleared LCV tyres and Jeep tyres in the guise of tyres for trailer and tyres for tractors respectively and thus evaded differential duty payable. He has confirmed the demand for duty of Rs. 10,60,78,334/- and imposed a penalty of equivalent amount under Section 11AC on the assessee and penalty of Rs. 5 lakhs on Pramod Poddar, the other appellant. The plant and machinery of the assessee has also been confiscated with an option to redeem on payment of fine of Rs. 10 lakhs. 2.The show cause notice proposed the following grounds for its conclusion and these are the grounds that he has accepted in the impugned order : (a)        Ply rating of LCV tyre is always higher than that of tractor trailer tyre; ply rating of LCV tyre are 12 to 18 and ply rating of tractor trailer tyre are 8 and 10 only whereas the appellants manufactured tractor trailer tyres of ply rating 12, 14 and 16. Therefore these are LCV tyres. (b)        Same compound is use....

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....y rating, whereas the appellant's tyres on this size, cleared in this guise were up to 16 ply rating. The Commissioner finds it significant, against the appellant that it cleared tyre for a particular use having a higher ply rating than that accepted in the trade, as exemplified in the Indian Standard Specifications. 5.The appellant's argument is that the Indian Standard Specifications were not actually being followed in the trade. What was followed in the trade was the specification embodied in the Data Manual published by the Indian Tyre Technical Advisory Committee (ITTAC). This manual shows the range of 8-14 ply rating. 6.It cannot be denied that the Indian Standard Specifications specified the general requirement of tyres for the machinery in question. It has also to be accepted that the Indian Standard Specifications are indicative of the trade practice. In the absence of anything to the contrary, therefore, such specification would be acceptable as indicating of the practice prevailing in the trade. But it is to be noted that these standards are no means to be applied with inflexible rigidity to determine finally the end-use of the manufacture. There may be manufacture....

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....ecommend fitment of tyres in the absence of their being manufacture. The fact of such manufacture therefore establishes, in our opinion, a practice of fitment of such tyres of such load bearing capacity and their manufacture. 11.The Commissioner does not deal with this aspect in his order. He dismissed the evidence in the form of letters written by various tyre dealers and their enquiries with the customers who buy the tyres manufactured by the appellant showed them to be used in trailer tyres. We agree with the Commissioner that these letters have to be viewed with certain degree of skepticism. It is difficult for us to believe that tyre dealers will ask their customers the use of which proposes to buyers. Even discounting this factor, we have already come to the conclusion that there is sufficient basis to show the manufacture of these tyres of 14 or 16 ply rating and therefore the demand for duty on the trailer tyres is unsustainable. 12.The next is the use of the variety of compounded rubber used for the tread and side walls of tyres for the trailers as well as LCVs. The Commissioner finds that this compound satisfies the requirement in the Indian Standard Specification f....

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....y the Commissioner. The explanation that the difference of skid depth, is that the greater the skid depth the less or the dissipating of heat generated due to internal flexures which results from the stress to which the tyre is subjected when the vehicle runs. Therefore, within the said limits, the lower depth is required in the case of faster running so as to dissipate the heat more quickly. Hence the lesser skid depth of LCV tyres which cater for the speed of up to 105 kilometers, as against the 30 kilometers for tractor trailers which is mentioned in the Indian Standard Specifications. 15.The Commissioner also finds that the tractor trailer tyres have patterns other than lugs showing them to be capable of use for LCVs. It was explained to us that a lug pattern on the tread is one which contains a pattern on the tread, referred as a hering hone pattern. This consists of a central ridge from which parallel diagonal elevations run to the edge. Such a pattern need not be necessarily limited to tractor trailer tyres. Both this pattern and what is termed the rib pattern, consisting of a protraction of the tread parallel to the diameter could be used for both tractor tyres and LCV t....

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....ould be the same particularly having regard to the constructional aspect of these tyres being same. If there is no difference in the material used or pattern of construction, the cost would be the same. It is in fact the appellant's contention that the higher cost of tractor trailer tyres is on account of greater amount of compounded rubber contained in them. Advocate for the appellant refers to a document which was seized by the officers from the appellant's factory and is referred to as annexure 23 to the show cause notice. This document shows costing of various kinds of tyres. One of these is the pattern BK 208, 14 ply rate of tyre of size 7.5 - 16 is indisputably for tractor trailer. Another model BK 716 size 7.15 - 16 14 ply rating is indisputably used for LCV. The cost of the production of the former is Rs. 1733.39 the, the latter's Rs. 1588.37. This document, which contains the details of each of the items that goes into the manufacture of the tyre and quantity of such items, indicates that except for one, the quantities and the cost of the material used in both items are identical. The only difference is the quantity of the tread compound, as 12.617 kg in the case of tracto....

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....hich the employees of the company acted to misdeclare the tyres or to clear them with a wrong description. There is no material whatsoever to show that any of the dealers or distributors of the appellant has stated that the tyres declared to be the one kind were in fact of another type and so sold. There is, in this regard, a total lack of evidence, which we consider to be crucial. 20.On merits therefore it will have to be held that the department has not made out a case. The same would also hold true for limitation. The show cause notice, as we have noted, invoked the extended period contained in the proviso to Section 11A(1). It is alleged that the appellant had suppressed the production and clearance of LCV tyres and suppressed the fact that they were manufactured to the standard of LCV tyres. This is amplified by referring to suppression of the fact of use of the same rubber compound and construction, tensile strength and elongation of side wall and the other features of the tyres which we have already dealt with. The jurisdictional Superintendent had written to the appellant by his letter dated 23-11-1993 asking it to submit the explanation as to what was the difference bet....