2001(05)LCX0043
IN THE CEGAT, SOUTH ZONAL BENCH, BANGALORE
S/Shri G.A. Brahma Deva, Member (J) and S.S. Sekhon, Member (T)
SAASTHA PLASTICS (INDIA) PVT. LTD.
Final Order Nos. 946-948/2001, dated 24-5-2001 in Appeal Nos. E/2621/97, E/65 & 66/98
CASE CITED
Trusound (P) Ltd. v. Collector—1997(06)LCX0003 Eq 1997 (095) ELT 0053 (Tribunal) — Referred .................. [Para 2(b)]
Advocated By : S/Shri K.S. Ravi Shankar, B.N. Gururaj, Advocates, for the Appellant.
Smt. Radha Arun, SDR and Shri Thomas George, JDR, for the Respondent.
[Order per : S.S. Sekhon]. - The appellant in E/2621/97 is a Private Limited Company (hereinafter referred to as A-1) and appellants in E/65/98 & E/66/98 are the Directors (hereinafter-referred to A2 & A3 respectively) of A1. The appeals are against the impugned order of Commissioner Central Excise, who confirmed a demand of Central Excise duty of Rs. 8,54,141/- payable by A1, and ordered that A1, would be entitled to Modvat for having used duty paid inputs in the manufacture of excisable goods classified by him under Heading 85.38 (Voltage Stabilizer Parts) & under Heading 8529 (TV receiver parts cleared without declaration, during the period 1-4-1994 to 31-3-1995, even after crossing the exemption limit of Notification No. 1/93), dated 28-2-1993, by wilfully suppressing the facts with intention to evade duty on the grounds given in Show Cause Notice dated 18-2-1997. A penalty of Rs. 1 lakh on A1 and Rs. 50,000/- each on A2 & A3 was also imposed along with demand of interest under Section 11AB on duty determined by him.
2. After hearing both sides and considering the submissions, we find -
(a) The admitted portion is that the two entities, whose classification is disputed, are Plastic Moulded items, coming into being, by the injection moulding technology. A perusal of Show Cause Notice does not indicate any details as to how and why the subject goods are being proposed to be classified as -
(i) parts of voltage stabilizer under Heading 8538.00
(ii) parts of TV receivers falling under Heading 8529
except a bold statement made, that it is from the observation on the basis of records/documents obtained. The impugned order, as regards the classification records -
“I have considered the facts of the case and various submissions made by the noticees. Before I deal with other submissions, made by the noticees, I would first like to deal with the classification aspects of both parts of voltage stabilizers and parts of television receivers, which the department in the show cause notice had proposed to classify under the Heading No. 3538.00 and 3529.00 respectively. As far as the paras of the voltage stabilizers are concerned, the samples have been shown during the personal hearing also. There is no dispute that these products have been given a specific shape and size for being used in the manufacture of voltage stabilizers. As against this, the contention of the party is that the product is essentially an article of plastic meriting classification under 3923.00. It has also been their contention, though not pressed much, that such outer cover for voltage stabilizers used in the stabilizer would at best be an accessory helping the function of a voltage stabilizer to a subordinate degree and cannot be treated as part of the stabilizer itself.
Before dealing with whether or not this is classifiable under 3533.00, it would be relevant to first see whether the product in question is classifiable under Heading 39.23 of the tariff which reads as under :—
“39.23 Article for the conveyance or packing of goods, plastics; stoppers, lids; caps and other closures, of plastics.”
reference to the Explanatory Notes appearing under Heading No. 39.23 would reveal that this heading covers all Articles of plastics commonly used for the packing or conveyance of all kinds of products and includes items specified under clauses (a), (b) and (c) mentioned therein. As the heading itself suggests goods falling under Heading 39.23 should essentially be articles for the conveyance or packing of goods. It cannot be assessee’s contention that outer cover of voltage stabilizer especially having been given a specific design and shape is intended either for packing or conveyance of any kind of product. It has also not been demonstrated that a voltage stabilizer is a complete product and commercially known as such without tlie use of such outer cover. The undisputed nature of its use in manufacture of voltage stabilizer, it clearly fails to satisfy the requirements of use under description against the Heading No. 39.23 of the Tariff. Contrary to this, as discussed earlier, the product having been given a specific design and shape meant for use in the manufacture of voltage stabilizer and would thus rightly fall under heading 8538.00."
(b) From the above and keeping in mind the submissions made, by the appellants, the classification of said parts of Voltage Stabilizer under 8530 cannot be determined, since the appellants are contesting them to be ‘outer cover’ of voltage stabilizer and not an essential part of the same, they are submitted to be an "accessory" being just a plastic cover/housing & not performing any function relating to stabilizing of voltage and not to be the covers as found by Tribunal in the case of M/s. Trusound (P) Ltd. - 1997 (095) ELT 53, it is therefore not a part. But no material or expert opinion is on record, in the appeal, or before the lower authority to substantiate this plea advanced. Similarly, the adjudicator, has seen the samples at the hearing, considered that undisputedly a special shape has been given, and thereafter considering the plea advanced of it being an “accessory” and a cover not functioning in stabilizing voltage, he found it to be a “part” and relying on H.S.N notes under Heading 39.23 rules out its classification there-under. The adjudicator has also not relied on any expert opinion or other material to come to his findings. His findings are based on his opinion, which cannot be the basis to arrive at a classification or and function of the entity under dispute. The adjudicator should have recorded the detailed functions and determined the identity, and thereafter decided whether the same is an “Accessory” as claimed or an “essential part”, after obtaining expert opinion. Classification arrived at merely on his own viewing the product and opining thereon, cannot be approved by us. The same therefore requires to be re-determined.
(c) As regards classification of the alleged TV part, it is admittedly, in the form of “a spool” and the Adjudicator has not accepted it to be excluded from Chapter 85, by virtue of Section XVI notes by finding that the note excludes, only such bobbins, spools, etc. which are used in Textile Industry. He has based his findings, since they are not defined, Common Parlance Test would apply, and as no yarn is wound or unwound from them, they are not spools. He disregarded the purchase order description ‘spool transformer’, ‘spool TV’, etc. Since the winding of wire done on them is never unwound, they therefore were found to be not satisfying the condition of ‘for the conveyance of goods’ and would not fall under 39.23 and would be classified under 85.38 as parts of Television, since the Transformer manufactured from such wire wound spools, would be used as TV parts. We cannot accept the grounds for this classification arrived at. The exclusion notes of Section XVI are very clear and candid and would exclude ‘spools’ all sorts. ‘Spools’ in the Collins Dictionary and Thesaurus are defined as -
“a device around which magnetic tape, film, cotton, etc can be wound up, with plates at top and bottom to prevent it from slipping”
Therefore we find, in Technology, a spool is understood as support for a coil. There is no restriction found by us to limit the exclusions by notes to Section XV of ‘spools’ used, only in yarn winding/unwinding, as arrived at by the learned adjudicator. We would, therefore, consider that the ‘spools’ made of plastic on which wire is coiled, and thereafter used as part of Transformer would be excluded from Section XVI, and thus Chapter 85. Thus they cannot be classified under 85.30 as arrived at in the impugned order. We would consider them to be more appropriately classified under heading 39.23 as claimed to be correct, as per section notes read with rule 1 of ‘Rules for Interpretation of the Schedule’ to CETA, 1985. The demands are therefore required to be reworked out, keeping this classification in mind.
(d) We have considered the submission that demand has been issued under Section 11A and as per Section 11A(1) it was required to be served on the person who was liable to pay duty and for the period prior to the incorporation of the appellant company i.e. the date the present ‘person’ a ‘Private Limited Company’ came into existence and no demand for an earlier period i.e. up to the incorporation date could be said to be served on the person liable to duty during the period earlier to the date of incorporation. The manufacturer, earlier was a partnership concern, no duty demand has been served as such on the firm and or its partners. We would, therefore, find that the present Private Limited Company cannot be made liable for duty for the period prior to its incorporation. However, notices have been served on the two Directors of the present Company, in their personal names, therefore it has to be decided, whether such a service would suffice service on the partners of the erstwhile partnership firm. Since we are remanding the matter back to re-determine the classification of Voltage Stabilizers and the re-quantification of demand required to be made on ground of our findings the classification of spools to be under 39.23. This aspect of the service of notice under Section 11A(1) for the period of demand earlier to the date of incorporation of the Private Limited Company could also be arrived at in the de novo proceedings.
(e) We also keep the other issues of limitation of demand and eligibility of Notification No. 175/86 or and 1/93 and other pleas and issues open to both sides, in the remand proceedings.
3. In view of our findings, we allow the appeal for de novo adjudication.
Equivalent 2001 (132) ELT 498 (Tri. - Bang.)
Equivalent 2001 (046) RLT 0037