2000(04)LCX0240

IN THE CEGAT, COURT NO. II, NEW DELHI

Ms. Jyoti Balasundaram, Member (J) and Shri V.K. Agrawal, Member (T)

ESCORTS LTD.

Versus

COMMISSIONER OF CENTRAL EXCISE, NEW DELHI

Final Order Nos. 616 to 620/2000-B, dated 25-4-2000 in Appeal Nos. E/1128/97-B, E/1313 & 1314/96-B, E/1049/98-NB & E/1430/98-NB

Collector v. Phenolite Electroheat Pvt. Ltd. — 1999(05)LCX0066 Eq 2000 (116) ELT 0262 (Tribunal) — Referred [Para 5]

Collector v. Woodcraft Products Ltd. — 1995(03)LCX0070 Eq 1995 (077) ELT 0023 (S.C.) — Referred ................. [Para 5]

Commissioner v. Radial Industries — 1998(06)LCX0240 Eq 1999 (105) ELT 0523 (Tribunal) — Referred........... [Para 5]

Nizam Sugar Factory v. Commissioner — 1999(10)LCX0254 Eq 1999 (114) ELT 0429 (Tribunal) — Referred.... [Para 5]

SAIL v. Commissioner — 1999(01)LCX0010 Eq 1999 (107) ELT 0040 (Tribunal) — Referred................................. [Para 5]

Advocated By:    Ms.Smita Ekka, Manager Law, for the Appellant.

S/Shri R.K. Sharma, and K. Srivastava, SDRs, for the Respondent.

[Order per : V.K. Agrawal, Member (T)]. - These are 5 appeals - 4 filed by M/s. Escorts Ltd. and the 5th appeal filed by Shri W.R. Sehgal, Manager - Stores, involving the issue whether the product manufactured by them is classifiable as heating element under heading 85.14 of the Schedule to the Central Excise Tariff Act or electric heating resistor classifiable under heading 85.16, and whether the appellants were eligible to take credit of the duty paid in excess of the duty directed to be deposited by the Appellate Tribunal in stay order in their PLA on their own.

Appeal No. E/1313-1314/96-B1

2. Miss Smita Ekka, Manager - Law, submitted that M/s. Escorts Ltd. manufacture heating elements; that these elements are mineral filled metal sheathed type tubular heating elements; that these heating elements consist of helical coil of nickle chromium wire centered in a heavy wall metal tube of stainless steel, incoloy, Titanium, Copper, etc. and surrounded by high grade mineral solution; that the insulation is further compacted to maximum density for rapid transaction of heat to the sheathing and further to the medium to be heated; that most of their customers are either manufacturer of industrial ovens or furnaces or have installed industrial ovens and furnaces in their factories; that as their product in question is used in industrial ovens and furnaces, it is c1assifiable under heading No. 85.14. She further submitted that electric heating resistors are quite different functionally and technically from heating element manufactured by them; that these resistors are used to produce heat and are used in domestic electrical appliances; that their product is squarely covered under the second limb of heading 85.14 i.e. "Other Industrial or Laboratory Induction or Dielectric heating equipment"; that further the products which are for domestic purposes only can be classified under heading 85.16: that heading 85.14 being a specific entry is to be preferred over the general entry 85.16 and thus the heating element manufactured by them are right1y classifiable under heading 85.14.

Appeal No. E/1128/97-B1

3. The learned Manager, Law, submitted that the demand in this appeal is beyond the period of limitation prescribed under law; that the show cause notice is dated 10-1-96 and the demand of central excise duty has been made for the period from 4-4-93 to January, 1994 which is beyond the period of 6 months; that the department had issued the show cause notice to them earlier on the issue of classification of their product on 2-9-94, 4-1-95, and 29-3-95 and as such the extended period of limitation cannot be invoked by the department in this matter.

Appeal No. E/1049-1430/98-NB

4. The learned Manager, Law, submited that the Dy. Commissioner under order-in-original No. 90/DC/94 dated 28-2-95 confirmed the demand of Rs. 4,44,580/- and imposed a penalty of Rs. 5000/- and the Asstt. Commissioner under order No. 100/95 dated 21-6-95 confirmed the demand of duty of Rs. 17,36,081/- classifying their product under heading 85.16; that they had deposited the duty on 28-7-95 and 3-11-95; that these two orders were taken by them in appeal to the Appellate Tribunal and the appeal Nos. are E/1313-1314/96-B1; that they had also filed stay applications; that the Tribunal in stay order No. E/125-126/96-B1 dated 18-10-96 directed them to deposit Rs. 10 lakhs and penalty of Rs. 5000/- and waived the requirement of pre-deposit for the remaining amount of duty; that accordingly in the month of December, 1996 they had taken credit of the entire amount deposited earlier in their PLA and under a separate entry dated 13-12-96 deposited the sum of Rs. 10 lakhs in accordance with the stay order passed by the Tribunal; that the Commissioner under order No. 2/98 dated 23-1-98 has confirmed the demand of Rs. 11,85,660/- and imposed a penalty of Rs. 3 lakhs on them and Rs. 25,000/- on Shri W.R. Sehgal, holding that an assessee is not authorised to take credits without making any cash payment and Rules do not permit taking of suo moto credit even when an assessse claims that an amount is due to be refunded to them. The learned Manager, Law, further submitted that they had taken credit of duty in their PLA as they had paid the same in excess of the amount ordered to be deposited by the Tribunal in the stay order No. 125-126/96 dated 18-10-96; that the initial act of the department coercing them to deposit the amount under dispute was illegal act and once the matter was decided by the Hon'ble CEGAT they acted accordingly; that there was no need to file refund application as this refund was due in pursuance of the judicial order issued in favour of the appellants.

5. Countering the arguments Shri K. Srivastava, learned SDR submitted that heading 85.16 is applicable to electric resistors of all types; that according to the Explanatory Notes of HSN all electrical heating resistors are classifiable under heading 85.16 irrespective of the classification of the apparatus or equipment in which they are to be used; that the Explanatory Notes further mention that resistor remains classified in this heading even if specialised for a particular machine. He also submitted that the samples shown by the learned Manager, Law, clearly shows that the product manufactured by them is nothing but a resistor; that even drawing shows that wire has been put in an insulating material. He also mentioned that examples given in the Explanatory Notes for the group of items referred to under heading 85.16 makes it clear that all the items need not be for domestic purposes. The learned SDR submitted that HSN Explanatory Notes are of high persuasive value and are to be followed in case of dispute about the classification of product. He relied upon the decision in the case of CCE v. Woodcraft Products Ltd., 1995(03)LCX0070 Eq 1995 (077) ELT 0023 (S.C.) and CCE, Bangalore v. Phenolite Electroheat Pvt. Ltd., 1999(05)LCX0066 Eq 2000 (116) ELT 0262 (Tri.) = 1999 (033) RLT 126. He also relied upon the decision in the case of SAIL v. Commissioner of Customs, Calcutta, 1999(01)LCX0010 Eq 1999 (107) ELT 0040 (Tri.) = 1999 (031) RLT 531, wherein it was held that the heating element which performs function of thermal conductivity by functioning as resistor is classifiable under heading 85.16 irrespective of the classification of the apparatus or the equipment in which it is to be used. Reliance was also placed by the learned SDR on the decision in the case of CCE, New Delhi v. Radial Industries, 1999 (105) ELT 523 where the heating element was classifiable under heading 85.16. The learned SDR submitted that this is evident from these decisions that for classifying product under heading 85.16 the product need not be used for domestic purposes. Learned SDR further submitted that in appeal No. E/1128/97-B1 the demand is not hit by time limit as extended period of limitation is invokable as they had not described the product correctly; that the appellants in their classification list and the gate passes had described these items as heating element whereas in their various sale documents the goods were not mentioned as heating element but as heater assembly, commercial heater, 'U' tube heater, water immersion heater, lead cover heater, etc.; that the appellants were manufacturing and selling electric heating resistors which were not mentioned in their classification list. He also submitted that issue of show cause notices in 1994 and 1995 will not make any difference for invoking the extended period of limitation as the period involved in the said appeal is prior to the date of issue of the show cause notice. He placed reliance on the decision of the Larger Bench of the Tribunal in the case of Nizam Sugar Factory v. CCE, Hyderabad, 1999(10)LCX0254 Eq 1999 (114) ELT 0429 (Tri.) = 1999 (034) RLT 864

7. We have considered the submissions of both the sides. We first take into consideration the submissions made in appeal No. 1049 & 1430/98-NB. As mentioned by the appellants themselves in their memorandum of appeal the duty was deposited by them in pursuance of the adjudication order under TR-6 dated 28-7-95 and 3-11-95. Appeal No. 1313 of 96-B was filed by them on 18-9-96 and appeal No. 1314 of 96 was filed on 18-9-96. It is, therefore, apparent that the amount of duty was deposited by M/s. Escorts Ltd. much before the appeal was filed before the Appellate Tribunal. We also observe that in their EA-3 form they have not indicated that the amount of duty demanded by the department has been deposited by them. In fact, it was mentioned by them that “application for pre-deposit of duty amount has been filed”. If the fact of payment of duty had been brought to the notice of the Appellate Tribunal their stay applications would have been liable to be dismissed as infructuous as the amount of duty for the stay of which said applications were filed had already been deposited by them. We also notice that in their stay applications they had even claimed that the appeal procedure would become infructous in case stay is not granted and the recovery is enforced whereas the fact was that much before that they had already deposited the entire amount of duty confirmed against them. We also agree with the submissions of the learned SDR that stay order is not final order which will give rise to the refund of the duty, inasmuch as stay order is issued on the prima facie view of the matter and it is not a final order. We also agree with the learned SDR and the Commissioner's finding in the impugned order that neither the provisions in the Act nor in Central Excise Rules empowers any assessee to take credit of any duty on its own in the PLA. We, therefore, find no infirmity in the impugned order-in-original No. 2/98 dated 23-1-98, as far as the demand of duty is concerned. However, taking into account all the facts and circumstances of the case we reduce the penalty from Rs. 3 lakhs to Rs. l lakh on M/s. Escort Ltd. and from Rs. 25,000/- to Rs. 5,000/- on Shri W.R. Sehgal, Manager - Stores.

8. The two headings which are in dispute are as under :-

9. On the question of classification it has been emphasised by the learned Advocate for the appellants that their product is used in industrial furnaces and ovens in support of which they have even furnished the list of their customers along with the certificate. She has also contended that the product manufactured by them cannot be used for domestic purposes. We do not agree with the submissions of the appellants that heading 85.16 applies only to the domestic appliances. A perusal of the heading would reveal that this contention has no basis. Heading 85.16 covers many products which have been specified by name. The requirement of use for domestic purpose is only in respect of 'other electro-thermic appliances’, and not in respect of all the products specified in the heading. This is also evident from the Explanatory Notes of HSN below heading 85.16. For example, Electric space heating apparatus and soil heating apparatus include heating units for motor cars, railway coaches, aircraft, etc. and road heating equipment to prevent the formation of frost and soil heating equipment which are usually burried in the ground. Similarly, it is mentioned in the Explanatory Notes that electric smoothening irons cover irons of all kinds, whether for domestic use or for tailoring, dress makers, etc. In any case electric heating reistors appear in the heading after other electro-thermic appliances used for domestic purpose and certainly that phrase cannot be made applicable to electric heating resistors.

10.  We find that Commissioner in order-in-appeal No. 380/96 dated 9-8-96 has dealt with the classification of the product as under :-

"However, even if we assume that appellants' contention that the goods manufacatured by them are nothing but heating elements, I find that the impugned goods would still be classifiable under heading 8516. Heating elements are nothing but electric heating resistors. The word 'element' is defined in the Concise Oxford Dictionary as "resistance wire that heats up in a electric heater, cooker etc." The Explanatory Note to the HSN describe electric heating resistors consisting of bars, rods, plates etc. or lengths of wire (usually coiled, of special material which becomes very hot when current is passed through it. "Thus heating elements are nothing but electric heating resistors. Heading 8516 has a specific entry for electric heating resistors. At times it is mistakenly believed that goods falling under 8516 are of kind used for domestic purposes. In fact Heading 8516 has two parts: one part refers to various appliances for heating water, air etc. The Second part refers to electric heating resistors. The Explanatory note to Heading 8516 clearly states that "that the exception of those of carbon (heading 8545), all electrical heating resistors are classified here irrespective of the classification of the apparatus or equipment in which they are to be used." The Explanatory Note to Heading 8516 further states that resistors remains classified here even if specialised for a particular machine...." Thus even if electric heating resistors are of the type which are usable in industrial or specific entry under 8516, these are classifiable under 8516. In this regard section note (2)(a) is also relevant according to which “parts which are goods included in any of the heading of Chapter 84 or Chapter 85 (other than heading Nos. 8485 and 8548) are in all cases to be classified in their respective heading." Finally according to Explanatory Note to Heading 8514 the said heading excludes "electric heating resistors (heading 8516 or 8545 as the case may be)".

11. We do not find any reason to disagree with the findings of the Commissioner (Appeals) which has also been followed by the Commissioner in the impugned order 20/97 dated 17-3-97. We, therefore, hold that the goods in question are classifiable under heading 85.16 of the Central Excise Tariff. It has not been controverted by the appellants that the appellants had not given the description of their product in C.L. which was mentioned in their sale documents. Correct description of the goods which was only known to them was suppressed from the department and as such larger period of limitation as provided under proviso to Section 11A(1) of the Central Excise Act is attracted in the present matter. Accordingly, the demand of duty of excise is confirmed. For the similar reasons the penalty of Rs. 1 lakh imposed on M/s. Escorts Ltd under the impugned order No. 20/97 dated 17-3-97 is also upheld.

12. All the appeals are disposed of in above terms.

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Equivalent 2000 (123) ELT 1024 (Tribunal)