2001(04)LCX0040

IN THE CEGAT, WEST ZONAL BENCH, MUMBAI

S/Shri J.H. Joglekar, Member (T) and G.N. Srinivasan, Member (J)

SHARPMAX ENGINEERS

Versus

COMMISSIONER OF CENTRAL EXCISE, RAJKOT

Order Nos. 1200-1201/2001-WZB/C-II, dated 28-4-2001 in Appeal Nos. E/690-R, 901-R/96-Mum.

Collector v. Muzaffarnagar Steels — 1989(08)LCX0054 Eq 1989 (044) ELT 0552 (Tribunal) — Referred............... [Para 4]

Khanderia Engineering Works — Referred .......................................................................... [Para 2.3]

Advocated By :   S/Shri A. Hidayatullah, Sr. Advocate, T. Gunasekaran and M.V. Ravindra, Advocates, for the Appellant.

Mrs. Reena Arya, DR, for the Respondent.

[Order per : G.N. Srinivasan, Member (J)]. - The above two appeals have been filed against the Order-in-Original No. 62/COMMR./1995, dated 21-12-1995 passed by the Commissioner of Central Excise and Customs, Rajkot whereby he confirmed a duty of Rs. 84,31,835/- and imposed a penalty of Rs. 15,00,000/- on the assessee. He also confiscated land, building, plant, etc., and imposed redemption fine of Rs. 1 lakh. The order also imposed penalty on a partner of Rs. 1 lakh under Rule 209A of the Central Excise Rules, 1944, who has filed Appeal No. E/901-R/96-Mum.

2.1. The assessee (appellant in Appeal E 690-R/96) is a registered Partnership firm and was a SSI unit. It was engaged in the manufacture of goods falling under Chapter 82 of the Central Excise Tariff including spoons, forks, ladles, skimmers, cake-servers, fish-knives, butter-knives and knives with cutting blades, kitchen knives, etc. In doing its business it filed several classification list. The classification list No. 154/87-88 was filed with effect from 1st March, 1998 (page 47 of the Paper Book) in that item No. 2 read as follows :

In the said classification list item No. l was specified as SPOONS, FORKS, etc., and classification thereof was claimed as under Chapter Sub-heading 8215, whereas KNIVES WITH CUTTING BLADES were claimed to be classified under Chapter 8211.00. In the said classification list under item No. 2 benefit under Notification No. 107/88 was also claimed up to the period 1990. The pattern of classification lists filed by the assessee show that they were claiming classification under the same sub-heading namely 8211 (pages 53, 55, 57 of the paper book).

2.2. Two show cause notices were issued on 20th June, 1990 by the Assistant Commissioner, seeking to reclassify the KNIFE-CUM-SCISSOR SHARPENER under sub-heading 8205.00, instead of 3926.00 as claimed by the appellant and also sought to deny the benefit of Notification No. 107/88 in respect of KNIVES WITH CUTTING BLADES falling under Chapter Heading 8211.00. On 23rd November, 1990 two Orders-in-Original were passed by the Assistant Commissioner, purporting to reclassify the KNIFE-CUM-SCISSOR SHARPENER under heading 8205.00 and granted benefit of Notification No. 107/88. Both, the department as well as the assessees filed Appeals before the Commissioner (Appeals). By order dated 29th September, 1992 the Commissioner (Appeals) upheld the reclassification of KNIFE-CUM-SCISSOR SHARPENER under 8205.00 and denying the benefit of Notification No. 107/88 to the assessee, on the ground that the items came under Heading 8211.00 which were not covered under the said notification. The assessees filed an appeal to the Tribunal at Delhi Appeal Nos. E/5517-5527/92-B 1. By order dated 27-5-1994 the Tribunal at New Delhi upheld the order passed by the Commissioner (Appeals) thereby classification of the KNIFE-CUM-SCISSOR SHARPENER were covered under Chapter sub-heading 8205.00.

2.3. For the period 90-91 the classification list No. 1/90-91 was filed by the assessee (page 99 of the paper book) describing the products manufactured by them as under :

They also claimed in this classification list benefit under Notification No. 107/88 for this item. In August, 1990 the appellants learnt that for some other assessee (M/s. Khanderia Engineering Works, Rajkot), who were engaged in the manufacture of similar articles, had classified their kitchen knives under Chapter Heading 8215.00 and it has been accepted by the assessee vide Order dated 12th June, 1990.

2.4. On 3rd August, 1990 a revised classification list was filed classifying the products reading as under Chapter Heading 8215.00 page 108 the covering letter is page 107.

To

The Suptd. of C. Ex.,

Range-II,

 RAJKOT.

     Sub : Filing of Revised Classification List with effect from 1-4-90.

Dear Sir,

Please find enclosed herewith our revised classification list with effect from 1-4-1990 for the items manufactured by us and classified under sub-heading 8211.00 in the classification list filed on 2-4-1990 before Your Honour.

On perusal to the order passed by the learned Asstt. Collector in the case of M/s. Khandhueria Engineering Works Ltd., Bamanbore in order-in-original No. 26/VAL/1990, date 12-6-1990 it has come to our knowledge that the kitchen knives are properly classifiable under sub-heading 8215.00 and the classification claimed by us under sub-heading 8211.00 is not proper.

Therefore, we are filing herewith our revised classification list with effect from 1-4-1990 for the goods classified under sub-heading 8211.00 in the classification list filed before your Honour on 2-4-1990 claiming therein the exemption from the whole of the duty of excise under Notification No. 107/88, dated 1-3-1988 vide entry No. 3.

You are requested to approve our classification list at an earliest possible date and return to us duly approved classification list at an earliest possible date. We also enclose herewith the copy of order passed by the learned Asstt. Coll. of Your Honour’s perusal.

Thanking you,

Yours faithfully,

SHARPMAX ENGINEERS

In the above revised classification list benefit of Notification No. 107/88 as amended by Notification No. 67/90 was also claimed. This Classification List was approved by the Assistant Commissioner with effect from 3-8-1990 although the appellants had sought approval with effect from1-4-1990. For the period Classification List No. 1/91-92 was filed with effect from 1-4-1991. The knives were described as Item No. 2 reading as under and Item No. 3. The curious thing is that assessee has claimed classification in both headings. It is submitted by the appellants that it is done under the advice of the department and stocks held prior to approval were cleared under 8211.00. Subsequently due to Budget, another Classification List was filed with effect from 25-7-1991 in respect of their articles which reads as follows :

The classification list was approved on 13-5-1993, for the subsequent period 93. Classification List No. 1/92-93 was filed with identical details as found in pages 113, 115 and 117. For the period 1993-94 classification list was filed with effect from 1st April, 1993 with identical details as in pages 115 and 117 please refer to page 122.

2.5. The show cause notice dated 28-4-1995 was issued by the department claiming for the period from April, 1992 to December, 1993 that the appellants had wrongly classified their kitchen knives under Heading 8215 with effect from 3-8-1990 and claimed benefit of Notification No. 107/88, and that the appellants had deliberately mis-stated description of their product in their classification list with intent to avail benefit of Notification No. 107/88, after crossing exemption limits under Notification No. 175/86. Replies was filed by appellants. They were heard and by the impugned order, the adjudicating authority rejected the contentions. Hence the present appeals.

3. Shri Arshad Hidayatullah, Sr. Counsel with Shri T. Gunasekaran and Shri M.V. Ravindra, ld. Advocates appeared for the Appellants and Smt. Reena Arya the learned SDR appeared for the Revenue.

4. It is contended by the ld. Sr. Counsel that the classification list approved by 92-93. It is well known that an approval of classification list is not a mechanical act but should be deemed to be after due verification. Therefore, there cannot be invocation of longer period of limitation. He cites the judgment of the Tribunal in the case of Collector of Central Excise v. Muzzaffarnagar Steels [1989(08)LCX0054 Eq 1989 (044) ELT 0552 (Tribunal)]. It is further argued on behalf of the assessees that the department had made aware by letter dated 3-8-1990 page 107 that the appellants were re-classifying the goods under heading 8215.00. In view of the order of the assessing authority in M/s. Khanderia Engineering Works the classification list was approved from 3-8-1990. It is therefore stated that the burden is on the department which approved that the goods come under heading 8211.00. It is, therefore, argued that the appellants had bona fide belief that the correct classification list under heading No. 8215.00. RT 12 returns have been regularly assessed at nil rate of duty meaning thereby benefit of Notification No. 107/88 has been granted (The goods come under Chapter 82). It is therefore claimed that larger period of limitation namely alleging suppression of facts is wrong and imposing penalty is absolutely unwarranted in the case.

5. Ld. SDR Smt. Reena Arya adopts the reasoning of the lower authority.

6. We have considered the rival submissions, when we go through the classification lists, we find that the products have been sought to be covered under the respective Tariff sub-headings as mentioned in the Chapter headings. The contents of the various classification lists have been described above, the Tariff heading 8211.00 starts “KNIVES WITH CUTTING BLADES SERRATED OR NOT” Chapter Headings 8211.00 and 8215.00 read as under :

The SERRATED BLADES are referred to Chapter Heading 8211.00 therefore they have claimed under heading 82.11. But once the assessment has been made by a assessing officer for some other assessee under heading 8215.00 assessees sought to change it. It is not possible for us to hold that the assumption of the assessee that the SERRATED KNIVES falling under Chapter Heading 8215.00 was wrong. It may be true that serrated knives may fall under specific entry 8211.00. The argument of ld. Senior Counsel during the course of the hearing was he accepts that SERRATED KNIVES will come under Heading 82.11, but only states that invocation of larger period of limitation may not be warranted in this case.

7. We have considered this aspect. The bona fide belief is evidenced by the fact that in respect of assessment of one of the assessees in Rajkot Collectorate the department had classified kitchen knives were classifiable under sub-heading 8215. That is also evidenced by the assessee’s letter dated 3-8-1990 referred to in the earlier portion of the order. We are therefore of the view that invocation of the larger period of limitation cannot be made not only on the basis of the bona fide belief of the assessees but also the fact that RT 12 returns have been approved.

8. It is to be mentioned that the Tribunal in the assessee's case was merely concerned about the grant exemption under Notification No. 107/88 that is not the dispute before us. In this case here the show cause notice proceeds on the basis of re-classification of the goods only. We are therefore of the view that the goods should be classified under Heading 8211.00 only. But the demand of duty for the larger period cannot be demanded and it should be restricted to six months from the date of receipt of show cause notice. In view of the above levy of penalty on both appellants do not arise. The matters are remanded back to the adjudicating authority for re-calculating the quantum of the demand as indicated here. The appeals are disposed of accordingly.