Hon'ble Aditya Nath Mittal,J.
Delivered by Hon'ble Aditya Nath Mittal, J.
1. This appeal has been filed against the order dated 22.4.2004 passed by Customs, Excise and Service Tax Appellate Tribunal, New Delhi passed in Appeal No.E/2987/02-B.
2.This appeal was admitted on the following questions of law:-
(i)Whether it is not legal impropriety committed by the Tribunal whilst taking contradictory views on two vital issues, which are common in the present case and in the matter of Ratan Industries in Appeal No.E/2258-2259/02-B dated 23.12.2003. In the latter case, the Tribunal was pleased to hold that the departmental contentions are superfluous and mainly based on the report of a technical expert Sri Prashant Kumar and on the statements of the buyers of the said Hubs, who were dealing in the manufacture of tractor trolley wheels. This evidence in the said case was not even considered to be tenable and demand of duty and penalty was set aside. The Tribunal's observation in the appellant's case are perverse with regards of the same set of evidence and were pondered to be suffice to uphold the demand of duty and penalty?
(ii)Whether it was justified for the tribunal to overlook the material fact that only one sample was taken in glaring contravention of Rule 56 of the Central Excise Rules, whereby the normal procedure is that the 3 samples of the articles are to be taken. The appellant was not afforded opportunity to challenge the correctness of the same, which amounts to be the violation of the principles of natural justice?
(iii)Whether the tribunal is justified whilst not discerning the issue raised by the department was barred by limitation, more particularly when the appellant was served with a show cause notice dated 30.11.1999 by the officers of the Central Excise (Preventive) for the alleged indulgence in clandestine removal of fully finished excisable goods. It is thus articulated that the Central Excise Officers were aware of the products manufactured by the present appellant. Therefore, they cannot claim that the appellant was suppressing or mis-declaring his product. More so, the appellant was filing the regular returns before the Excise authorities and the classification of the product was not challenged erstwhile. The appellant was issued a show cause notice by the department in the year 1999, whereby they carried out rigorous investigations. This issue was favourably decided by the Tribunal in the matter of Ratan Industries whilst adverse view was taken in the present matter?
(iv)Whether the Tribunal was justified whilst overlooking the two expert reports furnished by appellant, which specifies that the hub manufactured by the appellant cannot be used in tractor trolley. It is relevant to mention here that even the report of Dr. Prashant Kumar does not specify that the hub manufactured by the appellant can be used in tractor trolley. It is settled law that the defense witnesses must be considered and given the due weightage, equivalent to the departmental witnesses?
3. The appellant was engaged in manufacturing of excisable goods. The department, after investigations in regard to the clearances of Hubs effected by them during the period 1.1.1997 to 31.3.2000, issued a show cause notice on 12.11.2001 demanding Central Excise Duty of Rs.43,83,440/- along with penalty on the ground that the benefit of exemption under Notification No.76/86-CE dated 10.2.1986 was not available to the Hubs manufactured and cleared by the appellant during the aforesaid period. The Commissioner of Central Excise, in adjudication of the dispute confirmed the aforesaid demand of duty and also imposed penalty. An appeal was filed before the Customs, Excise and Service Tax Appellate Tribunal, New Delhi which was also dismissed with a modification in the quantum of penalty.
4. We have heard Sri Pankaj Bhatia, learned counsel for the appellant and Sri S.P. Kesarwani for the respondent.
5. Learned counsel for the appellant has submitted that vide notification regarding exemption of certain specified goods of erstwhile tariff item no.68 the Wheels and Axles of Animal Drawn Vehicles was exempted. The Hubs are the part of the Axles hence they are also exempted.
6. It has also been submitted that the Commissioner could not invoke the extended period of limitation because there was no concealment on the part of the appellant.
7. The main question for consideration is whether Hubs manufactured by the appellant are exempted item in view of Notification dated 28.2.1986.
8. The Notification dated 28.2.1986 contains the schedule of exempted goods of the description specified in the schedule and the relevant item no.21 runs as under:-
9. In the subject notification there is no mention of Hubs of animal drawn vehicles. The exemption notification dated 28.2.1986, grants exemption from excise duty to only two specified parts of animal drawn vehicles, namely, Wheels and Axles. The contention of the appellant was not found to be legally tenable by the authorities below on the ground that exemption notification is required to be construed strictly. The benefit of exemption cannot be extended by presuming application to goods not explicitly specified in the actual wordings of the notification. Learned Commissioner of Central Excise, Kanpur has observed as follows:-
"The wheel of an animal drawn vehicle is an assembled product in itself and it comes into existence as a result of manufacturing process of putting together several components and parts which comprise the wheel. For example, tyres and tubes which are mounted on the outer circumference of the wheel also constitute a part of the wheel. Similarly, roller/ball bearings which are used in the wheel also constitute part of the wheel. If under the law, only wheels have been exempted from the excise duty the exemption cannot be automatically extended to tyres and tubes or roller/ball bearings which are used in the manufacture of wheels and which are in themselves distinct excisable products and fall under different sub-headings under Central Excise Tariff. On the same analogy, hubs are distinct excisable products in themselves and hubs cannot be extended exemption which is available to wheels on the grounds that hubs constitute a part of wheel."
10. The subject notification dated 28.2.1986 has exempted Wheels and Axles as a part of Animal Drawn Vehicles. In the present case after due scrutiny and after cross examination from the purchasers of Hubs sold by the appellant, it was found that the Hubs manufactured by appellant were for the purpose of use in the tractor trolley and not for animal drawn vehicles. It was found that only 5% of the total sale of animal drawn vehicle's hubs in casting forms were sold and remaining 95% were sold after finishing to the buyers engaged in the manufacture of tractor trolleys. After analysis, the Commissioner of Central Excise, Kanpur came to the conclusion that the hubs manufactured by the appellant were used in the manufacture of tractor trolley and that the appellant was wilfully camouflaging the description of the goods in the invoices to give an impression that they were clearing hubs for animal drawn vehicles only so as to avoid tax liability.
11. The Assessing Authority has also observed as follows:-
"Hubs are cylindrical central parts of wheel, propeller or fan while wheel is circular frame with hub at center for attachment to an axle about which it may revolve and bear a load. (McGraw Hill Dictionary on Scientific and Technical Terms - Iind edition). (RUD No.17 Xerox Copy) ISI specifications for axle assembly for conventional animal drawn vehicles IS-4930-1985 also indicate that hubs are part of wheel or axle assembly. (RUD NO.4). Actually hubs are mounted on axle with the help of bearing and on this hub wheel drum is attached to which tyres, tubes are fixed. Therefore, it is clear that Hubs are distinct parts and cannot be said to be either axles or wheel. As exemption notification is strictly construed, exemption can only be granted if the party is either manufacturing wheel of ADV or axle of ADV. Therefore, hubs of ADV cannot be granted this exemption."
12. Out attention has been drawn towards G.S. Auto International Ltd. Vs. Collector of Central Excise, Chandigarh, 2003 (152) ELT 3 (S.C.), in which Hon'ble the Apex Court has held as under:-
"The question that needs to be adverted to is: whether the goods in question can appropriately be classified under Tariff Item 52 or not having been specified elsewhere, they fall under Tariff Item 68. In construing these items, what is the proper test to be applied? Is it the functional test or is it commercial identity test which would determine the issue. It seems to us that this question is no longer res integra. It fell for consideration of this Court earlier and it was laid down that the true test for classification was the test of commercial identity and not the functional test. It needs to be ascertained as to how the goods in question are referred to in the market by those who deal with them, be it for the purposes of selling, purchasing or otherwise."
13. Undoubtedly there is a distinct commercial identity of the "Hubs". It may form part in the assembly of Axles or Wheels but the Central Government had no intention to exempt Hubs for animal drawn vehicles from excise duty. In the present case, the authorities below have considered all the aspects of the Hubs manufactured by the appellant and have rightly concluded that Hubs do not come within the definition of axles hence they were not exempt under the Notification dated 28.2.1986.
14. Our attention has been drawn towards Collector of Customs, Bangalore Vs. Maestro Motors Ltd., 2004 (174) ELT 289 (S.C.), in which the Hon'ble Apex Court has held that:- "if according to the language of Notification an item is specifically exempted then the exemption would be available even though for the purposes of classification it may be considered to be something else".
15. It has been further held that:- "when in a notification, the exemption is with reference to an item in the First Schedule to the Customs Tariff Act, 1975, then the interpretative rules would equally apply to such notification".
16. It has been further held that:- "when a notification exempts goods falling within the First Schedule to the Customs Tariff Act, 1975, then the goods must be classified in the same manner both for purposes of payment of custom duty as well as for purposes exemption/benefit under that Notification. However if the wording of the Notification shows that an item is specifically exempted then the exemption will apply to that item even though for purposes of classification it may be considered to be something else."
17. The Notification dated 28.2.1986 cannot be said to be ambiguous as it clearly mentions the exemption for wheels and axles of animal drawn vehicles and certainly it do not include the hubs.
18. Accordingly we do agree with the findings of the authorities below that hubs do not come within the meaning of "Wheels" or "Axles".
19. Learned counsel for the appellant has submitted that Tribunal has taken a contradictory view on two vital issues which are common in the present case and in the matter of Ratan Industries in Appeal No.E/2258-2259/02-B dated 23.12.2003.
20. As far as the matter of Ratan Industries is concerned, their dispute was settled before the Commissioner under the KVSS and the appellant had accepted the settlement and paid the duty. It was also found that appellant had been filing regularly classification declarations during the relevant period as well as R.T.-12 returns which were already accepted by the Department without any objection. The Tribunal did not find any suppression of material facts regarding manufacturing and clearance of goods in question "Animal Drawn Vehicles". Further it was found that the hubs manufactured by the said company were for the use in the animal drawn vehicles. As far as the present appellant is concerned both the authorities below have come to the conclusion that hubs manufactured by the appellant were not for the use of animal drawn vehicles but for the use of tractor trolley. In the present case both the authorities below have also come to the conclusion that appellant has suppressed and has submitted wrong statement with intention to evade payment of duty. We do not find any legal impropriety committed by the Tribunal taking a different view.
21. It has been submitted by learned counsel for the appellant that Rule 56 of the Central Excise Rules has been violated by taking only one sample and the appellant was not afforded opportunity to challenge the correctness of the same.
22. Rule 56 of the Central Excise Rules, 1944 deals with taking of samples for excise purposes, it provides as under:-
Rule 56. Taking of samples for excise purposes.-- [(1)] The manufacturer shall permit any officer to take samples of any manufactured or partly manufactured goods [or of any intermediate or residual products resulting from] the manufacture thereof, in his factory.
[(2) The officer referred to in sub-rule (1) shall conduct the test from the samples taken under that sub-rule and communicate to the manufacturer the result of such test.
(3) (a) Where the officer is of the opinion that the samples after completion of the test can be restored to the manufacturer, the officer shall send a notice in writing to the manufacturer requesting him to collect the samples within such period as may be specified in the notice.
(b) If the manufacturer fails to take delivery of the samples within the period specified in the notice referred to in clause (a), the samples shall be disposed of in such manner as the [Commissioner of Central Excise] may direct.
(4) Where a manufacturer is aggrieved by the result of the test, he may within ninety days of the date on which the result of the test is received by him, request the [Assistant Commissioner of Central Excise] that the samples be re-tested.]
23. The manufacturing-cum-office premises of the appellant were searched by the officers of the Directorate General of Central Excise Intelligence, North Zonal Unit, New Delhi on 26.5.2000, and a memo was drawn on the spot. During the proceedings of the Panchanama, one representative sample of the so called animal drawn vehicle' hubs manufactured by the appellant was also drawn by the inspection team. The sample was affixed with the identification slip signed by the witnesses, along with Sri K.M.L. Agrawal, proprietor of the unit, and was sealed on the spot. This issue was not agitated before the authorities below.
24. Rule 56 do not envisage more than one sample to be taken. The contention of learned counsel for the appellant is contrary to the requirement of the Rule 56. We do not find any irregularity or illegality in taking only one sample.
25. Learned counsel for the appellant has argued that the department could not invoke the extended period of limitation. This contention has no substance because both the authorities below have come to the clear conclusion that appellant had suppressed the material facts from the department with a view to get undue benefit of exemption and, therefore, the extended period of limitation could be invoked. Certainly the appellant in his declaration filed under Rule 173-B with the Department from time to time had described the goods either as "Hubs of Bullock Carts" or as "Hubs of Animal Drawn Vehicles solely designed to be used in the Wheels". The allegation of suppression and mis-statement with intention to rebate the payment of duty, thus stood proved. The authorities below relying upon the Supreme Court decision in CCE Vs. Sri Vallabh Glass Works Ltd., 2003 (153) ELT 494 (SC), held that the classification declaration under Rule 173-B requires to be analysed in a meticulous manner to ascertain the intention of the declarent. Therefore, we do not find any reason to interfere with the findings of the authorities below.
26. As far as the consideration of the expert's report furnished by the appellant, both the authorities below have taken into consideration this aspect and have come to the conclusion that the finished hubs cleared by the appellant were also meant for tractor trolleys and not for animal drawn vehicles. Apart from the report of the experts, the authorities below have also relied upon the other evidence and have come to the conclusion that the test reports of the two laboratories in question subsequent to the issue of show cause notice was conducted unilaterally without associating the Department and without disclosing to the department, the place and time of manufacture of such hubs and specifications based on which such hubs were manufactured. The appellant was given full opportunity of hearing and failed to establish the nexus between the samples of the hubs, which it got tested on its own, through the two laboratories in question and the hubs in respect of which the offence case is made out in the show cause notice. The test report relied upon by the appellant was not admissible in evidence. More over, the appellant also failed to show how the breaking load certified in the said reports of the two laboratories controvert and disprove the opinion tendered by Dr. Prashant Kumar of IIT, Kanpur. In these circumstances, the contention of learned counsel for the appellant is of no substance.
27. In the result, the appeal is devoid of any merits, and is accordingly dismissed.
Order Date :- 20.7.2012 Kpy