1985 (8) TMI 228 - AT - Central Excise

Issues Involved:
1. Classification of MS specials under Central Excise Tariff.
2. Applicability of extended period for duty recovery under Section 11A.
3. Justification for confiscation and penalty under Rule 173Q.
4. Validity of classification lists and approval by Central Excise authorities.

Detailed Analysis:

1. Classification of MS Specials under Central Excise Tariff
The Collector of Central Excise, Bombay-I, classified MS specials manufactured by M/s. Indian Hume Pipe Co. Limited under Item 68 of the Central Excise Tariff, not under Item 26AA(iv) as claimed by the factory. The manufacturers argued that MS specials were correctly classifiable under Item 26AA(iv) and exempted under Notification No. 69/73-C.E. They cited previous decisions and ISI specifications to support their claim, asserting that their products were pipes and tubes. However, the Tribunal concluded that MS specials, although made from pipes, do not serve the functions of pipes but act as fittings and aids. Therefore, the correct classification is under Item 68.

2. Applicability of Extended Period for Duty Recovery under Section 11A
The manufacturers contended that there was no suppression or misstatement of facts to warrant recovery within the extended period of 5 years under Section 11A. They argued that all clearances were made with the knowledge of the central excise and that the claim was time-barred. The Tribunal found no evidence of fraud or suppression by M/s. Indian Hume Pipe, noting that the Central Excise Department was aware of their clearances. Consequently, the Tribunal ruled that the recovery period should be limited to six months preceding the notice, not five years.

3. Justification for Confiscation and Penalty under Rule 173Q
The Collector imposed a penalty of Rs. 25,000/- and ordered confiscation of seized goods, allowing redemption on fine. The manufacturers argued that there was no justification for confiscation or penalty as there was no fraud or suppression. The Tribunal agreed, setting aside the confiscation and penalty, stating that there were no conditions warranting such actions. The Tribunal noted that the department failed to take proper action when it could have stopped the factory from clearing goods wrongly.

4. Validity of Classification Lists and Approval by Central Excise Authorities
The manufacturers referred to several classification lists approved by the Central Excise, which classified MS pipes and specials under Item 26AA and claimed exemptions. The Tribunal observed that the department was aware of the MS specials and their clearances, but there was inconsistency in how the classification lists were handled. The Tribunal criticized the Collector's order for not addressing the pending classification lists and the submissions made by the manufacturers. The Tribunal concluded that the classification under Item 68 was correct but found no fraudulence, limiting the duty recovery to six months.

Conclusion
The Tribunal upheld the classification of MS specials under Item 68 of the Central Excise Tariff, rejecting the claim for classification under Item 26AA(iv). It limited the duty recovery period to six months, set aside the confiscation of seized goods and the penalty imposed under Rule 173Q, and directed M/s. Indian Hume Pipe to pay the duty short paid during the six months preceding the notice. The demand of Rs. 11,628/- payable on the goods under seizure was upheld.

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