1989 (8) TMI 175 - AT - Central Excise

Issues Involved:
1. Classification of TV cabinets as handicrafts.
2. Legality of the demand for duty and penalties imposed.
3. Applicability of the extended period of limitation.

Detailed Analysis:

1. Classification of TV Cabinets as Handicrafts:

The appellants argued that TV cabinets should be considered as 'handicrafts' and relied on various definitions and reports from bodies connected with handicrafts, including the UNCTAD, Inter-Governmental Group of Experts on Tariff Classification, and the Delhi State Industrial Development Corporation (DSIDC). They contended that the TV cabinets were exempt from duty under Notification No. 104/82-C.E. The Collector, however, did not accept this defense, stating that TV cabinets did not qualify as handicrafts because they were utility items rather than decorative or joyful objects.

Upon review, the Tribunal noted that the Collector's findings were not based on the evidence presented by the appellants. The Tribunal referred to previous judgments, including Padmini Products v. Collector of Central Excise, which accepted similar survey reports and documents. The Tribunal emphasized that the essential character of the product should be derived from the handmade aspect, even if some processes involved the use of power. The Tribunal concluded that the TV cabinets assembled by the appellants were indeed handicrafts, as supported by the DSIDC survey and other documents.

2. Legality of the Demand for Duty and Penalties Imposed:

The Collector had ordered confiscation and imposed penalties of Rs. 1,00,000/- and Rs. 1,50,000/- on the appellants, along with demands for Central Excise duty amounting to Rs. 7,63,235/- and Rs. 12,82,633.08. The appellants contended that the demand was time-barred and that there was no suppression of facts or mis-statement.

The Tribunal examined the show cause notices and found that they did not contain any allegations of suppression or mis-statement, nor did they invoke the proviso to Section 11A for extending the period of limitation. The Tribunal referred to the Supreme Court's judgment in Collector v. Chemphar, which established that for demands beyond six months to be sustainable, there must be evidence of fraud, collusion, willful mis-statement, or suppression of facts. The Tribunal found no such evidence in this case and noted that the appellants maintained records and conducted their business openly.

3. Applicability of the Extended Period of Limitation:

The Tribunal addressed the issue of limitation first, noting that the show cause notices did not mention the period of demand as being from 1-4-1979 to 26-11-1982 and 1-4-1979 to 25-11-1982. The demands were made under Rule 9(2), but Section 11A was not mentioned, and there were no allegations of suppression or mis-statement. The Tribunal cited previous judgments, including S.P. Kumria & Sons v. Collector of C. Ex., which held that the extended period of limitation could not be applied without clear allegations of suppression or mis-statement.

The Tribunal concluded that the demands for the periods beyond six months prior to the dates of the show cause notices were time-barred. Despite this finding, the Tribunal proceeded to examine the merits of the demand and found that the TV cabinets were indeed handicrafts and exempt from duty under the relevant notification.

Conclusion:

The Tribunal allowed the appeals, setting aside the penalties and demands for duty for the entire period. The Tribunal found that the TV cabinets were handicrafts entitled to exemption and that the demands were time-barred due to the lack of allegations of suppression or mis-statement in the show cause notices.

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