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Eminence Equipments Pvt Ltd, Makarand S. Savagaonkar Versus Commissioner of Central Excise, Pune-I

2015 (7) TMI 545 - CESTAT MUMBAI

Manufacture of Grain Feeder, En-mass Grain Feeder, Grain Discharger, Bins for grain storage, Loaders & Hoppers - These machines are used for transporting of grains - classification under Heading 8437/8436 or under 8428/8479 - appellants had not taken Central Excise registration and were clearing the said machines without payment of duty - Denial of CENVAT Credit - Penalty u/s 11AC - Held that:- keeping in view the HSN Explanatory Notes as also the fact that the machines manufactured by the appel .....

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construction and the item being handled is cement or minerals or grains.

In view of the above position, we have no hesitation in holding that the machines being manufactured would be correctly classifiable under Heading 8428 and not 8437 as claimed by the appellants and the goods would, therefore, be chargeable to excise duty. - there are few other machines viz. bins, hoppers and Grain Feed Controller which the Revenue has proposed under Heading 8479 and the appellants claim the same .....

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s were aware about the dutiability of the said goods and, therefore, they have intentionally not used the generally understood commercial terminology of the said goods and instead used the words green feeder, en-masse feeder etc. to avoid payment of excise duty. In our view, the conduct of the appellants would support the invocation of the extended period of limitation as also imposition of penalty.

There can be no doubt as even after knowing that their goods are chargeable to excise .....

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e held to be dutiable, they are eligible for taking the cenvat credit. The appellants, therefore, must be given a chance to provide the copies of various documents like invoices etc. and other records as required to prove that the said inputs or input services were used in the manufacture of the goods and if the appellants are able to satisfy from the documentary evidence then the cenvat credit should be extended to the appellants and the net duty should thereafter be worked out. Penalty will al .....

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K Jain: Brief facts of the case are that the appellants are engaged in the manufacture of machines described by them as Grain Feeder, En-mass Grain Feeder, Grain Discharger, Bins for grain storage, Loaders & Hoppers. These machines are used for transporting of grains from one point to the other point in the factory or storage or for feeding into other machines. The appellants had not taken Central Excise registration and were clearing the said machines without payment of duty treating the s .....

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show cause notice dated 24.12.2012 was issued to the appellants proposing to classify grain feeders, en-mass grain feeders, grain discharger, screw feeder, sieving belt, grain mover etc. manufactured by them under Heading 8428 and bins, hoppers, Grain feed controller under Heading 8479. The notice further proposed recovery of duty of an amount of ₹ 10,66,36,263/- as detailed in annexure to the show cause notice covering the period from April 2008 to October 2012. Recovery of interest as a .....

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y was allowed. Vide the impugned order, a duty amount of ₹ 9,59,81,498/- was confirmed and equal amount of penalty under Section 11AC was imposed. Recovery of interest was also confirmed. A penalty of ₹ 1,00,00,000/- was imposed on Shri Makarand S. Savagaonkar, managing director of the appellant company and the second appellant in this case. Aggrieved by the said order, the appellants are before us. 2. This Tribunal vide order dated 10.3.2014 decided that keeping in view the nature o .....

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lling and the machines in question are not for such purposes but are for handling/transporting of such items and such machineries are covered under Heading 8428 of the First Schedule to the Customs Tariff Act, 1975. 4. The learned senior counsel for the appellants submitted that the functions of the machines are as under;- Grain feeders are designed to ensure a regular and even flow of grain to the milling machines. En-mass grain feeder is used for conveying grains from unloading point/godown to .....

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y help to control the continuous streamline flow of grain during the milling process. Grain bag stacker are designed and developed to stack grain bags. Grain Silo has been designed, developed and installed systems for loading and unloading of grain in the Silos. Sieving belt or grain mover consist of series of rolls operating an endless belt running under a feeding hopper. Grain movers are running under bins/feeding hoppers. 4.1 It would be important to note that 95% of the demand pertains to th .....

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lants are exclusively designed for use in milling industry only. In other words, the machines manufactured by the appellants are not built to handle any product other than grains. These machines form integral part of milling machinery, without such machines milling operations cannot function. Learned senior counsel submitted that Heading 8428 broadly covers machines which are usually fit to use in mines and quarry, construction sector, power and energy sector, oil sector etc. where the weightage .....

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es other than farm-type machinery. The learned senior counsel submitted that the machinery manufactured by them would be covered by the second part. The learned senior counsel submitted that their machines are used in the rice mill machinery, flour mill machinery, seed plant machinery, animal feed plant etc. and, therefore, would fall under the second component. The learned senior counsel also submitted that Technical Handbook for the Paddy Rice Post Harvest Industry in Developing Countries writ .....

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pon the following judgments:- (i) Thermax vs. CCE reported in 1996 (81) ELT 417 (T); (ii) Moped Assembly vs. CCE reported in 2001 (129) ELT 195 (T); (iii) CCE vs. Bhawani Roller Flour Mill reported in 2003 (156) ELT 133; (iv) Dunlop India Ltd. & MRF Ltd. vs. UOI reported in 1983 (13) ELT 1566 (SC) (v) Maa Durga Flour Mill P. Ltd. vs. CC reported in 2008 (227) ELT 0301. (vi) SKF Boilers & Driers P. Ltd. vs. CCE reported in 2011 (264) ELT 425 (T). The learned senior counsel further relied .....

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es manufactured by them are for transporting the grains from place to another and lifting from one level to another, though the similar function is performed by chain conveyor and bucket elevator classifiable under Heading 8428 but the similar functions performed by their machines will not take away these from the heading 8437. 4.4 It was also submitted that the Explanatory Notes to HSN are not applicable in the present case, as the Explanatory Notes to HSN have no legal force and cannot prevail .....

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tements. 4.7 It was also submitted that only a very insignificant part of the machinery manufactured by the appellants was supplied to distilleries, breweries and animal feed plants and at the most, the department can restrict the demand to the machines supplied to the said industry and in that event, the excise demand will get reduced to ₹ 38,94,503/-. 4.8 The learned senior counsel also submitted that the demand beyond the period of normal limitation is not sustainable as there is no sup .....

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s manufactured by them and relied upon the judgment of the Hon'ble Supreme Court in the case of Continental Foundation vs. CCE reported in 2007 (216) ELT 177 (SC). IT was also submitted that the issue involved is purely interpretational in nature and, therefore, extended period of limitation cannot be invoked as held by the Hon'ble Supreme Court in the case of Padmini Products vs. CCE reported in 1989 (43) ELT 195 (SC). It was also submitted that even if the demand is to be sustained, th .....

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submitted that a perusal of the HSN Explanatory Notes for Heading 8437 would indicate that what is proposed to be covered under the said heading are the machines which are required for processing of grains which may include cleaning, sorting or grading seed, grain or dried leguminous vegetables. Further, the HSN Explanatory Notes clarify certain machines which are used prior to milling like machines for mixing grains in pre-determined quantities or grain scouring machines are included in the sa .....

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t the said Explanatory Notes very clearly state that the conveyors and elevators (e.g., of the bucket, belt or pneumatic suction types) are not covered by the said heading and are covered by heading 8428. The learned Commissioner (AR) submitted that when there is such a specific exclusion given in the HSN Explanatory Notes, there cannot be any doubt whatsoever that the machines cleared by the appellants are classifiable under Heading 8428. It was submitted that Heading 8428 does not confine to m .....

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In a very small milling mill, these can be manually handled. Keeping in view the volume and weight of the grains being handled, such machines may be necessary and therefore such machines may be installed in a milling industry, but that itself will not make the machinery as machinery for milling industry. It was further submitted that Central Excise Tariff is fully aligned with the HSN classification system as far Heading 8428 and 8437 are concerned and therefore the Explanatory Notes to HSN can .....

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rain feeder, grain discharger etc. Even though the model number given by them itself indicates in brief that the said machine is a screw conveyor or chain conveyor or bucket elevator. In various models the word used SC indicates screw conveyor, the word used CC indicates chain conveyor and the word used BE indicates bucket elevator. There was no reason for the appellants to use other terminology. They could have called their items as screw conveyor for grain or bucket elevators for grain but the .....

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the appellants have very cleverly filed the declaration with the department. In the declaration form, instead of indicating that these are bucket elevators or chain conveyors, they indicated different description and also stated that these are classifiable under heading 8437. It was further submitted that the purpose of the said declaration is not to examine the classification of the goods but just to keep track by the jurisdictional officers that certain units within their jurisdictions are no .....

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id not take any registration or filed any returns. Thus the department was kept in dark. 5.2 The learned Commissioner (AR) further submitted that at the time of export, the examination is limited to certify that the goods being stocked in the container or package are as per the invoice and nothing beyond that and in fact the function being done by the Central Excise officer is on custom's behalf so that the appellants goods are not examined at the port of export. It has nothing to do with ch .....

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rned AR submitted the following case laws in support of his contention:- (i) Samsung India Electronics Ltd. vs. CC, New Delhi reported in 2014 (307) ELT 160 (Tri.-Del.); (ii) Godrej Consumer Products Ltd. vs. CCE, Indore reported in 2014 (308) ELT 61 (Tri.-Mum.); (iii) DCL Polyester Ltd. vs. CCE, Nagpur reported in 2005 (181) ELT 190 (SC); (iv) CC, Kandla vs. Essar Oil Ltd. reported in 2004 (172) ELT 433 (SC) (v) R.G. Nagori & Sons vs. CCE reported in 1989 (39) ELT 303 (T). (vi) Samsung Indi .....

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Learned Commissioner (AR) submitted that as on today, the concept is of self-assessment and self-payment of duty and under these circumstances, the department cannot be held responsible for mis-clasification by some other manufacturer. In any case it is possible that these manufacturers may be within the SSI limit and may be clearing because of that at nil rate of duty. It was also submitted that the Hon'ble Supreme Court in the case of Faridabad CT Scan Centre vs. D.G. Health Services repor .....

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(ii) Kores India Ltd. vs. CCE, Chennai reported in 2004 (174) ELT 7 (SC) - Para 16 (iii) Tamil Nadu Petroproducts Ltd. vs. CCE, Chennai reported in 2004 (176) ELT (Tri.-Chennai) - Para 18, 23,28 & 29. 6. We have considered the rival submissions and given considerable thought over the dispute. At the outset, we observe that none of the machines being manufactured by the appellants are for processing of grains. All the machines are meant for handling of grains i.e. transporting the grains wit .....

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ifts, escalators, conveyors, teleferics). 8428.10 - Lifts and skip hoists 8428.20 - Pneumatic elevators and conveyors - Other continuous action elevators and conveyors, for goods or materials 8428.31 - Specially designed for underground use 8428.32 - Other, bucket type 8428.33 - other, belt type 8428.39 - Other 8428.40 - Escalators and moving walkways 8428.60 - Teleferics, chair-lifts, ski-draglines, traction mechanisms for funiculars 8428.90 - Other machinery With the exception of the lifting a .....

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or of the type falling in heading 84.13, and floating docks, coffer-dams and similar marine lifting and re-floating appliances operating solely by hydrostatic buoyancy (heading 89.05 or 89.07) .................. .................." From the above description, it is very clear that the said heading does not get limited to any particular type of goods but is applicable to all types of goods or materials etc. and in fact while discussing the scope of various items at number of places, Explanat .....

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s 8437 80 - Other machinery; Nil 8437 80 10 - Flour mill machinery Nil 8437 80 20 - Rice mill machinery Nil 8437 80 90 - Other Nil 8437 90 - Parts; 8437 90 10 - Of flour mill machinery kg. Nil 8437 90 20 - Of rice mill machinery kg. Nil 8437 90 90 - Other kg. Nil" 6.1 The appellants' main contention is that the said Heading 8437 covers three types of machineries. First one, machines for cleaning, sorting or grading seed, grain or dried leguminous vegetables. The second type of machineri .....

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rior to milling (see Part (I) above), the following are included as machinery used in the milling industry: (A) Certain machines for mixing or preparing grain prior to milling, e.g.: (1) Machines for mixing grain in pre-determined quantities. (2) Grain scouring machines consisting of spiked drums turning against rubber cylinders and thus eliminating the softer grains. However, the heading does not cover: (a) Plant operating by temperature change (heading 84.19). For example, heading 84.19 covers .....

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or mills with smoother rollers, specially designed to convert middlings, semolina etc., into flour. (4) Disintegrators or impact grinders used to grind down into flour, the meal, etc., which adheres to the mill or converted rollers in the preceding processes. (5) Feeders, machines designed to ensure a regular and even flow of grain to teh crushing rollers. The heading does not include small farm type grinding mills (heading 84.36). (C)Machinery for the sorting or separation of Hour from sharps o .....

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ng sifters or plansifters consist of nests of free-swinging superimposed sieves and collecting trays. (2) Sieving machines or "purifiers". These grade the middlings, etc., and also blow off the bran by means of vibrating sieves through which a current of air is drawn. (3) Bran cleaners. (4) Blending machines for flour, bran, etc.; also machines for adding vitamins to flour. However, the heading does not cover: (a) Flour -drying machines (heading 84.19). (b) Air filters and "cyclon .....

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l thus be seen that the scope is limited to the machines which are in some way or the other working on the grains. It is undisputed fact that the machines manufactured by the appellants are not for working on the grains and do not in any way clean, sorts, grinds, crushes etc. The machines are only for transporting from one place to the other or for lifting the grains. In fact the said Explanatory Notes in the first category very clearly say that conveyors and elevators would get classified under .....

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nes designed for any goods are covered under Heading 8428 irrespective of the fact that such machines are used in a factory or in mines or in construction and the item being handled is cement or minerals or grains. In view of the above position, we have no hesitation in holding that the machines being manufactured would be correctly classifiable under Heading 8428 and not 8437 as claimed by the appellants and the goods would, therefore, be chargeable to excise duty. 6.2 We also note that the app .....

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n 8428. In the present case, heading 8437 specifically excludes the goods in question and 8428 specifically includes the goods. In view of the said position, the said judgments are not applicable in the facts and circumstances of the present case and we do not consider it necessary to discuss each of these case laws. 7. The appellants have also submitted that only 5% of such machines have been used in the breweries, animal feed and industries other than milling industry and, therefore, the deman .....

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main machines, there are few other machines viz. bins, hoppers and Grain Feed Controller which the Revenue has proposed under Heading 8479 and the appellants claim the same would be classifiable under Heading 8437. Again, these goods are not meant for processing of the grains etc. but are machines for storage of grains or their parts. We agree with the Revenue that such machines would fall under the residuary heading of 8479 as these cannot be considered as machinery for milling industry. 8479 c .....

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in discharger or grain feeders. We also note that Shri Narpinder Kumar Gupta, Managing Director of M/s. Dr. Ing. N.K. Gupta Technical Consultants Pvt. Ltd., New Delhi, who acts as a consulting firm to the appellants and helps them in procuring orders, has admitted that the appellants are manufacturing elevators and conveyors. We also note that one of their business associate, Shri Shripad M. Salumke, Director of M/s. Elina Solutions Pvt. Ltd., Pune has stated in the statement dated 7.5.2012 that .....

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r, Grain discharger etc. and insisted for such description in the purchase orders from other customers. We have also gone through the declaration made by them. The said declaration is required to be furnished by the manufacturing units who are not paying duty either due to the fact that their turnover is within the small scale exemption limit or they are manufacturing the goods which are exempt from payment of duty. Purpose of this declaration is not to examine the classification or dutiability .....

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SC should have been elaborated in the declaration and catalogue should have been submitted. Instead of indicating that these are conveyer and elevator, the appellants very cleverly described the goods as "Grain handling equipments for rice, flour, dal mills/storage silo system accessories/ storage bins for rice/grain feed controller Job work." They did not indicate the classification of the goods manufactured, in serial No.4. In serial No.5, value/ quantity of goods cleared during the .....

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ven by them until and unless they raise and very specifically ask the question relating to Heading 8428 versus 8437 with Revenue. We also note that the appellants have not taken registration or filed any returns. From the show cause notice, it is clear that the department started investigation only due to a receipt of information. Keeping in view these facts, we are of the considered view that this is a case of fraud and there was suppression of facts and extended period of limitation under prov .....

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n in its proper perspective. The Department was not informed about the actual activity undertaken by the appellant. It was not disclosed as to whether a new name has been given and the applicability and functions of the products were not clearly stated. That new and distinctive product came into existence which was sold and known in the commercial world under a separate name having different and distinct qualities. Commissioner of Central Excise, Calcutta 1, confirmed the demand of duty ₹ .....

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tion list was filed by the appellant. He has drawn our attention to a letter dated 8th March, 1994 written by the appellant to the Assistant Collector of Central Excise, Calcutta disclosing the activity undertaken by the appellant and requesting the Revenue to let the appellant know about the Central Excise formalities required to be observed. That the writing of the letter well in advance shows the bona fides of the appellant and that there was no suppression, misstatement, etc., on the part of .....

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raw material cannot be used. The impugned goods were specially packed in the cardboard packages and are known differently in the commercial as well as common circles. That the appellant's products are cleansing products and deserved to be classified under Chapter 34 and the adjudicating authority has rightly classified them under heading 3402.90. 15. As regards limitation, it was submitted on behalf of the Revenue that the letter dated 8th March, 1994 written by the appellant did not state t .....

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ates that there was a doubt as to whether the products would invite the Central Excise duty. To overcome this, they obtained the opinion of an Advocate and the Advocate advised them that instead of solvent, the word thinner should be printed on the carton to avoid the Central Excise Rules. 30. On the question of limitation, the submission made by the counsel for the appellant that the letter dated 8th March, 1994 disclosed the entire facts to the authorities regarding the items manufactured by t .....

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nown in the commercial world under a separate name having different and distinct qualities. The appellant had not produced sample of the subject goods along with the letter. For the aforestated reasons, it cannot be held that the authorities had full knowledge about the activities undertaken by the appellant. 31. It appears that duty liability under the Central Excise Act & Rules was well known to the appellant as is evident from the correspondences made by Shri Arun Kanti Paul (who is the c .....

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ia Ltd. was actually executed by the appellant by printing thinner instead of solvent on the cartons. Shri Arun Kanti Paul during examination, when asked to throw some light on the correspondence with M/s. Philips India Ltd., stated that he had some doubt about the excise liability of these products and accordingly he obtained legal opinion regarding the same and persuaded M/s. Philips India Ltd., to allow them to print thinner against solvent on the cartons. It clearly shows that the appellant .....

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lassification. We do not see any force in this argument. The goods exported from India are not charged to excise duty. If the goods are exempted, no duty is chargeable. Even if the goods are chargeable duty, either goods are exported under bond where not duty is levied or duty paid at the time of export is refunded in the form of rebate, thus overall no duty is collected by Revenue for export goods. Thus, in connection with export, the leviability of the duty is of no consequence. Moreover, the .....

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ty and Revenue has not raised any objection in their case. In support of their contention, the learned counsel also submitted the Hon'ble Bombay High Court judgment in the case of Galaxy Plastics (Bombay) Pvt. Ltd. vs. UOI in Writ Petition No. 298 of 2006. We have gone through various documents and leaflets submitted by the appellant. From the documents submitted by the appellant, it cannot be concluded that the goods are exactly similar and the classification and duty leviable/levied. It is .....

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and unless any information is received about the evasion of duty. In the overall factual matrix of the case, we are not in a position to say that the competitors are being allowed clearance duty free by the Revenue. 9.4 The learned Commissioner (AR), on the other hand, has submitted the Hon'ble Supreme Court's decision in the case of Faridabad CT Scan Centre vs. DG Health Services reported in 1997 (95) ELT 161 (SC). In the said judgment, the Hon'ble Supreme Court in para 3 has observ .....

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ame learned Judge in his judgment has observed in para 21 that the principle of equality enshrined under Article 14 does not apply when the order relied upon is unsustainable in law and is illegal. Such an order cannot form the basis for holding that other employees are discriminated against under Article 14. The benefit of the exemption notification, in the present case, cannot, therefore, be extended to the petitioner on the ground that such benefit has been wrongly extended to others. With re .....

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nd generally known commercial description was written in the abbreviated form viz. BC, CC, SC etc. The appellants were insisting from the buyers to indicate the description as per their requirement. Even one of their main customers has stated in the statement that initially when they started the business with the appellant, they were informed that if they don't use the said description, excise duty will become payable. 9.6 The appellants have also pleaded that they had a bona fide belief tha .....

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situation in the case of Tamilnadu Petroproducts Ltd. vs. CCE, Chennai reported in 2004 (176) ELT 116, the Tribunal has observed as under:- 28. As regards the invocation of the proviso to Section 11(A) of the C.E. Act 1944, I find that suppression of facts from the department is very clear from the evidence available on record as the appellants, to suit the requirement of their customers, and to derive the consequential benefit by them, cleared the goods under a different name, without bringing .....

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ce. They want to know whether we can invoice the product as Transformer Oil Base Stock (TOBS) under Tariff heading 27.10 attracting 10% Excise duty. Presently Transformer oil Grade II comes under Tariff heading 3817, attracting 20% Excise duty. If Reclassification of the product as Transformer Oil base Stock under Tariff heading 2710 with 10% Excise Duty is not possible, they wanted to know whether we can supply TO Grade II in the name of Spindle Oil (VG 22). You may please note that our Spindle .....

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reproduced below :- URGENT Dt. 16-11-95 FAX = MESSAGE S. RAMAMOORTHI, DM FROM (EXCISE) TPL-SITE. MR. S. KARTHIKEYAN, TO: DM (MKTG.DEVT.) TPL-H.O. PLEASE REF. YOUR FAX MSG. DT. 15-11-95. IN THIS REGARD WE HAVE ALREADY EXPLAINED OUR DIFFICULTY IN REGISTERING TOBS UNDER TARIFF 2710. THIS IS MAINLY DUE TO THE REASON THAT OUR MFG. PROCESS OF TOBS IS ENTIRELY DIFFERING FROM THE OTHER TOBS AVAILABLE IN THE MARKET. HOWEVER, WE CAN GO AHEAD WITH THE PROPOSAL AS YOU HAVE SUGGESTED VIDE PARA 4, AS THERE IS .....

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iew to evade payment of duty. They have intentionally changed the nomenclature of the goods and the tariff heading thereto, is established by the above correspondence exchanged between the Senior Officers of the appellants Company. Therefore, mens rea on their part is established by evidence on record. In the background of the evidence as discussed above, the charge against the appellants that they have suppressed the fact from the department is brought home by evidence on record. Therefore, the .....

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ent's allegation that the appellants had suppressed material facts rendering themselves liable to penalty under Section 11AC of the Central Excise Act. He submits that, as far back as on 8-2-1996, the appellants had filed a fresh classification list in respect of the subject products. Had the department had any doubt in the matter, they would have called for necessary clarification from the appellants and would have made further enquiries, if necessary, to verify the correctness of the class .....

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-2-96 was purportedly a "revised classification" from which it would not appear to the department that it had been filed in respect of any new product. It is also submitted that the declaration in the classification list was vague as it contained no specific details of the products or of the process of manufacture thereof. I have considered and appreciated these submissions. Having agreed, on the merits of the case, with the findings recorded by learned Member (Technical), I have got t .....

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hase orders of the buyers]; that no inspection, audit or investigation was carried out before approving the classification list and the price-list and, therefore, the department was not entitled to invoke the extended period of limitation. 26. We do not find any merit in these arguments. Firstly, no such arguments were advanced before the Tribunal. The only argument advanced before the Tribunal was on excisability and nil rate of duty vide notification dated 1-3-1992. Secondly, in the reply to t .....

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list particularly when it urged that "wastes" had emerged at different stages of production. In the circumstances, we are not inclined to interfere with the impugned judgment of the Tribunal." 9.9 Further, in the case of Essar Oil Ltd. (supra), the Hon'ble Supreme Court in para 29 to 36 has elaborately discussed the concept of fraud. The Hon'ble Supreme Court has observed that fraud is an intention to deceive. In the present case there can be no doubt that the appellants w .....

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ds are chargeable to excise duty, the appellants instead of paying the excise duty, chose to describe their goods with different nomenclature. We, therefore, uphold the imposition of penalty under Section 11AC. 11. Coming to the appellants' request of permitting cenvat credit, we are not in agreement with the reasoning given by the Commissioner in the impugned order. It is true that the cenvat credit can be taken as per Rule 3 of the Cenvat Credit Rules. However, the peculiar facts in the pr .....

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ants are able to satisfy from the documentary evidence then the cenvat credit should be extended to the appellants and the net duty should thereafter be worked out. Penalty will also change accordingly. We, therefore, remand the matter to the Commissioner for the limited purpose of examining the documents to be submitted by the appellants (within a period of three months from the date of receipt of this order) and the Commissioner would thereafter examine the said documents and in case he needs .....

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