TMI Blog2015 (7) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... tem 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 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 covers Machines and mechanical appliances having individual functions, not specified or included elsewhere in Chapter 84. There can be no doubt that the appellants 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rain dischargers are in reality the conveyors and elevators which are classifiable under Heading 8428 and liable to excise duty, investigations were taken up and during the investigation, searches were conducted as also statements of various persons which include officials of appellant, certain technical consultants, buyers etc. On completion of the investigation, a 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 also penalty under Section 11AC/Rule 25 of the Central Excise Rules was also proposed. Penalty under Rule 26 was also proposed on appellant No.2. The appellants contested the claim of the Revenue. The Commissioner vide impugned order dated 13.11.2013 adjudicated the case wherein he upheld the proposed classification, extended perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystems 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 the first three items and the remaining demand for the remaining six items. 4.2 The learned senior counsel submitted that the above mentioned machines are specifically designed for handling of grains and due to their superior designs, the grains are not broken during the processing of handling and due to this reason, the appellants' machines have got the name and goodwill and commands premium in the market. Learned senior counsel's submission was that the machines manufactured by the appellants 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the machines manufactured by the appellants, milling operations cannot function. Therefore, the machines manufactured by the appellants are squarely covered under Heading 8437. It was submitted that all the machines 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 over Section Notes, Chapter Notes and Rules of Interpretation which are part of the Central Excise Act, 1944 itself. 4.5 Another point submitted was that they had also exported similar machines and even at the time of exportation, they had classified these machines under 8437 and at that time the department had not taken any objection. 4.6 It was submitted that the statements relied upon in the impugned order are totally misconstrued and the department has not taken t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are used prior to milling like machines for mixing grains in pre-determined quantities or grain scouring machines are included in the said heading. However, it has been clarified in the said Explanatory Notes that this Heading does not cover:- (a) Plant operating by temperature change (heading 84.19). For example, heading 84.19 covers such drying or cooling columns, but grain dampening machines with thermal equipment remain this heading. (b) Centrifugal dryers (heading 84.21) (c) Conveyors and elevators (e.g., of the bucket, belt or pneumatic suction types) (heading 84.28). The learned Commissioner (AR) submitted that 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 mines or quarries or construction industries etc. The said h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on their part. It was also submitted that 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 not paying duty as they are manufacturing exempt goods or are small scale industries. It was submitted that in any case the wordings and the drafting of the declarations very clearly indicate the wilful intention of the appellants. If that was not so, in normal course, declarations would indicate the exact models and commercially understood nomenclature of the goods manufactured and there was no reason to indicate that the duty is nil because these are falling under Heading 8437. Appellants also did 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has clearly held that once the court comes to a conclusion on any aspect, the court cannot extend the benefit to an assessee on the grounds that such benefit had been wrongly extended to others. The correct procedure would be to correct the incorrect and not to proliferate the incorrect. Learned Commissioner (AR) further submitted following case laws:- (i) Mercantile Company vs. CCE, Calcutta reported in 2007 (217) ELT 330 (SC) - Para 9, 13, 14, 15, 30, 31 32 (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 within the factory premises or lifting the grains within the factory premises or for storing or feeding into certain machines. It is also not under dispute that the main three machines i.e. grain feeder, en-mass grain feeder and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 machineries are used in the milling industry and the third type are for working of cereals or dried leguminous vegetables other than farm-type machinery. Undoubtedly, these machines cannot be covered under the first and third category. As far as the second category is concerned, the Explanatory Notes explain the scope of the term machinery used in the milling industry as under:- (II) MACHINERY USED IN THE MILLING INDUSTRY In addition to machinery for cleaning, sorting or grading grain prior 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording the flour extraction rate, and other flour testing apparatus of Chapter 90. An examination of the scope of machinery used in the milling industry would indicate that these are the machines which are used for mixing or preparing grain, grinding or crushing the grains or for sorting or separation of flour from sharps or middlings. It will 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 heading 84.28. In our considered view, keeping in view the HSN Explanatory Notes as also the fact that the machines manufactured by the appellants in no way process the grains or even do not do any auxiliary function before processing of grains but are limited to conveying or lifting or storing grains. (The nomenclature feeder used by the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 covers Machines and mechanical appliances having individual functions, not specified or included elsewhere in Chapter 84. 9. Next issue is that the appellants have contended that the extended period of limitation is not invokable. We note in this particular case various customers of the appellants have also stated in their respective statements that in their initial enquiries they asked for supply of elevators and conveyors and it is on the request of the appellants that these were changed to grain 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if they describe the goods as conveyor and elevator, the same would be chargeable to excise duty, would nullify any declaration or intimation given 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 proviso to Section 11A is invokable and, therefore, the demand raised for the five years is correct and the same is upheld. 9.1 We also note that the Hon'ble Supreme Court in somewhat similar situation in the case of Mercantile Company vs. CCE, Calcutta reported in 2007 (217) ELT 330 (SC), has observed as under:- 9. On the question of limitation, it was held that the letter dated 8th March, 1994 relied upon by the appellant did not disclose the entire facts and did not reflect the situation in its proper perspective. The Department was not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th March, 1994 written by the appellant did not state the entire facts. The same was vague and lacking in particulars. In the letter, it was not disclosed by the appellant that the products were being marketed as cleanser and gave the impression as if they are only re-packing the raw material into smaller packs. It was not disclosed that a new name has been given to the products. That the appellant did not disclose the applicability and functions of the products. The correspondence between T. Paul Sons and M/s. Philips India Ltd. clearly indicates 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 the appellant cannot be accepted. The letter dated 8th March, 1994 did not disclose the entire facts. The letter did not disclose the situation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Central Excise officer at the time of export does the function of Customs officer and the examination is only to check that the goods being stuffed in the container or packages are as per the packing list, invoice etc. The officers are not expected to examine the issues raised in the present show cause notice. The appellant's contention is therefore rejected. 9.3 Another contention raised by the appellant is that in case of their competitors, the goods are being cleared without payment of duty 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inite conclusion that the goods are classifiable under heading 8428 and 8479 and, therefore, the party's plea is rejected. We also note that the appellants were conscious of the fact that the goods are classifiable under 8428 and chargeable to excise duty and in order to avoid excise duty, they used different description of the goods and 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 that their goods are not chargeable to duty. We fail to understand this plea. Evidences on record clearly indicate that they were aware that the goods are chargeable to duty and it is for this reason that they were insisting particular description. Statement recorded during the investigation indicates that they were fully aware about of their duty liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 NO MUCH DIFFERENCE BETWEEN TRANFORMER OIL SPINDLE OIL. ALSO, WE ARE ALREADY HOLDING THE REGN.CERT. FOR MFG. SPINDLE OIL. AND ALSO, PLEASE ARRANGE TO GET A REVISED P.O. MENTIONING THE PRODUCT NAME AS SPINDLE OIL FROM THE BUYER. REGARDS. Sd/- (S. RAMAMOORTHI) Thus the Records clearly show that M/s. TPL have been clearing the goods under 38.17 and they were prompted by the need of the customers to change the nomenclature of the item as Spindle Oil and they did so clearly with a view 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extended period of limitation under the proviso to Section 11A(1) was erroneous as the assessee had filed their classification list and price-list on 20-11-1991 [including the purchase 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 the show cause notice, the assessee submitted that wastes had emerged at various stages. However, in the classification list, they have not spelt out the various stages at which the so called wastes had emerged. In the present case, the department had alleged misdeclaration of polyester chips as wastes. According to the assessee, chips, which spilled over during bagging were unusable and, therefore, waste . However, no such details have been mentioned in the classification list particularly when it urged tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter examine the said documents and in case he needs any other documents as per law, he may inform the appellants about the same and the appellants will submit those documents and, after examination of the said documents, take a view about the quantum of cenvat credit available to the appellants. 12. Now coming to the penalty imposed on Shri Makarand S. Savagaonkar, Managing Director of the appellant-company, under Rule 26 of the Central Excise Rules, from the facts brought on records, it is clear that he was aware that the goods manufactured by them are elevator and conveyor as popularly understood in commercial parlance and with that description the goods would be chargeable to excise duty, but he instead of paying the excise duty changed the description of the goods and not only that while interacting with his customers, insisted that the description in the purchase order etc. should be as per his requirement. We have no hesitation in holding that the penalty should be imposed on the said appellant. However, keeping in view the fact that the duty liability after extending the benefit of cenvat credit would be substantially reduced as also the fact that the appellant is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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