ORDER
V.K. Ashtana, Member (T)
1. This is an Appeal against Order-in-Original No. 6/93, dated 24-2-1993 passed by Collector of Central Excise wherein differential duty of Rs. 5,58,313/- has been confirmed on the MODVAT inputs cleared under Rule 57F(1) as such during the period from 1-8-1987 to 13-6-1991 in consideration of the Show cause notice for the same issued on 23-7-1992. A penalty of Rs. 50,000/- has also been imposed. Shri R. Raghavan, Learned Advocate for the appellant introduces the issue by submitting that three parts which are basically mounted brakeliners were received as original equipment from M/s. Rane Brake Linings Ltd. by the appellants on the payment of duty. Majority of these inputs were used for manufacture of brake assemblies for motor vehicles. However, some percentage thereof were cleared as such for home consumption as spares in the market. Learned Advocate submits that only one of these was further worked upon to the extent that one wire spring was fixed to the top hole by way of revitting. However, he stated that this did not change the nature of the product at all and therefore this working upon did not amount to manufacture. Thereafter, these were also sometimes cleared under Rule 57F(1) to the market for home consumption. Learned Advocate submits that their suppliers were forced to pay duty under protest on these items under Sub-heading 6806.10 even as late as 21-12-1998 as per invoice No. 812758 submitted by him. Learned Advocate submits that since these are not merely virgin articles of asbestos products but are mounted on brake shoes and are therefore clearly identifiable as spare parts usable only in the particular model of the Motor vehicles, that is to say that these are products specifically designed and therefore are not capable of any general or interchangeable use. In this connection, he submitted that such mounted products of brakeliners have been advised in the HSN to be classifiable under 8708 as parts of motor vehicles at Page 908 thereof. He also cited that similar issues have been decided in the case of Cresent Tool Engineering as reported in 1996 (86) E.L.T. 90 and Rane Brake Linings as reported in 1997 (96) E.L.T. 593 wherein similar parts have been held as motor vehicle parts. Learned Advocate further submits that for the period after the period of this dispute, the Assistant Collectors of Central Excise of the then same Commissionerate have also issued orders-in-original classifying the same products under 8708 as motor vehicle parts. These decisions have acquired finality because they have not been reviewed or appealed against by the Commissioner concerned. In view of these facts he submits that their clearance of these goods after classifying them under 8708 in view of the wrong classification under protest by their suppliers is not violation of any law. Learned Advocate further submits that in any case, even without going into the merits of the case, it can be seen that the show cause notice dated 23-7-1992 seeking to cover a period from 1-8-1987 to 13-6-1991 is hopelessly barred by limitation because it cannot be said under these circumstances that there was any suppression of facts with wilful intent involved in this case for the following reasons:-
(a) Regular classification list (which were approved later) was filed.
(b) Goods were cleared on Gate passes /Invoices as per law.
(c) RG-I entry was made under that classification.
(d) RT-12 were regularly filed.
When the Department had enjoyed receipt of these inputs and clearances thereof under Rule 57F(1) in terms of the declaration under Modvat Rules as well as the invoices issued showing that the clearances were under Rule 57F(1). Under these circumstances, he submits that there is no question of any suppression of facts and the demand is also hit by time bar.
2. Heard learned DR Shri S. Kannan who reiterates the Order-in-Original. He submits that the question of change of classification when inputs are removed under Rule 57F(1) is clearly in the Department’s favour in as much as the Rule says that the duty should be same as was equal to the credit taken, and in any case, the duty paid on removal should not be less than the credit taken. He further submitted that the Rule as it stood at the relevant time provided with the removal of the goods under the said Rule would involve a deemed manufacture within the same factory.
3. We have carefully considered the submissions on both sides as well as the records of the case. We find that in this case, the goods were received as inputs and there is no dispute that they did not qualify for being so received as inputs under the Modvat Scheme. We find that the majority of these goods were used captively for the manufacture of final product which is also not disputed. We find that the dispute is only limited to some smaller percentage of these inputs which were mostly cleard in the same form under Rule 57F(1) for home consumption on payment of duty. Before this was done, it is clear from the records of the case, that all Central Excise procedures are followed by the appellants including filing of Classification list, filing of RT-12 returns, etc. and clearance of the goods on a proper duty paying document. Therefore we find that since this is not a case where raw materials were received and something was clandestinely made/manufactured out of it and removed either clandestinely or by mis-declaration of the classification. This was a case where duty paid inputs were received and some of which were only cleared as such for home consumption. We also know from the records that the quantum of duty paid on these inputs was higher than the credit taken by about Rs. 4,61,545.85/-. Therefore even there was no loss of revenue in these terms. Under these circumstances, we feel that there was no intention to defraud the Government revenue by suppression of facts with wilful intent. Since the show cause notice was issued much after 6 months of the period in dispute, therefore under these circumstances, the extended period is not available and the demand is straightaway found to be hit by time bar. We, therefore, do not find it worthwhile to go into the question of classification, etc. of these goods as demand is at the very outset hit by limitation. We, therefore, set aside the impugned order including the levy of penalty which does not survive as the demand itself is time barred. The Appeal is therefore allowed in the above terms.