ORDER
C.N.B. Nair, Member (T)
1. The dispute in the instant case is with regard to eligibility of Brakes Lining in roll form for the benefit of concessional rate of duty under Notifications No. 96/86 and 59/90. The concessional rate was available to “Brake Linings and pads and clutch facings, other than those used in vehicles of Chapter 87.” The appellants availed themselves of the concessional rate. The impugned order has held that the brakes linings in roll form were not eligible as they were supplied to M/s. Kinetic Engineering Ltd. (70%) and other manufacturers of automobiles for use as brake lining. The appellants have been contending all through that brake lining in roll form cannot be readily used in motor vehicles, several processes have to be carried out before they become usable as brake lining in vehicles and it has been held by the Madras High Court in the case of Brakes India Ltd. v. Superintendent of Central Excise that the processes involved in converting brake lining in roll form to usable motor vehicle part amounts to manufacture, the brake lining in roll form can be of use in several industries other than motor vehicles like industrial drum brakes, industrial band brakes, cranes and excavator brake and clutch lining and, therefore, these brake linings are “other than those used in vehicles of Chapter 87.” The appellants have also maintained that most of the demand is time barred as they had informed the full facts to the Central Excise authorities, particularly vide their letter dated 26.2.1989. They have also submitted that the clearances were as per the approved classification list. The appellants have also contended that imposition of penalty and demand of duty were not justified as the recipients of the goods were eligible to Modvat credit on the brake lining in roll form as inputs, which would show there could be no intention to evade Central Excise duty.
2. As against the aforesaid submissions of the appellants, the impugned order has gone by the fact that the goods were, in fact, sold to motor vehicle companies and those companies further manufactured and used them in motor vehicles.
3. Heard Shri V.M. Udhoji, learned DR for the Revenue. He has contended that it is an admitted case that the brake linings in roll form have indeed been used in the manufacture of motor vehicles. Therefore, there is no merit in the contention of the appellants that the brake linings are “other than those used in vehicles of Chapter 87”. He also submitted that the appellants’ contention that the goods require further manufacture before use in the motor vehicles is not relevant for the purpose of classification as exemption notifications are to be understood in terms of the language used in them and not in terms of tariff entry, Chapter Notes, Section Notes, etc. He has relied on the decision of the CEGAT in Pravindhandra D. Bros v. Collector of Central Excise, Bombay in support of this submission. He submitted that further manufacture of the goods before use in vehicles is not relevant as such use after further manufacture would also satisfy the requirement.
4. We have perused the records and have considered the submissions made by both the sides. We find that the crux of the dispute is with reference to the meaning of the words “other than those used in vehicles of Chapter 87”. The Revenue have based their case on the fact that the goods, in fact, (70%) were found to be used by motor cycle manufacturers. The appellants, on the other hand, submit that the goods in question have other uses also and that they have to be further subjected to manufacture before they can be used in vehicles. We find that the exemption is with reference to the use of the goods, i.e. whether in vehicles of Chapter 87 or not. This fact has to be determined with reference to the category into which the goods fall, i.e. whether goods are of the type, specifications for use in vehicles or not. The Revenue’s position is that use of 70% of the goods in itself is proof that the brake linings are of the category for use in vehicles. While the Revenue may not have approached the case from the correct angle, their finding seems to be vindicated by the evidence which shows that goods are not merely manufactured for use in motor vehicles, they not only conform to the specifications for such use, they, in fact, have been and are being used predominantly in motor vehicles. In the face of such evidence the finding that the brake linings are for use in vehicles of Chapter 87 and not eligible for the exemption has to be upheld. The appellants’ submission that in the rolls form brake linings cannot be used in vehicles and for that reason they are eligible for exemption cannot be accepted, as use of the material need not be direct and use after further processing would also qualify to be considered as use in vehicle or otherwise. That the processes carried out on the brake linings in roll form amount to manufacture as held by the Hon’ble Madras High Court also does not help the appellants, inasmuch as indirect use also would qualify for the benefit. However, the appellants’ submission that the demand show cause notice for the period September 1987 to December 1989 has to be treated as time barred has to be accepted since the appellants had informed the Central Excise authorities through their detailed letter dated 26/2/89 that the goods are used in different machineries, but still the show cause notice was issued only on 9/5/91. Therefore, the demand of Rs. 8,94,073.06 is set aside on the score of time bar. The remaining duty demand of Rs. 1,25,863.18 for the period January 1990 to April 1990 being within time limit is confirmed. As the show cause notice for the extended period alleging wilful suppression of facts with intent to evade duty has been set aside as time barred, the penalty of Rs. 1,00,000.00 imposed on the appellants is also set aside.