Judgment:
1. This appeal arises from the Order-in-Original No. 36/90, dated 23-11-1990 passed by the Commissioner of Central Excise, Bangalore confirming duty demand of Rs. 6,53,058.37 on valve actuators and Rs. 1,06,162.28 on parts of valve actuators cleared during the period 2/87 to 3/87-88 and 1988-89 under the provisions of Section 11A of the Central Excise Act, 1944. A penalty of Rs. 75,000/- has also been imposed on the appellants. Show cause notice issued on 29-9-1990 alleging that the appellants had contravened various Central Excise Rules inasmuch as they had misdeclared the classification of the valve actuators and parts thereof falling under Chapter sub-headings 8481.80 and 8481.99 attracting duty of 15% ad valorem instead of correctly classifying under Chapter Headings 85.01 and 85.03 respectively attracting duty of Rs. 25% ad valorem and 20% ad valorem respectively.
It was alleged that the appellants had removed the goods with intent to evade payment of duty by suppressing actual construction of the equipment i.e. valve actuators in their classification list 1/87 effective from 1-3-1987 and 1/88 effective from 1-3-1988. Hence demand was raised in the show cause notice.
2. Classification list giving the following description of valve actuators in terms of Annexure to show cause notice is reproduced below : "Actuators are used in valve for controlling and regulating the flow of fluids and gases. The actuators will be used along with valves in Steel plants, cement plants, Atomic and Nuclear Plants, Sewearage Controls, water supply systems etc." Annexure to the show cause notice states that on examination of the valve actuators the officers found that the machine is nothing but a geared motor which transforms electrical energy into mechanical energy which is used to control or operate valves and hence classification under Chapter Heading 85.01 of the CET was proposed and parts of valve actuators would fall under Heading 85.03. Further the show cause notice stated that valve actuators (electrical) were found to consist of electrical motor with reducing gear and drive shaft and/or some devices to operate the valve. The show cause notice also referred to the technical write up dated 8-3-1983 given by Shri Balaji Rao of the appellants company and the literature on actuators.
3. Appellants contested the show cause notice on the ground that the classification lists were scrutinised by the range office and duly recommended by the Superintendent of Central Excise Peenya II Range for approval by the Range Divisional Office. It was also stated that all the particulars had been furnished including technical literature and write up and therefore it was contended that there was no suppression or misdeclaration in the classification lists. It was contended that the AC passed a detailed order approving the classification lists. The AC had also issued show cause notice on 6-9-1989 asking the appellants to show cause as to why the actuators should not be classified under Heading 85.01 and parts thereof under Heading 85.03 instead of 8481.80 and 8481.99 respectively. It is stated that the AC after detailed hearing passed the order dated 30-10-1989 holding actuators to be classified under Heading 85.01 and parts under Heading 85.03 basing his decision on the notes of the relevant chapters of Harmonised Commodity Description and Coding System. They have referred to the detailed order passed by the AC and submitted that the question of again re-opening the same classification after a detailed order passed by the AC is not sustainable. It was stated that the classification lists were initially approved and thereafter the show cause notice was given and thereafter detailed proceedings held and order had been passed by the AC on 30-10-1989 and therefore, the present proceedings drawn by the Commissioner invoking the longer period of limitation is totally unsustainable in law. The appellants contended that actuator is a product having distinct identity in the technical and commercial parlance; particularly commercially in the market, the product is known as actuators and not as electric motor and in this regard, they have relied upon the notes to relevant chapters of Harmonious Commodity Description and Coding System. The appellants also relied upon the judgment of the Tribunal in the case of National Newsprint and Paper Mills v. C.C.E. reported in 1985 (19) E.L.T. 221. Several other contentions were also taken by the appellants that the classification lists were approved by the AC.4. The Commissioner in the impugned order after noting various pleas of the appellants including the order passed by the AC in the order-in-original, held that he has not considered this argument as part of these proceedings, but by his cryptic order held that the items are classifiable under Headings 8481.80 and 8481.99 respectively without consideration of any technical literature or judgment cited by the appellants including the relevance of Note (2) of Section 16 of the Tariff. He has also not considered the judgment of the Tribunal in the case of National Newsprint and Paper Mills (supra). He has proceeded to hold that there was intention to suppress true and full facts and there was misdeclaration of the classification of the goods. But there are not sufficient reasons as to how there could be suppression when the appellants had filed declaration and submitted all the technical write-up and literature and the same was scrutinised and approved and after detailed proceedings by issue of show cause notice by the AC and the proceeding were also approved. The Commissioner merely stated that he has not considered these arguments for the purpose of these proceedings and he has proceeded to confirm the demand and imposed penalty.
5. We have heard Shri R. Chander Kumar, learned Counsel for the appellants and Smt. Aruna N. Gupta, learned DR for the Revenue.
6. The learned Counsel strongly pleaded for setting aside the demand as there were proceedings initiated by the AC earlier and after detailed examination of the issue by the AC, he had dropped the proceedings and therefore, it is his contention that the Commissioner cannot re-commence the proceedings alleging misdeclaration and suppression by invoking the longer period of limitation in terms of Section 11A of the Central Excise Act, 1944. He has pleaded that all the facts were disclosed by the appellants which had been examined at the time of filing of classification lists and the same had been approved and show cause notice was issued for re-classification and the AC had given a detailed finding. He submitted that the Commissioner was not at all justified in ignoring these material facts holding that they are not relevant for these proceedings. He also pointed out that the Tribunal in the Stay Order No. 57/91 had given a clear prima facie finding that there was no suppression or mis-declaration in the matter and the Tribunal had granted full waiver of pre-deposit of duty and penalty. He submitted that the prima facie view arrived at by the Tribunal is required to be confirmed.
8. On consideration of the submissions made, we are of the considered opinion that the Commissioner had no ground to invoke the longer period of limitation in terms of Section 11A in the present case by issue of show cause notice again on 29-9-1990 when the AC had commenced the earlier proceedings on the same issue and for the same period and had dropped the proceedings by accepting and confirming the earlier classification lists. Further ground taken by the Commissioner was that the appellants had misdeclared and intentionally not furnished information as to the use of electric motor in the construction of valve actuators and had misdeclared the said equipment. It is seen from the show cause notice that the Commissioner has relied upon the write-up dated 8-5-1989 given by Balaji Rao of the appellants company and also the literature on actuators. Therefore, both these materials as well as the order passed by the AC dated 30-10-1989 it is clear that the technical literature and details had been furnished to the department at the time of filing of the classification lists and that there was no misdeclaration or suppression of any material fact by the appellants. The AC in the proceedings initiated by show cause notice dated 8-9-1989 had reconsidered the entire matter and had passed a detailed and considered order dated 30-10-1989 upholding the classification of actuators under Chapter Heading 85.01 and parts of actuators under Heading 85.03 and while so doing, relied upon the explanatory notes to Harmonised Commodity Description and Coding System (HSN) Volume IV, page 1334. Therefore, it cannot be said that the order of the AC was passed without any consideration of the technical literature and he had passed the order on a wrong information. The Commissioner after taking note of these detailed order merely states that they are not relevant for these proceedings. It is not understandable as to how the Commissioner can hold that they are not relevant for these proceedings when the classification of these items had been considered twice by the AC i.e. one at the time of filing of the classification lists and again at the time of re-opening the issue by issue of show cause notice. Therefore, the approach of the Commissioner in the matter is not fair and cannot be appreciated and no ground has been put forth for re-classifying the same under different headings. Also there is no ground or reasoning as to how the items can be re-classified under different headings. There is no consideration of the judgment of the Tribunal on the issue holding that actuator is not motor as held in the case of National Newsprint and Paper Mills (supra).Cosmic Dye Chemical v. C.C.E. reported in 1995 (75) E.L.T. 721 (S.C.), the Hon'ble Supreme Court has set aside the demand invoking the provisions of Section 11A of the Central Excise Act, 1944 holding that the department has to establish that there was mis-statement of facts in the declaration filed by the assessee or suppression of fact therein as the case may be and it should be wilful suppression with intent to evade payment of duty. In this particular case, no such grounds have been made out and in fact the department had all the information and it adjudicated the matter and therefore, the question of invoking the longer period of limitation after conclusion of the original proceedings, by the Commissioner is not sustainable in law. We also note that the Tribunal at the time of hearing the stay petition had given a prima facie finding that there was no suppression or misdeclaration in the matter. The Tribunal had expressed the view in the stay order passed by it that the appellants had described their product as valve actuators and parts thereof under the description column of the classification lists filed by them along with the use of the same. The Tribunal observed that actuators are well known piece of equipments in the engineering technology. It also observed that there is no column or requirement in the classification list for furnishing construction particulars of the equipment and further it observed that it is not as if the authorities had been misled in regard to the description of the product given by the appellants in the classification lists. It also observed that the appellants had furnished the catalogue and the literature along with classification lists. It also observed that it was not understandable as to what other details were required to be furnished by the appellants and in any case, the appellants could have been asked to furnish any more information needed by the Department in case the authorities entertained any doubt. The Tribunal observed that not having done so, prima facie, the Tribunal found that the authorities did not entertain any doubt in their mind in regard to the description of the product furnished by the party and in the facts and circumstances the Tribunal held that there was no suppression of information on the part of the appellants and it is only because of the authority's own ignorance that suppression of facts had been attributed. We confirm these findings by the Tribunal at the time of hearing the stay application. In this view of the matter, the appellants succeed and the impugned order is set aside and the appeal is allowed.