Aag Rola Magnetics Pvt. Ltd. Vs. Collector of C. Ex. - Court Judgment

Excerpt:
1. this appeal arises from order-in-original dated 24-5-1989 passed by the collector (appeals), madras. by this order the collector has held that the goods namely, 'hard ferrite (demagnetised and magnetised) pieces' of the same goods are liable to duty and they are not entitled for the benefit of notification no. 160/86. he has also held that the appellants have removed the goods clandestinely, hence there is a contravention of rules 9(2) read with proviso to sub-section (1) of section 11a of the central excises and salt act, and hence the larger period is attracted for clearances made during 1-4-1986 to 17-10-1988.the demands were raised on the clearances made by the appellants by show casue notice dated 17-2-1989. the collector has also imposed penalty of rs. 1,00,000/- besides confirming the duty demand of rs. 18,60,484.05. the appellants have requested the case to be decided on merits. it is contended by them that they are carrying on business in the manufacture of sale of hard ferrite magnet permanet magnets and they were clearing the goods under notification no. 160/86, dated 1-3-1986 without payment of duty. it is their contention that the appellants and the other manufacturers in the same line of trade acted under the bona fide belief that the item manufactured and sold by them are 'permanent magnets' covered by the notification. after the central excise officers visit to their factory, they had taken licence on 2-11-1988, thereafter they have been paying duty. they have pleaded that the demands are barred by time, as they held bonafide belief in respect of goods being exempted and in this regard they have relied on the hon'ble supreme court's judgment rendered in the case of collector of central excise v. chemphar drugs and liniments as reported in 1989 (40) e.l.t. 276. the appellants in the written submissions have stated that the government has issued a notification no. 48/90, dated 15-11-1990 under section 11c of the central excise act and has clarified that articles intended to become permanent magnets, falling under heading no. 85.05 are not liable for duty. it is also their contention that the goods were cleared in a demagnetised conditions for the purpose of transportation only and that is the general practice in the trade.2. the learned dr on perusal of the notification submits that the 11c notification covers the goods in question.3. on a careful consideration of the submissions made by the appellants in their written submission and on going through the grounds of appeal and also the notification no. 48/90 dated 15-11-1990 issued under section 11c of the act, we are of the considered opinion that the demagnetised hard ferrite removed by the appellants are intended for use as articles intended to become permanent magnets falling under heading no. 85.05 of the schedule to the central excise tariff act, 1985 and in terms of notification no. 160/86, dated 1-3-1986 and that of notification issued under section 11c hence the goods in question are covered and that they are not liable to pay duty or penalty in the present case. in that view of the matter, the impugned order is set aside and the appeal is allowed.

Judgment:
1. This appeal arises from Order-in-Original dated 24-5-1989 passed by the Collector (Appeals), Madras. By this order the Collector has held that the goods namely, 'Hard Ferrite (demagnetised and magnetised) pieces' of the same goods are liable to duty and they are not entitled for the benefit of Notification No. 160/86. He has also held that the appellants have removed the goods clandestinely, hence there is a contravention of Rules 9(2) read with proviso to Sub-section (1) of Section 11A of the Central Excises and Salt Act, and hence the larger period is attracted for clearances made during 1-4-1986 to 17-10-1988.

The demands were raised on the clearances made by the appellants by show casue notice dated 17-2-1989. The Collector has also imposed penalty of Rs. 1,00,000/- besides confirming the duty demand of Rs. 18,60,484.05. The appellants have requested the case to be decided on merits. It is contended by them that they are carrying on business in the manufacture of sale of hard ferrite magnet permanet magnets and they were clearing the goods under Notification No. 160/86, dated 1-3-1986 without payment of duty. It is their contention that the appellants and the other manufacturers in the same line of trade acted under the bona fide belief that the item manufactured and sold by them are 'permanent magnets' covered by the Notification. After the Central Excise Officers visit to their factory, they had taken licence on 2-11-1988, thereafter they have been paying duty. They have pleaded that the demands are barred by time, as they held bonafide belief in respect of goods being exempted and in this regard they have relied on the Hon'ble Supreme Court's judgment rendered in the case of Collector of Central Excise v. Chemphar Drugs and Liniments as reported in 1989 (40) E.L.T. 276. The appellants in the written submissions have stated that the Government has issued a Notification No. 48/90, dated 15-11-1990 under Section 11C of the Central Excise Act and has clarified that articles intended to become permanent magnets, falling under Heading No. 85.05 are not liable for duty. It is also their contention that the goods were cleared in a demagnetised conditions for the purpose of transportation only and that is the general practice in the trade.

2. The learned DR on perusal of the Notification submits that the 11C Notification covers the goods in question.

3. On a careful consideration of the submissions made by the appellants in their written submission and on going through the grounds of appeal and also the Notification No. 48/90 dated 15-11-1990 issued under Section 11C of the Act, we are of the considered opinion that the demagnetised hard ferrite removed by the appellants are intended for use as articles intended to become permanent magnets falling under Heading No. 85.05 of the Schedule to the Central Excise Tariff Act, 1985 and in terms of Notification No. 160/86, dated 1-3-1986 and that of Notification issued under Section 11C hence the goods in question are covered and that they are not liable to pay duty or penalty in the present case. In that view of the matter, the impugned order is set aside and the appeal is allowed.