Varalakshmi Rajamanickam, Member (T)

1. The issue in question is that the aluminium frames processed out of duty paid aluminium section are claimed to be not excisable, and no duty is attracted.

2. The appellants are engaged in the manufacture of travel goods viz. suitcases/brief-cases, vanity cases etc., falling under Heading 42.01/4201.10. The appellants also manufacture plastic shells, aluminium frames, etc., as intermediate products. The aluminium frame is prepared by bending aluminium sections procured form the supplier. The bending of the aluminium frames is done manually with the help of male and female dies. The frames undergo various processes such as finishing, drilling, anodising and pinching, subsequently in order to use them as components in making of travel goods. The Department has held that these aluminium frames are goods falling under Heading 8307.00 of the Central Excise Tariff and subsequently held these as classifiable under Heading 8302.90.

3. The appellants claim that the Department has all along been aware of the production of the aluminium frames and no suppression can be attributed. In the earlier proceedings about classification of plastic shells emerging as an intermediate stage in the course of manufacture of suit-cases, the officers had known about the machines installed in the factory for making the aluminium frames and the Collector had in the proceedings made note of the process of manufacture about the aluminium sections and making of aluminium frames.

The appellants had informed the Assistant Collector vide their letter, dated 24-4-1985, about recovering aluminium scrap generated during process of bending duty paid aluminium section into frames.

That during the period from 1982-86, the audit parties had visited the factory and the process of manufacture was within the knowledge of the department.

The appellants had submitted the classification list effective from 28-2-1986, with the introduction of the new tariff and the detailed process of manufacture along with the process of aluminium frames being bent from duty paid sections, was mentioned.

The officers of the Department, on visit to the factory on 27-12-1986 observed that the aluminium frames were excisable goods falling under Heading 8307 and seized 3451 pieces of aluminium frames valued at Rs. 62,118/-. A show-cause notice, dated 22-6-1987 was issued for recovery of duty of Rs. 11,87,749.49 for the frames manufactured from 1-3-1986 to 27-12-1986 under Rule 9(2) of the Central Excise Rules read with proviso to Section 11 of the Act, alleging suppression.

Subsequently, the Collector issued a letter, dated 31-8-1989, that the aluminium frames were classifiable under Heading 8302.90. The order of the Collector confirmed the demand for a higher amount of duty amounting to Rs. 15,83,605.99.

4. The appellants contend that the findings of the Collector for classification under Heading 8302.90 is beyond the scope of the show-cause notice, as the amount has been confirmed without issue of show cause notice.

The aluminium frames are in semi-finished form and are not known in the trade as goods and are not marketable.

The show-cause notice, dated 22-6-1987, for recovery of duty for the larger period between 1-3-1986 to 27-12-1986 is hit by limitation, as the activities of the appellant were within the knowledge of the Department and there was no suppression.

The classification under Heading 83.02/8302.90 is an error and is irrelevant as the frames were not goods known to the market and the penalty of Rs. 5 lakhs was not justified.

5. Shri Dushyant Dave, Advocate for the appellant reiterated the above points and stated that three issues are relevant.

(i) There was no manufacture as aluminium sections remain aluminium section even after bending and drilling.

(ii) The frames are not marketable

(iii) The show-cause notice is hit by limitation and he challenges the fine and penalty.

The learned advocate referred to the affidavits given by prominent persons in the