2000 (2) TMI 657 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the products.
2. Applicability of exemption under Notification No. 101/66-CE.
3. Applicability of the extended period of limitation.
4. Imposition of penalty.

Detailed Analysis:

1. Classification of the products:
The appeal arose from an order confirming a duty demand on four products (Durafil, Siotex RT, Siotex FRA, and Siotexize) manufactured and cleared by the appellants from 1-3-1986 to 31-3-1990. These products were classified under sub-heading 3801.90 for the period before 1-3-1987 and under sub-heading 3809.00 thereafter. The classification was based on the products being finishing agents for textiles, not organic surface agents under Heading 3402. The classification was not disputed by the appellants, referencing the Tribunal's decision in Collector of Central Excise, Bombay v. L.N. Chemicals and Industries.

2. Applicability of exemption under Notification No. 101/66-CE:
The products were not eligible for exemption under Notification No. 101/66-CE as they were classified under Chapter 38 rather than Heading 3402. The products contained a very low percentage of organic surface active agents and were used exclusively as textile softeners and finishing agents.

3. Applicability of the extended period of limitation:
The primary issue was whether the extended period of limitation (five years) could be invoked. The show cause notice dated 11th July 1990 proposed to recover duty for the period from 1-3-1986 to 31-3-1990. The Tribunal found that the appellants had disclosed the nature and use of the products to the department through various correspondences and declarations since 1975. The department was aware that the products were used for textile finishing. The Tribunal concluded that there was no suppression of material facts or willful misdeclaration by the appellants, thus the extended period of limitation could not be invoked. Consequently, the demand for the period from 1-3-1986 to 10-1-1990 was set aside as barred by limitation.

4. Imposition of penalty:
Since the Tribunal held that the products were not misdeclared and there was no suppression of facts, the appellants had not contravened the relevant Central Excise Rules. Therefore, the penalty imposed was set aside.

Separate Judgment by Vice President:
The Vice President disagreed with the majority opinion, emphasizing that the products were not merely softeners but finishing agents with additional qualities. The Vice President argued that the appellants had misdeclared the products and did not disclose full facts, justifying the invocation of the extended period of limitation and the imposition of penalty. The Vice President proposed that the demand be confirmed prospectively from 28-3-1989 and the penalty be upheld.

Majority Opinion:
The majority opinion, concurred by the third Member, held that the demand for the period from 11th January 1990 to 31st October 1990 was confirmed, while the demand for the period from 1-3-1986 to 10-1-1990 was set aside as barred by limitation. The penalty was also set aside. The appeal was partly allowed in these terms.