2002 (1) TMI 750 - Commissioner - Central Excise

Issues Involved:

1. Classification of HDPE/PP tapes and woven sacks under the Central Excise Tariff Act, 1985.
2. Eligibility for exemption under Notification No. 67/95-Central Excise.
3. Applicability of Additional Excise Duty (AED) under the AED (Textile and Textile Articles) Act, 1978.
4. Alleged contravention of Central Excise Rules, 1944.
5. Recovery of AED and imposition of penalties and interest.
6. Confiscation of property used in the manufacture of goods.

Issue-wise Detailed Analysis:

1. Classification of HDPE/PP tapes and woven sacks under the Central Excise Tariff Act, 1985:
The assessee, engaged in manufacturing HDPE/PP tapes, woven fabrics, and woven sacks, classified these products under Chapter 39 of the Central Excise Tariff Act, 1985. However, changes in the notes of Chapter 54 and expansion of entries in Chapter 63 effective from 16-3-95 led to the classification of sacks and bags woven from strips under Chapter 63.05 and plastic strips of width not exceeding 5 mm under sub-heading 5404.90, identified as "Textile Materials."

2. Eligibility for exemption under Notification No. 67/95-Central Excise:
The assessee availed exemption under Notification No. 67/95-Central Excise for HDPE/PP tapes used captively in the manufacture of other dutiable final products. However, the notification exempts only Basic Excise Duty and not Additional Excise Duty (AED) under the AED (Textile and Textile Articles) Act, 1978. The final products (sacks and bags) did not attract AED, making the strips used in their manufacture liable for AED.

3. Applicability of Additional Excise Duty (AED) under the AED (Textile and Textile Articles) Act, 1978:
The Additional Excise Duty under the AED (Textile and Textile Articles) Act, 1978, is 15% of the total excise duty. Since the Basic Excise Duty on the excisable goods was NIL due to the exemption under Notification No. 67/95-C.E., dated 16-3-1995, the AED also became NIL. Section 3 of the AED (Textile and Textile Articles) Act, 1978, specifies that AED is a percentage of the excise duty specified in the Central Excise Tariff Act, 1985, read with any notification in force. The notification does not fall under the exclusion clause, making AED NIL.

4. Alleged contravention of Central Excise Rules, 1944:
The assessee was accused of contravening Rules 173B and 173C by failing to file correct declarations and determining the duty liability under AED (T & TA) Act, 1978. The department alleged willful suppression of facts and mis-statement with intent to evade duty, constituting an offense under Rule 173Q(1).

5. Recovery of AED and imposition of penalties and interest:
A show cause notice was issued for the recovery of AED amounting to Rs. 19,17,821/- under Section 11A(1) of the Central Excise Act, 1944, read with Rule 9(2) of the Central Excise Rules, 1944. Penalties under Section 11AC and interest under Section 11AB of the Central Excise Act, 1944, were also proposed.

6. Confiscation of property used in the manufacture of goods:
The show cause notice also proposed the confiscation of land, building, plant, machinery, etc., used in the manufacture, storage, and removal of the goods under Rule 173Q(2)(a) of the Central Excise Rules, 1944.

Findings and Order:

The adjudicating authority carefully examined the case records, reply to the show cause notice, and submissions made during the personal hearing. It was concluded that due to the exemption under Notification No. 67/95-C.E., dated 16-3-1995, the Basic Excise Duty was NIL, making the AED also NIL. The notification did not fall under the exclusion clause of Section 3 of the AED (Textile and Textile Articles) Act, 1978. Therefore, no AED was payable, and the show cause notice was liable to be dropped.

Order:

The proceedings of the show cause notice dated 13-3-2000 against the assessee were dropped. The order was issued without prejudice to any other action that may be taken under the Central Excise Act, 1944, and the rules framed thereunder or any other law in force.

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