2002 (6) TMI 273 - AT - Central Excise

Summary

Issues:
Classification of goods under sub-heading 3926.90 vs. Heading 8546.00, Limitation period for demand of duty, Suppression of facts with intent to evade payment of duty, Effect of Board's circular on classification dispute.

Classification Dispute:
The appellant, engaged in manufacturing goods supplied to the Ministry of Railways, contested the demand of duty based on the classification of their products. The Commissioner rejected the appellant's claim under sub-heading 3926.90, classifying the goods as electrical insulators under Heading 8546.00. The appellant argued that previous tribunal orders and industry practice supported their classification under Chapter 39 for plastic goods. The appellant also highlighted the practice of filing declarations and classification lists under Chapter 39, known to the Revenue during the relevant period.

Limitation Period:
The appellant contended that the demand was time-barred, citing the Board's circulars clarifying classification disputes as having prospective effect only. The appellant emphasized that the show cause notice was issued after the circular's issuance, and the Revenue's knowledge of the classification during the relevant period. The Tribunal agreed, holding that the demand beyond the normal limitation period was barred, setting aside the duty demand and penalty on the appellant.

Suppression of Facts:
The Commissioner alleged suppression by the appellant regarding the goods' use as electrical insulators, leading to misdeclaration under Chapter 39. However, the Tribunal found no intentional suppression by the appellant, as mere misclassification does not equate to suppression unless essential facts were deliberately concealed. The Tribunal noted two appellate orders supporting the appellant's classification under Chapter 39, accepted by the Revenue, indicating a reasonable belief for the appellant's classification choice.

Effect of Board's Circular:
The Tribunal emphasized that the Board's circular on classification could not retroactively affect past periods, especially when the Revenue was aware of the classification practices. The Tribunal held that the circular's application was prospective and could not form the basis for demanding duty for past years. Consequently, the demand of duty was deemed time-barred, and the penalty on the appellant was set aside. No order was passed on the proper classification due to the appeal's resolution on the limitation issue.