1998 (2) TMI 472 - AT - Central Excise

Summary

Issues Involved:

1. Classification of textile lubricants, specialty textile lubricating oils, and mold release oils.
2. Validity of the demand for differential duty.
3. Imposition of penalty and interest.
4. Limitation period for issuing the demand.

Issue-wise Detailed Analysis:

1. Classification of Textile Lubricants, Specialty Textile Lubricating Oils, and Mold Release Oils:

The appellant classified its products under Heading 2010.60 of the Central Excise Tariff, which was initially approved. However, subsequent tests by the Deputy Chief Chemist and the Central Revenue Control Laboratory indicated the products were poly organo silicone compounds, suggesting classification under Heading 3910.00 as silicone in primary form. The appellant disputed these findings, requesting retests, which showed varying results. Ultimately, the Chief Chemist's report, after visiting the factory, indicated that the products contained mixtures of organo silicone compounds and polyorganosilicon compounds, not silicone in primary form. The Tribunal found that the retest by the Chief Chemist, using more sophisticated methods, should be given greater weightage, concluding that the products were preparations containing silicone but not in their primary form.

2. Validity of the Demand for Differential Duty:

The Department issued notices demanding differential duty based on the reclassification of the goods under Heading 3910.00. The Tribunal noted that the Chief Chemist's report, which was more detailed and conducted after visiting the factory, indicated that the products were not silicone in primary form. Therefore, the classification proposed in the notice was not acceptable, and the consequent demand for duty had to be set aside.

3. Imposition of Penalty and Interest:

The Collector had imposed a penalty of Rs. 1.50 crores and demanded interest of 25% under Section 11AA of the Act. The Tribunal, however, found that the classification proposed by the Department was incorrect based on the Chief Chemist's report. Consequently, the penalty and interest imposed were also set aside.

4. Limitation Period for Issuing the Demand:

The appellant argued that the demand for the period from 1988 to 1992 was barred by limitation, as the larger period of five years under Section 11 could not be invoked. The Tribunal did not address this argument in detail, as it had already set aside the demand on the merits of the classification issue.

Conclusion:

The Tribunal allowed the appeal, setting aside the impugned order. It concluded that the products were not silicone in primary form and thus not classifiable under Heading 3910.00. Consequently, the demand for differential duty, penalty, and interest were all set aside. The Tribunal emphasized the importance of the Chief Chemist's detailed report, which provided a more accurate classification of the products.