1999 (12) TMI 696 - AT - Central Excise

Issues Involved:
1. Classification of the product under the Central Excise Tariff Act.
2. Applicability of exemption under Notification No. 53/86-C.E.
3. Invocation of the extended period under proviso to Section 11A(1) of the Central Excise Act.
4. Allegations of suppression of information and mis-declaration.

Issue-Wise Detailed Analysis:

1. Classification of the Product:
The primary issue is whether the product manufactured by the appellants, declared as Industrial Diamond, falls under sub-heading 7101.80 (Dust and Powder of natural or synthetic precious or semi-precious stones) or sub-heading 7101.90 ("other"). The appellants claimed that their product, being industrial diamonds of micro dimensions, should be classified under 7101.90 and thus be exempt from excise duty under Notification No. 53/86-C.E. The Revenue argued that due to the size of the product being less than 1000 microns, it should be classified as dust or powder under 7101.80, making the exemption inapplicable.

2. Applicability of Exemption Under Notification No. 53/86-C.E.:
The appellants contended that their product, being synthetic precious stones, should be covered under serial number 2 of the Schedule to the Notification No. 53/86-C.E., which exempts "precious and semi-precious stones, synthetic stones and pearls" from excise duty. The Revenue disagreed, asserting that the exemption does not apply to dust or powder of such stones.

3. Invocation of the Extended Period Under Proviso to Section 11A(1):
The show-cause notice covered the period from 10-3-93 to 28-2-98, invoking the extended period under proviso to Section 11A(1) on the grounds of suppression of information. The appellants argued that they had informed the Central Excise authorities about their product and its classification before commencing production, and had not received any response or guidance from the authorities.

4. Allegations of Suppression of Information and Mis-Declaration:
The Revenue accused the appellants of mis-declaring their product as synthetic diamond stones with an intention to evade duty, arguing that the product was actually synthetic diamond dust or powder. The appellants countered that they had consistently communicated with the authorities, providing all requested information and acting in good faith based on their understanding and the approvals received from the Government.

Judgment:

On Merits:
The Tribunal found that the order-in-original did not consider the technical test reports and certificates submitted by the appellants, which indicated that the products were industrial diamonds. The Tribunal held that the non-consideration of these reports amounted to a denial of natural justice. Therefore, the order was set aside, and the matter was remanded for de novo consideration by the original authority, focusing on the technical aspects and classification of the product.

On Limitation:
The Tribunal agreed with the appellants that the extended period was not invokable due to the following reasons:
- The appellants had informed the department about their product and technology.
- The description used by the appellants was consistent with the licence issued by the Directorate General of Technical Development.
- There was no precedent for the classification of the product in India.
- The appellants had sought clarification from the authorities and provided all requested information.
- The department had not provided an alternative classification or tested the product during the relevant period.
- The decision of the Commissionerate to exempt the product from duty was based on the information provided and was not merely one-sided.

The Tribunal concluded that the extended period under proviso to Section 11A(1) was not applicable. The matter was remanded for de novo consideration on the merits of the classification, confiscability of the goods under seizure, and imposition of penalties, if any, with the direction that the extended period issue was not to be reconsidered. The original authority was instructed to provide effective opportunities for the appellants to be heard and to pass a speaking order based on the submissions and evidence.

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