2003 (3) TMI 585 - AT - Central Excise

Summary

Issues Involved:
1. Classification of goods.
2. Invocation of the longer period of limitation for demand of duty.
3. Imposition of combined penalty under Section 11AC of the CE Act and Rule 173Q of the CE Rules.
4. Demand of interest under Section 11AB of the Act.
5. Eligibility for CENVAT credit on inputs used by the appellants.
6. Whether the price charged is cum-duty price and entitlement to abatement of duty under Section 4(4)(d)(ii) of the Act.

Issue-wise Detailed Analysis:

1. Classification of Goods:
The appellants accepted the classification of Nylon x Nylon and Nylon x Cotton fabrics under heading 5911.90 of the CET Act, 1985, as decided by the department. This classification was not contested to avoid further litigation.

2. Invocation of the Longer Period of Limitation:
The appellants contended that the longer period could not be invoked due to the absence of any suppression of facts or intention to evade duty. They argued that all manufacturing details were known to the department and that there was no misdeclaration. However, the department argued that the appellants misdeclared the goods and did not submit classification and price lists, leading to evasion of duty. The tribunal observed that the appellants' declarations were inconsistent and that they did not seek clarification from the department, thus justifying the invocation of the longer period of limitation under the proviso to Section 11A(1) of the Act.

3. Imposition of Combined Penalty:
The tribunal noted that the appellants did not separately apportion the penalty under Section 11AC and Rule 173Q of the CE Rules. The tribunal held that the composite penalty was not sustainable and remanded the aspect of penalty imposition for de novo consideration, instructing the original authority to apportion the penalty separately.

4. Demand of Interest:
The tribunal upheld the demand for interest under Section 11AB, considering the facts and circumstances of the case, including the appellants' misdeclaration and evasion of duty.

5. Eligibility for CENVAT Credit:
The tribunal remanded the issue of CENVAT credit eligibility to the lower authority for reconsideration. The appellants were instructed to submit all duty-paying documents for the raw materials used in manufacturing their final product. The tribunal cited judgments supporting the reconsideration of Modvat/Cenvat Credit even in cases of clandestine removals.

6. Cum-duty Price and Abatement of Duty:
The tribunal agreed that the price charged by the appellants was a cum-duty price, entitling them to abatement of duty under Section 4(4)(d)(ii) of the Act. The duty was to be worked out after allowing Modvat/Cenvat Credit and abatement of duty, with the appellants being afforded an opportunity to be heard before confirming the final duty amount.

Separate Judgments:
One member disagreed with the invocation of the longer period, arguing that the demands were time-barred due to the absence of misdeclaration. The member highlighted the conflicting opinions on classification and the declarations made by the appellants, concluding that the larger period was not applicable. The majority, however, held that the demands were time-barred and allowed the appeal accordingly.