2004 (6) TMI 433 - AT - Central Excise

Stay/Dispensation of pre-deposit - Demand - Naphtha - Return stream Naphtha - Classification of

Summary

Issues:
Classification of goods under different sub-headings of the Central Excise Tariff Act, 1985; Demand of differential duty; Reversal of Modvat credit; Imposition of penalties; Stay of recovery pending appeal.

Classification of Goods:
The case involved the classification of "return stream naphtha" by the Commissioner under sub-heading 2710.19 instead of sub-heading 2710.14 as contended by the appellant. The appellant argued that the product should be classified under sub-heading 2710.14 based on the Chief Chemist's opinion and historical understanding among all parties involved. The Tribunal noted the notifications and trade notices referring to "return stream naphtha" as falling under sub-heading 2710.14, supporting the appellant's contention. The Tribunal found a strong prima facie case in favor of the appellant due to the reclassification against the established understanding, leading to the waiver of pre-deposit pending appeal.

Demand of Duty and Reversal of Modvat Credit:
The Commissioner demanded a significant amount of differential duty from the appellant and ordered the reversal of Modvat credit taken by another party based on the reclassification of the goods. The appellant argued against the reclassification, emphasizing that the product was naphtha falling under sub-heading 2710.14. The Tribunal considered the appellant's contentions, the historical understanding, and the notifications supporting the classification under sub-heading 2710.14. Consequently, the Tribunal waived the pre-deposit of duty and penalties demanded/imposed on the appellant, as well as the pre-deposit of Modvat credit reversed pending the appeal's disposal.

Imposition of Penalties:
In addition to the demand for duty and reversal of Modvat credit, penalties were imposed on both appellants by the Commissioner. The Tribunal, after considering the appellant's arguments and the circumstances surrounding the classification issue, decided to waive the penalties pending the appeal's final disposal.

Stay of Recovery Pending Appeal:
Given the significant implications of the case, the Tribunal granted an early hearing and scheduled the appeals for final hearing on a specific date. The Tribunal also decided to stay the recovery of duty, penalties, and reversed Modvat credit pending the appeal's resolution, providing relief to the appellants during the legal process.