1992 (2) TMI 319 - AT - Central Excise

Issues Involved:
1. Correct classification of the product manufactured by the appellants.
2. Allegations of mis-declaration and suppression of facts.
3. Jurisdiction of the Collector to issue show cause notice.
4. Applicability of the larger period under the proviso to Section 11A of the CET Act, 1944.
5. Time-barred nature of the demands raised by the Department.

Detailed Analysis:

1. Correct Classification of the Product:
The primary issue was the correct classification of the product manufactured by the appellants, declared as "Cotton Fabric - Man-made Fabrics." The Department contended that the products were Industrial Fabrics and should be classified under Chapter sub-heading 5909.00 of the CET Act, 1985. The appellants argued that their products were "Cotton Fabrics not subjected to any process" and "Fabrics of Man-Made Filament Yarn, not subjected to any process," classifiable under Chapter sub-headings 5205.00 and 5408.00, respectively, both chargeable to a nil rate of duty.

The Collector held that the fabrics manufactured by the appellants were indeed Industrial Fabrics, as evidenced by the embossing on the fabrics stating "for Industrial use only and not for local sale." The fabrics were sold to industrial users engaged in oil processing or similar filtering processes, fulfilling the conditions for classification under Chapter 5909 as industrial fabrics. The Collector relied on the HSN explanatory notes and various technical definitions to conclude that the products were not "cotton fabrics" as understood in common parlance but were special woven fabrics suitable for industrial use.

2. Allegations of Mis-declaration and Suppression of Facts:
The Department alleged that the appellants mis-declared their products in the classification list and suppressed facts to evade payment of duty. The Collector found that the appellants had indeed mis-declared their products as ordinary cotton fabrics and man-made fabrics, while they were actually industrial fabrics. The appellants' contention that the goods were not processed and hence classifiable under Chapter 5205.00 and 5408.00 was rejected. The Collector noted that the goods were marketed and sold as industrial fabrics, as evidenced by the embossing on the fabrics and the fact that they were used for industrial purposes.

3. Jurisdiction of the Collector to Issue Show Cause Notice:
The appellants argued that the show cause notice was issued illegally and without jurisdiction, as the matter was sub-judice in the High Court, and the Department had filed an appeal against the classification list approved by the Assistant Collector. The Collector rejected this argument, stating that the show cause notice was validly issued based on the information and evidence available to the Department. The Collector had the jurisdiction to issue the notice and proceed with the matter.

4. Applicability of the Larger Period under the Proviso to Section 11A of the CET Act, 1944:
The Department invoked the larger period under the proviso to Section 11A of the CET Act, 1944, alleging suppression of facts by the appellants. The Collector upheld this invocation, stating that the appellants had failed to declare the correct particulars of the goods, leading to the evasion of duty. However, the Tribunal found that the appellants had clearly described the nature of the goods in the GP-1 and invoices, and the Department had knowledge of the nature of the goods. Therefore, the charge of suppression failed, and the confirmation of demand for the larger period was set aside.

5. Time-barred Nature of the Demands Raised by the Department:
The Tribunal held that the demands raised by the Department were time-barred beyond the normal period of six months. The Tribunal relied on the Supreme Court rulings in TISCO v. CCE, Plasma Machine Manufacturing Co. v. CCE, and Elson Machines v. CCE to conclude that the demands could only be maintained for the normal period of six months. The Tribunal noted that the description of the goods was clearly indicated in the GP-1 and invoices, and the Department had knowledge of the nature of the goods, negating the charge of suppression.

Conclusion:
The Tribunal allowed the Revenue's appeal, confirming the classification of the products under Chapter 5909.00 as industrial fabrics. The assessee's appeal was partly allowed, with the demands for the larger period being set aside as time-barred. The other appeals filed by the assessee were rejected as infructuous. The Tribunal emphasized the importance of correctly classifying goods based on their nature and use, as well as adhering to the statutory provisions and guidelines for issuing show cause notices and raising demands.

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