2003 (9) TMI 651 - AT - Central Excise

Summary

Issues Involved:
1. Classification of "Transformer Oil Feed Stock" and "Spindle Oil."
2. Allegation of mis-declaration and evasion of duty.
3. Invocation of extended time period under Section 11A(1) of the Central Excise Act.
4. Imposition of penalties under Section 11AC and Rule 173Q of the Central Excise Rules.

Detailed Analysis:

1. Classification of "Transformer Oil Feed Stock" and "Spindle Oil":

The main issue was whether the products "Transformer Oil Feed Stock" and "Spindle Oil" should be classified under Chapter Heading 2710.90 or 3817.00 of the Central Excise Tariff Act. The department argued that the products were misdeclared under 2710.90 and should have been classified under 3817.00, attracting a higher rate of duty. The appellants contended that their products were correctly classified under 2710.90 as "Transformer Oil" and "Spindle Oil" used in the textile industry.

The Commissioner examined the manufacturing process and found that the products were obtained after the alkylation process and contained significant aromatic constituents, making them "Mixed Alkyl Benzene." The Chemical Examiner's report supported this by stating that the samples contained predominantly aromatic substances. Consequently, the Commissioner concluded that the products should be classified under 3817.00.

2. Allegation of Mis-declaration and Evasion of Duty:

The department alleged that the appellants had willfully suppressed and misdeclared facts to evade the appropriate Central Excise duty. The show cause notice detailed the allegations, including the appellants' internal communications indicating their intent to market "Transformer Oil Feed Stock" as "Spindle Oil" to benefit from a lower duty rate. The Commissioner found sufficient evidence of misrepresentation and intent to evade duty.

3. Invocation of Extended Time Period under Section 11A(1) of the Central Excise Act:

The department invoked the extended period of five years for demand, citing willful suppression of facts by the appellants. The Commissioner justified this by pointing out the appellants' internal communications and other documentary evidence showing their deliberate attempt to misdeclare the products to evade higher duty.

4. Imposition of Penalties under Section 11AC and Rule 173Q of the Central Excise Rules:

The Commissioner imposed penalties under Section 11AC and Rule 173Q, citing the appellants' willful suppression and misdeclaration. The penalties included a proportionate mandatory penalty under Section 11AC and a penalty of Rs. 5,00,000 under Rule 173Q.

Judgments by the Tribunal:

Majority Decision:
- The majority upheld the Commissioner's order, confirming the classification under 3817.00 and the demand for differential duty.
- The penalties under Section 11AC were confirmed, but the penalty under Rule 173Q was reduced to Rs. 1,50,000.
- The appeal was dismissed except for the modification in the penalty under Rule 173Q.

Separate Opinion by Member (Judicial):
- One member (Judicial) suggested remanding the case for de novo consideration, arguing that the Commissioner had not provided a detailed analysis and that the appellants' contentions and evidence were not adequately considered.

Conclusion:
The Tribunal, by majority, confirmed the classification of the products under 3817.00, upheld the demand for differential duty, and imposed penalties for willful suppression and misdeclaration. The penalty under Rule 173Q was reduced, and the appeal was otherwise dismissed.