2005 (5) TMI 499 - AT - Central Excise

Summary

Issues:
1. Allegation of wilful misdeclaration of Feedstock.
2. Applicability of penalty under Section 11AC.
3. Correct classification of the product.

Analysis:

1. The case involved an allegation of wilful misdeclaration of Feedstock by the appellants, which led to a duty demand and penalty imposition. The Feedstock supplied for the manufacture of Xylene was initially exempted but later became liable to duty at the full rate. The excise authorities alleged that the appellants misdeclared the item as C5+ Reformate instead of Xylene Reformate. The Tribunal initially confirmed the duty demand but set aside the penalty for the period before Section 11AC came into force. The High Court remanded the penalty issue back to the Tribunal for reconsideration.

2. The learned counsel for the appellants argued that no wilful misdeclaration occurred as the item was consistently declared as C5+ Reformate in both excise and commercial documents, and the buyer accepted it as such. The product was specifically recognized in the exemption notification, and it was used as Feedstock for Xylene by the buyer. The Tribunal agreed with the appellants, stating that there was no misdeclaration, especially not wilful, as the item's description and usage were consistent, and the appellants gained no advantage by the alleged misdescription. The dispute was deemed legal in nature, and the correct classification was the main issue, not fraud or misdeclaration.

3. The Tribunal found merit in the appellant's argument, emphasizing that the product's description was consistent across documents and had been accepted under approved classification lists. The exemption notification acknowledged the nomenclature of C5 Reformate, and the item was undisputedly used as Feedstock for Xylene. As there was no fraud, misdeclaration, or suppression of facts, the Tribunal held that the penalty under Section 11AC was not warranted. Therefore, the penalty was set aside, and the appeal was allowed.

This detailed analysis of the judgment highlights the key issues of wilful misdeclaration, penalty imposition under Section 11AC, and the correct classification of the product, providing a comprehensive understanding of the legal reasoning and decision-making process involved in the case.