2006 (5) TMI 331 - AT - Central Excise

Summary

Issues:
Limitation period for demand based on suppression of facts in classification declaration.

Analysis:
The judgment revolves around the issue of the limitation period for making a demand based on the suppression of facts in a classification declaration. The demand in question was raised for the period between May 1999 to July 2001 through a show cause notice dated 12-7-2002. The appellants argued that the demand was beyond the permissible period of limitation as there was no suppression or misstatement of facts justifying the extended period under Section 11A of the Central Excise Act, 1944.

The lower authorities rejected the contention of the appellants, stating that the impugned Lycra Yarn was not classified correctly by the appellants. The Commissioner (Appeals) found that the appellants had correctly stated the factual position in their declaration, mentioning the core spun yarn as cotton and lycra yarn in the ratio of 93/7. During the relevant period, there was no prescribed form for classification declaration, and no requirement to indicate the characteristics of the yarn or its intended use. The failure to disclose particulars not legally required does not constitute suppression of facts. The Revenue could have requested additional details before assessing the products, as there was correspondence between the parties regarding the classification.

The judgment emphasized that the element of suppression of facts necessary for making a demand during the extended period was absent in this case. Therefore, the demand was deemed to fail on the grounds of limitation. Consequently, in the absence of a duty demand, the penalty could not be sustained. As a result, the impugned order was set aside, and the appeal was allowed.

During the hearing, the contention was raised by the learned DR regarding the mis-declaration of 'single/multiple' yarn in the declarations. However, the court did not delve into this issue further as it was not the basis of the Commissioner's order. Overall, the judgment highlighted the importance of correctly interpreting the classification declarations and the absence of suppression of facts in determining the limitation period for making a demand.