2007 (2) TMI 391 - AT - Central Excise

Summary

Issues: Classification of floor carpet for automobile under Heading 57 or Heading 87, applicability of circulars in classification, undue hardship due to belated demand, justification of penalty, stay application for recovery, listing for regular hearing.

Classification Issue:
The appellant, an OE supplier of floor carpet for automobiles, historically classified the product under Heading 57, with duty paid as Modvat credit by buyers. However, the impugned order reclassified the product under Heading 87 as automobile parts, demanding over Rs. 4 crores in duty, penalty, and interest. The order cited a Tribunal decision in a similar case for the reclassification. The appellant argued that the practice of years and a 1987 circular supported Heading 57 classification, emphasizing that any pre-deposit would disrupt business arrangements and cause undue hardship. The SDR contended that the order was consistent with prior Tribunal decisions and the 1995 circular had superseded the 1987 circular.

Undue Hardship and Penalty Justification:
The Tribunal noted that the classification, duty payment, and Modvat credit practice had been ongoing for years, with the order issued in 1999 but implemented only in 2004 with a delayed demand. The Tribunal found that any pre-deposit would cause undue hardship as the duty paid by the appellant was directly credited to buyers. It deemed the penalty unjustified, stating that both parties were aware of the materials relied upon for the order, making the finding of an intent to evade duty unreasonable.

Stay Application and Regular Hearing:
Considering the significant amounts involved and the recurring nature of the dispute, the Tribunal allowed the stay application, halting recovery pending appeal disposal. It ordered the case to be listed for regular hearing in the first week of March to address the substantial dispute comprehensively.