2008 (1) TMI 732 - AT - Central Excise

Summary

Issues:
1. Interpretation of Notification 125/87-C.E. dated 29-4-1987 regarding duty rates for glues and adhesives.
2. Validity of duty demand and penalty imposed by the lower appellate authority.
3. Consideration of chemical composition of the product in determining duty liability.
4. Application of the extended period of limitation in case of suppression or misstatement.
5. Decision on the appeal, cross-objection, and miscellaneous application filed by the parties.

Analysis:
1. The case involves an appeal against the lower appellate authority's decision confirming duty and penalty amounts under Notification 125/87-C.E. dated 29-4-1987 for glues and adhesives based on plastics and other materials. The Department contested the dropping of part of the duty demand and penalty, while the respondents filed a Cross Objection and Miscellaneous Application against the remaining demand confirmed by the lower appellate authority.

2. Upon reviewing the case records and chemical test reports, it was found that the respondents had submitted a classification list approved by the Department, clearly indicating the chemical composition of the product. The adhesives were based on chemically treated "natural gum," with specific percentages of other components. Despite a subsequent sample report showing the presence of different materials, there was no suppression or misstatement by the respondents regarding the composition of the goods.

3. A belated show-cause notice was issued demanding higher duty based on the chemical report received by the respondents. However, since the approved classification was based on the information provided by the respondents and the Department's report did not specify the percentage composition to warrant a change, there was no justification for altering the classification or imposing additional duty.

4. The Tribunal concluded that there was no basis for applying the extended period of limitation due to the absence of suppression or misstatement by the respondents. Consequently, no differential duty was deemed payable, and no penalty was imposed on the respondents. The Department's appeal was dismissed, while the respondents' cross-objection was allowed, setting aside the duty liability and penalty imposed by the lower appellate authority.

5. In the final disposition, the Tribunal rejected the Department's appeal, allowed the respondents' cross-objection, and disposed of the miscellaneous application in favor of the respondents. The impugned order confirming duty liability and penalty was set aside, providing a comprehensive resolution to the issues raised in the case.