2009 (4) TMI 957 - AT - Central Excise

Synthetic Rubber Master Batch (SRMB) - Colour Master Batch (CMB) - Classification of - Demand - Limitation

Issues Involved:
1. Clubbing of clearances and mutuality of interest.
2. Classification of Synthetic Rubber Master Batch (SRMB).
3. Classification of Colour Master Batch (CMB).
4. Classification of strap-plaps.
5. Invocation of extended period of limitation.
6. Validity of the second show cause notice dated 30-3-2006.
7. Denial of Modvat benefit.
8. Imposition of penalties.

Detailed Analysis:

1. Clubbing of Clearances and Mutuality of Interest:
The Revenue proceeded against the units for clubbing clearances of three units on the grounds of mutuality of interest and use of the common brand name 'Premier'. The Commissioner, in the de novo proceedings, demanded duty separately for each unit, which was contrary to the Tribunal's directive to treat the units as one entity and demand duty from one unit treating others as dummies. The Tribunal found this approach flawed and reiterated that the duty demand should be on a single concern.

2. Classification of Synthetic Rubber Master Batch (SRMB):
The appellants claimed SRMB under Chapter heading 4005.20, which carries a nil rate of duty if used within the factory of production. The Commissioner classified it under 4005.90 with 16% duty, stating it was removed between units and not used captively. The Tribunal set aside this classification, noting that SRMB was used to produce Rubber Mix within the same premises and thus should be classified under 4005.20.

3. Classification of Colour Master Batch (CMB):
The Chemical Examiner's report on CMB was inconclusive as the FTIR instrument was out of order, and the sample was not sent to the Central Revenues Control Laboratory for further testing. The Tribunal upheld the appellants' claim for classification due to the inconclusive report and granted the benefit of doubt to the appellants.

4. Classification of Strap-Plaps:
The Commissioner followed a previous Tribunal decision, classifying strap-plaps under heading 4008.29 as sheets of vulcanized rubber. The appellants argued they should be classified as parts of Hawai chappals under heading 6401.92, invoking Rule 2(a) of the Interpretative Rules and citing the Supreme Court decision in Phoenix International Ltd. The Tribunal acknowledged the conflict and referred the matter to a Larger Bench for a definitive ruling on the classification.

5. Invocation of Extended Period of Limitation:
The Tribunal found that the issues raised pertained to interpretation of the Central Excise Tariff/law and thus did not justify the invocation of the extended period of limitation. Consequently, any demand should be confined to the normal period, and all penalties were set aside.

6. Validity of the Second Show Cause Notice Dated 30-3-2006:
The second show cause notice was issued after the first adjudication order, invoking the longer period despite the facts being known to the Department. The Tribunal, citing the Supreme Court decision in P&B Pharmaceuticals (P) Ltd., held that suppression could not be alleged, rendering the entire demand for the period from 31-1-2003 to 31-1-2005 time-barred and set aside.

7. Denial of Modvat Benefit:
The Tribunal directed the Commissioner to take a decision on the Modvat benefit on EVA in accordance with the law based on available evidence during the de novo proceedings.

8. Imposition of Penalties:
Given that the extended period of limitation was not applicable, the Tribunal set aside all penalties imposed under Section 11AC of the Central Excise Act, 1944.

Conclusion:
(i) SRMB is classifiable under 4005.20 with nil duty, requiring re-calculation of total duty liability.
(ii) Differential duty on CMB is set aside.
(iii) Classification of strap-plaps to be decided by a Larger Bench.
(iv) Demand should be confined to the normal period, and all penalties are set aside.
(v) The second show cause notice dated 30-3-2006 is time-barred, and all related demands are set aside.

Pronounced in the Court on 21-4-09.

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