2009 (6) TMI 872 - AT - Central Excise

Summary

Issues: Classification of product 'abda' as fertilizer under Chapter Sub-heading 3808 leading to duty evasion, demand of duty, penalty imposition, waiver of pre-deposit, reliance on Fertilizer Control Order, plea of limitation, notice requirement for relying on Fertilizer Control Order.

In this case, the appellants, M/s. EID Parry (India) Ltd., were found to have manufactured and cleared a product called 'abda', a plant vitalizer, which was classified as fertilizer under Chapter Sub-heading 3808 instead of CSH 3101.0099, resulting in duty evasion of Rs. 22,09,717. The original authority affirmed the demand of duty, interest, and imposed a penalty under Section 11A of the Act. The appellants sought waiver of pre-deposit and stay of recovery of the dues. The appellants argued that they had intimated the department about the classification of 'abda' as per CSH 31010099 in 2005, and the demand confirmed in 2007 was time-barred. They also presented a test report showing 'abda' as organic manure entitled to full exemption under the Fertilizer Control Order, which the original authority did not consider. The appellants contended that they were not notified about the department's reliance on the Fertilizer Control Order for classification.

The appellants' plea for waiver of pre-deposit was supported by the argument that the demand was not sustainable due to reliance on the Fertilizer Control Order without prior notice to the appellants. The appellants also relied on a CBEC Circular and a Supreme Court judgment to challenge the lower authorities' decision. The JCDR argued that the appellants did not provide details of clearance of 'abda' in their ER1 returns, justifying that the plea of limitation was not valid. The JCDR further supported the reliance on the Fertilizer Control Order for classification based on the test results.

The Tribunal, after considering the submissions, found that the impugned demand was not sustainable as it was based on the Fertilizer Control Order without notifying the appellants. Additionally, the Tribunal acknowledged the plea of limitation, noting that a significant portion of the demand was time-barred. Consequently, the Tribunal granted a complete waiver of pre-deposit of the adjudged dues and stayed the recovery pending the appeal, recognizing a prima facie case against the demand and penalty.