1984 (3) TMI 388 - AT - Central Excise

Issues Involved:
1. Classification of the product under the Central Excise Tariff.
2. Applicability of exemption Notification No. 165/70-C.E., dated 5-9-1970.
3. Limitation period for recovery of duty.

Detailed Analysis:

1. Classification of the Product under the Central Excise Tariff:

The appellants manufactured varnished/coated paper by impregnating/coating duty-paid kraft paper with insulating components. The core issue was whether this product falls under Item 17(4) of the Central Excise Tariff (C.E.T.). The appellants contended that their product, electric insulating varnished paper, should not be classified under Item 17, which pertains to "paper, all sorts." They argued that their product is used solely for electrical insulation and does not serve the general purposes of paper, such as printing, writing, or packing. Various examples and precedents were cited to support this claim, including products like emery paper and sandpaper, which are excluded from Item 17 despite being called "paper."

The Tribunal agreed with the appellants, stating that the product in question is an electrical insulator and not paper as envisaged under Tariff Entry No. 17. The Tribunal emphasized that the product's utility as an electrical insulator distinguishes it from other types of paper listed under Item 17. Consequently, the Tribunal set aside the lower authority's order classifying the product under Item 17(4) and allowed the excise authorities to classify it under any other appropriate tariff item.

2. Applicability of Exemption Notification No. 165/70-C.E., dated 5-9-1970:

The appellants argued that their product was exempt from duty under Notification No. 165/70-C.E., which exempts certain types of converted paper. However, the Tribunal found no merit in this contention, as the product does not fall under Item 17(4) of the C.E.T., and even otherwise, the product does not come within the ambit of the said notification.

3. Limitation Period for Recovery of Duty:

The appellants contested the recovery of duty for the period from 7-10-1969 to 16-12-1974, arguing that it was barred by limitation under Rule 10 of the Central Excise Rules, 1944. The Tribunal noted that the appellants had submitted a classification list in 1969, declaring the product as non-excisable, which was provisionally accepted by the Superintendent of Central Excise. This continued until 1972, when a show cause notice was issued but decided in favor of the appellants, exempting the product from duty under Notification No. 165/70-C.E. The Tribunal found that the appellants had manufactured the product under the bona fide impression that it was non-excisable and that the departmental authorities had not taken any steps to levy excise duty until 1975.

Citing precedents from the Supreme Court and Madras High Court, the Tribunal held that Rule 9(2) could not be invoked to extend the limitation period for recovery of duty. The Tribunal concluded that the recovery of duty for the period from 7-10-1969 to 17-12-1974 was barred by limitation, as the case was covered under Rule 10, which prescribes a one-year limitation period.

Conclusion:

The Tribunal set aside the lower authority's order in both appeals, holding that the product is not classifiable under Item 17(4) of the Central Excise Tariff. The department was given the liberty to classify the product under any other appropriate tariff entry, but the demand for the period from 7-10-1969 to 17-12-1974 was barred by limitation. The appeals were accepted accordingly.

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