1984 (12) TMI 296 - AT - Central Excise

Summary

Issues Involved:
1. Classification of 'Violetwove 35 GSM to 44 GSM' paper.
2. Validity of the Show Cause Notices dated 20-11-1980 and 7-3-1981.
3. Applicability of the period of limitation for the demand of differential duty.
4. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.

Detailed Analysis:

1. Classification of 'Violetwove 35 GSM to 44 GSM' Paper:
The Respondents, manufacturers of various paper types, initially classified 'Violetwove 35 GSM to 44 GSM' under Tariff Item No. 17(1) of the Central Excises and Salt Act, 1944, attracting a 25% ad valorem duty. This classification was approved by the Central Excise authorities on 22-5-1980. However, subsequent verification revealed that the paper was used for purposes other than those declared, leading to a reclassification under Tariff Item No. 17(2) CET, attracting a higher duty of 40% ad valorem. The Assistant Collector upheld this reclassification and imposed a differential duty and penalty.

2. Validity of the Show Cause Notices Dated 20-11-1980 and 7-3-1981:
The primary legal issue was whether the Show Cause Notice (SCN) dated 20-11-1980 or the revised SCN dated 7-3-1981 was valid. The Respondents argued that the SCN dated 20-11-1980 lacked essential details and did not specify the rules or the exact amount of differential duty, making it invalid. The revised SCN dated 7-3-1981 provided detailed allegations and evidence, making it the valid notice. The Tribunal agreed with the Respondents, noting that the SCN dated 20-11-1980 was defective in material particulars and did not comply with the requirements of Rule 10 or Section 11A. Therefore, the SCN dated 7-3-1981 was deemed the valid notice.

3. Applicability of the Period of Limitation for the Demand of Differential Duty:
The ordinary period of limitation for making a demand for short levy or non-levy was six months. The Tribunal had to determine whether the computation of this period should run from 20-11-1980 or 7-3-1981. The Tribunal concluded that the SCN dated 7-3-1981 was the valid notice, thus the demand for short levy would be restricted to six months from this date. The Appellate Collector's decision to restrict the demand to six months from 7-3-1981 was upheld.

4. Imposition of Penalty Under Rule 173Q of the Central Excise Rules, 1944:
The Assistant Collector had imposed a penalty of Rs. 250 under Rule 173Q for contravention of Rule 173B. However, the Appellate Collector waived this penalty, considering that the classification list filed by the Respondents was accepted by the Excise authorities twice, subject to the Chemical Examiner's report, which was never provided to the Respondents. The Tribunal found no grounds to interfere with the Appellate Collector's decision to waive the penalty, noting that the Respondents had classified the goods in good faith without deliberate concealment.

Conclusion:
The Tribunal dismissed the appeal, upholding the Appellate Collector's order to reclassify the paper under Tariff Item No. 17(2) CET, restrict the demand for differential duty to six months from 7-3-1981, and waive the penalty imposed on the Respondents.