2009 (12) TMI 534 - AT - Central Excise

Surface coating compounds - products manufactured by the Respondent classified Type C Loid T-8 under SH 3208.40 as Insulating varnish Department sought classification of Type C Loid - 8 under SH 3208.90 - chemical examiner s report silent on the point as to whether the product has insulating properties Held that - competing sub-headings would be 3208.40 and 3208.90 and the product would fall under 3208.40 only if it is an insulating varnish - Department has not produced any evidence that the product in question does not has insulating property. No test in this regard has been got conducted by the Department while the Respondent claim that addition of 12-14% paraffin wax gives the product in question insulating property and in this regard they have cited condensed chemical Dictionary - 1997 edition according to which use of paraffin wax gives insulating properties - The adjudicating authority s conclusions are based on similarly between the composition of Type B Loid 1-7 and Type C Loid T-8 which is factually incorrect as while Type B Loid T-7 does not has any paraffin wax the product in question has 12-14% paraffin wax which according to the Respondent gives it the insulating property. Therefore we hold that CCE (Appeals) s finding on the question of classification of Type C Loid T-8 are correct and in view of this the order setting aside the duty demand and penalty is also correct - In view of our above discussion the impugned order is upheld. The Revenue s appeal is dismissed.

Summary

Issues:
Classification of products 'Type B Loid T-7' and 'Type C Loid T-8' under Central Excise Tariff headings 3208.40 and 3208.90, Provisional assessment, Time-barred duty demands, Imposition of penalties under Central Excise Rules.

Classification Dispute:
The Respondent manufactured two products, 'Type B Loid T-7' and 'Type C Loid T-8', with differing compositions. The dispute arose regarding the classification of 'Type C Loid T-8' under Central Excise Tariff headings 3208.40 as "insulating varnish" or 3208.90 as a primer, similar to 'Type B Loid T-7'. The chemical examiner's report described 'Type C Loid T-8' as a varnish without confirming its insulating properties. The Respondent argued that the presence of paraffin wax in 'Type C Loid T-8' provided insulating properties, supported by a reference to the "condensed chemical Dictionary - 1997 edition." The Tribunal found the Respondent's argument valid, noting the absence of conclusive evidence from the Department regarding the lack of insulating properties in 'Type C Loid T-8'. The composition differences between the two products supported the classification of 'Type C Loid T-8' as an insulating varnish under heading 3208.40, upholding the CCE (Appeals)'s decision and dismissing the Revenue's appeal.

Provisional Assessment and Time-barred Duty Demands:
The Assistant Commissioner finalized provisional assessments for 'Type C Loid T-8' under heading 3208.90, confirming duty demands totaling Rs. 9,61,614 for various periods. The duty demands were challenged on grounds of being time-barred and lacking issue of show cause notices for some amounts. The Tribunal noted that part of the duty demand was indeed time-barred, and some demands were confirmed without proper show cause notices. However, the primary issue of classification overshadowed these procedural matters, leading to the dismissal of the Revenue's appeal.

Penalties Imposed under Central Excise Rules:
Penalties under Rule 9(2), 52A(8), and 173Q(1) of the Central Excise Rules, 1944, were imposed on the Respondent by the Assistant Commissioner. The CCE (Appeals) set aside these penalties, considering the classification dispute and lack of conclusive evidence regarding the product's properties. The Tribunal agreed with the CCE (Appeals)'s decision, emphasizing the factual correctness of the Respondent's arguments and the absence of substantial evidence from the Department. Consequently, the penalties were deemed unwarranted, and the impugned order was upheld, resulting in the dismissal of the Revenue's appeal.

This detailed analysis of the legal judgment from the Appellate Tribunal CESTAT, New Delhi highlights the classification dispute, procedural issues related to provisional assessment and duty demands, and the imposition of penalties under the Central Excise Rules. The Tribunal's decision favored the Respondent based on the factual correctness of their arguments regarding the insulating properties of 'Type C Loid T-8', ultimately leading to the dismissal of the Revenue's appeal.