2010 (1) TMI 601 - AT - Central Excise

Classification - asbestos cement products - which being unmarketable, had been destroyed by the appellants under the Central Excise Supervision and in respect of which, remission of duty had been allowed - whether the powder obtained by grinding the broken pieces of the asbestos cement products is chargeable to Central Excise Duty under sub-heading 6805.90 of the Central Excise Tariff - grinding not done by the appellants but by the job workers - allegation of the Revenue that the transactions between the Appellants and the job-worker were not on principal to principal basis, or the job-workers were just hired labour - pleaded by the learned DR that the point as to who is liable to pay the duty, cannot be taken at this stage, as the same had not been raised at the original adjudication stage or before Commissioner (Appeals) - grinding was being done through job-workers order not sustainable Appeal allowed

Summary

Issues Involved:
1. Classification of Hard Ground Powder (HGP) under Central Excise Tariff.
2. Marketability and excisability of HGP.
3. Liability for duty payment - whether on job workers or the appellant.
4. Invocation of the extended period for demand under proviso to Section 11A(1) of Central Excise Act.
5. Imposition of penalties under Section 11AC and Rule 173Q(1) of Central Excise Rules.

Detailed Analysis:

1. Classification of Hard Ground Powder (HGP) under Central Excise Tariff:
The primary issue revolves around the classification of HGP under heading 6805.90 of the Central Excise Tariff. The Department contended that HGP, being a mixture with a basis of asbestos, should be classified under this heading. However, the Tribunal noted that heading 68.05, identical to HSN heading 68.12, pertains to mixtures of asbestos with other materials used for specific purposes such as packing for heat insulation, filtering, or as a basis for molding asbestos articles. The Tribunal concluded that the Department failed to provide evidence that HGP fits this description, thus rejecting the classification under heading 6805.90.

2. Marketability and Excisability of HGP:
The Tribunal examined whether HGP is marketable and hence excisable. The appellant argued that HGP is merely pulverized asbestos cement products with no marketable value or bonding strength, used only as landfill to avoid environmental pollution. The Tribunal found no evidence from the Department to counter this claim, such as chemical test reports proving HGP's usability in fabricating asbestos articles or as filtering/insulating material. Consequently, the Tribunal held that HGP is not marketable and thus not excisable.

3. Liability for Duty Payment - Whether on Job Workers or the Appellant:
The Tribunal addressed the issue of duty liability, noting that the grinding of asbestos cement products into HGP was done by job workers. Citing established legal precedents, the Tribunal clarified that duty liability would fall on the job workers if the transactions were on a principal-to-principal basis. The Tribunal rejected the Department's plea that this issue could not be raised at this stage, emphasizing that it is a point of law that can be addressed at any stage of the proceedings.

4. Invocation of the Extended Period for Demand under Proviso to Section 11A(1) of Central Excise Act:
The Tribunal scrutinized the invocation of the extended period for demand, which requires evidence of fraud, willful misstatement, or suppression of facts with intent to evade duty. The appellant had declared "hard ground waste" in their classification declaration, which was approved by the Department. Additionally, a previous order by the Additional Commissioner had dropped proceedings on a similar issue. Given these facts, the Tribunal found no justification for alleging suppression of facts and held that the demand was time-barred.

5. Imposition of Penalties under Section 11AC and Rule 173Q(1) of Central Excise Rules:
The Tribunal considered the penalties imposed under Section 11AC and Rule 173Q(1). Since the duty demand itself was found unsustainable, the basis for penalties also collapsed. The Tribunal noted that when a penalty under Section 11AC is imposed, there is no need for a separate penalty under Rule 173Q(1), aligning with the Commissioner (Appeals)'s earlier decision.

Conclusion:
The Tribunal set aside the impugned order, concluding that HGP is not classifiable under heading 6805.90, is not marketable or excisable, and the extended period for demand was unjustified. Consequently, the appeal was allowed, and the penalties were annulled.