2010 (5) TMI 474 - AT - Central Excise

Regarding contention of appellant for non supply of test report - If there was at least one letter after receipt of test result till personal hearing in 2001 informing the department of upgradation of facilities, result of laboratory of OPL and seeking re-test, this claim would have been sustainable. It is all the more surprising that appellants did not seek re-test when the results were negative and they had upgraded the facility. - It is not the case of the appellant here that the report was in their favour and it was deliberately withheld. No evidence has been brought out to show that the gist of the report communicated by the department was different from the actual report. Regarding provisional assessment - it has also been pointed out that OPL themselves had written a letter vide No. C/217/01 in 1989 wherein OPL had spoken about execution of bond in connection with provisional assessment of the goods covered under Chapter 27. - On going through RT-12 returns, it was noticed that quite a few were provisionally assessed. RT-12 returns produced before us were found to be assessed provisionally from Jan. 93 to Feb. 94. - provisional assessment endorsements speak of assessment being provisional only in respect of Benzene and Toluene. No differential duty has been indicated in respect of other products in any of the assessment endorsements produced before us. In view of the fact that the provisional assessment memorandum was available upto Feb. 94 and thereafter clearly there was no provisional assessment memorandum, it has to be held that upto Feb. 94 assessment was definitely provisional.

Summary

Issues Involved:

1. Classification of Driploene-C.
2. Classification of Cyclo Hydro Carbons (BTX and BUR).
3. Classification of Benzene and Toluene.
4. Classification of Ethylene and Propylene.
5. Provisional assessment and duty demand for various products.
6. Adherence to principles of natural justice in the communication of test reports.

Detailed Analysis:

1. Classification of Driploene-C:

The issue was whether Driploene-C was classifiable under Heading 2707.90 or 2713.90 and its eligibility for exemption under Notification No. 75/84. The Commissioner (Appeals) concluded that Driploene-C should be classified under CSH 2707.90 and was not eligible for the exemption. The appellant conceded that Driploene-C was not mentioned against Sr. No. 37 of the Notification and thus was not eligible for exemption. Therefore, the department's contention was upheld.

2. Classification of Cyclo Hydro Carbons (BTX and BUR):

The department contended that the classification list was approved without sending samples for chemical testing. The Commissioner (Appeals) upheld this contention but no further action was taken by the department. The Tribunal noted that the proper course of action would have been to direct the Assistant Commissioner to draw samples and revise the classification after providing the test report to the appellant. In the absence of such action, the confirmation of the demand for differential duty on these products could not be sustained.

3. Classification of Benzene and Toluene:

The classification of Benzene and Toluene was disputed, with the appellant claiming classification under CSH 2902.00 and the department under CSH 2707.10 and 2707.20, respectively. The Tribunal upheld the classification under CSH 2707.10 and 2707.20 based on the test report indicating that the purity of Benzene and Toluene was less than 96%. The appellant's argument that the classification should depend on the purity and that the test report should not be relied upon was rejected. The Tribunal noted that the department had issued show cause notices based on the test report and that the appellant had not requested a re-test despite being informed of the test results.

4. Classification of Ethylene and Propylene:

The classification of Ethylene and Propylene was resolved by the CEGAT decision in the case of IPCL v. CCE, which stated that these products are classifiable under CH 29. The appellant did not claim exemption under Notification No. 276/67, and the Commissioner (Appeals) held that the demand for differential duty could not be sustained. This observation was not challenged by the Revenue.

5. Provisional Assessment and Duty Demand for Various Products:

The Commissioner (Appeals) held that the assessments were not provisional and set aside the demand based on the 0-41 register, as the department could not provide all the RT-12 returns. The Tribunal found that the RT-12 returns for January and February 1993 indicated provisional assessment and differential duty liability for Benzene and Toluene. For other products, there was no provisional assessment or differential duty liability after March 1993. The Tribunal upheld the differential duty demand for Benzene and Toluene for January and February 1993 but rejected the demand for other products.

6. Adherence to Principles of Natural Justice in the Communication of Test Reports:

The appellant contended that the test report was not communicated, violating principles of natural justice. The Tribunal found that the department had communicated the gist of the test report and that the appellant had not requested a re-test. The Tribunal held that the department had fulfilled its obligation to communicate the test results and that the appellant's failure to request a re-test could not be attributed to the department.

Conclusion:

The Tribunal upheld the classification of Benzene and Toluene under CSH 2707.10 and 2707.20 and confirmed the demand of Rs. 1,97,17,015/-. The department's appeal was partially allowed, upholding the differential duty demand of Rs. 18,16,304/- for Benzene and Toluene for January and February 1993. All other demands were not sustained, and no penalty was warranted. The appeals and cross-objections were disposed of accordingly.