2010 (8) TMI 348 - AT - Central Excise

Bakery improvers Classification Reliance on HSN - rival entries considered by the lower authority are Heading 1905.90 and Heading 2108.99 - counsel for the appellant has argued that Heading 19.05 of the CETA schedule was not aligned with the corresponding HSN Heading - Heading 21.08 of the CETA schedule was not aligned with Heading 21.06 of the HSN as claimed by the Revenue Held that - Classification under HSN could not be said to be aligned/pari material with Tariff, and reliance on HSN Explanatory notes to classify goods under heading 21.08 was not proper Res Jdicata - The fact that the Pune Assistant Commissioner s order was not reviewed by the department will not per se preclude the Revenue from revising the classification of similar goods for another period on the strength of independent evidence. Even otherwise, the Pune Assistant Commissioner s order of classification cannot bind this Tribunal. Alternative classification - The assessee classified the goods under SH 1905.90, the Revenue wanted to classify them under SH 2108.99 and the assessee now comes up with an alternative proposal to classify the goods under Chapters 11 and 15. This plea of the appellant cannot be entertained in view of the above ruling of the apex court in Warner Hindustan Ltd. v Collector, (1999 -TMI - 45233 - SUPREME COURT OF INDIA) Extended period of limitation - That decision of the Assistant Commissioner was rendered as early as on30-06-2000. Naturally, the appellant was emboldened to classify their products under the same Heading and they did so. They filed periodical returns showing payment of duty at nil rate as applicable to SH 1905.90 during the period of dispute. There was no whisper against this self-assessment of the appellant, in the departmental circles. In this scenario, the plea of bona fide belief in favour of classification under Heading 19.05 appears to be cogent and valid. Therefore, it cannot be said that the appellant suppressed any material fact before the department with intent to evade payment of duty. The extended period of limitation, therefore, is not invokable in this case.

Issues Involved:

1. Classification of goods under the correct tariff heading.
2. Reliance on HSN Explanatory Notes.
3. Applicability of res judicata due to previous classification by the Assistant Commissioner.
4. Entitlement to claim classification under a third entry.
5. Correct classification of the goods.
6. Assessment under Section 4 or Section 4A.
7. Applicability of the extended period of limitation.

Detailed Analysis:

(a) Reliance on HSN Explanatory Notes:

The central issue revolves around the classification of 'bakery improvers.' The assessee argued that their goods should not be classified under the residuary entry 21.08 unless specific entries under edible preparations are ruled out. They contended that neither heading 19.05 nor 21.08 of the CETA schedule was aligned with the HSN, thus HSN Explanatory Notes should not be relied upon. The Tribunal noted significant differences between the sub-headings of Tariff Heading 19.05 and HSN Heading 19.05, concluding that they are not aligned. Similarly, it found that Tariff Heading 21.08 and HSN Heading 21.06 also have more differences than similarities, thus rejecting the reliance on HSN Explanatory Notes. However, the Tribunal acknowledged that the show-cause notice contained sufficient information regarding the method of manufacture, ingredients, and intended use of the products, which could independently support the classification under Heading 21.08.

(b) Applicability of Res Judicata:

The Tribunal held that the Assistant Commissioner's order classifying similar goods of the appellant's sister-unit at Pune would not operate as res judicata. It cited the Supreme Court's decision in Swaraj Mazda Ltd. v. CCE, which established that there is no estoppel in taxation matters. The Tribunal emphasized that if the Revenue can provide adequate evidence, the classification of the appellant's products can be independently determined.

(c) Entitlement to Claim Classification Under a Third Entry:

The Tribunal referred to the Supreme Court's decision in Warner Hindustan Ltd. v. Collector, which held that it is not permissible for an assessee to claim classification under a new entry at the appellate stage. The appellant's alternative plea to classify the goods under Chapters 11 and 15 was thus rejected. The Tribunal noted that the appellant's reliance on the Helios Food Additives case was not tenable, as the appellant had consistently argued against the use of HSN Explanatory Notes.

(d) Correct Classification of the Goods:

The Tribunal found the Commissioner's decision unsustainable and called for a remand of the classification dispute. The Commissioner was directed to decide the classification based on the records without reference to HSN Explanatory Notes, ensuring a reasonable opportunity for the assessee to be heard.

(e) Assessment Under Section 4 or Section 4A:

The Tribunal noted that this issue would be relevant only if the goods are classified under SH 2108.99. It directed the Commissioner to determine the applicability of Rule 34(a) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, after proper verification of facts.

(f) Applicability of the Extended Period of Limitation:

The Tribunal accepted the appellant's plea of bona fide belief in favor of classification under Heading 19.05, supported by the unchallenged classification of similar products by their sister-unit. It concluded that the extended period of limitation was not applicable, and thus the Commissioner could not demand duty for the period beyond the normal limitation period. Consequently, no penalty under Section 11AC of the Act was warranted.

Conclusion:

The Tribunal set aside the impugned order and remanded the case to the Commissioner for de novo adjudication within the parameters of this order and in accordance with law, ensuring a reasonable opportunity for the assessee to be heard.

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