2011 (6) TMI 113 - AT - Central Excise

Classification - Notification No 6/2002, Serial No. 237 - Scrutiny - Demand - Time barred - There is no requirement under the central excise law to declare the manufacturing process or usage of the product and hence it was not required to be declared - Supreme Court of India in case of Padmani Product vs. CCE (1989 -TMI - 42519 - SUPREME COURT OF INDIA) has held that mere failure or negligence on the part of the manufacturer in not taking out a licence and in not paying duty does not attract the extended period of limitation unless there is positive evidence to show that the manufacturer knew that the goods were liable to duty and he was required to take out a licence - As is well settled, claim of wrong classification or benefit of notification by itself cannot be held to be a suppression or mis-statement so as to invoke the longer period of limitation - Appeal is allowed

Summary

Issues:
- Proper classification of goods for availing exemption under Notification No. 6/2002
- Invocation of extended period of limitation for raising duty demand
- Suppression of facts and deliberate mis-classification by the appellants
- Applicability of penalty on the appellant

Classification of Goods for Exemption:
The appellants, engaged in manufacturing Water Treatment Plant, RO Plant, claimed exemption under Notification No. 6/2002, Serial No. 237. However, the Revenue contended that the goods did not meet the description under this serial, asserting that the correct serial was 196A. The absence of a required certificate led to duty liability.

Invocation of Extended Period of Limitation:
The Revenue initiated proceedings against the appellants for duty demand, invoking an extended period of limitation. The show cause notice raised a demand of Rs. 4,83,620, alleging non-compliance with the correct exemption conditions. The order passed by the original adjudicating authority and confirmed by the Commissioner (Appeals) led to the present appeal.

Suppression of Facts and Mis-Classification:
The Revenue claimed suppression by the appellants, justifying the extended period of limitation. However, the advocate argued that no suppression occurred as the appellants had filed ER-1 returns during the relevant period, indicating the availed exemption. The Tribunal found no evidence of deliberate mis-classification or suppression, emphasizing that mere wrong classification or benefit claim does not warrant extended limitation.

Applicability of Penalty:
The Tribunal ruled in favor of the appellants, setting aside the duty demand and penalty due to the Revenue's failure to prove deliberate misrepresentation or suppression. The order highlighted that the entire demand was time-barred, thus requiring dismissal. Consequently, the penalty imposed on the appellant was also revoked.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Ahmedabad underscores the issues of proper classification for exemption, the invocation of extended limitation, the absence of suppression or misrepresentation by the appellants, and the consequent decision on the penalty applicability.