2012 (8) TMI 346 - AT - Central Excise

Classification of shikakai powder - Revenue contending classification under Chapter 33 of the CETA particularly under sub-heading 3305.90. whereas assessee not discharging duty on the premise that it is a vegetable product and more over classifiable under Chapter 14 of the Central Excise Tariff Act, 1975 - period 1.4.1993 to 31.3.1998 - invocation of extended period of limitation - Held that - As the issue involved is more than of classification of shikakai powder, which was held against the appellants in 2009 in case of Mayil Mark Nilayam Vs. CCE, Chennai (2009 (3) TMI 170 - CESTAT, CHENNAI), therefore, demand for the extended period of limitation is not sustainable but demand for the normal period of limitation is sustainable. As the issue is of classification, no penalty is warranted in this case. Hence the penalties are set aside. As the appellants have not collected duty separately, therefore the amount of clearance be treated as cum-duty price, so duty liability is to be reduced to that extent - Decided partly in favor of assessee.

Summary

Issues:
- Classification of shikakai powder under the Central Excise Tariff Act, 1975
- Applicability of extended period of limitation for demand of duty
- Liability for payment of duty, interest, and penalties

Classification Issue:
The appellants contested the classification of shikakai powder under Chapter 33 of the Central Excise Tariff Act, 1975, arguing it should be under Chapter 14 as a vegetable product. They relied on a previous Tribunal ruling in Mayil Mark Nilayam Vs. CCE, Chennai, which favored their classification. The Tribunal, however, noted that the issue was not solely about classification but also about the dutiability of the product. The Tribunal ruled that the demand for the extended period of limitation was unsustainable but upheld the demand for the normal period of limitation. It concluded that the appellants were liable to pay duty along with interest for the normal period, as the issue was primarily one of classification.

Extended Period of Limitation Issue:
Regarding the applicability of the extended period of limitation for demanding duty, the Tribunal found that since the appellants were under a bonafide belief about the dutiability of the product, no penalties were imposed in the previous case, and hence, the extended period of limitation could not be invoked. Therefore, the Tribunal held that the demand for the extended period of limitation was not sustainable, and the appellants were only liable to pay duty along with interest for the normal period of limitation.

Liability for Payment Issue:
In terms of the liability for payment of duty, interest, and penalties, the Tribunal set aside the penalties as the issue primarily revolved around the classification of the product. The Tribunal also directed that since the duty was not collected separately, the amount of clearance should be treated as cum-duty price, thereby reducing the duty liability to that extent. Consequently, the appeal was disposed of with the appellants being held responsible for paying duty along with interest for the normal period of limitation, without any penalties imposed due to the classification issue at hand.