2011 (5) TMI 865 - AT - Central Excise

Classification of goods - Classification under CSH 4901.90 or CSH 4819.19 - Bags and cartons - Printed cartons and bags Held that - They are classifiable under sub-heading 4819.19 of Central Excise Tariff and not under sub-heading 4901.90 - Such bags could be open on one side and need not be closed on all four sides - Folders also are normally open on three sides - Inclusion of terms like bags letter boards and similar articles in Heading under 48.19 discloses that entries thereunder are not confined to containers which are enclosed on all sides and they can include containers which are open on one side or more. - Being so the decision of the Apex Court in G. Claridge & Company Ltd. s case 1991 (2) TMI 112 - SUPREME COURT OF INDIA can be of no help to the appellants in the matter in hand. - The ground that the product being not enclosed on all four sides it cannot be container within the meaning of the said expression under the said Tariff Entry therefore cannot be accepted. - Decided against the assessee. Scope of Show cause notice - traversing beyond the scope of the show cause notice Assessee contends that that the case pleaded thereunder was to the effect that the folders manufactured by the appellants were part of cartons whereas the findings arrived at by the authorities below are that the folders fall within the ambit of the word container Held that - it is difficult to accept the contention that merely by using the word at one place as carton in the show cause notice the authorities can be said to have traversed beyond the scope of show cause notice for having arrived at the finding that the product in question falls within the ambit of the word container - Adjudicating authority cannot be said to have traversed beyond scope of show cause notice for finding that impugned product fell within the ambit of container . Bar of limitation - Bona fide belief Suppression of facts - Held that - a specific defence was raised in reply to the show cause notice that pursuant to the Board s instructions dated 2-9-1986 and referring to the packing materials of various other products the appellants were justified in not paying the duty in respect of the said product. The said averments apparently disclose that the appellants consciously took the decision not to pay duty in relation to the said product on the ground that it cannot be subjected to the payment of duty. Once the assessee s consciously decides to exclude the product from being liable to the payment of duty the question of bona fide belief cannot arise. Imposition of Penalty Malafide intention - Held that - Merely because clerk was employee of assessee firm which evaded duty and even though had necessary information about same it cannot be said that he too had intention to connive with owner of firm to evade duty - Employee cannot deny instructions of owner of firm to prepare necessary records with intent to evade duty - In that case there must be some additional material which could reveal intention of such employee in assisting the firm whereby it could be disclosed that he had personal interest in availing some gain from owner in evasion of duty However Assessee found guilty of suppression of relevant facts for invocation of extended period - In such case imposition of penalty is unavoidable - Decided against assesse.

Issues Involved:
1. Classification of the product under the appropriate Chapter sub-heading of the Central Excise Tariff Act (CETA), 1985.
2. Alleged traversing beyond the scope of the show cause notice by the authorities.
3. Applicability of the extended period of limitation for issuing the show cause notice.
4. Justification for the imposition of penalties on the appellant firm and its employee.

Issue-wise Detailed Analysis:

1. Classification of the Product:
The primary issue was whether the product manufactured by the appellant firm, described as folders, should be classified under Chapter sub-heading (CSH) 4819.19 or 4901.90 of the CETA, 1985. The appellant argued that the product should be classified under CSH 4901.90, as it was essentially a folder with printed materials used for advertisement and information, and not a container. They relied on the Supreme Court decision in G. Claridge & Company Ltd. v. Commissioner of C. Excise, which defined a container as something that must be closed on all sides. However, the Tribunal noted that the relevant tariff entry had been amended to include terms like "bags and other packing containers," which do not need to be enclosed on all sides. Consequently, the Tribunal upheld the classification under CSH 4819.19, rejecting the appellant's reliance on the earlier Supreme Court decision.

2. Traversing Beyond the Scope of the Show Cause Notice:
The appellant contended that the authorities had traversed beyond the scope of the show cause notice by classifying the product as a container rather than as a part of cartons. The Tribunal examined the show cause notice and found that it clearly described the product as one manufactured for the purpose of adequately protecting the product inside the folders. The Tribunal concluded that the authorities had not traversed beyond the show cause notice, as the notice and the findings were consistent with each other.

3. Applicability of the Extended Period of Limitation:
The appellant argued that the show cause notice issued on 30-12-2002 for the period from April 1997 to March 1998 was beyond the one-year limitation period, as the department had knowledge of the relevant facts on 8-9-1998 when the premises were searched. The Tribunal held that the facts revealed on 8-9-1998 related to a period that had already expired, and the department had not been informed of these facts during the relevant period. The Tribunal distinguished this case from the Supreme Court decisions in Kushal Fertilisers (P) Ltd. and Nizam Sugar Factory, where the department had prior knowledge of the facts. The Tribunal concluded that the extended period of limitation was applicable due to the suppression of facts by the appellant.

4. Justification for the Imposition of Penalties:
The Tribunal upheld the penalty on the appellant firm, finding that there was suppression of relevant facts and the invocation of the extended period of limitation was justified. However, the Tribunal set aside the penalty imposed on the employee, Shri D.B. Agarwal, as there was no evidence of his personal interest or intention to connive with the firm to evade duty. The Tribunal emphasized that an employee merely following instructions from the firm could not be penalized without additional material evidence of personal gain or intent to evade duty.

Conclusion:
The Tribunal rejected the appeal concerning the classification and the extended period of limitation, upholding the classification under CSH 4819.19 and the penalties on the appellant firm. However, the penalty on the employee was set aside due to the lack of evidence of personal intent to evade duty. The appeals were disposed of accordingly.

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