2014 (7) TMI 1071 - AT - Central Excise

Classification of orthopaedic heating belts - Chapter Heading No.90219090 or Chapter Heading No.90189099 - extended period of limitation - Held that - claim of the Revenue is incorrect and not supported by any of the reasoning - The reliance placed by the adjudicating authority on Chapter Note 6(i) of Chapter 90 seems to be misplaced as the said chapter note specifically talks about the preventing or correcting bodily deformities. - giving a very narrow interpretation of the phrase preventing or correcting bodily deformities needs to be visible and should be outside the body, would be an incorrect interpretation for the classification of the product like orthopaedic heating belts - the use of such product may be ascertained by the experts who are using or recommending such products. - The explanatory Notes to HSN specifically talks about as to what would get covered under Chapter Heading No.9018. - it is settled law that for classification of the product, the sub heading which is specific, should be preferred to general sub-heading - classification as done by the assessee under Chapter Heading No.9021 is correct - Decided in favor of assessee. Demand of Duty on the product Bandages - Manufacturing by Job worker - Held that - The lower authorities have not conducted any further investigation and the packages of bandages as produced before us would indicate that the entire manufacturing activity took place in the job worker s premises. The submission of ld.Counsel that they are not doing any activity seems to be correct as the adjudicating authority has not recorded any finding to indicate that the appellant herein was undertaking further activity in his factory premises on the bandages which are received from the job worker in duly packed form. - the said product cleared from the factory premises as such cannot be subjected to any duty as Central Excise duty is on manufacture. - Decided in favor of assessee. Extended period of limitation - Held that - It is seen from the show cause notice that the said show cause notice categorically records that the demand has been raised based upon the scrutiny of the declarations filed by the appellant from 2004 onwards. We are at loss to understand why the very same exercise, if any, was not undertaken by the Revenue authorities when the declarations were filed. In our view, on this factual ground, show cause notice invoking the extended period, is totally incorrect - Decided in favor of assessee.

Issues Involved:
1. Classification of orthopaedic heating belts.
2. Demand on bandages.
3. Invocation of extended period for demand.

Detailed Analysis:

1. Classification of Orthopaedic Heating Belts:
The primary issue is whether the orthopaedic heating belts manufactured by the appellant should be classified under Chapter Heading 9021 or 9018 of the Central Excise Tariff Act, 1985. The appellant argued that the heating belts are orthopaedic appliances used for relief from backaches, sprains, muscular and joint pains, and thus should be classified under Heading 9021. The Revenue contended that these belts should be classified under Heading 9018 as "other electromedical apparatus" due to their electrical components.

The tribunal found that the heating belts marketed as orthopaedic appliances are used for preventing or correcting bodily deformities, which aligns with the definition under Chapter Note 6 of Chapter 90. The tribunal also noted that internal defects like swelling and pain are forms of bodily deformities. The expert opinions from orthopaedic doctors supporting the use of these belts for medical purposes were considered valid. Additionally, the tribunal referenced the HSN explanatory notes which exclude orthopaedic appliances from Chapter 9018 and support their classification under Chapter 9021. Consequently, the tribunal concluded that the orthopaedic heating belts should be classified under Chapter Heading 9021.

2. Demand on Bandages:
The adjudicating authority demanded duty on bandages, alleging they were manufactured and cleared from the appellant's factory. The appellant contended that the bandages were received in a packed condition from job workers and no further manufacturing activity took place in their factory.

The tribunal found that the appellant's claim was substantiated by evidence, indicating that the bandages were indeed received in a completely packed condition from job workers. The adjudicating authority did not provide any findings to the contrary. Therefore, the tribunal held that no manufacturing activity was conducted by the appellant on the bandages, and thus, they should not be subjected to duty.

3. Invocation of Extended Period for Demand:
The show cause notices issued by the Revenue authorities invoked the extended period for demand, alleging misclassification by the appellant. The appellant argued that they had been regularly filing declarations with the authorities, detailing the manufacturing process and classification of their products.

The tribunal observed that the appellant had been transparent in filing declarations since 2004, and the Revenue authorities had not sought any further clarification or raised any objections until the show cause notices were issued. The tribunal found that the extended period for demand was incorrectly invoked as there was no suppression or misstatement of facts by the appellant with the intent to evade duty.

Conclusion:
The tribunal concluded that the classification of orthopaedic heating belts under Chapter Heading 9021 was correct, the demand on bandages was unsustainable, and the invocation of the extended period for demand was incorrect. The impugned order was set aside, and the appeal was allowed with consequential relief.

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