2014 (12) TMI 35 - AT - Central Excise

Invocation of extended period of limitation - Suppression of facts - Wrong classification of goods - Held that - Commissioner (Appeals) held them guilty of suppression for not taking initiative and not consulting the department if they had any doubt while the appellants never stated that they had any doubt. In fact they have claimed that they were clearly of the view that their goods were classifiable where they classified them. The Commissioner (Appeals) has not mentioned anywhere as to what they suppressed which was required to be disclosed as per law. Not taking suo moto initiative has never been a valid ground for sustaining charge of suppression. Thus, prima-facie, the appellants have made out a good case regarding non invokability of the extended period. It is seen that out of the impugned demand, an amount of about ₹ 8.68 lakhs pertains to the normal time limit. Therefore, we are of the view that pre-deposit of ₹ 8.70 lakhs with proportionate interest would meet the requirement of Section 35F of the Central Excise Act, 1944 - Partial stay granted.

Summary

Issues:
Classification of goods under Central Excise Act, 1944 based on tariff system change, suppression of facts by the appellants, applicability of extended period for demand, pre-deposit requirement under Section 35F.

Classification Issue:
The appellants contended that their product, kimam, should be classified under heading 24039960 as a tobacco extract under the eight-digit tariff system. However, the department classified it under 24039920, subjecting it to Section 4A assessment. The Supreme Court judgment in a similar case supported the department's classification under preparation containing chewing tobacco. The appellants argued that kimam was not a preparation containing chewing tobacco, but the Supreme Court's interpretation was binding. Consequently, the goods were prima facie classifiable under 24039920, leading to a sustainable demand.

Suppression Issue:
The Commissioner (Appeals) found the appellants guilty of suppression for not consulting the department regarding the classification dispute. The appellants claimed clarity in their classification and argued against being singled out for duty under a specific tariff heading. The Commissioner's decision was based on the lack of initiative shown by the appellants, despite their consistent duty payments under Section 4. The appellants contended that not taking suo moto initiative did not imply suppression, citing legal precedents. The appellants were considered to have made a good case against the extended period's invokability, with a portion of the demand falling within the normal time limit.

Pre-Deposit Requirement:
The Tribunal directed the appellants to pre-deposit a specified amount with interest within eight weeks to comply with Section 35F of the Central Excise Act, 1944. Failure to do so would result in the dismissal of appeals. The pre-deposit amount was determined to cover the portion of the demand falling within the normal time limit, ensuring compliance with the statutory provision.

This detailed analysis of the judgment highlights the key issues addressed, including the classification of goods, the allegation of suppression, the application of the extended period for demand, and the pre-deposit requirement under the relevant legal provisions.