2015 (2) TMI 697 - AT - Central Excise

Benefit of Notification No. 6/06-CE dated 01/03/06 - Classification of packing machines used for packing of various dairy products - Change in classification after introduction of Notification - Held that - Appellant have given half description in the said returns, it is also a fact that the Revenue has never questioned the said assessee as regards the full description of their product. We also note that the appellants prior to introduction of the notification were classifying the goods under heading 84.22 and it is only on the introduction of the notification, they switch the classification to 84.34, in respect of goods supplied to dairy owners. Thereafter they continued to adopt two different classifications for the same very product, dependent upon the purchaser of the said goods. An assessee who is working under the Central Excise, is expected to be knowledge of the basic fact that one product cannot be held to be falling under two different headings and cannot be allowed to adopt two different classifications in respect of the same product. This, read with the insufficient description of the goods in the monthly/quarterly returns, read with the fact of shifting of classification, with the introduction of the notification, leads us to believe, at this prima facie stage that this was done with an intention to claim the non-available benefit of Notification No. 6/06 and as a modus operandi. - Partial stay granted.

Summary

Issues:
1. Classification of packing machines under Tariff heading 84.22 or 84.34.
2. Applicability of Notification No. 6/06-CE dated 01/03/06 on the clearance of packing machines.
3. Invocation of longer period of limitation for demand of duty.
4. Allegations of suppression of facts by the appellant in their returns.
5. Imposition of penalties and pre-deposit requirements.

Analysis:
1. The judgment revolves around the classification of packing machines by the appellant under Tariff heading 84.22 or 84.34. The appellant initially classified the machines under 84.22 and paid duty. However, upon the issuance of Notification No. 6/06-CE, which exempted goods under Chapter heading 84.34, the appellant changed the classification for machines supplied to dairy owners to claim the exemption. The issue arose as to whether the machines supplied to dairy owners were correctly classified under heading 84.34 as per the law declared by the Supreme Court in a previous case.

2. The Supreme Court's decision in HMT Ltd. vs. CCE & CUS, Aurangabad clarified that machines for processing milk, cream, pasteurizer, etc., fall under Chapter 84.22 and are excluded from heading 84.34. The appellant was issued a show cause notice demanding duty for the period July 2007 - January 2011 for machines cleared to dairy farm owners under the exemption notification. The demand was upheld by the lower authorities based on the classification issue and the law laid down by the Supreme Court.

3. The appellant contested the demand on the grounds of limitation, arguing that they had correctly declared both exempted and dutiable clearances in their returns, thus nothing was suppressed. However, the Revenue contended that the appellant had provided incomplete descriptions in their returns, leading to a suspicion of suppression of facts. The Tribunal noted the incomplete descriptions but also observed that the Revenue had not questioned the appellant regarding the full product description.

4. Despite the incomplete descriptions in the returns, the Tribunal found that the appellant had shifted classifications upon the introduction of the notification, which raised suspicions of intentional manipulation to claim undue benefits. The Tribunal emphasized that a product cannot be classified under two different headings and that the appellant's actions seemed to be a modus operandi to exploit the notification. Considering the circumstances, the Tribunal directed the appellant to make a specific deposit within a stipulated period to waive the balance duty and penalty, with a stay on recovery during the appeal.

5. The judgment concluded by waiving the personal penalties imposed on certain individuals and setting a compliance date for the deposit. The decision highlighted the importance of accurate classification, complete disclosure, and adherence to excise laws to avoid penalties and disputes.