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2016 (1) TMI 386 - AT - Central ExciseClassification of forged round bars - Extended period of limitation - Whether the articles manufactured by appellant get covered under Heading 7214 or 7326 during the relevant period - Held that - Appellant s records were audited by audit party in EA-2000, Comprehensive audit, which has been formulated by the Govt. of India, includes all the aspects of business of the unit which is being audited. This would mean that EA-2000 audit were also looking at the discharge of duty liability of the appellant in accordance with law. Appellant had clearly indicated in the monthly returns that the products manufactured by them are being classified under Ch. Heading 72.14 and cleared by availing the benefit of Notification 16/04. It was the duty of the audit party to consider whether the classification was correct and the appellant had availed the benefit of Notification correctly or otherwise. The audit report which has been produced before us indicate that this issue was not raked by the audit team would mean that it was accepted by the audit team that the classification of products is under Notification 72.14. On limitation the appeal succeeds and the demand for the period 01.03.2004 to 31.10.2004 is blatantly hit by limitation and the show-cause notice invoking the period of limitation under the provisions of Section 11A(1) is not correct. The impugned order is liable to be set aside on limitation only - Decided in favour of assessee.
Issues Involved:
1. Classification of forged round bars under Central Excise Tariff Act (CETA). 2. Applicability of Notification 16/2004. 3. Invocation of extended period of limitation for demanding differential duty. 4. Imposition of penalties on the appellant and its Managing Director. Issue-wise Detailed Analysis: 1. Classification of Forged Round Bars: The primary issue was whether the products manufactured by the appellant should be classified under Chapter Heading 7214 or 7326 of the CETA. The appellant argued that their products, forged round bars and rods of iron or non-alloy steel, should be classified under Heading 7214. They relied on the Explanatory Note to HSN, which supports their classification under Chapter Heading 7214. The Revenue, however, contended that the products were forged articles and should be classified under Heading 7326, citing various judgments including those from the Tribunal and the Apex Court. The Tribunal noted that the products were not bars and rods but articles with a definite shape, thus meriting classification under Heading 7326. This conclusion was supported by the Explanatory Note to HSN, which excludes pieces cut from bars and rods from Heading 7214 and includes them under Heading 7326. 2. Applicability of Notification 16/2004: The appellant sought the benefit of Notification 16/2004, which provides a lower rate of duty. However, since the Tribunal concluded that the products were correctly classifiable under Heading 7326, the benefit of this notification was not applicable. 3. Invocation of Extended Period of Limitation: The demand for differential duty was for the period 01.03.2004 to 31.10.2004, with the show-cause notice issued on 30.04.2009. The appellant argued that the extended period of limitation could not be invoked as they had been regularly informing the department about their manufacturing activities and filing returns. The Tribunal found that the appellant had indeed classified the same products under Heading 7214 since 1994 and had informed the authorities about this classification. Additionally, the appellant's records were audited by the EA-2000 audit party, which did not raise any classification disputes. The Tribunal held that the extended period of limitation could not be invoked as the department was aware of the classification and had not objected during the audit. 4. Imposition of Penalties: Since the demand for duty liability was set aside on the ground of limitation, the Tribunal concluded that the imposition of interest and penalties on the appellant and its Managing Director did not arise. Conclusion: The Tribunal set aside the impugned order on the ground of limitation, allowing the appeal. The classification of the products under Heading 7326 was upheld, but the demand for differential duty was deemed time-barred, and consequently, no penalties or interest were imposed.
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