2007 (8) TMI 188 - AT - Central Excise

Demand raised by change in classification by Dept. Dept. has been approving classification of Leather products under Heading 3814 since a long time Classification cannot be revised mere on basis of audit objection even if test results of samples are in favor of classification done by appellant

Summary

Issues:
Classification of products under CETA 1985; Time-barring of demands; Justification for invoking a longer period; Test results from Central Leather Research Institute (CLRI); End-use classification; Commercially known classification; Lack of testing by the department; Revision of classification based on audit objection; Commissioner's failure to provide a speaking order; Ignoring test reports and literature submitted by the appellants.

Classification of products under CETA 1985:
The appellants, manufacturers of various products for the leather industry, classified their products under CSH 3814 of CETA 1985 for 15 years. However, the audit party disagreed with this classification and proposed a different one. The Deputy Commissioner confirmed the proposed classification, leading to demands of duty, interest, and penalties. The Commissioner (A) upheld this decision. The appellants challenged this classification based on their consistent filing under Heading 3814, which was approved by the department over time. The Tribunal found no suppression of facts and deemed the demands time-barred, setting them aside.

Test results from Central Leather Research Institute (CLRI) and End-use classification:
The appellants presented test results from CLRI supporting their classification and argued that it was based on end-use and commercial knowledge. They contended that similar manufacturers classified products under sub-item 3814. The department did not conduct tests but revised the classification solely on audit objections. The Tribunal noted the absence of test-based revisions and the Commissioner's failure to provide a detailed order, leading to the decision that the impugned order was not sustainable. The Tribunal emphasized the importance of considering test reports and literature submitted by the appellants in classification disputes.

Conclusion:
In conclusion, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellants. The decision highlighted the necessity of justifying classification changes with proper testing and analysis, emphasizing the importance of consistent classification practices and the need for detailed, well-reasoned orders in such matters.