2008 (8) TMI 78 - AT - Central Excise

Classification of goods changed - Assessee had actually filed classification list revising classification of the product - Department was fully aware that the goods have been cleared at concessional rate which was not admissible and the classification had been changed without any valid reason whatsoever - Other than the statement of the Managing Director, no other evidence was available to show that there was suppression - invocation of extended period of limitation u/s 11A, is not justified

Summary

Issues: Misclassification of product leading to duty evasion, Time-barred demand, Penalty imposition

In this case, the respondents were manufacturing instruments for analysis classifiable under Chapter 90 of the Central Excise Tariff Act, 1985. They initially classified their product under CETH 90.27 and paid duty at 5% ad valorem. When the duty rate increased to 10% in 1994-95, they continued to pay duty at 5% by misclassifying the product under Chapter Heading 90.18. Later, when the product became duty-free, they reclassified it under heading 90.27 to avail nil rate of duty. The Managing Director admitted the misclassification and paid the differential duty. A show cause notice was issued, leading to a demand of Rs. 13,72,314, penalty imposition, and confiscation of assets. The Commissioner (Appeals) set aside the order, stating the demand was time-barred and unsustainable, leading to the Revenue's appeal.

The Revenue argued that the respondents intentionally evaded duty by changing the classification of the product to avoid paying the increased duty rate. They highlighted the admission of the Managing Director as evidence of intent to evade payment.

The respondents contended that there was no suppression or fraud on their part, supporting the Commissioner's (Appeals) decision to set aside the penalties.

Upon review, the Tribunal found no evidence besides the Managing Director's statement to prove suppression or misdeclaration for invoking the extended period of limitation. The respondents had filed a revised classification list, indicating the change in classification, and the Department was aware of this change. As the Department had been informed and did not take action, the extended time limit for issuing a show cause notice was not applicable. The Tribunal upheld the Commissioner's decision that the demand was unsustainable, leading to the rejection of the Revenue's appeals.