2017 (4) TMI 736 - AT - Central Excise

Classification of goods - Borotik Boards out of rubber wood - Appellants classified under chapter heading 4403.00 of CETA upto 27.02.2005 and thereafter, under CTH 4407 attracting nil rate of central excise duty. However, department took the view that the products are required to be classified under chapter heading 4405.90 till 27.02.2005 and thereafter under CTH 44091090 attracting 16% advalorem duty? - Held that - the Borotik Boards in question will only merit classification in erstwhile CETA Heading 4403.00 (4407.9900 w.e.f 28-02-2005). This being so, the impugned orders dated 03-01-2007 (relevant to Appeal E/296/2007) and 29-01-2009 (relevant to Appeal E/290/2009) ordering their classification under erstwhile CETA heading 4405 (present 4409.2090) cannot sustain, and will necessarily required to be set aside, which we hereby do - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of Borotik Boards under the Central Excise Tariff Act (CETA).
2. Applicability of extended period of limitation under Section 11A of the Central Excise Act, 1944.
3. Imposition of penalties under Section 11AC of the Central Excise Act, 1944, and Rule 25 of the Central Excise Rules, 2002.

Issue-wise Detailed Analysis:

1. Classification of Borotik Boards under CETA:

The primary issue revolves around the correct classification of Borotik Boards manufactured by the appellants. The appellants classified the boards under chapter heading 4403.00 (later 4407) of CETA, attracting a 'nil' rate of duty. The department, however, argued for classification under chapter heading 4405.90 (later 44091090), attracting a 16% ad valorem duty.

The appellants contended that their products, which are finger-jointed and edge-glued, do not fit the description of continuously shaped wood required for classification under heading 4405 (later 4409). They argued that their boards are not continuously shaped along any edges or faces, and thus should be classified under heading 4403 (later 4407).

The Tribunal examined the manufacturing process, which includes planing, finger-cutting, finger-jointing, edge-gluing, and sanding. It noted that these processes do not amount to continuous shaping as required under heading 4405 (later 4409). The Tribunal concluded that the boards should be classified under heading 4403 (later 4407), as they are not continuously shaped along any edges or faces.

2. Applicability of Extended Period of Limitation:

The appellants argued that the extended period of limitation under Section 11A of the Central Excise Act, 1944, should not apply as there was no willful suppression or misstatement to evade duty. They pointed out that the department had previously adjudicated the classification of similar products, indicating that the department was aware of their manufacturing activities.

The Tribunal agreed with the appellants, noting that the department's prior knowledge of the manufacturing activities negated the grounds for invoking the extended period of limitation. Consequently, the Tribunal found that the entire adjudication proceedings were hit by limitation.

3. Imposition of Penalties:

The department imposed penalties under Section 11AC of the Central Excise Act, 1944, and Rule 25 of the Central Excise Rules, 2002. Given the Tribunal's findings on classification and limitation, the penalties imposed were also set aside.

Conclusion:

The Tribunal set aside the impugned orders, holding that Borotik Boards should be classified under heading 4403 (later 4407) of CETA. It also found that the extended period of limitation was not applicable and, consequently, the penalties imposed were unwarranted. The appeals were allowed with consequential relief as per law.