2017 (4) TMI 792 - AT - Central Excise

Classification of goods - quilts - misdeclaration - whether during the material period respondent had intentionally evaded duty on the quilts manufactured and cleared while classifying the same under Heading 58.11 and claiming the benefit of N/N. 30/2004-CE? - Board Circular dated 20.10.2009 - Held that - there was a general practice in the trade to classify the product under Chapter 5811 while in some other places, it has been classified under Chapter 94 - By the Circular dated 20.10.2009, the Board has clarified that the product merits classification under Chapter 9404 and the benefit of N/N. 30/2004-CE is not available. Since the CBEC Circular had issued clarification only on 20.10.2009 that the product manufactured and cleared by the appellant merits classification under 9404, the defence of the respondent herein before the appellate authority that they were under a bona fide belief that the products classifiable under Chapter 5811 cannot be faulted with - the respondent has made out a case for setting aside the demand of duty only on the ground of limitation as has been held by the first appellate authority - appeal dismissed - decided against Revenue.

Summary

Issues:
Classification of goods under Tariff Heading, Duty liability, Mis-classification, Bona fide belief, Circular interpretation, Time limitation for demand.

Classification of Goods under Tariff Heading:
The case involved a dispute regarding the classification of quilts manufactured by the respondent. The Department contended that the quilts should be classified under Tariff Heading No.9404, while the respondent was classifying them under Tariff Heading No.5811. The issue was whether the respondent intentionally evaded duty by misclassifying the quilts.

Duty Liability and Mis-classification:
The Department alleged that the respondent misclassified the quilts under Tariff Heading No.5811 to claim an ineligible exemption under Notification No.30/2004-CE. The show cause notice demanded duty for the period 2006-2008, stating that the mis-classification was intentional and duty was liable to be paid.

Bona Fide Belief and Circular Interpretation:
The first appellate authority set aside the confirmed demand, stating that the appellant had a bona fide belief that the products were exempted under Notification No.30/2004. The authority relied on a Circular stating divergent practices in the trade for classification. The Circular clarified that the products should be classified under Chapter 9404, but it was issued after the period in question. The respondent argued that they believed in good faith that their classification was correct based on prevailing trade practices.

Time Limitation for Demand:
The respondent contended that the show cause notice issued in 2010 was time-barred as the demand was only up to December 2008. They cited previous tribunal decisions to support their argument.

Judgment Analysis:
The appellate tribunal upheld the impugned order, stating that the respondent had a bona fide belief in the classification under Tariff Heading No.5811 due to divergent trade practices. The tribunal noted that the Circular clarifying the correct classification was issued after the relevant period. Therefore, the respondent's belief was reasonable. The tribunal found no evidence of fraud or willful misstatement to invoke the extended period for demand. The impugned order was deemed correct and legal, leading to the rejection of the appeals and disposal of the cross-objections in support of the order.

This detailed analysis of the judgment highlights the key issues of classification, duty liability, belief, circular interpretation, and time limitation, providing a comprehensive understanding of the legal reasoning and decision-making process involved in the case.