2018 (7) TMI 1273 - AT - Central Excise

Classification of goods - wastage firewood mango wood - whether the goods merit classification under chapter heading No.4408.40 or not? - certain sale proceeds not shown in the ER-1 returns - Demand of the differential duty - Held that - The wastages as has been cleared by the appellant cannot be classified under 4408.40 is the findings of the first appellate authority which in our view is correct - It can be seen from the findings of the first appellate authority he was correct in coming to the conclusion that the remnants of the logs which has undergone an activity of peeling for purpose of manufacturing ply wood cannot be classified under 4408.40 and we concur with the same. Appeal dismissed - decided against Revenue.

Summary

Issues:
Classification of goods under chapter heading 4408.40 based on discrepancies in reporting income and assessable value in ER-1 returns for specific years.

Analysis:
The appeal by Revenue challenged the Order-in-Appeal regarding the classification of goods under chapter heading 4408.40 due to discrepancies in reported income and assessable value in ER-1 returns for the years 2002-03, 2003-04, and 2004-05. The lower authorities alleged that certain sale proceeds were not reflected in the ER-1 returns, leading to a demand for differential duty. The appellant contended that the income shown in balance sheets pertained to wastage, firewood, and mango wood resulting from processing logs in the factory. The adjudicating authority did not accept this defense, prompting an appeal to the First Appellate authority, which ruled in favor of the appellant, stating that the goods were wastage and rollers, not cuttings and trimmings of plywood as claimed by the adjudicating authority.

The Revenue's appeal was specifically against the first appellate authority's findings that the products did not fall under chapter heading 4408.40. The Revenue argued that the first appellate authority erred in disregarding the classification under 4408.40. However, the respondent's counsel explained the manufacturing process, emphasizing that the cleared items were wastage and remnants of logs after peeling, distinct from cuttings and trimmings of plywood. Reference was made to a Tribunal decision supporting this position and highlighting an incorrect reliance on a previous order by the Revenue.

Upon careful consideration, the Tribunal analyzed the issue of differential duty based on discrepancies in reported sales income. It was observed that the demand was solely on waste and remnants of logs, specifically wooden rollers and leftover rollers, not falling under 4408.40. The Tribunal concurred with the first appellate authority's decision, which emphasized that the remnants from the peeling process for manufacturing plywood could not be classified under 4408.40. The Tribunal found no basis for classifying the goods under the said category, supporting the appellant's position that the remnants were waste wood resulting from the manufacturing process.

In conclusion, the Tribunal upheld the first appellate authority's decision, deeming it correct and legally sound. The appeal by the Revenue was rejected concerning the findings of the first appellate authority. The judgment emphasized the distinction between the waste remnants and the intended manufactured products, affirming that the former did not fall under the specified classification, thereby resolving the issue of classification under chapter heading 4408.40.