2019 (2) TMI 756 - AT - Central Excise

Classification of manufactured item - Recombinant Human Erythropoietin (R-EPO) - whether classifiable under Chapter heading No.3002 or under Chapter heading No.3003? - extended period of limitation - Held that - The detailed correspondences which undertook between the appellant and the departmental authorities on filing of the classification by the appellant, the extended period cannot be invoked by the show cause notice for demanding duty for the period February, 2001 to February, 2002 and is incorrect and hit by limitation - entire demand in the case in hand is unsustainable on limitation only - penalties also set aside - appeal allowed - decided in favor of appellant.

Summary

Issues: Classification of product under Chapter headings 3002 or 3003, Limitation for demanding duty, Suppression of facts, Imposition of penalties

Classification Issue Analysis:
The central issue in this case revolves around the classification of the product, Recombinant Human Erythropoietin (R-EPO), under Chapter heading No.3002 as claimed by the appellant or under Chapter heading No.3003 as contended by the revenue. The lower authorities initiated proceedings based on the view that the product falls under Chapter heading No.3003, leading to a show cause notice alleging misclassification and demanding duty. The appellant challenged this classification, arguing that the product should be classified under Chapter heading No.3002 as a fraction of blood, citing the classification by the supplier, M/s Wockhardt Ltd, as supporting evidence. However, the adjudicating authority upheld the classification under Chapter heading No.3003, resulting in the imposition of penalties. The appellant's counsel highlighted the correspondence between the appellant and the department regarding the classification, emphasizing that the extended period for demanding duty based on alleged suppression of facts was unjustified.

Limitation Issue Analysis:
The crux of the limitation issue lies in the timeline of events concerning the classification and correspondence between the appellant and the department. The appellant had filed a classification list for the product in March 2001, providing detailed information on the manufacturing process. Subsequent exchanges of letters between the appellant and the departmental authorities indicated a thorough discussion on the classification, with the appellant justifying the classification under Chapter heading No.3002. However, despite the ongoing correspondence, a show cause notice demanding duty was issued in 2006, invoking an extended period based on alleged suppression of facts. The appellate tribunal, after careful consideration, concluded that the extended period for demanding duty from February 2001 to February 2002 was unwarranted, citing the detailed correspondences and the absence of further communication post-October 2001. The tribunal relied on the legal precedent set by the Apex Court in a similar case to support its decision on the limitation issue.

Penalties and Final Decision:
The tribunal found the entire demand unsustainable solely on the grounds of limitation and deemed the penalties imposed as unjustified. Consequently, the impugned order was set aside, and the appeals were allowed in favor of the appellant. The decision highlighted the importance of adherence to procedural requirements and the significance of timely and accurate communication between the parties involved in such matters.

This detailed analysis of the judgment provides insights into the legal complexities surrounding the classification of products, the application of limitation periods in demanding duties, and the implications of alleged suppression of facts in customs matters.