2019 (2) TMI 1300 - AT - Central Excise

SSI Exemption - classification of manufactured goods in dispute - Polyurethane Moulded Parts of Chairs of various models and polyurethane moulded seats for motor vehicles - appellants have claimed the classification under 94019000 and 94012000 respectively - Revenue disputed the classification and has held that the classification of the same should be under 39263010 as Polyurethene moulded form seat cushion and the benefit of said notification is not available. Held that - Chapter sub-heading 39.29 covers other articles of plastics and articles of other materials of heading 3901 5o 3914 - 3926 30 10 is a sub-heading for fitting for furniture cut work or article under chapter heading 3926 3010, pertains to such articles made of polyurethene foam. Therefore, the description given in the chapter is specifically covering the articles manufactured by the appellants. In view of the chapter note 1 (a) to Chapter 94 Section XX, these are not covered under Chapter 94. Therefore, this cannot be classified under Chapter 94 as claimed by the appellants. The learned Commissioner (Appeals) has correctly found that the products manufactured by the appellant is polyurethene form in the required shape to be used as cushion for revolving chairs are furniture, as such they do not find any entry under Chapter 94 and in views of the specific entry under Chapter 3926 30 10, the products are to be classified as held by the order-in-original/order-in-appeal. Cum-duty benefit - Held that - The appellants are eligible for cum duty benefit - in order to verify the eligibility of the appellants for Cenvat Credit and for quantification of demand after allowing cum duty benefit, the case requires to go back to the jurisdictional Assistant/Deputy Commissioner. Penalty u/s 11AC - Held that - The issue has already been raised by the department and Additional Commissioner vide adjudication order dated 03/08/2007 has confirmed the classification in favour of the Revenue. In spite of the same, the appellants continued to classify the impugned goods under Chapter 94. It is not brought to our notice if an appeal has been filed against the said order and if a stay was granted - Penalty upheld. Appeal allowed in part and part matter remanded.

Summary

Issues Involved:
1. Classification of Polyurethane Moulded Parts.
2. Eligibility for SSI exemption under Notification No. 8/2003-CE.
3. Applicability of cum duty benefit and Cenvat Credit.
4. Imposition of penalty under Section 11AC.

Detailed Analysis:

1. Classification of Polyurethane Moulded Parts:
The primary issue in this case revolves around the correct classification of polyurethane moulded parts manufactured by the appellants. The appellants classified these parts under headings 94019000 and 94012000, claiming them as parts of chairs and seats for motor vehicles, respectively, and availed SSI exemption under Notification No. 8/2003-CE. However, the Revenue disputed this classification, asserting that the correct classification should be under 39263010 as "Polyurethane moulded form seat cushion," thus disqualifying them from the said exemption. The tribunal examined the relevant chapter notes and found that the description under heading 3926 30 10 specifically covers articles made of polyurethane foam, which includes the items manufactured by the appellants. Consequently, the tribunal upheld the Revenue's classification under heading 3926 30 10.

2. Eligibility for SSI exemption under Notification No. 8/2003-CE:
Given the reclassification of the goods under heading 3926 30 10, the tribunal determined that the benefit of SSI exemption under Notification No. 8/2003-CE was not available to the appellants. The tribunal noted that the products manufactured by the appellants did not fall under Chapter 94, as claimed, and therefore, the exemption could not be availed.

3. Applicability of cum duty benefit and Cenvat Credit:
The appellants argued that if their classification claim was not accepted, the duty demand should be recalculated after allowing cum duty benefit and Cenvat Credit. The tribunal agreed that the appellants were eligible for cum duty benefit and directed the original authority to re-quantify the demand accordingly. Additionally, the tribunal instructed the original authority to verify the eligibility of the appellants for Cenvat Credit as per the provisions of the Cenvat Credit Rules.

4. Imposition of penalty under Section 11AC:
The appellants contended that no penalty should be imposed under Section 11AC due to the issue being related to the classification of goods and interpretation of statutory provisions. However, the tribunal found that the appellants continued to classify the goods under Chapter 94 despite an earlier adjudication order confirming the classification in favor of the Revenue. The tribunal noted the absence of any appeal or stay against the said order and upheld the penalties imposed, stating that the appellants had continued to misclassify the goods.

Conclusion:
The tribunal upheld the classification of the impugned goods under CETA Heading 3926 30 10 and remanded the case to the original authority for re-quantification of the demand after allowing cum duty benefit and examining the eligibility for Cenvat Credit. The penalties imposed on certain individuals were set aside, and the appeals were disposed of accordingly.