2005 (3) TMI 125 - SC - Central Excise

Whether the appellant s products fall under Sl. No. 9 or Sl. No 42 of Exemption Notification No. 53/88, dated 1-3-1988? Held that - The findings of the Collector and of the Tribunal are based on merits of the case. The Department had discharged its onus to show that the product in question is acrylic polymer resin in primary form. We are also, therefore, satisfied that the products in question are not covered by Sl. No. 9 of Notification No. 53/88-C.E. but would be covered by Sl. No. 42 of the schedule to the said notification. The appeal stands dismissed. No costs.

Issues Involved:
1. Classification of the appellant's products under the correct sub-heading and applicable rate of duty.
2. Alleged collusion between the Assistant Collector and the appellants.
3. Violation of principles of natural justice and Rule 56 of the Central Excise Rules, 1944.
4. Validity of the penalty and confiscation imposed by the Collector of Central Excise.

Detailed Analysis:

1. Classification of the Appellant's Products:
The appellants, a small-scale unit manufacturing various grades of acrylic polymers, initially classified their products under Chapter sub-heading 3906.90, claiming a concessional rate of duty at 40% ad valorem. They later revised their classification to claim a lower rate of 20% ad valorem, arguing that their products were emulsions. The revised classification was approved by the Assistant Collector within eight days. A show-cause notice alleged that the revised classification was not in accordance with Rule 173B(4) and demanded differential duty and proposed confiscation. The primary issue was whether the products fell under Serial No. 9 (20% duty) or Serial No. 42 (40% duty) of Exemption Notification No. 53/88.

2. Alleged Collusion Between the Assistant Collector and the Appellants:
The show-cause notice alleged collusion in the approval of the revised classification list. The Tribunal found that there was apparent collusion between the Assistant Collector and the appellants, as there was no substantial reason for filing the revised classification list after having three lists already approved at a higher rate. The Tribunal reduced the penalty from Rs. 10 lacs to Rs. 5 lacs but upheld the confiscation of the plant, machinery, etc.

3. Violation of Principles of Natural Justice and Rule 56:
The appellants argued that the Collector forwarded their technical opinions to the Deputy Chief Chemist without their knowledge, violating principles of natural justice. The Deputy Chief Chemist's test results were not communicated to the appellants, denying them the right to request a retest under Rule 56. The Tribunal held that non-supply of the test report did not lead to a violation of natural justice, as the test report was not relied upon by the adjudicating authority. The Supreme Court agreed, stating that seeking the Deputy Chemist's opinion was legally permissible and did not constitute a breach of natural justice or Rule 56, as the test report was not relied upon in the final decision.

4. Validity of the Penalty and Confiscation:
The Collector confirmed a demand of Rs. 9,95,928/- and imposed a penalty of Rs. 10 lacs, along with confiscation of land, building, plant, and machinery. The Tribunal reduced the penalty to Rs. 5 lacs but upheld the confiscation. The Supreme Court found the findings of the Collector and Tribunal to be based on merits, agreeing that the products were correctly classified under Serial No. 42 (40% duty) and dismissing the appeal. The Court held that the Department had discharged its onus to show that the products were acrylic polymer resin in primary form, not covered by Serial No. 9.

Conclusion:
The Supreme Court dismissed the appeal, upholding the Tribunal's decision that the products were correctly classified under Serial No. 42, and there was no violation of principles of natural justice or Rule 56. The penalty and confiscation imposed were also upheld, with the penalty reduced to Rs. 5 lacs.

← Previous Next →