2006 (5) TMI 89 - SC - Central Excise

Classification of the tiles manufactured by the appellant and consequential liability of the appellant to pay differential duties on the same Whether the notice issued demanding excise duty is barred by limitation under Section 11-A of the Central Excise Act? Held that - Simply because the tiles in question are polished or having a shiny look, they do not become glazed tiles. It is clear that vitrification and glazing are two distinct and separate processes - the former being a process to which the ceramic body is subjected before it is made, while the latter is a process to which the said body is subjected after being made. Thus, polishing and glazing are distinct and separate processes and hence the submission of the learned counsel for the Revenue cannot be accepted. The assessee is not coating or applying, substances on the tiles which it makes, and hence it s tiles cannot be termed as glazed tiles . Moreover, the Tribunal has held that there was no suppression. This being a finding of fact, we cannot interfere with the same in this appeal. Where the Department had full knowledge of the facts about manufacture of the goods of the assessee, it cannot be said that there was any suppression. We respectfully agree with this view.Thus, we are of the opinion that on both the points involved in this case, i.e. on merits as well as limitation, the view taken by the Tribunal is correct. We hold that the proviso to Section 11A will not apply in this case, and we also hold that the assessee did not manufacture any glazed tiles. Appeal dismissed.

Summary

Issues: Classification of manufactured tiles and liability for differential duties, and whether the notice for demanding excise duty is barred by limitation under Section 11-A of the Central Excise Act.

The appeal involved two main issues. Firstly, it concerned the classification of ceramic tiles manufactured by the appellant and the resulting liability to pay differential duties. The Department initially approved the classification of both polished and unpolished tiles under Heading 6901.90 of the tariff. However, a subsequent inquiry led to the opinion that polished tiles should be classified under Heading 6906.10, attracting a higher excise duty rate. The Department issued a notice proposing to recover the differential duty, penalty, and confiscation of assets. The Commissioner determined the correct classification under Heading 69.05 and imposed duties, interest, penalty, and ordered confiscation. The Tribunal, in the impugned judgment, ruled in favor of the assessee, stating no suppression of facts and that the tiles were not glazed.

Secondly, the issue revolved around the limitation period under Section 11-A of the Act for demanding excise duty. The Commissioner held the assessee liable for duties, interest, penalty, and confiscation. The Tribunal disagreed, stating the extended limitation period would not apply as there was no suppression of facts, and the tiles were not glazed. The Tribunal highlighted the distinction between glazing and polishing, emphasizing that the appellant's tiles underwent mechanical polishing only, not glazing. The Tribunal's decision was based on factual findings, which the Supreme Court respected.

The Supreme Court analyzed the definitions of glaze and glazing from various sources, emphasizing the application of melted glass for glazing, which was distinct from the mechanical polishing done on the appellant's tiles. The Court agreed with the Tribunal's findings, stating that the proviso to Section 11-A did not apply, and the appellant did not manufacture glazed tiles. Citing precedent, the Court reiterated that the extended period under Section 11-A applies only in cases involving fraud, collusion, willful misstatement, or suppression of facts. Since the Department had full knowledge of the manufacturing process, there was no suppression found. Consequently, the Court dismissed the appeal, upholding the Tribunal's decision on both the merits and limitation aspects.