2000 (7) TMI 117 - AT - Central Excise

Summary

Issues: Classification of product manufactured by the appellant, imposition of penalty, limitation period, applicability of circulars, imposition of penalty under different sections.

Classification of Product:
The issue in this appeal is the classification of the product manufactured by the appellant, consisting of aluminium foil covered by polyester film and polyethylene, used for forming containers. The appellant claimed classification under chapter 76, while the department argued for classification under heading 3920.38. The appellant contended that the goods should be classified under heading 76.07 due to the specific nature of the product and cited relevant tribunal decisions. The Commissioner, however, classified the goods under chapter 39, relying on interpretative rules and explanatory notes to the Harmonized System of Nomenclature. The Tribunal found that the plastic component predominated in weight, leading to classification under chapter 39.

Imposition of Penalty:
The Commissioner imposed a penalty equal to the duty demanded, under section 11AC, along with interest under section 11A. The Tribunal found that the penalty under section 11AC was not applicable due to the extended period not being available to the department. The penalty under Rule 173Q was also deemed unjustified, as the goods had been approved for classification even after testing in 1991, and the appellant had conducted its affairs in accordance with the department's classification.

Limitation Period:
The appellant raised a strong case regarding the limitation period, arguing that the demand for duty was barred by limitation. The Tribunal agreed, stating that the department was aware of the composition of the goods and the predominance of plastic, making the notice to show cause dated in 1998 time-barred. The demand for clearances beyond six months from the relevant date was also considered barred by limitation.

Applicability of Circulars:
The appellant contended that circulars issued by the Board in 1989 and 1990 were contradictory and could create doubts. The Tribunal clarified that the circulars dealt with different products and that the classification of the goods under chapter 39 was appropriate based on the HSN Explanatory Notes.

Imposition of Penalty under Different Sections:
The Tribunal found that penalties imposed under section 11AC and Rule 173Q were not justified, given the approval of the classification by the department and the appellant's compliance with the same. Interest under section 11AB was also deemed inapplicable. Consequently, the penalty and interest demands were set aside, and the appeal was allowed in part.