2001 (2) TMI 215 - AT - Central Excise

Summary

Issues Involved:
1. Classification of "Glass Filled Nylon-66 Insulating Liners" (GFN Liners) under the Central Excise Tariff.
2. Allegations of suppression of facts and clandestine removal of goods.
3. Applicability of penalties.
4. Validity of the Board's Circular No. 189/23/96-CX, dated 26-3-1996.
5. Allowance of modvat credit on inputs.

Issue-wise Detailed Analysis:

1. Classification of GFN Liners:
The primary issue was whether GFN Liners should be classified under sub-heading 3926.90 as "Other articles of Plastics" or under sub-heading 8546.00 as "Electrical Insulators." The appellants argued that GFN Liners are used as joints between the rail and electric rail clips, primarily to provide holding force and prevent corrosion, and not exclusively for electrical insulation. They presented certifications from the Research Designs & Standards Organisation (RDSO) and other experts supporting their claim that GFN Liners are not electrical insulators. The Revenue contended that GFN Liners, used in track-circuited sections to prevent the flow of electric current, should be classified as electrical insulators. The Tribunal concluded that GFN Liners are not exclusively used in track-circuited areas and serve primarily as track fitting materials, thus meriting classification under sub-heading 3926.90 as "Other articles of Plastics."

2. Allegations of Suppression of Facts and Clandestine Removal:
The show cause notices alleged that the appellants indulged in suppression of facts and clandestine removal of GFN Liners, invoking a longer period for demanding duty. The Commissioners, however, agreed with the appellants on the question of limitation and confirmed the duty demands only for the normal period.

3. Applicability of Penalties:
Penalties were proposed in the show cause notices but were not imposed by the Commissioners in their adjudication orders. The Tribunal did not address this issue further as the appellants succeeded on merits.

4. Validity of the Board's Circular No. 189/23/96-CX, dated 26-3-1996:
The Revenue relied on the Board's Circular for classifying GFN Liners under sub-heading 8546.00. The appellants argued that the Circular related to "insulated rail joints," which are different from GFN Liners. The Tribunal agreed with the appellants, noting that the primary function of GFN Liners is to act as a track fitting, not to prevent the flow of electric current. Therefore, the Board's Circular was deemed inapplicable to GFN Liners.

5. Allowance of Modvat Credit on Inputs:
The appellants claimed the benefits of modvat credit on the duties paid on the inputs. The Tribunal did not provide specific findings on this issue as the appellants succeeded on the primary issue of classification.

Conclusion:
The Tribunal concluded that GFN Liners should be classified under sub-heading 3926.90 as "Other articles of Plastics" and not under sub-heading 8546.00 as "Electrical Insulators." Consequently, the impugned orders were set aside, and the appeals were allowed with consequential benefits to the appellants.