2002 (5) TMI 111 - AT - Central Excise

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Classification of the product "Bleach-9".
3. Demand of duty and limitation period.
4. Imposition of penalties on M/s. MCPL and its director.

Detailed Analysis:

1. Violation of Principles of Natural Justice:

The appellants argued that the Commissioner passed the order without a personal hearing, despite a request for such a hearing being made in their final reply. This was claimed to be a violation of the principles of natural justice.

2. Classification of the Product "Bleach-9":

The primary issue was whether "Bleach-9" should be classified under CET Heading 38.02 as "activated natural mineral product" or under CET Heading 25.05 as "mineral substances not elsewhere specified." The appellants contended that "Bleach-9" was "washed clay" and did not undergo any structural change during the manufacturing process. However, the Chemical Examiner's report and the process of manufacture indicated that the product was activated by acid treatment, making it suitable for decolorizing oils, which aligned with the description under Heading 38.02. The tribunal concluded that the product was appropriately classified under Heading 38.02.

3. Demand of Duty and Limitation Period:

The demand for duty was contested on the grounds of limitation. The appellants had filed declarations under Rule 174, describing their product as "activated earth" and later as "washed clay." The department did not object to these classifications during the material period. The tribunal found that there was no suppression of facts or misstatement by the appellants, as both the department and the appellants were aware of the product's nature. Consequently, the extended period of limitation was not applicable, and the demand for duty beyond the normal period of six months was barred by limitation.

4. Imposition of Penalties:

- Penalty on M/s. MCPL:
The penalties imposed under Section 11AC and Rule 173Q were challenged. The tribunal held that no penalty could be imposed under Section 11AC in the absence of fraud, collusion, or willful suppression. The confiscation of goods under Rule 173Q was also set aside, as mere non-accountal without mens rea did not attract penal provisions.

- Penalty on Shri D.V. Patel:
The penalty under Rule 209A on the company's director was also set aside, as there was no finding that he dealt with excisable goods in a manner that rendered them liable to confiscation.

Conclusion:

The tribunal delivered a comprehensive judgment addressing each issue in detail:

1. The principle of natural justice was acknowledged, but the tribunal proceeded to consider the final submissions in the appropriate context.
2. The product "Bleach-9" was classified under CET Heading 38.02 as an activated natural mineral product.
3. The demand for duty beyond the normal period of six months was barred by limitation.
4. The penalties imposed on M/s. MCPL and its director were set aside.

Final Orders:

- The product "Bleach-9" is classifiable under CET Heading 38.02 and chargeable to duty accordingly.
- The demand of duty for the period beyond the normal six months is barred by limitation. The Commissioner is directed to recover duty for the normal period.
- The confiscation of seized goods and the penalties imposed on M/s. MCPL and its director are set aside.