2005 (8) TMI 159 - AT - Central Excise

Summary

Issues:
Classification of HDPE bags under Heading 63.01, duty demand raised under Heading 39.23, retrospective amendment of Section 11A, applicability of Notification No. 14/92-C.E.

Classification Dispute:
The respondents were clearing HDPE bags under Heading 63.01, but a circular issued by the Board stated that the bags should be classified under Chapter 39. A show cause notice was issued for duty demand under Heading 39.23, which was dropped by the original adjudicating authority due to the classification list being duly approved during the relevant period. The Commissioner (Appeals) upheld this decision, citing the inability to amend classification retrospectively based on the Supreme Court's ruling in H.M. Bags Manufacturer v. CCE.

Retrospective Amendment of Section 11A:
The Tribunal noted the subsequent Supreme Court decision in CCE, Baroda v. Cotspun Ltd., which clarified that duty demand cannot be raised for a period of six months when the classification list is duly approved. The Finance Act, 2000, retrospectively amended Section 11A, allowing duty demand for six months prior to the show cause notice issuance. This retrospective amendment was validated in the case of ITW Signode India Ltd. v. CCE, confirming the validity of the amended Section 11A.

Applicability of Notification No. 14/92-C.E.:
The Board's circular limited the demand period to six months due to changes in classification, with no penalty and neutralization of duty against Modvat credit. The Tribunal held that duty demand could be raised for six months, but as the respondents were not availing Modvat credit under Chapter 63, the duty calculation needed adjustment to include the benefit of Modvat credit for inputs. The matter was remanded to the original authority to examine the applicability of Notification No. 14/92 and quantify the demand accordingly.

In conclusion, the Tribunal set aside the impugned order, allowed the appeal by the Revenue, and remanded the case for further examination regarding the applicability of Notification No. 14/92 and recalculating the duty demand considering the benefit of Modvat credit.