2005 (8) TMI 221 - AT - Central Excise

Summary

Issues Involved:
1. Classification of prefabricated buildings
2. Essential character determination of the panels
3. Correctness of the issued show cause notices
4. Limitation period for duty demand

Issue-wise Detailed Analysis:

1. Classification of Prefabricated Buildings:
The appellants, engaged in manufacturing prefabricated buildings, claimed classification under Chapter Heading 94.06 of the Central Excise Tariff Act, 1985, which covers 'prefabricated buildings'. The department, however, classified the product under Chapter Heading 39.25, which pertains to 'Builders' ware of plastics, not elsewhere specified or included'. The appellants argued that their products, including 'Isowall Prefabricated Insulated Panels' and necessary flashings, should be classified as prefabricated buildings as per Note 4 to Chapter 94, which defines prefabricated buildings as those finished in the factory or put up as elements to be assembled on site.

2. Essential Character Determination of the Panels:
The department's classification under 39.25 was based on the contention that the panels consist of 98% expanded polystyrene, giving them their essential character. The appellants disputed this, stating that the panels are made with a polystyrene core sandwiched between two metal sheets, and the essential character should be derived from the metal sheets rather than the polystyrene. The appellants further argued that the polystyrene core consists of 98% air and does not constitute 98% of the panel's material.

3. Correctness of the Issued Show Cause Notices:
Several show cause notices were issued by the department, alleging that the panels should be classified under 39.25 due to their polystyrene content. Notably, a notice dated 5-9-2001 classified the product under Chapter Heading 73.08, which the Commissioner later found unsustainable. The Tribunal observed inconsistencies in the department's classification approach, noting that different notices for the same period classified the product under different headings (39.25 and 73.08). This inconsistency indicated a lack of clarity and supported the appellants' claim that the correct classification should be under 94.06.

4. Limitation Period for Duty Demand:
The Tribunal found that the show cause notice dated 29-11-2001, demanding duty for the period November 1996 to April 1998, was barred by limitation. The Commissioner had accepted that the appellants made correct declarations, negating any case of suppression. Therefore, the demand for this period could not be sustained.

Conclusion:
The Tribunal concluded that the essential character of the panels was not derived from the polystyrene core but from the metal sheets. Consequently, classification under Chapter Heading 39.25 was ruled out. The Tribunal also noted the inconsistency in the department's classification approach and the lack of evidence supporting the claim that the panels consisted of 98% polystyrene. The Tribunal set aside the impugned order, allowed the appeal, and upheld the classification under Chapter Heading 94.06 for prefabricated buildings, resulting in the setting aside of the duty and penalty demands.

Order:
The appeal was allowed, and the order was set aside. The classification under Chapter Heading 94.06 was upheld, and the duty and penalty demands were annulled. The judgment was pronounced in court on 5-8-2005.