2006 (8) TMI 18 - AT - Central Excise

Central Excise Timber Preservative treatment of wood does not equate such as densified wood Densified wood defined under Note 2 of Chapter 44 of CET does not come into existence by mere treatment preservative of wood No evidence to show that appellant suppressed any information or facts

Summary

Issues Involved:
1. Classification of treated timber as "densified wood" under heading 4409.00 of the Central Excise Tariff Act, 1985.
2. Limitation period for issuing the show cause notice.

Detailed Analysis:

1. Classification of Treated Timber as "Densified Wood":

The central issue in this appeal is whether the treatment of timber with wood preservatives results in the manufacture of "densified wood" classifiable under heading 4409.00 of the Central Excise Tariff Act, 1985. The respondents treat timber with a preservative compound of copper-chrome-arsenic, which is water-soluble and used to protect timber from wood-destroying elements. The preservative treatment involves soaking the timber in a solution within a cylindrical vessel.

The respondents argued that this treatment does not result in the timber becoming "densified wood" as defined under Chapter Note 2 of Chapter 44 of the Schedule to the 1985 Act, which states that densified wood must acquire increased density or hardness along with improved strength or resistance to chemical or electrical agencies. The respondents supported their argument with Indian Standards Institution Specifications (IS: 401-1982), which indicate that preservative treatment does not enhance the basic properties of the wood, such as mechanical, electrical, or chemical properties.

The respondents provided several certificates from experts and institutions, including the Forest Research Institute and the Timber Development Association of India, which unanimously stated that preservative treatment does not increase the density or hardness of the wood or improve its mechanical strength or resistance to chemical or electrical agencies. The Explanatory Notes in Chapter 44 of the Harmonised Commodity Description and Coding System (HSN) also support this view, indicating that the classification of wood is not affected by treatment necessary for its preservation.

The Tribunal compared the processes and purposes of densified wood with those of wood treated with preservatives and found significant differences. Densified wood involves processes like impregnation with thermosetting plastics or molten metal and densification through compression, which increase the wood's density and hardness. In contrast, preservative treatment aims to protect wood from biological attacks without altering its density or mechanical properties.

Based on the evidence and expert opinions, the Tribunal concluded that the treatment of timber with wood preservatives does not result in the manufacture of densified wood.

2. Limitation Period for Issuing the Show Cause Notice:

The period involved in the appeal is from 1-1-1987 to 31-12-1991, while the show cause notice was issued on 21-1-1992. The respondents contended that the period prior to six months from the date of issuance of the show cause notice was barred by limitation. They argued that the Central Excise Authorities were aware of their activities since 1964, and previous proceedings in 1978 and 1979 had been dropped. The respondents maintained that they and the authorities believed that preservative treatment did not result in densified wood, as evidenced by the lack of duty demands on similar activities by other organizations.

The Tribunal agreed with the respondents, noting that the Revenue was aware of the respondents' activities and that there was no evidence of suppression or misstatement of facts by the respondents. The Tribunal concluded that the demand was barred by limitation except for the period of six months before the issuance of the show cause notice.

Conclusion:

The Tribunal held that the treatment of timber with wood preservatives does not result in the manufacture of densified wood classifiable under Chapter 44. Consequently, no duty liability arises for the respondents. Additionally, the demand for the period prior to six months from the date of issuance of the show cause notice was barred by limitation. The Revenue's appeal was dismissed on both counts.