1987 (7) TMI 255 - AT - Central Excise

Summary

Issues:
- Classification of the product as waxed paper under Central Excise Tariff Item 17(2)
- Applicability of duty demand for a period of 5 years
- Whether the product is exempt under Notification No. 55/75 dated 1.3.1975
- Time-barred demand for duty and imposition of penalty

Classification of the Product:
The department alleged that the appellants were manufacturing waxed paper falling under Central Excise Tariff Item 17(2). The appellants argued that they were manufacturers of printed labels, which are products of the printing industry, and the waxing was done on branded labels meant for specific manufacturers. The tribunal held that the product was indeed waxed paper, rejecting the argument that the product was solely for specific manufacturers and not saleable in the open market. The tribunal emphasized that the process of waxing after printing still results in the manufacture of waxed paper falling under Tariff Item 17(2).

Applicability of Duty Demand:
The department demanded duty for a 5-year period, relying on the limitation period from the date of the Show Cause Notice. The appellants contended that the demand was time-barred, as the department was aware of the production of goods, having issued a Show Cause Notice earlier, which was later withdrawn. The tribunal agreed that the demand for duty should be limited to a period of 6 months, given the department's prior awareness of the production.

Exemption Under Notification No. 55/75:
The appellants argued that the printed labels, when subjected to waxing, continued to be classifiable under Tariff Item 68 and were exempt under Notification No. 55/75. However, the tribunal did not accept this argument and held that the goods were liable to Central Excise duty under Tariff Item 17(2) as waxed paper.

Time-Barred Demand and Penalty Imposition:
Regarding the time-barred demand and penalty imposition, the tribunal noted that the department had been uncertain about the classification and liability of the goods, as evidenced by the withdrawal of the earlier Show Cause Notice. Consequently, the tribunal set aside the penalty imposition, stating that the demand for duty should be limited to a period of 6 months. The appeal was partly allowed on these grounds.