2024 (7) TMI 1353 - AT - Central Excise

Classification of goods - process of printing, cutting and folding of a special paper and supplying the finished goods for use in the surgical glove industry - to be classified under Tariff headings 4823 9013 preferred by the department and 4817 3090 of CETA? - suppression of facts - extended period of limitation - HELD THAT - The process of manufacture of the impugned product, is that special paper in reel form is fed into the machine where the product details and user instructions are printed on the paper and then it is cut to sizes and machine folded. The resultant end product is known as surgical glove inner wrap or surgical glove inner wallet by the trade. A single sheet of the inner wrap is used for wrapping both the left and right hand (pair), latex surgical / examination gloves and are marked / indicated on the exterior of the inner wrap. The appellant has sought to classify the product under heading 4817 as a wallet . Boxes, wallets and writing compendiums, of paper or paper board, containing an assortment of paper stationery mentioned under heading 4817 of CETA, 1985 and relied upon by the appellant, are basically in the nature of goods used to store or carry smaller items. The appellant has stated that the Merriam-Webster Dictionary defines wallet as a bag for carrying miscellaneous articles while travelling, a container that resembles a money wallet such as an usually flexible holding case fitted for carrying specific items. Therefore, a wallet is defined to be any article which is used to carry or hold any item. Since there is no definition for the term 'wallet' in the tariff, reliance can be placed on the dictionary meaning of the said word. Therefore, the product in question is clearly a wallet. The nature and purpose of the inner wrap is to provide a sterile cover to the surgical gloves and is designed to facilitate the easy and uncontaminated wearing of the gloves by the users, who are generally in the medical profession. It is not designed to store and carry goods by hand and is open from three sides - The inner wrap is hence used as a packing and wrapping paper for surgical gloves and is appropriately classification under tariff heading 4823 9013 of CETA as determined by revenue. This being so the classification of the goods under heading 4817 3090 has correctly been rejected. Extended period of limitation - suppression of facts or not - HELD THAT - The issue involves the classification of a product known in the trade as surgical glove inner wrap or surgical glove inner wallet . Wallet figures under tariff heading 481730 of CETA, 1985. Even though, it is found that the classification of the product under the said heading is not correct due to its characteristics, the appellant could not be blamed for having thought otherwise. There is no suppression of fact that has been brought out by revenue, nor is an intention to evade payment of duty discernable. Hence the demand under the extended period of time has to fail along with the imposition of penalty. The classification of the goods under tariff heading 4823 9013 of CETA 1985, as determined in the impugned order upheld, but the demand of duty limited to the normal period with appropriate interest - the penalty imposed is set aside - appeal allowed in part.

Summary

Issues Involved:
1. Classification of the goods.
2. Time-barred nature of the notice.

Issue-wise Detailed Analysis:

1. Classification of the Goods:

The primary issue in this case is the classification of the product manufactured by the appellant, which is a special paper used for packing surgical gloves. The appellant classified the product under Chapter 48173090 of the Central Excise Tariff Act (CETA), 1985, which covers "boxes, wallets, and writing compendiums of paper or paperboard, containing an assortment of paper stationery." The department, however, argued that the correct classification should be under Chapter 48239013, which pertains to "packing and wrapping paper."

The appellant argued that their product is marketed and sold as a "paper wallet" and should thus fall under Chapter 48173090. They relied on the dictionary meaning of "wallet" to support their classification. The appellant also contended that the product is known in the trade as a "wallet," which should be considered under the common parlance test.

The department countered that the product does not meet the description of a "wallet" as it does not contain an assortment of paper stationery. They argued that the product is merely a cover used for packing surgical gloves and should be classified under Chapter 48239013. The department supported their argument with references to previous Tribunal judgments and the definition of "stationery."

The Tribunal examined the manufacturing process and the nature of the product. It found that the product, known in the trade as a "surgical glove inner wrap" or "surgical glove inner wallet," is designed to provide a sterile cover for surgical gloves and facilitate their easy and uncontaminated use. The product is not designed to store or carry items by hand, as a wallet would. Therefore, the Tribunal concluded that the product is appropriately classified under tariff heading 4823 9013 of CETA, 1985, as packing and wrapping paper.

2. Time-Barred Nature of the Notice:

The second issue is whether the demand notice issued by the department is time-barred. The appellant argued that they had informed the department about their manufacturing process and classification of the product in 2007. They contended that the department was aware of their activities, and there was no suppression of facts or intention to evade duty. Therefore, the extended period of limitation should not be invoked.

The department argued that the issue was thoroughly examined based on an audit objection, and the show cause notice was issued after a detailed investigation. They contended that the extended period of limitation was justified.

The Tribunal found that the appellant had indeed informed the department about their manufacturing process and classification. There was no evidence of suppression of facts or intention to evade duty. Therefore, the Tribunal concluded that the demand under the extended period of limitation could not be sustained. The demand was limited to the normal period, and the penalty imposed was set aside.

Conclusion:

The Tribunal upheld the classification of the goods under tariff heading 4823 9013 of CETA, 1985, as determined by the department. However, it limited the demand of duty to the normal period with appropriate interest and set aside the penalty imposed. The appeal was thus partly allowed, and the appellant was granted consequential relief as per law.