1989 (10) TMI 127 - AT - Central Excise

Issues Involved:
1. Classification of products under the Central Excise Tariff.
2. Applicability of exemption under Notification No. 66/82-C.E.
3. Marketability and dutiability of intermediate product "slurry."
4. Legality of modification of approved classification list without show cause notice.
5. Limitation period for demand of duty.

Detailed Analysis:

1. Classification of Products:
The primary issue was whether the products manufactured by the respondents, namely egg filler flats, egg cartons, tube light packing trays, duck egg trays, and apple trays, should be classified under Item 68 or Item 17(4) of the Central Excise Tariff.

- Old Tariff (Pre-1-3-1986): The Tribunal referenced its earlier decision in *Mohan Paper Moulding Ltd. v. Collector of Central Excise, Chandigarh*, which held that egg trays did not fall under Item 17(4) as articles of paper but under Item 68. The Tribunal concluded that the respondents' products were not "containers" as they could not hold, restrain, or enclose contents when tilted or reversed. Therefore, these products were correctly classifiable under Item 68 and not Item 17(4) or 17(3) of the Central Excise Tariff.

- New Tariff (Post-1-3-1986): Under the Central Excise Tariff Act, 1985, the Tribunal held that the products did not fall under sub-heading 4818.19 as "cartons, boxes, containers, and cases" but under sub-heading 4818.90 as "Other articles of paper pulp, paper, paperboard, cellulose wadding or webs of cellulose fibres."

2. Applicability of Exemption under Notification No. 66/82-C.E.:
The respondents claimed exemption under Notification No. 66/82-C.E., which exempts articles of paper or paperboard falling under Item 17(4) from Central Excise duty.

- The Tribunal held that since the products were not classifiable under Item 17(4) but under Item 68, the exemption under Notification No. 66/82-C.E. was not available to the respondents.

3. Marketability and Dutiability of Intermediate Product "Slurry":
The respondents argued that the intermediate product "slurry" was unstable and not marketable, and hence not dutiable.

- The Tribunal, referencing judgments from the Supreme Court, held that for a product to be excisable, it must be marketable. The Revenue did not provide evidence of the marketability of the slurry. The Tribunal accepted the respondents' argument and set aside the demand for duty on the slurry.

4. Legality of Modification of Approved Classification List without Show Cause Notice:
The respondents contended that the Assistant Collector modified the approved classification list without issuing a show cause notice, which was against the law.

- The Tribunal observed that the show cause notice dated 4-5-1984 did not propose to modify the classification but only to recover duty. A subsequent show cause notice for modifying the classification was issued on 24-11-1984. The Tribunal held that the modification of the classification list without a show cause notice was not permissible, referencing the Supreme Court's judgment in *Union of India v. Madhumilan Syntex Pvt. Ltd.*

5. Limitation Period for Demand of Duty:
The respondents argued that the demand for duty for the period from 1-3-1982 to 31-12-1983 was time-barred.

- The Tribunal noted that the Collector (Appeals) did not provide findings on the limitation issue as he decided the case in favor of the respondents. Since the Tribunal decided the classification issue in favor of the Revenue, it remanded the case to the Collector (Appeals) to decide the question of limitation after providing a personal hearing to the respondents.

Conclusion:
The Tribunal allowed the Revenue's appeals regarding the classification of the products under Item 68 of the old Central Excise Tariff and under Heading 4818.90 of the new Central Excise Tariff. The demand for duty on the slurry was set aside. The case was remanded to the Collector (Appeals) to decide the issue of limitation for the duty demand. The exemption under Notification No. 66/82-C.E. was not applicable as the products were not classifiable under Item 17(4).

← Previous Next →