1990 (1) TMI 197 - AT - Central Excise

Issues Involved:
1. Classification of the product (battery tops).
2. Demand of Central Excise Duty based on the classification.
3. Imposition of penalty for alleged misclassification.

Detailed Analysis:

Issue 1: Classification of the Product

The appellant is a manufacturer of injection-moulded articles, including battery tops used in dry battery cells. Initially, the product was classified under Tariff Item (T.I.) 15A(2) but was later reclassified under T.I. 68 due to changes in the tariff structure and relevant notifications. The Department later contended that the product should be classified under T.I. 42, which led to the dispute.

The appellant argued that the Department had previously accepted the classification under T.I. 68 and granted exemptions accordingly. There was no change in the tariff entry or the manufacturing process that warranted a reclassification. The appellant also contended that the product did not qualify as pilfer-proof caps as defined under T.I. 42. They supported their argument with references to tariff advice, Indian Standard Specifications, and certificates from manufacturers.

The Department relied on an opinion suggesting that the product was pilfer-proof and thus classifiable under T.I. 42. However, the tribunal found that the product did not meet the criteria for pilfer-proof caps as it could be removed without leaving any trace and was not intended to make the container tamper-proof.

Issue 2: Demand of Central Excise Duty

The Department issued a show cause notice demanding duty under T.I. 42 for the period 1983-84. The appellant had cleared goods without payment of duty based on the classification under T.I. 68, which was exempt from duty under Notification No. 182/82. The tribunal noted that the Department had accepted this classification and granted exemptions in previous years.

The tribunal found that the Department had not issued a show cause notice before finalizing the classification list under T.I. 42, which was a procedural lapse. The classification approved by the Assistant Collector was not done in a proper manner and required to be set aside. The tribunal decided not to remand the matter but to resolve it based on the available evidence, concluding that the product should be classified under T.I. 68.

Issue 3: Imposition of Penalty

The Additional Collector had imposed a penalty of Rs. 1,00,000 on the appellant, alleging suppression of facts and mis-declaration. The appellant argued that they had declared the product's manufacture and classification to the Department, which had granted exemptions based on this declaration. The tribunal found no evidence of suppression, fraud, or mis-declaration by the appellant.

The tribunal noted that the Department had the opportunity to verify the classification and product details at the relevant time and had accepted the appellant's classification under T.I. 68. Therefore, the appellant could not be faulted for the Department's later change in interpretation. The tribunal set aside the penalty, stating that there was no basis for demanding duty or imposing a penalty for the period 1983-84.

Conclusion:

1. Appeal No. E/1514/85-C: The tribunal allowed the appeal, set aside the impugned order, and confirmed the correct classification of the product under T.I. 68.

2. Appeal No. E/320/86-C: The tribunal allowed the appeal, set aside the impugned order, and granted consequential relief to the appellant, including the setting aside of the penalty and the demand for duty.

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