1990 (6) TMI 154 - AT - Central Excise

Summary

Issues Involved:
1. Amendment of memorandum of appeal.
2. Applicability of Notification 217/86 and MODVAT Scheme to resin coated sand.
3. Classification and excisability of resin coated sand.
4. Time-barred demand of duty.

Issue-wise Detailed Analysis:

1. Amendment of Memorandum of Appeal:
The appellants sought to amend the memorandum of appeal by incorporating new grounds, specifically Ground L, Ground M, and Ground N. Ground L involved the applicability of Notification 217/86 and the MODVAT Scheme to resin coated sand. Ground M was contingent on the acceptance of Ground L. Ground N pertained to the time-barred nature of the demand based on a Trade Notice. The Tribunal agreed with the respondent that Ground L involved a mixed question of law and facts, which was not before the adjudicating authority. Consequently, Ground L was not allowed to be raised. As Ground M was dependent on Ground L, it was also disallowed. Ground N was admitted as it did not require further factual inquiry.

2. Applicability of Notification 217/86 and MODVAT Scheme:
The appellants argued that resin coated sand should be granted exemption under Notification 217/86, dated 2-4-1986, and be considered under the MODVAT Scheme. The Tribunal noted that determining whether resin coated sand falls under the exclusion clause of Notification 217/86 is a factual question. Since there was no admitted material on record to make this determination, the Tribunal did not allow this ground to be raised at this stage.

3. Classification and Excisability of Resin Coated Sand:
The primary question was whether resin coated sand is liable to excise duty and, if so, under which Tariff Heading. The Tribunal examined the facts, including the manufacturing process and the statements of the appellants' representatives. The Tribunal agreed with the respondent that resin coated sand is a new commodity known to the market, with a different name, character, and use. The Tribunal held that the activity of producing resin coated sand amounts to manufacturing a new commodity, making it liable to duty. The adjudicating authority had classified it under Tariff Heading 3801.90, but a subsequent Trade Notice indicated classification under Heading 6807.00. The Tribunal, referencing the decision in Hindustan Polymers, held that duty should be demandable under Tariff Heading 6807.00.

4. Time-barred Demand of Duty:
The appellants contended that the demand for duty was time-barred, as the notice was issued on 28-1-1987 for the period 1-3-1986 to 31-8-1986. The Tribunal considered whether the larger period of limitation could be invoked. The Tribunal noted that the adjudicating officer had refrained from imposing any penalty, indicating an absence of mens rea. The Tribunal referenced the Supreme Court's decision in Padmini Products, which requires something positive other than mere inaction or failure on the part of the manufacturer to invoke the extended period. The Tribunal found that no mens rea could be attributed to the appellants, as the product was not dutiable before 1-3-1986. Consequently, the demand was limited to the normal period of six months under Tariff Heading 6807.00.

Conclusion:
The Tribunal admitted Ground N while disallowing Grounds L and M. It held that resin coated sand is liable to duty under Tariff Heading 6807.00 and limited the demand to six months. The appeal was otherwise rejected.