1991 (2) TMI 220 - AT - Central Excise

Issues Involved:

1. Classification of the product "Krinklglas".
2. Applicability of exemption under Notification 38/73.
3. Allegation of suppression of facts and time-barred demand.
4. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Classification of the product "Krinklglas":

The appellants sought classification of their product, "Krinklglas," under Tariff Item 15A(2) CET, claiming it should be exempt from Central Excise duty. The Department, however, contended that the product was not acrylic sheets but rigid plastic sheets, hence not eligible for exemption. The product was manufactured from a mixture of polyester resin, methyl methacrylate monomer, and other chemicals, reinforced with fiberglass. The Tribunal noted that the product was not wholly made of plastic materials as required under Item 15A(1) CET. The Supreme Court's decision in the Geep Flashlight Industries case was cited, establishing that articles made of plastic should be wholly made of plastic. Consequently, the product "Krinklglas" was classified under Item 68 CET, not 15A(2).

2. Applicability of exemption under Notification 38/73:

The appellants claimed total exemption from Central Excise duty under Notification 38/73, arguing that their product fell under the category of acrylic sheets. However, the Department found that the product was not acrylic sheets but modified acrylic sheets, thus not eligible for exemption. The Tribunal held that the product did not meet the criteria for exemption under Notification 38/73, as the notification specifically exempted acrylic sheets, not modified acrylic sheets.

3. Allegation of suppression of facts and time-barred demand:

The Department alleged suppression of facts by the appellants, invoking a longer period of 5 years for the demand of duty under Section 11A of the Central Excises & Salt Act. The appellants contended that the demand was time-barred and that there was no suppression of facts. The Tribunal found that the appellants had disclosed the use of polyester resin and other materials in their classification list filed in 1974 and in subsequent communications with the Department. The Department's inability to trace the file and the appellants' correspondence dated 19-8-1985 indicated no suppression of facts. Therefore, the demand for duty was limited to the period subsequent to 19-8-1985, and the longer period for demand was not justified.

4. Imposition of penalty:

The Department imposed a penalty on the appellants under Rule 173Q and Rule 226 of the Central Excise Rules, alleging mis-declaration and suppression of facts. The Tribunal found no mala fide intent on the part of the appellants, as they had disclosed the relevant facts to the Department. The charge of suppression was not established, and the penalty was deemed unsustainable. Consequently, the penalty imposed on the appellants was set aside.

Conclusion:

The Tribunal concluded that the product "Krinklglas" was not classifiable under Item 15A(2) CET but under Item 68 CET. The exemption under Notification 38/73 was not applicable to the modified acrylic sheets. The demand for duty was limited to the period subsequent to 19-8-1985, and the penalty imposed on the appellants was set aside. The case was remanded to the Collector for re-determining the classification of the products under the CET Act, 1985, after hearing the appellants and in accordance with law.

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