1992 (9) TMI 216 - AT - Central Excise

Summary

Issues:
1. Time-barred demand of duty.
2. Classification of input material.
3. Modvat credit admissibility.
4. Applicability of extended period.

Time-barred demand of duty:
The appellant argued that the notice for demand of duty was beyond six months and time-barred, with no wilful misstatement or suppression to justify the longer period up to five years. The Additional Collector had acknowledged that the input material was sold in different names and classified under different headings by Central Excise authorities, leading to a lack of uniformity in classification practices. Despite this, the appellant was denied modvat credit for the period from April 1989 to April 1991. The appellant contended that the misdeclaration of Tariff classification did not warrant the extended period. The tribunal agreed, noting the genuine divergent practice in classification and the appellant's good faith reliance on supplier documentation. The appeal was allowed on this ground.

Classification of input material:
The dispute centered on the classification of the input material, referred to as lime sludge by the appellant but described differently in some Gate Passes. The appellant provided certificates from suppliers confirming that lime sludge, carbon sludge, and sludge were one and the same. The tribunal accepted this position, emphasizing that the variation in description did not alter the identity of the product received. The variation in Tariff classification was attributed to different practices followed by manufacturers and Central Excise Officers, which did not invalidate the appellant's entitlement to modvat credit. The tribunal held that the appellant's availing of credit on declared inputs as lime sludge was legitimate, even if received under a different name, such as carbide sludge.

Modvat credit admissibility:
The Senior Departmental Representative relied on previous decisions to argue that modvat credit was not admissible without a proper declaration. However, the appellant contended that the use of different names for the same product across factories did not disqualify them from modvat credit. They referenced a trade notice and tribunal decision to support their position. The tribunal agreed with the appellant, emphasizing that the variation in description due to market practices did not preclude the appellant from claiming modvat credit. The appellant's good faith and adherence to declared inputs justified their entitlement to credit.

Applicability of extended period:
The tribunal distinguished previous decisions cited by the Departmental Representative, noting that the present case involved a clear and specific declaration of lime sludge by the appellant. Unlike cases where no declaration was filed or where the goods were assessed under different headings, the variation in description in this case did not change the product's identity. The tribunal highlighted the genuine divergent practices in classification and the appellant's bona fide actions based on supplier information. Consequently, the tribunal ruled out the applicability of the extended period, allowing the appeal both on the question of limitation and on merits.