1992 (9) TMI 238 - AT - Central Excise

Summary

Issues:
1. Classification of goods under Central Excise Tariff Act.
2. Allegations of contravention of Central Excise Rules.
3. Duty demand and confiscation of goods.
4. Exemption availed by the appellants.
5. Applicability of High Court ruling on classification.

Detailed Analysis:

1. Classification of goods under Central Excise Tariff Act:
The appellants contested the classification of HDPE sacks under Chapter 54 by the department, claiming they should be classified under sub-heading 3923.90 and be exempted under specific notifications. They argued that the goods fell under Chapter 39 based on a ruling by the Hon'ble High Court of Madhya Pradesh in a similar case. The Tribunal examined the evidence and upheld the appellants' claim, ruling that HDPE sacks were rightly classifiable under Chapter 39 as articles of plastics, not textiles, in line with the High Court's decision.

2. Allegations of contravention of Central Excise Rules:
The Preventive staff conducted a search based on suspicions of the appellants creating dummy units for production. A show cause notice was issued, alleging contravention of various Central Excise Rules. The appellants refuted the allegations, stating they had not evaded duty and had not violated any rules. The primary contention revolved around the correct classification of the goods, with the appellants relying on the High Court ruling to support their argument.

3. Duty demand and confiscation of goods:
The Collector confirmed a duty demand under Rule 9(2) of the Central Excises and Salt Act, 1944, amounting to Rs. 11,54,192/-, and ordered the confiscation of seized HDPE sacks valued at Rs. 2,14,940/-. A penalty was imposed on the company and an individual under relevant rules. The appellants' security deposit was also appropriated. However, the Tribunal, considering the classification issue, allowed the appeals and upheld the classification under a different heading, leading to consequential relief for the appellants.

4. Exemption availed by the appellants:
The appellants were availing exemption benefits for HDPE woven sacks under specific notifications. They argued that the goods should be exempted based on their classification under Chapter 39, as per the High Court ruling. The Tribunal agreed with the appellants' interpretation, leading to the allowance of the appeals and potential relief for the duty demand and confiscation of goods.

5. Applicability of High Court ruling on classification:
The Tribunal extensively discussed the ruling of the Madhya Pradesh High Court in a similar case, emphasizing that the classification of HDPE sacks as articles of plastics under Chapter 39 was appropriate. By applying the ratio of the High Court's decision, the Tribunal concluded that the appellants' claim for classification under Heading 3923.90 was valid. The Tribunal set aside the Collector's order, emphasizing the binding effect of the High Court's ruling on the matter.