1993 (6) TMI 157 - AT - Central Excise

Issues Involved:

1. Classification of the product under Central Excise Tariff.
2. Applicability of Notification No. 175/86-C.E.
3. Confiscation and imposition of fines and penalties.

Issue-wise Detailed Analysis:

1. Classification of the Product under Central Excise Tariff:

The primary contention revolves around the classification of the product manufactured by the appellant. The appellant argued that their product, a leather adhesive, should be classified under sub-heading 3506.00 of the Central Excise Tariff, which pertains to "Prepared glues and other prepared adhesives not elsewhere specified or included." They asserted that their product is not an article of rubber but a glue or adhesive, relying on the ruling in the case of Elgi Polytex Ltd. v. Collector of Central Excise (1988 (34) E.L.T. 404), which was confirmed by the Supreme Court (1989 (43) E.L.T. A130).

The department, however, classified the product under sub-heading 4005.00, which pertains to "Compounded rubber, unvulcanised in primary forms or in plates, sheets or strips." The department's stance was supported by the absence of a vulcanising agent in the product, which they argued is necessary for classification under sub-heading 35.06. They referred to the ruling in Collector of Central Excise v. Adhinesh Rubber (Order Nos. 76-77/90-C dated 31-1-1990).

Upon review, the Tribunal noted that the Collector did not examine the case on its merits and did not consider the ruling in Elgi Polytex's case. The Tribunal found that the product, which contains 4% natural rubber, does not fall under Chapter 40, as Chapter 40 deals with rubber and articles thereof, not glues or adhesives with a rubber base. The Tribunal highlighted that the explanatory notes of HSN under Heading 40.05 explicitly exclude prepared glues and adhesives consisting of rubber solutions or dispersions. Consequently, the Tribunal upheld the appellant's contention that the product should be classified under sub-heading 3506.00.

2. Applicability of Notification No. 175/86-C.E.:

The appellant claimed exemption under Notification No. 175/86-C.E., dated 1-3-1986. However, the Collector did not address this claim in the impugned order. The Tribunal noted that the Collector's failure to consider the appellant's claim for the benefit of this notification rendered the order non-speaking and thus deserving of being set aside. The Tribunal emphasized that the benefit of the notification should have been examined, given the appellant's specific plea.

3. Confiscation and Imposition of Fines and Penalties:

The Collector ordered the confiscation of 540 litres of rubber solution valued at Rs. 7,000/- and imposed a fine of Rs. 1,000/-. Additionally, a fine of Rs. 500/- was imposed on M/s. Namaste Leather Garments (P) Ltd., and a penalty of Rs. 12,000/- was imposed on the appellant under Rule 9(2)/52A/173Q(1)/226 of Central Excise Rules, 1944. The Tribunal did not specifically address the confiscation and fines in detail but set aside the impugned order in its entirety, thereby nullifying the confiscation and penalties imposed by the Collector.

Conclusion:

The Tribunal allowed the appeals, setting aside the impugned order. The classification of the product was determined to fall under sub-heading 3506.00, and the Collector's failure to address the applicability of Notification No. 175/86-C.E. was noted as a significant oversight. The Tribunal's decision effectively nullified the confiscation and penalties imposed by the Collector.

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