1992 (12) TMI 151 - AT - Central Excise

Issues Involved:
1. Classification of Temporary Corrosion Preventive Fluid (Protective PX-2).
2. Classification of Rustillo-114.
3. Classification of Iloquench-179.
4. Applicability of retrospective change in the Classification List.
5. Legality of demand for duty under Section 11A on grounds of mis-declaration and suppression of facts.

Detailed Analysis:

1. Classification of Temporary Corrosion Preventive Fluid (Protective PX-2):
The appellants argued that Protective PX-2 should be classified under Item 68 as a Speciality Oil, not as a varnish under Item 14II(i). They contended that commercial understanding and end-use should determine classification, not solely the chemical test report. The Assistant Collector and Collector (Appeals) classified it as varnish based on its composition and characteristics, which was upheld by the Tribunal. The Tribunal referenced the Madhya Pradesh High Court's definition of varnish, which includes protective coatings of gums or resins, and found that Protective PX-2 fits this description despite being termed a temporary corrosion preventive fluid.

2. Classification of Rustillo-114:
Similar to Protective PX-2, Rustillo-114 was argued by the appellants to be classified under Item 68. The Deputy Chief Chemist's report identified it as a product composed of mineral solvent, synthetic resin, and additives, giving a tack-free transparent coating. The Assistant Collector classified it as varnish under Item 14II(i), a decision upheld by the Collector (Appeals). The Tribunal found no evidence to contradict this classification, noting that the product's composition and use align with the definition of varnish. The Trade Notice cited by the appellants was deemed irrelevant as Rustillo-114 did not fit the description of speciality oils.

3. Classification of Iloquench-179:
Iloquench-179 was initially classified under Item 68. Upon testing, it was identified as a surface-active preparation. The Assistant Collector reclassified it under Item 15AA and demanded duty for past clearances, citing mis-declaration by the appellants. The Tribunal agreed with the reclassification and found that the appellants' claim for exemption under Notification No. 101/66 was invalid as the product did not meet the conditions stipulated in the notification.

4. Applicability of Retrospective Change in the Classification List:
The appellants argued that any change in classification should apply prospectively. The Tribunal found no evidence of retrospective application in the Assistant Collector's order or the demand notice. The change was effective from the date the Classification List was approved, in conformity with the law.

5. Legality of Demand for Duty under Section 11A:
In the case of Rustillo-114, the Assistant Collector found deliberate suppression of facts and mis-declaration by the appellants, extending the demand period to five years. The Tribunal, however, restricted the demand to six months, citing the Supreme Court's decision in Nat Steel Equipment Pvt. Ltd. v. Collector of Central Excise, which limits the extension of the demand period in cases of procedural lapses by the Department. For Iloquench-179, the Tribunal upheld the demand for past clearances, agreeing with the Assistant Collector's finding of deliberate mis-declaration.

Conclusion:
The Tribunal upheld the classification of Protective PX-2 and Rustillo-114 as varnishes under Item 14II(i) and Iloquench-179 as a surface-active preparation under Item 15AA. The demand for duty on Rustillo-114 was restricted to six months, while the demand for Iloquench-179 was upheld in full. The appellants' arguments regarding the prospective application of classification changes and mis-declaration were largely dismissed, affirming the decisions of the lower authorities.

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