1993 (11) TMI 122 - AT - Central Excise

Issues Involved:

1. Classification of Durone-10 under the Central Excise Tariff.
2. Alleged suppression of facts and intent to evade duty.
3. Applicability of time-barred demand.
4. Denial of natural justice and procedural fairness.

Issue-wise Detailed Analysis:

1. Classification of Durone-10 under the Central Excise Tariff:

The appellants were engaged in the manufacture of Durone-10, a product made from rosin since 1979. Initially, it was classified under Tariff Item 68 until the new Tariff Act of 1985, after which it was classified under 3806:90 and subsequently under 3806.90. The Department's contention was that Durone-10 was an artificial resin different from estergum and rosin derivative, classifiable under Tariff Item 15A and later under 3913.90 as a modified natural polymer not elsewhere specified. However, the Tribunal concluded that Durone-10 was a rosin derivative in the nature of an artificial ester resin produced by esterification of natural rosin, classifiable under Tariff Item 15A as an artificial resin obtained by esterification of natural resin or resinic acid under the old Central Excise Tariff. Under the new tariff, it was classifiable as a rosin derivative under 38.06, specifically under 3806.10 for estergum and 3806.50 for reactions with other polyhydric alcohols.

2. Alleged Suppression of Facts and Intent to Evade Duty:

The Department alleged that the appellants wilfully suppressed the correct raw materials and manufacturing process to evade duty. However, the Tribunal found that the appellants had declared their product merely as Durone-10 in the Classification List, which was insufficient but not fraudulent. The product had been repeatedly tested and classified by the Department, and the approval could not be faulted. The non-declaration of glycerine did not change the basic character of the case or entail any penal liability as it could not be considered a case of fraud perpetuated with intent to evade duty.

3. Applicability of Time-barred Demand:

The appellants argued that the demand was time-barred because the process of manufacture was always known to the Central Excise officers, and the test reports confirmed the declarations made by the appellants. The Tribunal noted that even if the product was classifiable under Tariff Item 15A, the duty liability was duly discharged as per the effective rate of duty, and the demand was time-barred for the period beyond the normal period. The Department's changing stand and the Supreme Court judgment in a similar case supported the appellants' contention that the extended time limit of five years was not applicable.

4. Denial of Natural Justice and Procedural Fairness:

The appellants contended that there was a denial of full opportunity, resulting in a violation of the principles of natural justice. They were not allowed to cross-examine all the officers, and the detailed analytical report was not supplied despite requests. The Tribunal acknowledged these procedural lapses but focused on the substantive issues of classification and duty liability.

Conclusion:

The Tribunal concluded that Durone-10 was a rosin derivative classifiable under Tariff Item 15A as an artificial resin obtained by esterification of natural resin or resinic acid under the old Central Excise Tariff and under 38.06 in the new tariff. The appellants and the Assistant Collector could not be faulted for the classification under Tariff Item 68 due to the Board's circular. The appeal was accepted, and the Tribunal found no intent to evade duty or deliberate suppression of facts by the appellants.

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