1995 (2) TMI 185 - AT - Central Excise

Issues Involved:
1. Classification of PVC Compound Master Batches.
2. Entitlement to exemption under Notification 206/77.
3. Validity of the demand raised by the Department.
4. Applicability of the extended period of limitation.

Issue-wise Detailed Analysis:

1. Classification of PVC Compound Master Batches:
The respondents filed classification list No. 6/79-80 on 7-5-1979, classifying PVC Compound Master Batches under T.I. 14(1)(ii). They claimed the product was entitled to exemption from duty under Notification 206/77, which exempted PVC compound from the whole of duty leviable. The Department issued a show cause notice on 5-7-1980, proposing classification under T.I. 14 and duty levy on all past clearances up to 30-4-1979. The Assistant Collector upheld the classification under T.I. 14-I(ii) and directed duty payment for the period from 18-10-1978 to 30-4-1979.

2. Entitlement to Exemption under Notification 206/77:
The respondents claimed exemption under Notification 206/77, dated 26-6-1977, arguing that PVC Master Batches were PVC compounds. However, the Department contended that the product was wrongly classified under Item 15A instead of T.I. 14 and exemption was wrongly availed of. The lower appellate authority set aside the demand on the ground of limitation, but upheld the classification under T.I. 14-I(ii).

3. Validity of the Demand Raised by the Department:
The Department argued that the demand was not barred by limitation due to the misclassification and non-maintenance of records by the respondents. The respondents countered that they had replied to the Superintendent's letter and provided necessary information, contesting the Department's classification. The Vice President observed that the respondents did not deliberately withhold or suppress information, and the Department could have conducted market enquiries and issued the notice earlier.

4. Applicability of the Extended Period of Limitation:
The Department invoked the extended period of limitation, arguing that the respondents withheld relevant information. The Vice President disagreed, stating that the respondents had provided detailed submissions and there was ongoing correspondence about the classification. The Vice President concluded that the normal period of limitation applied, and the show cause notice was time-barred. The third Member agreed with the Vice President, noting that the classification of PVC Master Batches had been subject to differing opinions and the extended period was not applicable.

Conclusion:
The majority opinion held that the extended period of limitation was not available to the Department, and the appeal by the Revenue was rejected. The classification list filed by the respondents and their explanation indicated no deliberate misstatement or suppression of facts. The demand was deemed time-barred, and the respondents were not liable for the duty claimed by the Department.

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