1993 (10) TMI 201 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the goods.
2. Time-barring issue.
3. Valuation of the goods.
4. Imposition of penalty.

Detailed Analysis:

1. Classification of the Goods:
The primary issue was whether the goods in question were semi-finished floor coverings of felt or "felt" as classified by the department. The appellants argued that the goods were semi-finished floor coverings of felt meant for domestic use, which involved a four-stage process, with latexing being the final stage. The department, however, contended that the goods were "felt" under sub-heading 5602.90 CET, as they were needle-punched and not fully latexed.

The Collector, in the impugned order, held that the goods were "felt" as per Chapter Note 2 of Chapter 56, which includes needle loom felt and fabrics consisting of a web of textile fibers enhanced by a stitch-bonding process. The appellants argued that the goods did not meet the definition of felt as per the H.S.N. explanatory notes, which describe felt as compact and difficult to disintegrate, unlike the goods in question which were easy to peel off. However, the Tribunal found that the Collector was correct in classifying the goods as "felt" under sub-heading 5602.90, as there was no stipulation in the H.S.N. Notes that both ends should be covered by fibers.

2. Time-Barring Issue:
The appellants contended that the demand was barred by time as the show cause notice was issued on 13-3-1990 for the period from 23-12-1988 to 27-12-1989, which exceeded the six-month limitation period. They argued that there was no suppression of facts as they had disclosed all relevant information to the department and had obtained permission to remove the semi-finished goods for latexing under Rule 56B. The Tribunal agreed with the appellants, noting that since the appellants had sought and obtained permission from the Collector, the demand beyond six months was not sustainable.

3. Valuation of the Goods:
The appellants argued that the Collector had incorrectly taken the value of latexed floor coverings (finished goods) instead of the pre-latexed goods for determining the quantum of duty. The Tribunal concurred with this argument, stating that the value of pre-latexed material should be considered for the purpose of computation, as duty was chargeable on the semi-finished goods.

4. Imposition of Penalty:
The appellants requested the Tribunal to set aside the penalty, arguing that there was no intention to evade payment of duty. The Tribunal found that given the appellants' bona fide belief that the goods were semi-finished, there was no justification for imposing a penalty. Consequently, the penalty was set aside.

Conclusion:
The Tribunal upheld the classification of the goods as "felt" under sub-heading 5602.90, agreed that the demand beyond six months was time-barred, determined that the value of pre-latexed material should be used for duty computation, and set aside the penalty imposed on the appellants.