1996 (8) TMI 186 - AT - Central Excise

Issues Involved:

1. Classification of goods under Central Excise Tariff.
2. Eligibility for exemption under Notification Nos. 135/89-C.E. and 20/94-C.E.
3. Invocation of extended period of limitation under Section 11A of CESA, 1944.
4. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Classification of Goods under Central Excise Tariff:

The appellants were engaged in the manufacture of decorative laminated sheets and claimed classification under Tariff sub-heading 4823.90, asserting that their products were paper-based decorative laminated sheets. The department contended that the appellants' products should be classified under Chapter Heading 39.09, as they involved sheets of paper coated with plastics. The appellants argued that the formulations used (phenol formaldehyde and melamine formaldehyde) were not plastics as they were unstable and not marketable. However, the Tribunal referred to the case of C.C.E. v. Jay Enterprises and concluded that the resols produced by the appellants were indeed classifiable under Chapter 39, as they were plastic materials capable of being formed under external influence, aligning with Note 1 and Note 3 of Chapter 39.

2. Eligibility for Exemption under Notification Nos. 135/89-C.E. and 20/94-C.E.:

The appellants claimed eligibility for exemption under the mentioned notifications, arguing that their products did not involve plastic-coated laminated sheets. The department disagreed, stating that the appellants did not furnish the required information about the plastic coating, making them ineligible for the exemptions. The Tribunal upheld the department's view, confirming that the appellants' products were indeed plastic-coated and thus did not qualify for the exemptions under the cited notifications.

3. Invocation of Extended Period of Limitation under Section 11A of CESA, 1944:

The department invoked the extended period of limitation, alleging that the appellants had suppressed vital facts with the intention to evade duty. The appellants contended that there was no suppression or misrepresentation, as they had regularly submitted their Classification Lists and RT-12 returns, which were approved by the department. The Tribunal found that the classification lists were approved up to 31-3-1994, and RT-12 returns were assessed unconditionally. It was also noted that the manufacturing process was communicated to the department. Therefore, the Tribunal held that there was no suppression or wilful mis-statement, and the extended period beyond six months was not justified. The demand was confirmed only for the normal period of limitation.

4. Imposition of Penalty under Rule 173Q of the Central Excise Rules, 1944:

The department imposed a personal penalty of Rs. 15,00,000/- on the appellants under Rule 173Q, citing evasion of duty. The appellants argued that there was no intention to evade duty and that the imposition of penalty required the establishment of mens rea. The Tribunal acknowledged the evasion of duty but found the penalty excessive. Consequently, the penalty was reduced to Rs. 1,00,000/-.

Conclusion:

The Tribunal upheld the demand for Central Excise duty limited to the normal period of limitation, confirmed the classification of the appellants' products under Chapter 39, and reduced the penalty to Rs. 1,00,000/-. The appeal was disposed of with these modifications, and the operative part of the order was pronounced in the Open Court.

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