1996 (6) TMI 245 - AT - Central Excise

Summary

Issues: Classification of goods as containers or bags, demand of duty retrospectively, eligibility for Modvat Credit

Classification of Goods:
The appeal concerns the classification of goods described as containers by the appellants but classified as bags by the authorities. The appellants argued that their goods, made of kraft paper sheets stitched into containers resembling bags, were previously assessed under Tariff Heading No. 4819.12 as containers. However, post a change in the tariff, the authorities classified the goods under a different heading. The consultants for the appellants contended that the goods should be classified as containers, not bags, as they had been consistently described and accepted as such by the authorities. The Tribunal analyzed the definitions of containers and bags, noting that bags can also be considered containers. The Tribunal found that the appellants' goods did not fit the description of containers under the relevant tariff heading and upheld the lower authority's classification of the goods under a different heading (TI 4819.90).

Demand of Duty Retrospectively:
The appellants sought that if duty was payable, it should be demanded prospectively from the date of the show cause notice. However, referring to a Supreme Court decision, the Tribunal ruled that duty can be recoverable prior to the issuance of a show cause notice. Consequently, the appellants' plea for prospective duty payment was rejected.

Eligibility for Modvat Credit:
Regarding the appellants' request for Modvat Credit, the Tribunal acknowledged that the goods were cleared without duty payment based on a specific notification. The Tribunal held that the appellants should be entitled to Modvat Credit from the date of the show cause notice, provided they fulfill the necessary conditions under the Modvat Rules. The Tribunal emphasized that since the appellants were allowed clearance without duty by the department, they should be granted Modvat Credit, subject to compliance with the relevant rules and notifications. The appeal was dismissed with the observation that the appellants should be restored to their position as of a specific date for Modvat Credit purposes while demanding duty from that date.

In conclusion, the Tribunal upheld the classification of the goods as bags, rejected the plea for prospective duty payment, and allowed the appellants to claim Modvat Credit under certain conditions.