1996 (12) TMI 207 - AT - Central Excise

Summary

Issues: Misrepresentation of fiber composition in yarn classification leading to duty evasion, seizure of goods, and imposition of penalty.

In this case, the appellants were manufacturing yarn under Heading 5504, declaring the composition in two classification lists. However, during a factory visit, it was discovered that instead of using ramie fiber as declared, they had used flax fiber, which changed the classification to a higher duty rate under sub-heading 5504.29. The officers seized the yarn and issued a show cause notice alleging duty evasion amounting to Rs. 12,43,152.37. The Collector confirmed the demand, confiscated the goods, imposed a fine of Rs. 1 lakh, and a penalty of Rs. 1 lakh. The appeal challenged this order.

The appellant's advocate argued that both ramie and flax were vegetable fibers falling under the same tariff item, allowing the use of either fiber for the claimed classification. He contended that the assessees did not misrepresent and had declared the intention to use either ramie or flax in the composition, which was approved by the department without alteration. Therefore, he asserted that the confiscation of goods and penalty imposition were unjustified.

On the other hand, the Revenue's representative argued that the assessees misrepresented the facts by using flax instead of ramie fiber, which was approved only for ramie fiber use in the classification list. He supported the duty confirmation and goods confiscation based on this misrepresentation.

The Tribunal analyzed the submissions and classification lists, noting that the composition included polyester, viscose, and flax/ramie. The requested classification under 5504.22 specified the fiber content and excluded any other textile material. The Tribunal observed that the department approved the classification lists with the knowledge that either ramie or flax fiber could be used. Therefore, they concluded that there was no deliberate misrepresentation by the assessees. The Tribunal limited the duty recovery to six months from the show cause notice issuance and set aside the orders of confiscation and penalty imposition, ruling in favor of the appellant.