1997 (7) TMI 322 - AT - Central Excise

Summary

Issues:
1. Classification of manufactured goods under different headings.
2. Application of extended period for demand of duty.
3. Imposition of penalty and confiscation of goods.
4. Interpretation of relevant notifications for duty exemption.
5. Classification of goods under specific tariff headings for duty calculation.

The judgment by the Appellate Tribunal CEGAT, New Delhi dealt with the classification of goods manufactured by the appellants under different headings. The appellants were producing 'Terry towelling' falling under Heading 5802 and towels made from such fabric by cutting, hemming, and stitching. The issue arose when jurisdictional officers seized the towels, alleging that they attracted further duty under Heading 6301. The Principal Collector's order dropped the demand for duty on yarn and fabric used for export but confirmed duty for towels under Heading 6301 for September 1987. The order imposed fines and penalties on the assessees, leading to an appeal against it.

The Tribunal considered the arguments citing relevant judgments and the Principal Collector's findings. The Collector observed that the extended period for demand was not applicable as the manufacture of towels was known to the department and export inspection agencies. He noted that the assessees had not willfully suppressed facts, leading to the conclusion that the extended period for demand was not justified. The demand for duty on towels under Heading 6301 for September 1987 was upheld, but the balance amount was dropped due to the time limit.

Regarding penalties and confiscation, since the Collector found no intent to evade duty, the Tribunal set aside the penalties and confiscation of goods. The confirmation of duty on towels cleared from March 1986 to August 1987 was challenged, citing a duty exemption notification. The Tribunal found that the confirmation of duty based on this notification was incorrect and set it aside.

The Tribunal analyzed the classification of goods under different headings for duty calculation. The advocate argued for a different classification under Heading 6202, but the Tribunal upheld the Principal Collector's decision to classify the towels under Heading 6201 for September 1987. Ultimately, the appeal succeeded in part, with the confirmation of duty for September 1987 upheld, while penalties and duty for earlier periods were set aside.