1997 (11) TMI 200 - AT - Central Excise

Summary

Issues: Classification under new Tariff, Benefit of Notifications, Demand Barred by Limitation, Interpretation of Notification 37/86

Classification under new Tariff:
The appellant, a manufacturer of Surgical Cotton wool I.P., was previously classified under Tariff Item 68 and exempted from duty. After the introduction of the new Tariff, the item fell under sub-heading 3004.00. The appellant obtained a Central Excise license and claimed the benefit of Notification 175/86 for SSI units. The dispute arose regarding the correct classification under the new Tariff.

Benefit of Notifications:
The appellant claimed exemption under Notification 37/86 for surgical absorbent packets of cotton wool. The department initially agreed that the product was entitled to this benefit. However, a show cause notice was later issued alleging removal of goods in excess of the exemption limit, leading to duty demand and a penalty. The issue was whether the appellant was eligible for the claimed exemptions.

Demand Barred by Limitation:
The department alleged suppression of facts by the appellant to evade duty and issued a notice beyond the six-month limitation period. The appellant argued that there was no suppression as they had consistently disclosed their manufacturing activities, and the department had previously acknowledged their eligibility for the exemption. The question was whether the demand was time-barred due to the absence of suppression.

Interpretation of Notification 37/86:
The impugned order disallowed the benefit of Notification 37/86, stating that "lint is not the same as absorbent cotton wool." The Tribunal examined definitions of lint and cotton from standard dictionaries, concluding that surgical absorbent cotton wool falls under the notification. The key issue was the correct interpretation of the notification in relation to the appellant's product.

In the judgment, the Tribunal found that the demand was barred by limitation as there was no suppression of facts by the appellant. The appellant was held entitled to the benefit of Notification 37/86 based on the definitions of lint and cotton, which supported their classification under the notification. Consequently, the impugned order was set aside, and the appeal was allowed on both merit and limitation grounds.