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Home Case Index All Cases Central Excise Central Excise + AT Central Excise - 1998 (1) TMI AT This

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1998 (1) TMI 201 - AT - Central Excise

Issues Involved:
1. Classification of flavoured pan masala.
2. Reasonableness of seizure at the factory premises.
3. Justifiability of invoking the extended period for raising the demand for duty under Section 11A of the Central Excises and Salt Act, 1944.
4. Admissibility of exemption Notification No. 175/86.
5. Time-bar of the demand.

Issue-wise Detailed Analysis:

1. Classification of flavoured pan masala:
The primary issue was whether the flavoured pan masala manufactured by the appellants should be classified under sub-heading 2107.91 as held by the Department or under sub-heading 2107.90 as claimed by the appellants. The Department contended that the product did not contain betel nuts, based on the container label, the statement of a partner, and a chemical examiner's report. The appellants argued that the absence of betel nuts on the label should not determine classification and cited a judgment to support their claim. They also contested the chemical examiner's report, stating it was inconclusive and not final. The Tribunal concluded that the product did not contain betel nuts based on the label, the partner's statement, and the chemical examiner's report, thus classifying it under Heading 2107.91.

2. Reasonableness of seizure at the factory premises:
The Tribunal held that the seizure was based on a reasonable belief formed by the officers due to information received, the absence of betel nuts on the label, and the lack of a Central Excise license and records by the appellants. The reasonable belief was deemed justified and the seizure was considered legal.

3. Justifiability of invoking the extended period for raising the demand for duty under Section 11A of the Central Excises and Salt Act, 1944:
The Tribunal found that the appellants had not disclosed to the Department that the disputed product contained betel nuts, which was crucial for classification. The lack of a license and records indicated an intention to evade duty, justifying the invocation of the extended period under Section 11A(1) to cover the demand beyond six months.

4. Admissibility of exemption Notification No. 175/86:
The Judicial Member noted that the Collector had not framed this issue for determination but had clubbed the clearances of the two appellants to deny the SSI exemption. The Tribunal observed that the appellants had a strong prima facie case based on a cited judgment and the lack of clear findings by the Collector. It was held that the appellants were entitled to the benefit of SSI exemption Notification No. 175/86.

5. Time-bar of the demand:
The Judicial Member held that the demand was time-barred except for the period from 6-2-1990 to 14-2-1990. The appellants had declared sugandhi masala in their classification list as non-excisable, and the Department's failure to ascertain its dutiability at that time could not be attributed to suppression or wilful misstatement by the appellants. Therefore, the demand beyond six months was not sustainable.

Majority Opinion:
The Vice President agreed with the Judicial Member, emphasizing that the Department had not established its case beyond doubt regarding the product's composition. The appellants were entitled to the benefit of doubt, and the penalty and confiscation were not sustainable. The appeals were disposed of accordingly, with the penalty on confiscation and the demand beyond six months being set aside.

 

 

 

 

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