1998 (3) TMI 259 - AT - Central Excise

Summary

Issues:
Classification of products under Central Excise Tariff Act, 1985; Applicability of extended period of limitation; Financial hardship of the applicant; Bona fide belief regarding exemption from duty payment.

Classification of Products:
The case involved the classification of three types of shampoos manufactured by M/s. Dena Jee Sansthan under the Central Excise Tariff Act, 1985. The Commissioner upheld the classification under Chapter Heading 3305, rejecting the argument that they were Ayurvedic medicines. The Tribunal noted that the issue of correct classification could be decided during the final hearing, considering past decisions on similar products. The Tribunal found a strong prima facie case for waiver based on the argument that the demand was time-barred.

Applicability of Extended Period of Limitation:
The Commissioner had upheld the applicability of the extended period of limitation due to the failure of the applicant to follow Central Excise procedures like registration and filing classification lists. The Tribunal referred to the Supreme Court's decision in Padmini Products, stating that a bona fide belief could negate the application of the extended period of limitation. The Tribunal found that the Commissioner did not consider the applicant's plea of bona fide belief, leading to a waiver of duty and penalty during the appeal's pendency.

Financial Hardship of the Applicant:
The applicant, M/s. Dena Jee Sansthan, faced extreme financial hardship as indicated by their profit and loss account, showing a net surplus of approximately Rs. 5 lakhs and a negative bank balance. The Tribunal considered this financial position and the undue hardship it would cause if asked to deposit the duty amount. Consequently, the Tribunal dispensed with the duty and penalty requirement during the appeal process.

Bona Fide Belief Regarding Exemption from Duty Payment:
The applicant claimed a bona fide belief, based on information from the U.P. Khadi Gram-Udyog Board, that units registered with the Board were exempt from paying Central Excise duty. The Commissioner did not consider this plea, but the Tribunal found that the existence of a bona fide belief could prevent the application of the extended period of limitation. The Tribunal granted a waiver on the grounds of a strong prima facie case for time-barred demand.