1998 (2) TMI 257 - AT - Central Excise

Summary

Issues:
1. Classification of goods under Central Excise Tariff Act, 1985
2. Applicability of exemption Notification No. 175/86-C.E.
3. Demand of excise duty and Modvat benefit
4. Allegations of suppression and intent to evade excise duty
5. Imposition of penalty and extended period under Section 11A

Classification of Goods:
The case involved a dispute regarding the classification of furniture parts made from rigid polyurethane foam under the Central Excise Tariff Act, 1985. The appellant argued that the parts should be classified under sub-heading No. 9403.00 for "Other Furniture and parts thereof" and not under sub-heading No. 3926.10 as contended by the respondent. The Appellate Tribunal confirmed the classification under sub-heading No. 3926.10 based on the facts presented and dropped the dispute regarding classification under Chapter 39.

Applicability of Exemption Notification:
The appellant claimed the benefit of exemption under Notification No. 175/86-C.E., dated 1-3-1986, for their small-scale industrial unit. They argued that their products made from rigid polyurethane foam were eligible for full exemption under this notification. However, the tribunal confirmed that the exemption was not applicable to the goods in question, as they were classified under sub-heading No. 3926.10 and not covered by the said notification.

Demand of Excise Duty and Modvat Benefit:
The dispute also involved the demand of excise duty on the manufactured articles made from rigid polyurethane foam. The tribunal upheld the duty liability on these articles and directed consideration of Modvat benefit, if applicable, despite minor procedural lapses. The appellant's plea for Modvat benefit was taken into account, and the redemption fine was reduced while the penalty was set aside based on the totality of facts and circumstances.

Allegations of Suppression and Intent to Evade Duty:
The respondent alleged that the appellant suppressed the fact of manufacture and clearance of goods to evade payment of excise duty. The tribunal found that the extended time limit of five years under Section 11A of the Central Excises and Salt Act, 1944, applied in this case due to the suppression of facts. However, the tribunal considered the appellant's bona fide belief in the classification of their products and reduced the penalty imposed.

Imposition of Penalty and Extended Period under Section 11A:
The tribunal addressed the issue of penalty imposed on the appellant in addition to the demand for excise duty. It noted that the penalty was too harsh and unjustified, especially when the classification of the goods was still in dispute. The tribunal reduced the redemption fine and set aside the penalty based on the circumstances of the case and the appellant's request for Modvat benefit consideration.