1997 (12) TMI 391 - AT - Central Excise

Summary

Issues:
Classification of goods under Tariff Heading, limitation on demand, benefit of Notification No. 175/86.

Classification of Goods under Tariff Heading:
The appellants were manufacturing three products without obtaining a Central Excise license, leading to the seizure of the products by the Jurisdictional Officer. While the product Chaman Bahar was classified under sub-heading 2106.90 with Nil rate of duty, a show cause notice was issued for the other products under Tariff classification 2107.91. The Adjudicating Collector classified the goods under Heading 2107.91, confirmed a demand of Rs. 3,87,130.76, and imposed a penalty of Rs. 25,000 on the appellants. The appellants disputed the classification, claiming the goods were also classifiable under Tariff Heading 2106.90, and sought the benefit of Notification No. 175/86. The Appellate Tribunal held that the Collector erred in denying the benefit of the notification, setting aside the confirmation of demand and penalty order.

Limitation on Demand:
The appellants did not contest the limitation on demand or the classification of goods but focused on availing the benefit of Notification No. 175/86. The Tribunal noted that the appellants' clearances of the products were within the value specified in the notification for each year covered under the show cause notice. The Collector had denied the benefit based on the failure to meet a test in the notification. The Tribunal considered Explanation II of the notification, which excludes clearances of goods charged to Nil rate of excise duty from the aggregate value of clearances. As the appellants' clearances were within the limit prescribed in the notification after excluding the value of Chaman Bahar, the Tribunal held that the Collector erred in not allowing the benefit, leading to setting aside of the demand confirmation and penalty order.

Benefit of Notification No. 175/86:
The Notification No. 175/86 provided an exemption based on the aggregate value of clearances of excisable goods. The appellants argued that the value of clearances of goods charged to Nil rate of excise duty should be excluded from the computation of the aggregate value. The Tribunal agreed with this interpretation, holding that wherever the aggregate value is computed for the previous year as per the notification, the value of clearances of goods charged to Nil rate of excise duty must be excluded. As the appellants' clearances fell within the prescribed limit after excluding the value of Chaman Bahar, the Tribunal allowed the appeal, setting aside the demand confirmation and penalty order.

This judgment highlights the importance of correctly interpreting and applying notifications for excise duty exemptions, ensuring that clearances of goods charged to Nil rate of duty are appropriately excluded from the aggregate value calculations.