1998 (5) TMI 93 - AT - Central Excise

Issues Involved:
1. Classification of ferrous waste and scrap obtained by ship breaking.
2. Applicability of exemption under Notification No. 171/88.
3. Validity of reopening the classification list within six months.
4. Historical import duty payment status of the dredger.
5. Time limitation for issuing a show cause notice under Section 11A.

Detailed Analysis:

1. Classification of Ferrous Waste and Scrap Obtained by Ship Breaking:
The primary issue was the classification of ferrous waste and scrap obtained by ship breaking. The appellant classified the scrap under Heading 72.30, which was approved by the Assistant Collector, granting full exemption from duty under Notification No. 171/88. However, the show cause notice challenged this classification, arguing that even if the goods fell under Heading 72.04, the exemption would not apply due to the nature of the scrap arising from ship breaking. The Tribunal upheld the classification under Heading 72.30, stating that this heading specifically covers waste and scrap from ship breaking, and is more specific than Heading 72.04, which generally covers waste and scrap from other activities.

2. Applicability of Exemption under Notification No. 171/88:
The appellant claimed exemption under Notification No. 171/88, which the Assistant Collector initially approved. However, the show cause notice and subsequent orders argued that this exemption was not applicable to goods classified under Heading 72.30. The Tribunal confirmed that Notification No. 171/88 did not provide exemption for goods under Heading 72.30, as this heading was not mentioned in the relevant exemption schedule. Even though Heading 72.30 appeared in Sr. No. 5 of the notification, the conditions specified (intended for consumption in ordnance factories or for supply to the Central Government) were not met by the appellant.

3. Validity of Reopening the Classification List within Six Months:
The appellant argued that the classification list, once approved, could not be reopened retrospectively within six months, citing the cases of Indian Oxygen Ltd. and Bhiwani Textile Mills. However, the Tribunal found that the department's action to issue the show cause notice within six months was valid, as it was based on the discovery that the exemption had been erroneously granted. The Tribunal referenced the Supreme Court decision in Ballarpur Industries Ltd., which allowed reopening of the classification list within six months if duty was erroneously not levied.

4. Historical Import Duty Payment Status of the Dredger:
The appellant contended that the dredger was imported with no customs dues, supported by a no-due certificate from the Customs authorities. The show cause notice questioned the import duty payment status, stating there was no evidence of duty payment. The Tribunal gave the benefit of doubt to the appellant regarding the duty-paying character of the dredger, based on the letter from the Customs House, Cochin. However, this did not affect the final decision, as the exemption under Notification No. 171/88 was not applicable to goods under Heading 72.30 regardless of the import duty status.

5. Time Limitation for Issuing a Show Cause Notice under Section 11A:
The Tribunal considered the timing of the show cause notice, which was issued within six months from the date of approval of the classification list. The Tribunal confirmed that the notice was within the permissible time limit under Section 11A, as the non-levy of duty was due to human error. The Tribunal distinguished this case from others cited by the appellant, as it did not involve reclassification but rather the correction of an erroneous exemption grant.

Conclusion:
The Tribunal concluded that the goods were correctly classified under Heading 72.30 and that no exemption under Notification No. 171/88 was applicable. The reopening of the classification list within six months was valid, and the show cause notice was timely. The appeal was dismissed, and the Tribunal clarified that the remand order in the impugned order was not related to this appeal.

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