1997 (12) TMI 393 - AT - Central Excise

Summary

Issues: Classification of goods for export, applicability of Notification No. 175/86, denial of Modvat Credit, plea of time-barred demand.

Classification of Goods for Export:
The appellant, a manufacturer of Phenyle, cleared goods for export to Nepal and Bhutan during a specific period. The Central Excise Officers issued a show cause notice demanding duty for these exports. The Additional Commissioner directed the Assistant Commissioner to calculate the duty payable on the export goods by deducting the excise duty element from the sale price. The appellant contended that the correct classification should be under Tariff Heading 3801.10 with a nil rate of duty, but the Tribunal rejected this argument, stating that Phenyle falls under Tariff Heading 3801.20. The Tribunal emphasized that Phenyle is a cleaning agent and not an insecticide, fungicide, herbicide, weedicides, or pesticides. The Tribunal referred to a previous judgment that did not apply to the relevant period. Consequently, the Tribunal held that the goods cleared for export are liable to duty.

Applicability of Notification No. 175/86:
The Tribunal analyzed whether the exemption under Notification No. 175/86, which provided an exemption up to Rs. 15.00 lakhs for goods cleared for home-consumption, applied to exports to Nepal and Bhutan. The Tribunal concluded that the notification only applied to clearances for home-consumption and not for exports. Therefore, the goods cleared for export to Nepal and Bhutan were not eligible for the exemption, and duty was payable on these exports.

Denial of Modvat Credit:
The appellant contended that they were denied Modvat Credit for duty paid on inputs used in manufacturing Phenyle because they did not follow the Modvat Credit Procedure during the relevant period. The Tribunal agreed with the appellant that they could claim the Modvat Credit if they could prove that they obtained duty-paid inputs and used them in manufacturing Phenyle. The Tribunal remanded this issue to the Assistant Commissioner for reconsideration based on evidence provided by the appellants.

Plea of Time-Barred Demand:
The appellants argued that the demand for duty was time-barred since they believed exports to any country were duty-free. However, the Tribunal rejected this argument, stating that Rule 12 of the Central Excise Rules clarified that full rebate of duty applied only to exports to countries other than Nepal and Bhutan. Therefore, the plea of bona fides regarding the time limitation was dismissed, and the Tribunal confirmed the order subject to the modification related to Modvat Credit, pending further evidence by the appellants.