1999 (1) TMI 130 - AT - Central Excise

Summary

Issues:
Classification of goods under the physical control system, application of Rule 9(2) regarding clandestine removal, reliance on Supreme Court judgments for limitation aspect, deliberate mis-declaration to evade duty, imposition of penalty, confiscation of goods.

Classification of Goods:
The appellants received polyamide chips under Chapter X procedure at Nil rate of duty, manufactured monofilament yarn, and cleared it on payment of duty. A consignment was cleared showing the goods as 'nylon monofilament yarn' under Heading 54.04. The chemical examiner later classified it as synthetic monofilament yarn under Heading 5406.19. The Superintendent requested additional duty payment due to the classification difference.

Application of Rule 9(2):
The appellants operated under the physical control system, where clearance required the officer's counter signature. The gate pass and application for removal were in the proper format, indicating clearance with the Department's knowledge. The Collector erred in not applying a judgment stating that Rule 9(2) does not apply when goods are removed with the authorities' permission. The basis for the duty demand was deemed unsustainable.

Reliance on Supreme Court Judgments for Limitation:
The appellants cited a Supreme Court judgment to challenge the show cause notice issued beyond six months from assessment, highlighting the absence of allegations regarding suppression. The judgment in Raj Bahadur Narain Singh Sugar Mills was applied, emphasizing that deliberate mis-declaration must be proven for Rule 9(2) invocation. The Collector's finding of mis-declaration did not justify duty demand or penalty imposition.

Deliberate Mis-declaration and Penalty:
The Collector held that the appellants deliberately mis-declared the goods to evade duty, leading to demand confirmation, goods confiscation, and penalty imposition. However, the absence of suppression allegations and the clearance under the Department's knowledge rendered Rule 9(2) inapplicable, invalidating the actions taken.

Confiscation of Goods:
The action of confiscation was based on the mis-declaration accusation, which was found unsubstantiated due to the goods being cleared with the Department's knowledge. The order confiscating the goods was set aside, and the appeal was allowed with consequential relief, emphasizing the lack of grounds for duty demand, penalty, or confiscation.