1999 (5) TMI 114 - AT - Central Excise

Summary

Issues: Misdeclaration of classification leading to duty evasion, invocation of Section 11A of the Central Excises and Salt Act, 1944, limitation defense raised by the appellant

Misdeclaration of classification leading to duty evasion:
The case involved a dispute over the correct classification of a product, Octadex EM, manufactured by M/s Visen Industries Ltd. Initially, the jurisdictional officer certified the product as a softener under Heading 3402, granting exemption under Notification No. 78/86-C.E. However, subsequent reclassification by the Asstt. Commissioner to Heading 3809 led to the denial of the exemption. The Collector (Appeals) ordered a chemical test to determine the product's usage, which resulted in classifying Octadex EM under Heading 3809, denying the benefit of Notification No. 101/66. The department later issued a show cause notice alleging misdeclaration, invoking Section 11A of the Act, demanding duty short levied and imposing penalties and confiscation.

Invocation of Section 11A of the Central Excises and Salt Act, 1944:
The Collector upheld the charge of misdeclaration by the assessee, confirming the duty demand from 18-6-1987 to 31-3-1990. The duty amount was quantified at Rs. 5,10,605.92, and penalties were imposed. The appellant challenged this order, arguing that the department was aware of the product's identity and usage throughout, and the misdeclaration was not intentional. The appellant highlighted that the department failed to draw samples for proper classification despite Rule 173B permitting such actions.

Limitation defense raised by the appellant:
The appellant contended that the department was aware of the product's identity at all times, and the misdeclaration allegation was unfounded. They emphasized that the department could have drawn samples for classification verification but failed to do so until after passing classification orders. The appellant argued that during the period under consideration, duty payable on goods under Heading 3402.90 was higher, indicating that misclassification would have led to the government gaining more duty.

Conclusion:
The Tribunal found merit in the appellant's limitation defense, noting that the department had not conclusively established the product's classification during the assessment period. The failure to draw samples for classification verification earlier was highlighted, indicating a lack of due diligence on the department's part. As a result, the appeal succeeded on the ground of limitation, and the Collector's order was set aside. The Tribunal did not delve into the merits due to the appeal's success, providing appropriate relief to the appellant.