1999 (7) TMI 160 - AT - Central Excise

Summary

Issues:
1. Waiver of pre-deposit of duty and penalty amounting to Rs. 1,80,76,929.
2. Stay of recovery of duty and penalty.
3. Correct classification of goods under sub-heading 4901.90 or 3920.32 of CETA.
4. Application of limitation regarding the show cause notice.

Waiver of Pre-deposit and Stay of Recovery:
The case involved an application for the waiver of pre-deposit of duty and penalty totaling Rs. 1,80,76,929, along with a stay of recovery. The applicants, engaged in printing on plastic films, had sought classification under sub-heading 4901.90 of CETA for the years 1994-95 and 1995-96. A show cause notice was issued, alleging misclassification under sub-heading 3920.32 with intent to evade duty. The Commissioner confirmed the demand and penalty. The applicants argued that their classification lists were approved, and the longer period for issuing the notice did not apply. The Commissioner invoked the extended period of five years, citing the deliberate misguidance by the applicants. The Tribunal found that the distinction between tariff headings was crucial, and the classification of the film was a finding of fact. The Commissioner ruled that the printing was not merely incidental, leading to classification under Chapter 39. However, on review, the Tribunal found that the applicants had a strong prima facie case, granting unconditional stay and waiver of the duty and penalty.

Correct Classification of Goods:
The issue of correct classification of goods under sub-heading 4901.90 or 3920.32 of CETA arose in the case. The applicants had initially sought classification under sub-heading 4901.90 for printing on plastic films used for packing food products. The show cause notice alleged misclassification under sub-heading 3920.32, triggering a dispute. The Tribunal emphasized the importance of the Section Note to Section VII of Chapter 49, which determined that if printing was merely incidental to the primary use of goods, they would remain classified under Heading 39. The Commissioner's ruling that the printing was not incidental led to classification under Chapter 39. However, upon scrutiny, the Tribunal found that the applicants had a strong case for classification under sub-heading 4901.90, ultimately granting them relief.

Application of Limitation:
The application of limitation regarding the show cause notice was a significant aspect of the case. The applicants argued that the longer period for issuing the notice did not apply since their classification lists were duly approved. The Commissioner, however, invoked the extended period of five years, accusing the applicants of withholding facts and misguiding the department. The Tribunal reviewed the facts and found that the applicants had not followed their prime obligation to disclose correct information, leading to the invocation of the extended period. Despite this, the Tribunal granted relief to the applicants based on the strong prima facie case they presented, allowing for the waiver of pre-deposit and stay of recovery of duty and penalty.