1999 (2) TMI 255 - AT - Central Excise

Summary

Issues:
Stay of collection of duty and penalty under Section 11AC read with Rule 173Q of the Central Excise Rules, 1944. Interpretation of exemption Notification No. 22/94 for inherent fitments. Applicability of Board's circular on classification of fitments. Financial condition of the company affecting waiver of pre-deposit.

Analysis:
The case involved applications for stay of duty collection and penalty amounting to approximately Rs. 40.73 lakhs under Section 11AC and Rule 173Q of the Central Excise Rules, 1944. The appellant, a manufacturer of various paper products falling under Chapter 48 of the Central Excise Tariff Act, 1985, including integral fitments, was charged with manufacturing certain components separately and claiming exemption under Notification No. 22/94. The show cause notice alleged misclassification of products like side fitments, top/bottom covers, partitions, and sleeves. The Commissioner upheld the demand, classifying side fitments under 4808.10 and other products under 4819.19.

In arguments, the appellant's Chartered Accountant contended that inherent fitments should be exempted based on similarity between the exemption notification and tariff entry. Referring to tribunal decisions and a Board circular, it was argued that fitments are integral to the cartons and should be classified under 4819.90. The appellant highlighted a declining financial trend to support the waiver of pre-deposit. On the other hand, the Departmental Representative asserted that the appellant did not declare selling inherent parts separately, justifying the longer limitation period and supporting the applicability of the Board's circular.

The Tribunal, considering the waiver of pre-deposit, observed a lack of evidence showing separate supply of integral parts by the appellant. Noting the company's financial stability with profits and reserves exceeding Rs. 1 crore, the Tribunal directed payment of Rs. 25 lakhs towards duty demand within 2 months, granting stay of collection for the remaining duty and penalty amounts. The compliance was set for 24th March 1999.