1999 (10) TMI 273 - AT - Central Excise

Summary

Issues: Classification of the product under sub-heading 3303.00 or 3304.00, Allegations of duty evasion, Penalty imposition, Waiver of pre-deposit and stay of recovery during appeal proceedings

Classification Issue:
The case involved the classification of a product named "Moyzen liquid" under sub-heading 3303.00 as perfumes and toilet waters, which the applicants claimed, against the department's contention of classification under sub-heading 3304.00 as a preparation for the care of the skin. The product was described as a moisturizing liquid for dry skin disorders, with the bottle labeling it as a skin emollient and humectant, aimed at preventing skin dehydration and lubricating the skin. The Tribunal analyzed the Tariff description and HSN sub-notes, emphasizing that the presence of alcohol would determine the classification under Heading 3303.00, considering the product's use as a skin care preparation based on sales literature.

Duty Evasion Allegations:
A show cause notice was issued alleging duty evasion due to misrepresentation and wrong classification from April 1993 to June 1996, resulting in confirmed duty of Rs. 20,46,176.38 and a penalty of Rs. 4 lakhs. The Commissioner also imposed confiscation but allowed redemption upon payment of a fine, along with interest on delayed duty payment. The applicants appealed against this decision, seeking waiver of pre-deposit of duty and penalty, as well as a stay on recovery during the appeal proceedings.

Legal Arguments:
The applicants argued that the show cause notice issued after 1.5 years could not allege suppression, as the department was aware of the product's details and the classification list had been approved periodically. They contended that the burden of verification lay with the department despite the amendment of Rule 173B in March 1995. The department's reliance on extended period was challenged based on precedents indicating that once a classification list is approved, the extended period cannot be invoked.

Judgment and Relief:
Considering the arguments presented, the Tribunal found a strong prima facie case in favor of the applicants regarding the limitation issue. As a result, the Tribunal granted the waiver of pre-deposit of the confirmed duty and penalty, along with a stay on their recovery during the appeal proceedings. This decision was based on the understanding that the department's prior approvals and verifications of the classification list precluded allegations of suppression and justified the relief granted to the applicants.

This detailed analysis of the legal judgment from the Appellate Tribunal CEGAT, Mumbai, highlights the key issues of classification, duty evasion allegations, penalty imposition, and the relief granted regarding waiver of pre-deposit and stay of recovery during the appeal process.