2000 (2) TMI 329 - AT - Central Excise

Issues Involved:
1. Classification of carpets/floor coverings under Chapter 57 of the Central Excise Tariff Act, 1985.
2. Determination of assessable value and duty payable.
3. Validity of invoking the extended time limit under Section 11A(1) of the Central Excise Act.
4. Confiscation of goods and imposition of penalties.

Issue-wise Detailed Analysis:

1. Classification of Carpets/Floor Coverings:
The primary issue in these appeals was the classification of carpets/floor coverings manufactured by the appellants. The appellants contended that their products should be classified under Chapter sub-heading 5703.20 as 'floor coverings of jute,' which attracted a lower rate of duty. The Department, however, classified the items under Chapter sub-heading 5703.90 as 'other textile floor coverings,' which attracted a higher rate of duty.

The Tribunal referred to the process of manufacture described by the appellants, which involved the use of jute fabric and synthetic fibers. The Tribunal also considered previous judgments, particularly the Andhra Pradesh High Court's decision in Charminar Non-wovens Ltd. v. CC & CE, Hyderabad, which held that carpets containing jute and polypropylene should be classified as 'floor coverings of jute' even if the exposed surface predominantly contained polypropylene fiber.

The Tribunal found that the classification dispute had been settled by the Andhra Pradesh High Court and followed the decision in Bajaj Carpet Industries Ltd. v. CCE, Meerut, which supported the classification under sub-heading 5703.20. Consequently, the Tribunal held that the floor coverings of jute manufactured by the appellants were correctly classifiable under Chapter sub-heading 5703.20.

2. Determination of Assessable Value and Duty Payable:
The appellants argued that the duty payable, even if the classification held by the Commissioner was upheld, would be Rs. 4,60,484.00. However, if the classification was under sub-heading 5703.20, the differential duty would be Rs. 1,71,248.97, which had already been paid by the appellants.

The Tribunal did not delve deeply into the valuation issue as it was contingent on the classification. Since the classification was decided in favor of the appellants, the valuation issue did not affect the final outcome.

3. Validity of Invoking Extended Time Limit:
The Commissioner had accepted the assessee's contention against invoking the extended time limit under Section 11A(1) of the Central Excise Act. However, the Commissioner did not accept the plea that the demand could be raised only prospectively from the date of the Show Cause Notice (SCN), relying on the Supreme Court judgment in Ballarpur Industries.

The Tribunal upheld the Commissioner's decision on the time limit, stating that the demand for the period of six months prior to the issue of the SCN was valid and sustainable.

4. Confiscation of Goods and Imposition of Penalties:
In the case of M/s. Tri Star Industries Felting (P) Ltd., M/s. Kanak Fibre Fabs (P) Ltd., and Shri Rajeev Khattar, the Commissioner had confirmed duty demands and imposed penalties based on the classification dispute. Goods and inputs were also ordered to be confiscated.

The Tribunal found that the classification issue had been fully settled by the Andhra Pradesh High Court in Charminar Non-woven case. The Tribunal disagreed with the Commissioner's distinction based on the new Section Note 2(B)(i) incorporated in the Tariff with effect from 16-7-1995. The Tribunal held that Interpretative Rule 3 would not be attracted in all cases and that the impugned goods were classifiable under Chapter sub-heading 5703.20.

As a result, the Tribunal set aside the duty demands, confiscation orders, and penalties imposed on the appellants, providing consequential benefits to them.

Conclusion:
The Tribunal allowed the appeals, holding that the floor coverings of jute manufactured by the appellants were correctly classifiable under Chapter sub-heading 5703.20. The impugned orders were set aside, and the other allegations against the appellants did not survive due to the favorable classification decision.

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