2006 (8) TMI 53 - AT - Central Excise

Central Excise Micro cellular rubber sole sheets classifiable under heading 4008.11 of CET Non-cellular sheets of rubber classifiable under residual heading 4008.29 of CE Act, 1944 -Clandestinely manufacture and removal of goods without Central Excise registration and strap sheets classified under wrong heading with intent to evade duty

Issues Involved:
1. Classification of "Micro-cellular Rubber Sole sheets" and "Strap sheets (Plap)".
2. Liability to pay excise duty and interest.
3. Imposition of penalties on M/s. PFP, M/s. KFP, and Shri M. Joy Verghese.
4. Invocation of the extended period of limitation under Section 11A(1) of the Central Excise Act.

Detailed Analysis:

1. Classification of "Micro-cellular Rubber Sole sheets" and "Strap sheets (Plap)":
The main dispute revolves around the correct classification of the products manufactured by M/s. PFP. The department proposed classifying the rubber sole sheets under SH 4016.19 and the strap sheets under SH 4008.29. M/s. PFP contended that the sole sheets should be classified under SH 4008.11, attracting a 'nil' rate of duty, and the strap sheets under SH 6401.92 as parts of Hawai chappals, also attracting a 'nil' rate of duty.

For the rubber sole sheets, the Tribunal found that the final product was a sheet of vulcanised rubber (other than hard rubber) with a micro-cellular structure. The Tribunal decided that the process involved was "surface-working" and not "further-working" as per Chapter Note 9, thus classifying the sole sheets under SH 4008.11, which attracts 'nil' duty.

Regarding the strap sheets, the Tribunal noted that they were in the form of a sheet of vulcanised rubber with a non-cellular structure. The Tribunal rejected the classification under SH 6401.92, as the strap sheets did not have the essential character of straps. The appropriate classification was under SH 4008.29, as sheets of vulcanised rubber.

2. Liability to Pay Excise Duty and Interest:
Since the micro-cellular rubber sole sheets were classified under SH 4008.11, no excise duty was leviable on them. However, for the strap sheets classified under SH 4008.29, excise duty was applicable. The Tribunal directed the lower authority to re-quantify the duty payable by M/s. PFP for the strap sheets and re-determine the penalty accordingly.

3. Imposition of Penalties:
The Commissioner had imposed substantial penalties on M/s. PFP, M/s. KFP, and Shri M. Joy Verghese. The Tribunal found no evidence of abetment by M/s. KFP and Shri M. Joy Verghese in any offense committed by M/s. PFP. Therefore, the penalties on M/s. KFP and Shri M. Joy Verghese were vacated.

4. Invocation of the Extended Period of Limitation:
The department invoked the extended period of limitation under Section 11A(1) of the Central Excise Act, alleging suppression of facts by M/s. PFP with intent to evade duty. The Tribunal upheld this invocation, noting that M/s. PFP did not inform the department about the manufacture and clearance of the goods, which were done clandestinely. The Tribunal concluded that the conduct of M/s. PFP reflected an intent to evade duty, justifying the extended period of limitation.

Conclusion:
The Tribunal concluded that the micro-cellular rubber sole sheets are classifiable under SH 4008.11, attracting 'nil' duty, while the strap sheets are classifiable under SH 4008.29, making them liable to excise duty. The penalties on M/s. KFP and Shri M. Joy Verghese were vacated, and the lower authority was directed to re-quantify the duty and penalty for M/s. PFP. The extended period of limitation was rightly invoked due to the suppression of facts by M/s. PFP.

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