1999 (8) TMI 534 - AT - Central Excise

Summary

Issues Involved:
1. Classification of "Dipped Tyre Cord Warp Sheet - Tenacity of Polyester Yarn"
2. Allegations of misdeclaration and suppression of facts
3. Invocation of the extended period for demand and imposition of penalty
4. Applicability of Board circulars and subsequent classification decisions

Issue-wise Detailed Analysis:

1. Classification of "Dipped Tyre Cord Warp Sheet - Tenacity of Polyester Yarn":
The central issue in the appeal is the classification of "Dipped Tyre Cord Warp Sheet - Tenacity of Polyester Yarn." The department classified the item under sub-heading 5905.20 of the Central Excise Tariff (CET) based on Section Note 4 of Section XI, which defines "High Tenacity Yarn" as having a tenacity greater than specified values. The appellants argued that the tenacity specifications apply to the yarn before manufacturing, not the finished product. They contended that the processed yarn's tenacity naturally reduces during manufacturing, and the department's approach was technically incorrect. The Commissioner upheld the department's classification, but the appellants highlighted that subsequent proceedings had accepted classification under Heading 5902.

2. Allegations of Misdeclaration and Suppression of Facts:
The department alleged that the appellants misdeclared and suppressed the tenacity of the yarn to evade duty, classifying the fabric as high tenacity yarn under Heading 5902. The appellants refuted these allegations, stating that the tenacity reduction is a normal manufacturing process, and there was no intention to misdeclare or suppress facts. They argued that the department's misunderstanding of Section Note 4 led to the allegations.

3. Invocation of the Extended Period for Demand and Imposition of Penalty:
The department invoked the extended period under Rule 9(2) of the Central Excise Rules read with the proviso to Section 11A(1) of the Central Excise Act, demanding duty for five years and imposing a penalty. The appellants contended that there was no suppression or intent to evade duty, and the demand was time-barred. The Commissioner confirmed the demand and penalty, but the appellants argued that the classification issue and subsequent acceptance of their classification by the department negated the grounds for invoking the extended period.

4. Applicability of Board Circulars and Subsequent Classification Decisions:
The appellants pointed out that the Board had issued circulars and the Commissioner (Appeals) had accepted classification under Heading 5902 for subsequent periods. They argued that these circulars and decisions should be binding, as held by the Supreme Court in Ranade Micro Nutrients v. CCE. The Commissioner did not consider these circulars and subsequent decisions, leading to the appellants' contention that the matter should be re-examined in light of these developments.

Conclusion:
The Tribunal remanded the matter to the Commissioner for de novo consideration, emphasizing the need to consider the Board's circulars, subsequent classification decisions, and the technical nature of the manufacturing process. The appeal was allowed by way of remand, directing the Commissioner to re-examine the classification issue and the grounds for invoking the extended period and penalty.