2000 (4) TMI 363 - AT - Central Excise

Issues Involved:
1. Classification of Prepegs under the Central Excise Tariff Act.
2. Legality of invoking the extended period for the demand of duty under Section 11A(1).

Issue-wise Detailed Analysis:

1. Classification of Prepegs:
The primary issue revolves around whether the Prepegs manufactured by the appellants should be classified under heading 39.20 or 39.26 of the Central Excise Tariff Act, 1985. The appellants argued that Prepegs, which are impregnated grey cotton fabrics in roll form, should be classified under heading 39.26, which carries a nil rate of duty. The department, however, contended that Prepegs should be classified under heading 39.20, as the final product, laminates, are exempted under heading 39.26.

The Tribunal noted that the classification of Prepegs was previously considered in the case of Formica India Division v. CCE, where they were classified under 3926.90 and not 3920.37. The appellants argued that since Prepegs are in continuous roll form and not cut to specific lengths, they should be considered as "sheeting" rather than "sheets," and thus not fall under heading 39.20. This distinction was supported by the Apex Court's decision in CCE v. K. Mohan & Company Exports, which held that film rolls of indefinite length are more appropriately described as "sheetings."

Given the lack of judicial precedence on the classification of Prepegs under the new tariff, the Tribunal found it necessary to remand the matter to the original authority for a de novo consideration. The original authority is directed to verify the factual accuracy of the manufacturing process and consider the appellants' contention that Prepegs in continuous roll length should not fall under heading 39.20.

2. Legality of Invoking the Extended Period for Demand of Duty:
The second issue pertains to whether the extended period for the demand of duty under Section 11A(1) is applicable. The appellants argued that there was no suppression of facts as all relevant information regarding the manufacturing process and the emergence of Prepegs as an intermediate product was disclosed in the classification lists and other communications with the department.

The Tribunal noted that the classification lists and other documents clearly indicated the emergence of Prepegs as an intermediate product and its use in the manufacture of laminates. The department had approved these classification lists, which showed a lack of alertness on their part. The Tribunal concluded that this scenario could not be considered as wilful suppression of information with intent to evade duty. Therefore, the extended period under Section 11A(1) was not applicable, and the demand should be restricted to the standard six-month period.

Demand for Rs. 7,05,778/- on Prepegs Cleared to M/s. Finetech Enterprises:
The demand of Rs. 7,05,778/- related to Prepegs manufactured on a job work basis and removed to M/s. Finetech Enterprises was also considered. The Tribunal found that since the demand is on Prepegs, and the matter has been remanded for reconsideration on merits, this part of the matter should also be remanded to the Commissioner. The same reasoning regarding the non-applicability of the extended period applies here as well.

Conclusion:
The Tribunal set aside the impugned order, including the imposition of penalties, and remanded the matter for de novo consideration by the Jurisdictional Commissioner of Central Excise. The Commissioner is directed to decide the classification of Prepegs on merits and compute the amount of duty demandable for a period of six months, providing an opportunity for a hearing and issuing a speaking order. The appeals were allowed by way of remand accordingly.

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