2000 (5) TMI 453 - AT - Central Excise

Issues Involved:
1. Classification of "Intaglio Paper" and "Opaque Laminating Base Paper."
2. Jurisdiction of the Collector to revise classification.
3. Applicability of the extended period of limitation under Section 11A(1).
4. Validity of the demand for differential duty and imposition of penalties.
5. Confiscation of seized goods.

Detailed Analysis:

1. Classification of "Intaglio Paper" and "Opaque Laminating Base Paper":
The Collector classified "Intaglio Paper" under sub-Heading 4806.90 and "Opaque Laminating Base Paper" under sub-Heading 4806.20, rejecting the appellant's classification under sub-Heading 4802.10 and 4805.90 respectively. The test reports from the Central Pulp and Paper Research Institute indicated that "Intaglio Paper" had low opacity and was closer to general grade packing/wrapping paper, while "Opaque Laminating Base Paper" had high strength properties and was glazed, classifying it under glassine and other glazed translucent papers.

2. Jurisdiction of the Collector to Revise Classification:
The appellants argued that the Collector had no jurisdiction to revise the classification without appealing against the approved classification lists. However, it was held that Sections 11A and 11B of the Central Excise Act, 1944, provide a substantive provision for the realization of excise duty in cases of short levy or short payment, irrespective of the approval of classification lists. The Collector's action was deemed within jurisdiction based on precedents set by the Hon'ble Calcutta High Court and the Supreme Court.

3. Applicability of the Extended Period of Limitation under Section 11A(1):
The show cause notice did not allege any suppression or misstatement with the intention to evade duty, nor did it invoke the proviso to Section 11A. The goods were cleared in accordance with classification lists approved after chemical examination. Therefore, the demand was governed by the normal period of limitation of six months. Since duty had been paid in June 1989 and the show cause notice was issued beyond six months, the demand was barred by limitation.

4. Validity of the Demand for Differential Duty and Imposition of Penalties:
The appellants' classification lists were approved under Chapter Heading 4802.10, covering uncoated paper used for writing, printing, or other graphic purposes. The Collector's reliance on the test reports to reclassify the paper under Heading 4806 was challenged as the process of glazing does not exclude papers from Heading Nos. 48.01 to 48.05. The test reports indicated that the papers could be considered as writing and printing paper as well as general purpose packing/wrapping paper. The material on record was insufficient for a change in classification, and the Department failed to establish that the papers were classifiable under Heading 4806.

5. Confiscation of Seized Goods:
The confiscation of the seized goods and the imposition of penalties were set aside. The classification lists for the disputed varieties of paper had been approved after chemical examination, and there was no evidence of processes necessary for manufacturing special papers under Heading 48.06. The Department's reliance on end-use for reclassification was not substantiated.

Conclusion:
The majority judgment held that the disputed varieties of paper are classifiable under CET Sub-heading Nos. 4802.10 (Intaglio Paper) and 4805.90 (Opaque Laminating Base Paper). The impugned order was set aside, and the appeal was allowed with consequential relief to the appellants in accordance with law. The Vice President dissented, emphasizing the clandestine removal and the relevance of test reports and market enquiry over the approved classification lists. The final decision was in favor of the appellants, allowing the appeal.

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