1999 (8) TMI 560 - AT - Central Excise

Issues Involved:
1. Violation of principles of natural justice.
2. Classification of products as emulsion or solution-based resin.
3. Demand of duty and applicability of the extended period of limitation.
4. Quantum of fine and penalty imposed.

Issue-wise Detailed Analysis:

1. Violation of Principles of Natural Justice:
The appellant argued that the impugned order violated natural justice principles as the Chemical Examiner's report was not provided to them, preventing them from requesting a retest or cross-examining the examiner. However, the respondent contended that the report was not relied upon in the show-cause notice or the adjudication findings, thus its non-disclosure did not breach natural justice. The Tribunal agreed with the respondent, stating that since the report was adverse and not relied upon, its non-supply did not violate natural justice principles.

2. Classification of Products as Emulsion or Solution-Based Resin:
The appellant claimed that their products should be classified as emulsions, attracting a lower duty rate. They presented technical opinions suggesting the products could be interpreted as non-aqueous emulsions. The respondent countered that these opinions were ambiguous and not categorical. The Tribunal found the technical opinions non-categorical and upheld the adjudicating authority's reliance on commercial parlance and statements from the appellant's own technical experts and customers. Consequently, it was determined that the products were not emulsions and should be classified under a higher duty rate.

3. Demand of Duty and Applicability of Extended Period of Limitation:
The appellant argued that the demand was partly time-barred and that the allegation of collusion was based on mere suspicion. The respondent highlighted several circumstances indicating collusion, such as the prompt approval of the classification list and the unchanged manufacturing process. The Tribunal agreed with the respondent, noting the apparent collusion and upholding the invocation of the extended five-year limitation period for duty demand.

4. Quantum of Fine and Penalty Imposed:
The appellant contended that the fine and penalty were excessively harsh. The respondent maintained that the penalty was justified given the circumstances. The Tribunal observed that the penalty was harsh, especially considering the penalty provisions introduced in 1996. Therefore, the penalty was reduced from Rs. 10 lacs to Rs. 5 lacs, while the fine for confiscation of plant, machinery, etc., was upheld.

Conclusion:
The Tribunal upheld the impugned order on all issues except for the quantum of penalty, which was reduced. The order was modified only to the extent of reducing the penalty from Rs. 10 lacs to Rs. 5 lacs.

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