2001 (5) TMI 264 - AT - Central Excise

Summary

Issues Involved:
1. Classification of 'Rice Husk Boards' under the Central Excise Tariff.
2. Allegation of suppression of facts and invocation of the proviso to Section 11A for extended period demand.
3. Imposition of penalty under Rule 173Q(1) of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Classification of 'Rice Husk Boards':
The appellant, a registered Small Scale Industry, manufactured 'Rice Husk Boards' but did not declare them, assuming they were non-excisable. The Assistant Commissioner (A.C.) later classified these boards under Chapter Heading 44.06 of the Central Excise Tariff Act, 1985, making them liable to duty. The appellant contested this classification, arguing that 'Rice Husk' was not included in the Harmonized System of Nomenclature (HSN) Note for particle boards. However, the judgment emphasized that the HSN Note is illustrative, not exhaustive, and the term 'ligneous materials' includes any plant material with resin. Therefore, 'Rice Husk Boards' fall under Chapter Heading 44.06.

2. Allegation of Suppression of Facts and Invocation of Proviso to Section 11A:
The appellant argued that the demand was time-barred and that there was no willful misstatement or suppression of facts. They claimed that the Central Excise officers were aware of their manufacturing activities. However, the judgment found that the appellant did not provide sufficient evidence of the records taken by the Preventive Staff or details of the Range Staff's visits. The appellant's failure to file a declaration for 'Rice Husk Boards' and their subsequent request for clarification on excisability indicated a deliberate intention to suppress facts. Thus, the invocation of the proviso to Section 11A for an extended period demand was justified.

3. Imposition of Penalty under Rule 173Q(1):
The Collector imposed a penalty of Rs. 5,000/- under Rule 173Q(1) for contravening various provisions of the Central Excise Rules, 1944. The appellant contended that there was no willful intention to evade duty. However, the judgment clarified that mens rea is not required for imposing a penalty; it flows from the breach of rules. Given the appellant's failure to comply with the procedural requirements and the deliberate suppression of facts, the penalty was deemed appropriate and confirmed.

Conclusion:
The appeal was dismissed, confirming the classification of 'Rice Husk Boards' under Chapter Heading 44.06, the demand for duty under the proviso to Section 11A, and the imposition of a penalty under Rule 173Q(1). The judgment emphasized adherence to classification rules, the importance of transparency in declarations, and the consequences of procedural breaches.