2000 (7) TMI 713 - AT - Central Excise

Issues Involved:
1. Classification of "Pitch Creosote Mixture" (PCM) and Road Tar.
2. Classification of "Pitch."
3. Applicability of extended period under Section 11A of the Central Excise Act, 1944.
4. Imposition of Penalty.

Detailed Analysis:

1. Classification of "Pitch Creosote Mixture" (PCM) and Road Tar:
The Commissioner classified PCM and Road Tar under sub-heading 2708.11 of the Central Excise Tariff, which pertains to pitch obtained by blending with creosote oil or other coal tar distillates. The appellant argued that these products should be classified under Chapter Heading 2706 at NIL rate of duty as "reconstituted tars." The Commissioner found that PCM and Road Tar are blends of pitch and tar oils, used as fuels and for road making, respectively, and thus do not qualify as reconstituted tars. The Tribunal, however, concluded that PCM and Road Tar are commercially and technically understood as tars, not pitch, and should be classified under Heading 2706 as "reconstituted-tars," relying on HSN notes and the Supreme Court's decision in the appellant's own case.

2. Classification of "Pitch":
The Commissioner classified pitch under sub-heading 2708.19, which pertains to pitch other than that obtained by blending with creosote oil or other coal tar distillates. The appellant claimed classification under sub-heading 2708.11, arguing that their pitch was obtained by a "fluxing back" process, which involves blending pitch with tar oils. The Commissioner rejected this claim, stating that the process described by the appellant did not involve actual blending but rather a natural course of distillation where tar oils drip back into the pitch. The Tribunal found that the process of "fluxing back" amounts to blending as per the Chief Chemist's and Board's understanding, and thus classified the pitch under sub-heading 2708.11.

3. Applicability of Extended Period under Section 11A of the Central Excise Act, 1944:
The Commissioner invoked the extended period under Section 11A, alleging that the appellant had misdeclared their products, resulting in misclassification and evasion of duty. The appellant argued that there was no mis-statement or suppression of facts, as the manufacturing process was clarified to the department in 1984. The Tribunal found that the issues of "fluxing" to be "blending" were within the department's knowledge, and no new material justified the invocation of the extended period. Thus, the Tribunal concluded that the extended period was not applicable.

4. Imposition of Penalty:
The Commissioner imposed a penalty of Rs. 30 lakhs under Rules 9(2) and 173Q(2) of the Central Excise Rules, 1944. The appellant contended that the penalty was unjustified as they had cleared the goods based on approved classification lists and had no intention to evade duty. The Tribunal found no mis-statement or incorrect classification by the appellant and thus saw no reason to uphold the penalty.

Conclusion:
The Tribunal set aside the Commissioner's order, allowing the appeal, and concluded that:
- PCM and Road Tar should be classified under Heading 2706 as "reconstituted-tars."
- Pitch should be classified under sub-heading 2708.11, considering the "fluxing back" process as blending.
- The extended period under Section 11A was not applicable.
- The penalty imposed was unjustified.

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