2010 (6) TMI 446 - AT - Central Excise

Demand limitation Misdeclaration - mis statement by the appellants in the declaration which entitled the department to invoke the extended period of limitation - Tribunal in Hindustan Packaging Company Ltd. (1994 -TMI - 48728 - CEGAT, NEW DELHI) had held that the said product was classifiable under chapter 76 - in order to claim the classification under Chapter 76, it was necessary that the product should have been sandwiched between the coatings on either side. There was nothing to suggest in the Chapter 76 that aluminium foil backed with plastic only on one side would fall under the said chapter and that if it is coated by plastic on both sides, it would be under Chapter 39. The aluminium foil whether it is backed on one side or coated on both sides would fall under sub-heading 7607 and that was their reply dated1-9-99to letter dated13-7-1999. This apparently disclosed that the appellants consciously had taken the stand that irrespective of the fact that the product was coated on both sides with plastic, it would fall under chapter 76 and not under 39. If one reads the appellants submissions in the year 1996, it is apparent that there was no clear description in the said declaration. It was not for the appellants himself to decide whether the classification would be under 76 or 39 irrespective of the description of the product and on the contrary, it was necessary for the appellants to give detailed description of the product in the declaration. This is more so, in view of the self-assessment procedure. Non-declaration of the correct description could have helped the appellant in justifying their claim is a totally different issue. But the fact remains that correct description of the product was not revealed in the declaration. In those circumstances, certainly mis-statement can not be said to be un-intentional. - Decided against assessee Merely because one of the said Managers was authorised signatory to defence filed in the case, that would not be sufficient to construe that he was responsible for the mis-statement. Being so, the penalty against the Managers cannot be sustained. In the result, the appeal filed by the appellant company fails whereas the appeals filed by the Managers succeed.

Summary

Issues Involved:
1. Classification of the product.
2. Invocation of extended period of limitation.
3. Imposition of penalties on company managers.

Detailed Analysis:

1. Classification of the Product:
The primary issue was the classification of the product, a multi-layer laminate consisting of aluminum foil laminated on both sides with plastic. The appellants argued that it should be classified under sub-heading 7607.90, whereas the department contended it should be classified under heading 39.20 of the Central Excise and Tariff Act. The adjudicating authority, relying on the Supreme Court's decision in Sharp Industries v. CCE Mumbai-III, held that the product was classifiable under Chapter 39, specifically under sub-heading 3923.90, rather than 7607.90. The Supreme Court in the Sharp Industries case clarified that the term "backed" implies coating on only one side, and a product coated on both sides is not "backed" but "sandwiched." Therefore, the product predominantly consisting of plastic and coated on both sides falls under Chapter 39.

2. Invocation of Extended Period of Limitation:
The appellants contested the invocation of the extended period of limitation, arguing that all relevant facts were within the department's knowledge. They pointed to their classification declarations and the department's stock inspection and audit reports as evidence of transparency. However, the department maintained that the appellants did not disclose the correct description of the product, specifically that it was coated on both sides with plastic. The Tribunal upheld the department's stance, noting that the appellants' declaration was misleading and constituted a mis-statement, justifying the invocation of the extended period of limitation. The Tribunal emphasized that the correct description of the product was not provided in the declaration, which was necessary for proper classification.

3. Imposition of Penalties on Company Managers:
The penalties imposed on the Ex-Deputy Manager and Assistant Manager of the company were also challenged. The Tribunal found no material evidence in the impugned order to show the involvement of these managers in the mis-statement. The mere fact that one of the managers was an authorized signatory to the defense filed was insufficient to hold them responsible for the mis-statement. Consequently, the Tribunal set aside the penalties imposed on the managers, while maintaining the order against the appellant company.

Conclusion:
The appeal filed by the appellant company was dismissed, upholding the classification of the product under Chapter 39 and the invocation of the extended period of limitation due to mis-statement. However, the appeals filed by the managers were allowed, and the penalties imposed on them were set aside. The Tribunal's decision was based on the detailed analysis of the product's classification, the adequacy of the appellants' declarations, and the involvement of the company managers in the alleged mis-statement.