2015 (9) TMI 1322 - AT - Central Excise

Classification of goods - first item is processed rubber compound in sheet form - second item is processed rubber compound which is in the cord form - whether the item is classifiable under 4005.10 or 4005.90 - Held that - It would be seen from the description of 4005.10 that the primary requirement to classify under the said sub-heading is that in relation to the manufacture, of which no Cenvat credit of duty paid on the inputs used has been availed. In the present case, there is no dispute that credit of duty paid on certain inputs have been availed by the appellant, as is clear from the show-cause notice. It is not disputed either by the ld. counsel for the respondent or not even by the Commissioner (Appeals). We find the Commissioner (Appeals) has taken a view that the respondent had classified the goods under 4005.10 and cleared the goods indicating this classification in their clearance document and their monthly return. This clearly indicates the intention of the respondent not to avail credit of the duty paid on inputs used in the manufacture of such goods. Accordingly, the appellant had not availed the credit on their main input i.e. raw rubber and fillers. However, they had availed on a minor quantity of consumables. Commissioner (Appeals) has thereafter observed that this is unintentional wrong availment of Cenvat credit and same cannot be considered as wrong classification of goods and has agreed with the contention of the respondent. - goods classified by the respondent in 4005.10 would be classifiable under 4005.90. We also note that the respondent has declared in various documents as also, in the form of letter that he is not availing the credit of any of the inputs used in the manufacture of such item which have been found to be factually incorrect on verification. In view of this position, there has been clear cut mis-statement of facts and extended period of limitation would be invocable as far as the first product is concerned. Penalty under section 11AC/Rule 25 will also be imposable. - Decided in favor of revenue. As regards, second item there is no dispute about the fact that for the manufacture of this product the compounded rubber in the primary form i.e. in the form of sheet is used as an input and the said sheet is further extruded through a die of dimension of 10 10 sq.mm. to get compounded rubber of the said dimension in running length. This product is outcome of second time extrusion process and extrusion process is carried out on the compounded rubber. This is a case where the processed compounded rubber in the primary form has been further worked upon and would therefore be classifiable under heading 4006 in view of chapter note 7 As the unit was in existence and producing this item, filing the classification list which had been continuously approved by the appellant and in view of this position, in our view, the extended period of limitation invoked in respect of the second item is not correct, and only the demand which is within the normal period of limitation is upheld - Decided partly in favour of Revenue.

Summary

Issues Involved:
1. Classification and rate of duty for processed rubber compound in sheet form.
2. Classification and rate of duty for processed rubber compound in cord form.
3. Invocation of the extended period of limitation.

Detailed Analysis:

1. Classification and Rate of Duty for Processed Rubber Compound in Sheet Form:

The primary dispute revolves around whether the processed rubber compound in sheet form should be classified under heading 4005.10 (nil rate of duty) or 4005.90 (16% duty). The revenue contends that since the respondent availed Cenvat credit on inputs, the goods should be classified under 4005.90. The Commissioner (Appeals) had previously ruled that the respondent's minor availing of Cenvat credit did not affect the classification under 4005.10. However, the Tribunal disagreed, emphasizing that any availing of Cenvat credit, regardless of the quantity, disqualifies the goods from being classified under 4005.10. The Tribunal referenced the Hi-Mile Rubber (P.) Ltd. case, reiterating that goods should be classified under 4005.90 if any Cenvat credit is availed. Consequently, the Tribunal concluded that the processed rubber compound in sheet form should be classified under 4005.90, and the extended period of limitation applies due to the misstatement of facts by the respondent.

2. Classification and Rate of Duty for Processed Rubber Compound in Cord Form:

The second issue concerns the classification of processed rubber compound in cord form. The respondent classified it under 4005.10, while the revenue argued it should fall under 4006.90. The Tribunal observed that the product undergoes a second extrusion process, transforming it from a primary form into a worked product, making it suitable for gaskets. According to Chapter Note 9, such further worked products should be classified under 4006.90. Therefore, the Tribunal held that the correct classification for the processed rubber compound in cord form is 4006.90. However, the Tribunal did not support the extended period of limitation for this item, noting that the respondent had been manufacturing this product for nearly ten years, filing classification lists that were previously approved by the department.

3. Invocation of the Extended Period of Limitation:

For the first item (processed rubber compound in sheet form), the Tribunal upheld the invocation of the extended period of limitation due to the respondent's misstatement about not availing Cenvat credit. This misstatement was seen as an intention to evade duty. Penalty under section 11AC/Rule 25 was also deemed applicable.

For the second item (processed rubber compound in cord form), the Tribunal found the invocation of the extended period of limitation to be incorrect. Given that the respondent had been consistently filing classification declarations and the unit had been audited multiple times without objection from the department, the extended period was not justified. Only the demand within the normal period of limitation was upheld, and no penalty was imposed for this item.

Conclusion:

The appeal filed by the revenue was allowed in the terms that:
- The processed rubber compound in sheet form is to be classified under 4005.90, with the extended period of limitation applicable and penalties imposed.
- The processed rubber compound in cord form is to be classified under 4006.90, but the extended period of limitation is not applicable, and no penalties are imposed.