2015 (12) TMI 10 - AT - Central Excise

Classification of goods - Classification of henna powder retail packs - Invocation of extended period of limitation - Held that - By section 67 (d) of Finance Act, 2006 heading 140410 alongwith its sub-heading 14041011 to 14041090 were deleted. Deletion of the sub-heading 14041011 and 14041019 which included the sub-heading 14041011 to 14041090 pertaining to henna leaves and henna powder respectively would imply that heena powder and leaves were no longer covered under heading 1404. However, the Central Excise Tariff published by the Directorate of the publication of Central Board of Excise & Customs continued to mention the word henna just below the sub-heading 140410 pertaining to raw vegetable materials of a kind used primarily in dying or tanning It is only in tariff for 2013-14 published by the publication directorate of the CBEC; that this mistake was corrected. When this fact stands accepted by the adjudicating authority, in our prima facie view the assessee cannot be blamed for entertaining belief that even after 1/1/07 henna powder was specifically covered under heading 1404 and would attract nil rate of duty. Irrespective of the merits of the department s case for classification of the goods, in question, under heading 3304, the longer limitation period of five years under proviso to section 11A(1) is not invokable and bulk of the duty demand would therefore to be time barred. Therefore, we are of the view that an amount of ₹ 20 lakh paid by appellant during investigation is sufficient for the hearing of the case and hence the requirement of the pre-deposit of the balance amount of duty demand, interest thereon and penalty by the appellant company and the requirement of pre-deposit of penaty by Sh. Vikas Gupta, Director of the appellant company is waived for hearing of their appeals and recovery thereof is stayed. - Stay granted.

Issues Involved:
1. Classification of Henna Products under Central Excise Tariff
2. Invocation of Extended Limitation Period
3. Requirement of Pre-Deposit for Hearing of Appeal

Issue-wise Detailed Analysis:

1. Classification of Henna Products under Central Excise Tariff:
The appellant, M/s. Neha Herbals Pvt. Ltd., received henna powder in bulk and manufactured two products: henna powder in retail packs and henna cones. Prior to January 1, 2007, henna powder was covered under sub-heading 14041019 of the Central Excise Tariff with a nil rate of duty. However, by Section 67(d) of the Finance Act, 2006, heading 1404 was amended, and sub-headings 14041011 to 14041090 were deleted. The department contended that post-amendment, henna products should be classified under heading 3304, which pertains to "beauty or make-up preparations and preparations for the care of skin (other than medicaments)." The appellant argued that the Central Excise Tariff published by the Directorate of Publications of the Central Board of Excise and Customs still mentioned "henna" under heading 1404 even after the amendment, leading them to believe that henna products continued to attract a nil rate of duty.

2. Invocation of Extended Limitation Period:
The Commissioner confirmed the duty demand by invoking the extended limitation period under proviso to Section 11A(1) of the Central Excise Act, 1944, alleging deliberate non-payment of duty and suppression of facts by the appellant. The appellant contested this, stating that the continued mention of "henna" in the Central Excise Tariff post-amendment led them to a bona fide belief that their products were still covered under heading 1404. The Tribunal noted that the Central Excise Tariffs from 2007-2008 to 2012-2013 continued to mention "henna" under heading 1404, and this mistake was only corrected in the 2013-14 tariff. Given this, the Tribunal held that the appellant could not be blamed for believing that henna powder was covered under heading 1404 and thus attracting a nil rate of duty. Consequently, the longer limitation period was deemed not invokable, rendering the bulk of the duty demand time-barred.

3. Requirement of Pre-Deposit for Hearing of Appeal:
The Tribunal considered the submissions from both sides and noted that the appellant had already deposited Rs. 20 lakh during the investigation. Given the circumstances and the prima facie view that the appellant could not be faulted for their belief regarding the classification of henna products, the Tribunal held that the amount already paid was sufficient for hearing the appeal. Therefore, the requirement for pre-deposit of the balance amount of duty demand, interest, and penalty by the appellant company and the pre-deposit of penalty by the director was waived. The recovery of these amounts was stayed, and the stay applications were disposed of accordingly.

Conclusion:
The Tribunal ruled in favor of the appellant by waiving the requirement of pre-deposit for the hearing of the appeal and stayed the recovery of the balance amounts. The decision was based on the continued mention of "henna" in the Central Excise Tariff post-amendment, which led to a bona fide belief by the appellant regarding the classification of their products. The extended limitation period was deemed not applicable, making the bulk of the duty demand time-barred.

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