2016 (3) TMI 266 - AT - Central Excise

Extended period of limitation - Availability of exemption under notification 29/2004-CE - re-classify the product under heading 7019 and to deny the exemption - sustainability to demand for extended period - Held that - The original authority clearly indicated in the order that the appellant has declared in their ER-1 returns that they are engaged in the manufacture of clearance of dust collection bags manufactured out of cotton fabric, poly fabric and woven glass fabrics. However, the Original Authority proceeds further to state that the Chapter heading was not mentioned in respect of woven glass fabrics and this will amount to deliberate suppression of facts. We are not able to agree with such conclusion. It is an admitted fact that the appellant has declared the nature of raw material and the nature of final product. They had in their assessment and clearance documents mentioned the classification as was done for many years. In the matter of classifying the product, the assessee followed their understanding. When the material facts are disclosed, a particular classification followed by the appellant will not make a case for suppression. The Hon ble Supreme Court in the case of Desons Pultretaknik (2003 (1) TMI 115 - SUPREME COURT OF INDIA ) held that merely claiming a classification under a particular heading cannot be a willful misstatement or a suppression of facts. The Tribunal in the case of AB Mauri India Pvt. Ltd. 2010 (8) TMI 348 - CESTAT, MUMBAI held that in the case of bonafide belief of a particular classification, it cannot be said that the appellant suppressed any material fact before the Department with intend to evade payment of duty. After careful consideration of the facts of the case, we find the demand for extended period is not sustainable, and accordingly, the appeal in so far as it relates to extended period is allowed. The penalty imposed on the appellant is also set aside. The demand due to reclassification as confirmed by the Original Authority with applicable interest will be restricted to the normal period of limitation. The appeal is disposed of in these terms. - Decided in favour of assesseee

Summary

Issues:
Classification of dust collection bags made from woven glass fabrics under tariff headings 70199090 and 59119090, availability of exemption under notification 29/2004-CE, time bar for demand from 9.7.2004 to 28.11.2006, sustainability of demand for extended period, deliberate suppression of facts by the appellant, applicability of self-assessment procedure, and penalty imposition.

Classification Dispute and Time Bar:
The appeal concerned the classification of dust collection bags manufactured from woven glass fabrics under tariff headings 70199090 and 59119090, impacting the availability of exemption under notification 29/2004-CE. The appellant argued that the demand notice issued in 2007 covering the period from 2004 to 2006 was time-barred due to their long-standing manufacturing history and regular compliance with declarations and audits. They contended that the dispute arose in 2004, and there was no deliberate suppression of facts, citing various legal precedents to support their stance.

Allegations of Suppression:
The appellant refuted allegations of deliberate suppression by the department, emphasizing their consistent declarations and compliance with rules. The Original Authority claimed that the appellant availed ineligible concessions knowingly, but the appellant argued that they followed self-assessment procedures and disclosed all material facts. The Tribunal noted that the appellant's classification of products under Chapter 59 for years did not amount to suppression, citing legal precedents that claiming a particular classification in good faith does not constitute suppression.

Sustainability of Demand for Extended Period:
The Tribunal analyzed the sustainability of the demand for an extended period, concluding that the demand was not viable. They highlighted that the appellant's actions did not demonstrate fraudulent intent or evasion of duty, and the penalty imposed was set aside. The demand for reclassification was restricted to the normal limitation period, and the appeal was allowed in favor of the appellant on the issue of the extended period.

In conclusion, the judgment revolved around the classification dispute of dust collection bags made from woven glass fabrics, the time bar for the demand, allegations of suppression, and the sustainability of the demand for an extended period. The Tribunal ruled in favor of the appellant, setting aside the penalty and restricting the demand to the normal limitation period, emphasizing the lack of fraudulent intent or suppression of facts by the appellant.