2016 (7) TMI 296 - AT - Central Excise

Demand of duty u/s 3A under compounded levy scheme - production. Ingots and billets of non-alloy steel - whether the goods is classifiable under Heading No. 7206.90 or 7224.90 of the CETA. - Held that - When the Chemical Examiner s report on the various elements contained in the respondent s sample is compared with the specifications, for non-alloy steel as specified in Note 1 (f) of Chapter 72, the conclusion is that the respondent s items would fall for classification under other alloy steel under 7206.90. Consequently, respondent stands covered by the Compounded Levy Scheme and is required to discharge duty as per this scheme, as alleged by the Revenue. It is fairly obvious that under this provision, the respondent is required to come out with a positive declaration if they were manufacturing the products covered by the scheme. It stands established by the report of the chemical examiner that what has been manufactured by the respondent is non-alloy steel products whereas what has been declared by them is otherwise. Under the circumstances, we are inclined to take the view that this is nothing but deliberate withholding of information which will make this a fit case to invoke extended time limit under the proviso to section 11A of the Act for demand of duty. Alowance of Modvat Credit - the allowability will need to be evaluated with reference to the Modvat Rules prevailing in at the relevant time. - For this limited purpose, the matter is remanded to the Original Adjudicating Authority. Demand of duty with penalty confirmed - Decided in favor of revenue.

Summary

Issues:
Classification dispute under Heading No. 7206.90 or 7224.90 of the CETA; Duty liability under Section 3A of the Act from 1/4/1998 to 31/3/2000; Sustainability of duty demand and proposals in the show cause notice.

Analysis:
1. The case involved a classification dispute to determine whether the goods in question were classifiable under Heading No. 7206.90 or 7224.90 of the CETA. The dispute arose due to the application of Section 3A of the Act, which required duty payment on notified goods based on production capacity.

2. Section 3A was inserted in the Central Excise Act to charge duty on notified goods like ingots and billets of non-alloy steel. The dispute centered around whether the goods manufactured were ingots of alloy steel or non-alloy steel, impacting the duty liability under Section 3A.

3. The respondent had two divisions in their factory, each producing different goods. The classification declaration and monthly returns filed indicated compliance with duty payment procedures. The dispute focused on charging duty specifically on ingots under Section 3A.

4. Central Excise Officers conducted checks and took samples of ingots for testing, which revealed the goods were other than alloy steel. A show cause notice was issued for recovery of duty under Section 3A based on this report.

5. The Adjudicating Authority quantified the duty liability but ultimately dropped the demand, citing a lack of evidence for deliberate misstatement or withholding of information to evade duty payment.

6. The Revenue challenged the order, arguing that the respondent had consistently manufactured non-alloy steel ingots and should be held liable for the duty demand.

7. The respondent contended that the test report should have prospective application and emphasized their compliance with classification declarations and filings.

8. The Tribunal heard arguments from both sides, with the Revenue pressing for full duty confirmation based on the test report's findings of misdeclaration by the respondent.

9. The Tribunal analyzed the chemical examiner's report and concluded that the goods fell under other alloy steel, supporting the Revenue's claim for duty under the Compounded Levy Scheme.

10. The Tribunal upheld the prospective effect of the test report and rejected the Revenue's attempt to back-date the demand, requiring evidence to support allegations prior to the sample date.

11. The Tribunal found deliberate withholding of information by the respondent, justifying the extended time limit for duty demand under Section 11A.

12. The Tribunal confirmed the duty liability for the specified period and allowed Modvat Credit for duty paid on ingots used for rolled products, remanding the matter for further evaluation.

13. The Revenue appeal partially succeeded, confirming a specific duty demand along with penalties and interest, while disposing of the respondent's cross-objections accordingly.