2017 (4) TMI 1207 - AT - Central Excise

Classification of Grey Oxide and Red Lead Oxide - trade parlance theory - Benefit of N/N. 50/2003- CE dated 10.03.2003 - denial on the ground that as the said items are covered under Chapter Heading 28 are mentioned in Annexure-I to the Notification No. 50/2003 ibid and the Red Lead and Grey Oxide manufactured by the assessee are classifiable under Chapter Heading 28.24, therefore, the assessee is liable to pay duty - extended period of limitation - Held that - in somewhat similar case where the classification of the product was based on the process involved, this Tribunal held that commercial parlance test will not be invoked for determining classification of such product - the trade parlance test is not applicable to the fact and circumstances of the case the test reports relied by the Revenue is inconclusive, as no procedure was followed and the assessee was deprived from re-testing the samples, therefore, the product in question cannot be classified under chapter heading 28.24 without any positive evidence. The assessee is entitled for benefit of N/N. 50/2003-CE - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the extended period of limitation is invokable.
2. Whether the goods in question are Red Lead Oxide based on the test reports.
3. Whether the goods can be classified as Red Lead Oxide as per trade parlance.

Issue No. I: Extended Period of Limitation

The assessee contended that they had disclosed their manufacturing process, including the production of Red Lead Powder through Barton Process, to the department on 09.04.2008. This disclosure was acknowledged by the department, which allowed the benefit of exemption Notification No.50/2003. The Commissioner observed that the assessee had filed all necessary declarations and information, and thus, there was no suppression of facts or intent to evade duty. Consequently, the extended period of limitation could not be invoked. The Tribunal agreed with the Commissioner’s observations and upheld the decision, dismissing the Revenue’s appeal on this ground.

Issue No. II & III: Classification and Test Reports

The assessee began manufacturing Red Lead Powder in 2008 but did not achieve the desired results, as evidenced by their test reports. During the investigation, samples were drawn and sent for chemical examination, but the test memos did not specify the purpose of the tests. The CRCL report indicated the presence of Lead Oxide content but did not provide a detailed analysis or chemical formula, making it unclear whether the oxide was PbO or Pb3O4.

The Tribunal found the test results unreliable due to procedural deficiencies and the delayed communication of the test reports, which deprived the assessee of the opportunity for re-testing. The Commissioner’s reliance on trade parlance to classify the product as Red Lead Oxide was deemed incorrect, as the classification should be based on chemical formulation. The Tribunal concluded that there was no positive evidence to classify the product under Chapter Heading 28.24 and allowed the benefit of Notification No.50/2003 to the assessee.

Conclusion:

The Tribunal set aside the demands for duty and interest against the assessee and also the penalty imposed, allowing the assessee's appeal. The Revenue's appeal was dismissed. The order was pronounced on 07.04.2017.