2017 (9) TMI 1487 - AT - Central Excise

Classification of goods - clearance of final product Palm Stearin - It is the case of the Revenue that the appellant had improperly availed the benefit of notification by mis-declaring final product as edible palm oil while the product would as to RBD Palm Stearin falling under Chapter 38 - Benefit of N/N. 03/2006-CE dated 01.03.2006 - Held that - appellant had in fact recorded the clearances and indicated the same in their monthly returns as to availment of benefit of notification - the appellants could have entertained a bona fide belief as to the classification of the product RBD Palm Stearin will be covered under Chapter 15, seems to be correct as during the relevant period, various decisions of the Tribunal indicated that the classification of RBD palm stearin is under Chapter 15 - the plea of limitation as raised by the appellant has to be answered in their favor. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of duty on clearances of Palm Stearin without payment of duty, mis-declaration of final product, classification of RBD Palm Stearin under Chapter 38, benefit of Notification No. 03/2006-CE, limitation defense, imposition of penalties.

Analysis:
The appeals were filed against the Orders-in-Original regarding the demand of duty on the clearances of Palm Stearin without payment of duty, claiming the benefit of Notification No. 03/2006-CE. The Revenue alleged that the appellants mis-declared the final product as edible palm oil while it actually fell under Chapter 38 as RBD Palm Stearin. Show cause notices were issued for the duty demand, interest, and penalties. The appellants contested the notices on merits and limitation. The adjudicating authority confirmed the demands and penalties, which the appellants challenged in the appeals.

The main issue for consideration was the classification of the product RBD Palm Stearin and the applicability of the benefit notification. The appellants argued that they believed in good faith that the product fell under Chapter 15 based on previous Tribunal decisions until the Apex Court's judgment in Jocil Ltd. clarified the classification under Chapter 38. The limitation defense was crucial, with the appellants claiming that they had a genuine belief in the product's classification until the Apex Court's decision. The Revenue argued against the limitation defense, citing the appellants' lack of response to audit queries as evidence.

After considering the submissions, the Tribunal found merit in the limitation defense raised by the appellants. It was noted that the appellants had indicated clearances of Palm Stearin on nil duty rate in their monthly returns, showing their intention to avail the benefit of the notification. The Tribunal acknowledged that until the Apex Court's judgment in December 2010, the appellants could have genuinely believed in the product's classification under Chapter 15 based on previous Tribunal decisions. The Tribunal also referenced similar views expressed by High Courts in related cases.

Ultimately, the Tribunal held that the impugned order confirming the demands and penalties was set aside solely on the ground of limitation in favor of the appellants. The appeals were allowed based on the limitation defense, indicating that the appellants' genuine belief in the product's classification until the Apex Court's judgment supported their position.

This detailed analysis of the judgment highlights the key issues of duty demand, mis-declaration, classification, benefit notification, limitation defense, and penalties, providing a comprehensive understanding of the Tribunal's decision.