2018 (8) TMI 318 - AT - Central Excise

Classification of manufactured goods - appellants manufactured and cleared two types of needles for sutures i.e. one having horizontal punch and the another having vertical punch - Department took the view that there cannot be two classifications for minor variations in the products and that they were not eligible for exemption under Notification No.6/2006-CE. Whether disputed goods are complete Atraumatic Needled Sutures or whether they are only parts and accessories thereof? Held that - Notwithstanding the stand of the department that items are required to be classified under CETH 90183210 as needles for suture, the fact is that they cannot be used as such for suturing purposes - it is noted that type 2 needle suture thread is fused with the needle by the manufacturer and the due is sterilized and packed. In the event, while the cleared needles having vertical punch‛, may well be final goods for the appellants, it can only be considered as a part or accessory for the manufacturer who would eventually be manufacturing Atraumatic Needled Suture - the impugned item being part / accessory of the Atraumatic Needled Suture required to be classified under CETH 9018, the said impugned goods would fall within the beneficial scope of Sl.No.59 of N/N. 6/.2006-CE and be eligible for the exemption provided thereunder. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Classification of needles for sutures under Central Excise Tariff Heading, eligibility for exemption under Notification No. 6/2006-CE, imposition of duty, interest, and penalty, time-bar for disputed demand, interpretation of relevant legal provisions.

Detailed Analysis:
1. Classification of Needles for Sutures:
The case involved the classification of needles for sutures manufactured by the appellants under different headings in the Central Excise Tariff. The Department contended that minor variations in the products did not warrant two separate classifications. The Commissioner classified the needles under a specific heading, leading to a demand for duty, interest, and penalties. The appellants challenged this classification, arguing that the needles fell under a different heading based on the Supreme Court judgment in Johnson & Johnson Ltd. vs. CCE Aurangabad. The Tribunal noted the classification issue and ruled in favor of the appellants, stating that the disputed goods were part of a specific category under the Central Excise Tariff, entitling them to exemption under Notification No. 6/2006-CE.

2. Eligibility for Exemption under Notification No. 6/2006-CE:
The appellants claimed exemption under Sl. No. 59 of Notification No. 6/2006-CE for the needles manufactured by them. They argued that the exemption extended to parts and accessories of specific goods headings without any specified conditions. The Tribunal analyzed the provisions of the notification and agreed with the appellants, emphasizing that the disputed goods fell within the scope of the notification. The Tribunal held that the appellants were entitled to avail the benefit of the exemption under Notification No. 6/2006-CE based on the classification of the goods.

3. Imposition of Duty, Interest, and Penalty:
The Department issued show cause notices proposing the imposition of duty, interest, and penalties on the appellants for the alleged misclassification of the needles for sutures. The Commissioner confirmed the proposals, leading to a significant demand on the appellants. However, the Tribunal, after considering the arguments presented by both sides, concluded that the impugned order could not be sustained. The Tribunal set aside the order, allowing the appeal and granting consequential benefits to the appellants as per the law.

4. Time-bar for Disputed Demand:
The appellants raised a contention regarding the time-bar for the disputed demand, highlighting that the show cause notice was issued after a significant period from the alleged period of default. They argued that the details of clearances were provided in their returns, indicating no suppression of facts. The Tribunal acknowledged this argument but primarily focused on the classification and exemption aspects in its final decision, ultimately ruling in favor of the appellants based on those grounds.

In conclusion, the Tribunal's judgment in this case primarily revolved around the correct classification of the needles for sutures, the eligibility for exemption under Notification No. 6/2006-CE, and the subsequent implications on duty, interest, and penalties. The decision provided clarity on the legal interpretation of relevant provisions and set aside the earlier order, granting relief to the appellants based on the classification and exemption criteria.