2020 (9) TMI 502 - AT - Central Excise

Classification of goods - RBD Palm Stearin which they manufacture from refined palm oil - classified under Central Excise Tariff heading 1511 9090 or not? - benefit of N/N. 03/2006- CE dt.01.03.2006 (S.No.9) (as amended) - CBEC Circular No.81/2002-CUS dt.03.12.2002 - period September, 2008 to September, 2010 - extended period of limitation - HELD THAT - The issue has been settled by the Hon ble Apex Court in October, 2010 in the case of CCE, C AND SERVICE TAX VERSUS JOCIL LTD. 2010 (12) TMI 24 - SUPREME COURT and it has been held that Palm Stearin is classifiable under Central Excise Tariff Heading 3823 and not under CTH 1511. Thus, it has been decided against assessee and in favour of the revenue - Respectfully following the judgment of the Hon ble Apex Court in the case of JOCIL Ltd, it is held that the appellant s product is classifiable under CTH 3823 and not under CTH 1511 as claimed by the appellant. Consequently, the exemption notification claimed by the appellant is also not applicable as the relevant entry pertains to only goods falling under Chapter Heading 1507 to 1515. Clearly the appellant s product falling under CTH 3823 is not covered. Extended period of Limitation - HELD THAT - The appellant has been filing ER-1 returns claiming the product s classification under CTH 1511 and there has been correspondence between the department and the appellant in this regard. On 03.12.2008 the department advised the appellant that the classification of Palm Stearin in ER-1 returns is not correct to which the appellant responded on 06.01.2009 justifying their classification. Thus, the department was fully aware of the appellant s classification. There is no delay in the appellant responding to the revenue s letter. It was open for the revenue to issue a show cause notice if they did not find the appellant s reply acceptable. However, this was not done. No action was taken until the expiry of normal period of limitation and thereafter, demand has been raised invoking extended period of limitation - The entire demand is based on the information provided by the assessee in their ER-1 returns. Making a wrong claim of classification, per se, is neither fraud nor collusion nor wilful misstatement nor suppression of any facts. It is just a wrong claim. If the claim is wrong in the ER-1 returns, it was open for the revenue to have raised demand by issuing a show cause notice immediately. Therefore, we find that there is no ground for invoking extended period of limitation in this appeal. The appeal is allowed on the ground of demands being time barred - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of RBD Palm Stearin under Central Excise Tariff Heading, Invocation of extended period of limitation for raising demands, Applicability of exemption notification, Correctness of classification in ER-1 returns, Imposition of penalty under section 11AC and Rule 25 of Central Excise Rules.

Classification of RBD Palm Stearin:
The appellant classified RBD Palm Stearin under Central Excise Tariff Heading 1511 9090 and claimed exemption under notification No.03/2006-CE. However, a specific entry for Palm Stearin under Chapter 38 was introduced w.e.f. 28.02.2005. The Hon'ble Apex Court in the case of JOCIL Ltd held that Palm Stearin is classifiable under CTH 3823, not under CTH 1511. Following this judgment, CBEC issued Circular No.32/2011 withdrawing the earlier circular of 2002. The Tribunal upheld the classification under CTH 3823, stating that the appellant's product does not fall under the exemption notification as it pertains to goods under Chapter Heading 1507 to 1515.

Invocation of Extended Period of Limitation:
The revenue raised demands for the period September 2008 to September 2010, issuing a show cause notice in May 2012 and adjudicating it in September 2012. While the notice covered until March 2012, the clearances were only up to September 2010. The demand was made invoking the extended period of limitation, with interest and penalties imposed under section 11AC and Rule 25 of Central Excise Rules. The Tribunal found no evidence of fraud, collusion, or wilful misstatement by the appellant to evade duty. The demand was solely based on the appellant's incorrect classification in ER-1 returns, which did not amount to intentional wrongdoing. Thus, the Tribunal allowed the appeal on the ground of demands being time-barred.

Applicability of Exemption Notification:
The Tribunal ruled that the exemption notification claimed by the appellant was not applicable as their product fell under CTH 3823, not covered by the relevant entry for exemption. The appellant had been filing ER-1 returns claiming classification under CTH 1511, despite the department advising against it in 2008. The Tribunal noted that the revenue did not issue a show cause notice promptly after the appellant's response, and there was no evidence of intentional evasion of duty. Therefore, the imposition of penalties and interest was deemed unjustified.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal in favor of the appellant. The classification of RBD Palm Stearin under CTH 3823 was upheld, and the demands were considered time-barred due to the absence of fraudulent intent or deliberate misstatement by the appellant. The decision was based on the settled judgment of the Hon'ble Apex Court and the lack of grounds for invoking the extended period of limitation.