2023 (10) TMI 350 - AT - Central Excise

Classification of goods - combipack which contains the EMD and MRR - to be classified under the Heading 85167920 of CETA 1985 or not - penalty u/r 25 of CER - HELD THAT - The issue has been considered by the Tribunal in the case of KARAMCHAND APPLIANCES PVT. LTD. VERSUS COMMR. OF C. EX., CHANDIGARH 2013 (4) TMI 79 - CESTAT, NEW DELHI . The Tribunal in the said case observed that the essential character of the combi pack is that of MRR and not EMD - The Tribunal thus held that the product is classifiable under 3808.10. By judicial discipline, following the above decision of the Tribunal and hold that the goods viz. the combipack consisting of EMD MRR are classifiable under 38089191 as determined by the department. The issue on merits is answered in favour of the Revenue and against the assessee. Levy of penalty u/r 25 of Central Excise Rules, 2002 - HELD THAT - The first Show cause notice has been issued invoking the extended period of limitation alleging suppression of facts with an intent to evade payment of duty. The adjudicating authority has rendered a finding that the issue was contentious and there were divergent views prevailing during the relevant time - the demand was thus restricted to normal period. In the absence of any malafide intention, penalty cannot be imposed under Rule 25 of Central Excise Rules, 2002 also. The said rule states that only when there is non-payment of duty with an intent to evade payment of duty, the penalty can be imposed. The findings recorded by the original authority itself shows that there was no intention to evade payment of duty and therefore the penalty imposed under Rule 25 of Central ExciseRules 2002 is not justified and requires to be set aside - the impugned order is modified to the extent of setting aside the penalty of Rs.5,00,000/- lakhs imposed under Rule 25 of Central Excise Rules, 2002. The demand confirmed along with interest is sustained. Appeal allowed in part.

Summary

Issues:
Classification of combipack containing Electrical Mosquito Repellant Device (EMD) and Mosquito Repellant Refill (MRR) under Central Excise Act, 1944.

Summary:

Issue 1: Classification of Combipack

The appellant, engaged in manufacturing Electrical Mosquito Repellant Devices, classified the combipack under Heading 85167920 of CETA 1985 and cleared them on payment of duty under Section 4A value of RSP availing the abatement. The department contended that the combipack should be classified under Chapter sub-heading 38089191 as applicable to MRR. Show cause notices were issued proposing to demand differential duty, interest, and penalties. The original authority held that the demand for the period November 2007 to October 2011 cannot sustain but confirmed subsequent demands for the period November 2011 to March 2012 and April 2012 to January 2013. Penalty under Section 11AC was dropped, but a penalty of Rs.5 lakhs was imposed under Rule 25 of Central Excise Rules, 2002.

Issue 2: Appellant's Arguments

The appellant argued that the essential character of the combipack is that of EMD, not MRR, making the classification under 85167920 correct. Referring to Rule 3 (c) of the Rules of Interpretation, the appellant claimed that when goods are not classifiable under Rule 3 (a) and Rule 3 (b), they should be classified under the heading which occurs last in numerical order. The appellant relied on a United States Customs Ruling to support their argument.

Issue 3: Department's Response

The department supported the findings in the impugned order, maintaining that the combipack should be classified under 38089191 as determined by the department.

Issue 4: Tribunal's Decision

The Tribunal, following the decision in a similar case, held that the combipack should be classified under 38089191, as the essential character is that of MRR. The Tribunal upheld the department's classification and ruled in favor of the Revenue. The penalty imposed under Rule 25 of Central Excise Rules, 2002 was set aside as there was no intention to evade payment of duty.

Conclusion

The Tribunal ruled in favor of the Revenue, classifying the combipack under 38089191. The penalty under Rule 25 of Central Excise Rules, 2002 was set aside due to the absence of intent to evade payment of duty. The demand confirmed along with interest was sustained, and the appeals were partly allowed.