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TMI Blog2000 (2) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit of exemption in terms of Notification No. 101/66-CE dated 17-6-1966 (as amended) and imposing a penalty of Rs. 20,000/- on the appellants herein. The above mentioned four products were used exclusively as textile softeners and finishing agents of various textile materials and contained a very low percentage (approximately 1.5%) of organic surface active agents. 2. The classification confirmed by the Adjudicating authority is not disputed by the appellants herein in view of the decision of the Tribunal in the case of Collector of Central Excise, Bombay v. L.N. Chemicals and Industries reported in [1996 (83) E.L.T. 458] wherein it has been held that the product Allenol Pesp used as softening agent in textile industry is a finishing agent classifiable under Chapter 38 and not under Heading 3402 of the Central Excise Tariff Act, 1985 and is not eligible to exemption under Notification No. 101/66 - the Tribunal inter alia relied upon the HSN Explanatory notes under Heading 3809 in coming to this conclusion. Therefore, the only question that is to be decided in the present case is the applicability of the extended period of limitation - the show cause notice dated 11th July, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to effect any further clearance without excise formalities and put on notice that failure to do so would render the goods liable to seizure (page 114). The appellants responded to this direction by sending a statement of clearances along with a certificate from Dr. W.B. Achwal, Head of the Textile Chemistry Division, Bombay University certifying that textile softening agents manufactured by the appellants can be regarded as surface active preparations, irrespective of the percentage of OSAA used therein (pages 115 and 116). 6. Subsequently on 12th May, 1989, the appellants were directed to apply for Central Excise licence for the finishing agents, softeners manufactured by them and classifiable under Heading 38.09 and informing them that declaration in terms of Notification 11/88 dated 15-4-1988 claiming the benefit of total exemption from duty under Notification 101/66 was not accepted and that the exemption Code No. allotted to them, if any, in 1986, stands cancelled (page 121). Samples of the disputed products were again drawn in May, 1989 for the purpose of testing whether the products were organic surface active agents and whether Notification 101/66 would be attracted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding the vital piece of information that the products were used for textile finishing. This, coupled with the fact that in their own factory in Kalol (Gujarat), where they manufactured identical products and cleared them as textile softeners at nil rate of duty in terms of Notification 101/66, no action was taken by the department for reclassification of the goods under Heading 38.09, supports the plea of the appellants that there was no suppression of any material facts or wilful misdeclaration on their part with intent to evade payment of duty. Further, we notice that after the personal hearing was granted by the Collector of Central Excise, Bombay, the appellants have put on record in the form of a letter dated 11th February 1991 the fact that during the course of submissions being made by their Counsel on the aspect of suppression as set out in para 15 of the show cause notice, the adjudicating authority stated after perusing certain correspondence that he would be holding that there was no suppression and informed their Counsel to only argue on the limited extent on merits for the period within the normal limitation period and in view of this, the appellants did not make any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. It is also matter of fact that when the products were subsequently examined and tested, they were found to have qualities or properties in addition to those of softening and, therefore, were finishing agents with softening as merely one of the functions. 17. The real facts about these aspects and the end-use were not disclosed by them to the Department and, therefore, the extended period of five years could be invoked and the demand was payable. 18. The learned D.R. also mentioned that now that the learned counsel is not contradicting or opposing the classification determined by the Collector, the Department s case is on a stronger footing and he would like to contend that once the classification was no longer in dispute, demand and penalty were required to be confirmed. 19. I have considered the submissions of both the sides and observe that the appellants have described in details as to what they had declared right from 1987-88 and the exchange of correspondence since then and the chemical tests, during that period but since the Tariff changed substantially in 1996, we are concerned with the legal and factual position with reference to this change and as to whether this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77 and 1978 which indicates, inter-alia, that even samples had been drawn and tested accordingly. However, all this was done during the period of old Tariff when legal requirements were different and, therefore, the communications were exchanged and test conducted in the light of those requirements and declaration. There was no specific heading for finishing agents at that time. Thus the situation was different and the issue of appropriate classification at that time is not before us and, therefore, this point need not be laboured further. What we have to take note of is the fact that during the period of new Tariff a specific provision had been made in the Tariff, first by way of a specific Chapter note covering such items and subsequently as a specific heading and since the present case falls during this period, we have to see what happened during this time. It is observed in this connection that the appellants had written letters and discussed the role of finishing agents and cited the textile terms and definitions given in the Publication of Textile Institute of Manchester and Dr. D.K. Sinha s opinion and Prof. V.A. Shenai s opinion and extracts from Man-made Textile Encyclopae ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to follow the orders in spite of having been directed to do so. 28. It is noticed in this respect that on one hand the appellants had not filed declarations for 1987-88 and 1988-89 (and filed only a vague one in 1989-90); And it is not only on 30-6-1989 that they have described their softeners as organic surface-active preparations (vide statement of Shri Sunil M. Brahmabhatt) (but they have continued to indicate them as such as organic surface-active preparations classifiable under 15AA as OSAA before 1986 and under 34.02 thereafter), on the other hand, the Superintendent of Central Excise had vide his letter dated 28-3-1989 clearly indicated, in the light of his discussions with the Assistant Collector, that their products were finishing agents/softeners classifiable under Heading 38.09 attracting duty at 15% ad valorem and directed that they should submit details of the quantity manufactured and cleared writing clearly that Please also note that no further clearance should be effected without excise formalities and failure for which the goods are liable to seizure and followed it up by another letter dated 12-5-1989 (in continuation of the former) and once again indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies the imposition of penalty was justified and was required to be confirmed. 30. In view of the above position, the impugned order is modified only to the extent indicated above and is otherwise confirmed. 31. The appeal is disposed of in the above terms. Sd/- (S.K. Bhatnagar) Vice President Dated 6-1-1999 POINTS OF DIFFERENCE 32. In view of the difference of opinion between Hon ble Judicial Member and the Vice President, the matter is submitted to the Hon ble President for reference to a third Member on the following points :- 1. Whether in view of the observations and findings of the Vice President, the impugned order is required to be modified and the appeal disposed of accordingly? 2. Whether the appeal is required to be disposed of in terms of the observations and orders of the Hon ble Judicial Member? Sd/- (Jyoti Balasundaram) Member (J) Sd/- (S.K. Bhatnagar) Vice President Dated 6-1-1999 33. [Order per : G.A. Brahma Deva, Member (J)]. - In view of the difference of opinion between the Member (Judicial) and the then Vice President, the matter is referred to me to express my views as third Membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were softners and have been described as such in their literature. This dispute was there even with reference to the old tariff entry and has been continued even after coming into force of Central Excise Tariff Act, 1985, as there was no separate entry (finishing agents) and as Notification No. 101/66-C.E. continued in force. He referred to the correspondence in between the department and the assessee with reference to the clarification of product since 1977 and even in the year 1988 i.e. on 29-1-1988 the department wrote to the appellants seeking clarification as to the classification of the disputed items under Chapter 34 as claimed by them and on 28-3-1989, the appellants were directed to submit details of quantum manufactured and removed during the past 6 months. He said that the details of correspondence, events have been recorded in the order proposed by the Member (Judicial) in detail. Further, he said that department was also not clear about the correct classification of the product in question since the Collector (Appeals) in the case of L.N. Chemicals and Industries has taken the view that item was classifiable under Chapter 34 but ultimately Tribunal decided the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the firm view that it was classifiable under 38 based upon the information furnisned by the assessee the best course open to the department was to issue notice instead of entering into further correspondence. In view of this position and taking into consideration that correspondence was going on in between the assessee and the department about the correct classification of the products, I am of the view that benefit of doubt should be given to the assessee and not to the department. In the facts and circumstances, particularly, in view of the clarification issued by the department on 14-6-1990, I am of the view that demand should be restricted to 6 months and demand if any beyond the 6 months from the date of show cause notice was barred by time. Accordingly, the view expressed by the Member (Judicial) is concurred with. Case file is returned to the original bench to pass an appropriate order. Sd/- (G.A. Brahma Deva) Member (J) Dated 28-1-2000 MAJORITY OPINION In the light of the majority opinion, demand for the period from 11th January 1990 to 31st October 1990 is confirmed, demand for the priod from 1-3-1986 to 10-1-1990 is set aside as barred by limit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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