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TMI Blog2010 (2) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case, the appellants are guilty of concealment deliberate non-disclosure of the description of goods as chemically modified phenol formaldehyde - penalty is warranted in the facts and circum stances of the case. In the light of the above, we uphold the impugned order and reject the appeal - appellant could hardly contend that it discharged the onus of making correct declaration if it had with held the description which was commonly used in respect of the goods not only by itself but also by those from whom it bought or to whom it sold the products - penalty imposed in the impugned order is liable to be set aside - appeal is allowed in part. - E/441/1998 - 459/2010 - Dated:- 15-2-2010 - S/Shri M.V. Ravindran, Member (J) and P. Karthikeyan, Member (T) REPRESENTED BY: Ms. S.L. Maithili, Advocate, for the Appellant. Ms. Sudha Koka, SDR, for the Respondent. [Order per: P. Karthikeyan, Member (T)]. - M/s. Baklite Hylam Ltd., Hyderabad (BHL) were engaged in the manufacture of resins, insulating varnishes etc. They had periodically filed classification lists under Rule 173B of the Central Excise Rules, 1944 (CER). Such classification lists filed in 1988 and '89 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he final order was passed by the first respondent Tribunal, and in view of the limited prayer of the learned counsel appearing on behalf of the petitioner and considering the fact that certain aspects, as noted above, had not been considered, when the first respondent Tribunal had passed the impugned order, dated 18-4-2000, the final order of the first respondent 'Tribunal, dated 18-4-2000, made in Appeal No. E/441 /98, is set aside and the first respondent Tribunal is directed to pass appropriate orders, on merits, and in accordance with law, considering all the relevant issues, in particular, the applicability of the first proviso to Section 11A of the Central Excise Act, 1944, to the petitioner, uninfluenced by its findings in its earlier decision, dated 18-4-2000. Accordingly, the writ petition is disposed of, with the above directions. No costs." The instant matter arises before us pursuant to the above order of the Hon'ble High Court of Madras. 2. The facts of the case are that BHL were engaged in the manufacture of insulating varnishes, mixture of resins etc. had filed classification lists describing the excisable goods manufactured by it as follows:- (i) Alkyd Resins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these grades were marketed for the purpose of using them as insulating varnishes as was clear from the technical data sheets and the admissions made by Sri Basha in his statements; (d) blending of phenolic resins or melamirie resins along with alkyd resins was made to get desired characteristics suitable for electrical or mechanical applications such as desired film thickness and electrical insulation. The assessee had been manufacturing and selling insulating varnishes whereas they suppressed the said actual use of the impugned product from the department in order to avail exemption applicable to products falling under 3907.50 to the extent of Rs. 17,41,328.65 during 6/88 to 2/93. During the proceedings before the Commissioner, the appellants had claimed that the impugned product fell under Chapter Heading 3208 in view of Note 3 of Chapter 32. The Commissioner found that the said note was an inclusive one and goods being solutions of products of CSH 3901 to 3913 in an organic solvent which weighed upto 50% of the total weight of the goods were not excluded from the coverage of the heading. The impugned was passed after due process of law. 3. In the appeal filed before the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steel Co. Ltd. v. UOI Ors. [1988 (35) E.L.T. 605 (S.C.)] (b) Indu Nissan Oxo Chemicals Ind. Ltd. v. CCE, Vadodara [2009 (241) E.L.T. 435 (Tri. - Abmd.)] They relied upon the judgment of the Apex Court in the case of Pahwa Chemicals Pvt. Ltd. v. CCE, Delhi [2005 (189) E.L.T. 257 (S.C.)] in support of the argument that penalty could not be imposed in a case where the proviso to Section 11A of the Act could not be invoked. 4. Revenue has sought to sustain the impugned order raising the following arguments :- The assessee had never disclosed the ingredients of the impugned product Alkyd Resin to the department till the department initiated investigation. In November, 1992, when the department sought to know the process of manufacture of the impugned goods, the assessee furnished certain details vide its letter dated 16-11-1992, which did not contain particulars of constituents of the product. As per the various statements given by Shri S.I. Basha, Asst. Manager, R D, the proportion of Alkyd Resins in the impugned goods was less than phenolic resins and melamine resins. He had deposed that the impugned product could be used as insulating varnishes without adding any other ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishree Engineering, it was evident that the appellant had not discharged the onus of furnishing the relevant details to the department and suppressed the facts to avail the admissible exemption in respect of the impugned product. 5. The following further arguments were also advanced in support of the classification and he demand confirmed in the impugned order :- The impugned product is bought and sold as insulating varnishes. As per the account of Shri S.I. Basha, Asst. Manager, R D of the assessee-company, the impugned goods are used as insulating varnishes without adding any other material. As per Note 3 of Chapter 32 of the Tariff, the said chapter included solutions of products of Chapter Heading 39.01 to 39.13, in organic solvents weight of which was not less than 50% of the weight of the product. The note does not exclude from the said chapter, varnishes where solvent weight is less than 50% of the weight of the product; they are covered by CSH 3208. As regards the impugned item, there is a specific entry 'insulating varnishes' under CSH 3208.40. Therefore the product is correctly classifiable under CSH 3208.40. The impugned product has phenolic resins and melamine resin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by Sri Basha in his statements; (iv) blending of phenolic resins or melamine resins along with alkyd resins is made to get desired characteristics suitable for electrical or mechanical applications such s desired film thickness and electrical insulation. 8. The product under consideration is described by the assessee as Alkyd resin. It transpired in investigation that the subject goods are composite articles and comprised other resin(s) as well, such as, phenolic resin and melamine resin in some cases and only phenolic resin in certain other cases in addition to Alkyd resin. The item discussed in the impugned order namely, 003-1010 FC, contained phenolic resin and Alkyd resin in the ratio 260: 645. In his statements rendered during investigation, the Assistant Manager, (R D) of the assessee, Shri Basha explained that the product in question was an insulating varnish and was marketed as insulating varnish. The technical literature of BHL on the product circulated among the trade was also to that effect. No material needed to be added to make it insulating varnish; it only needed to be dried. The other resins imparted electrical/mechanical properties to the product. We fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3. Rule 3 - When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows (a) the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or sub stances contained in mixed or composite goods or to part only of the items in a set up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. 8.2 It was ascertained in investigation that the goods involved are insulating varnishes; 'insulating varnishes' figure under CSH 320840. This was also the classification declared by BHL w.e.f. 1-3-93. Chapter note 3 to Chapter 32 reads as follows: "3. Heading No. 32.08 includes s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also obvious from the following answer to the department's enquiry on the process of manufacture and composition of the impugned goods; - "Polyester resins are condensation products of Dihydric or Polyhydric Alcohols and Dibasic or Polybasic Acids. (Polyester such as Alkyd type where in Polyester is modified with fatty acid and drying oil)." This explanation conceals more than what it reveals about the product. Rule 173B(1) of CER prescribing procedure for filing classification list for goods manufactured by an assessee at the material time read as follows: Rule 173B. Assessee to file list of goods for approval of the proper officer - (I) Every assessee shall file with the proper officer for approval a list in such form as the Collector may direct, in quintuplicate, showing- (a) the full description of (i) all excisable goods produced or manufactured by him, (ii) all the goods produced or manufactured by him and intended to be removed from his factory, and (iii) all the excisable goods already deposited or likely to be deposited from time to time without payment of duty in his warehouse; (b) the Chapter, Heading No. and Sub-heading No., if any, of the Schedule to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant had deliberately declared an incorrect description. Therefore the case laws cited do not assist the appellant's case. 10.1 As regards the case laws relied on by the Revenue, we find that in the case of LMP Precision Engg. Co. Ltd. (supra), the Apex Court held as follows in para 18 :- "18. The next issue is whether the extended period of limitation could be invoked by the appellant for the purpose of raising the impugned demand against the respondent. Rule 173B of the Rules requires inter alia that every assessee shall file with the proper officer for approval a list in such form as the Collector may direct showing the "full description" of the goods manufactured. The form in which the application is required to be submitted has been prescribed as the C.L.I. Form. The Form requires "a full description of each item of the goods produced, manufactured with warehouse together with the description as would appear from the invoice". Admittedly, the description of the goods given in the C.L.I. Form by the appellant for the period in question did not tally with the description in the invoices for the same period. The content of the C.L.I. Form has been excerpted in the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the Tribunal held that the respondents therein had not suppressed any material fact regarding the description of the goods, while in the present case, the appellants are guilty of concealment deliberate non-disclosure of the description of goods as chemically modified phenol formaldehyde. We, therefore, hold that the extended period of limitation has been rightly invoked and that the demand is not hit by time bar. We also hold that penalty is warranted in the facts and circum stances of the case. In the light of the above, we uphold the impugned order and reject the appeal." Apex Court in the case of Jaishri Engg. Co. P. Ltd. [1989(40) E.L.T. 214 (S.C.)], ob served as follows :- "10 ………The Tribunal noted then the appellant could hardly contend that it discharged the onus of making correct declaration if it had with held the description which was commonly used in respect of the goods not only by itself but also by those from whom it bought or to whom it sold the products. The appellant itself was both buying and selling these nuts and as such there was no conceivable reason why these nuts were described as end-fittings in the declaration to the department. It may be noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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