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TMI Blog2014 (5) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... e tariff description). However, for the period prior to 1-2-2003 and from 1-1-2007 onwards, when there is no specific inclusion, in view of Note 1 to Chapter 25 which excludes products whose structure has undergone a change, the said product merits classification under CTH 3802 90 19 and we hold accordingly. Extended period of limitation - Section 28(1)(a) stipulates that whenever there is a short levy or non-levy or erroneous refund of duty, then the proper officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty or interest which has not been so levied or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. Thus it is not date of issue of show cause notice but service of notice that is relevant for computing the time period. Further, as per the definition of relevant date, for reckoning the time period, it is not the date of filing of the bill of entry, but the date of payment of duty that would be relevant. If the show cause notice has been served on the party within a period of six months/one year, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 which specifically excludes goods in respect of which there is a change in the chemical structure on account of activation. Revenue also relies on three decisions of this Tribunal, namely, (1) Manek Chemicals Pvt. Ltd. [2002 (145) E.L.T. 335 (Tri.-Del.)]; (2) Adani Wilmar Ltd. [2010 (259) E.L.T. 464 (Tri.-Ahmd.)] and (3) Divya Enterprises [2006 (201) E.L.T. 339 (Tri.-Bang.)] wherein it has been held that activated Bentonite merits classification under CTH 3802. 3. As the matter relates to classification, we take up the appeals themselves for consideration after dispensing with the requirement of pre-deposits, if any, and with the consent of both the sides. 4. Prior to the introduction of the 8 digit Customs Tariff with effect from 1-2-2003, CTH 2508 and 3802 read as follows :- 25.08 Other clays (not including expanded clays of Heading 68.06), andalusite, kyanite and sillimanite, whether or not calcined; mullite; chamotte or dinas earths 2508.10 - Bentonite 2508.20 - .. 38.02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, the word activated was omitted from CTH 2508 10 90. There was no change in the tariff description of CTH 3802. 4.3 Chapter Note 1 to Chapter 25, which remained unchanged during the above period, read as follows :- 1. Except where their context or Note 4 to this Chapter otherwise requires, the headings of this Chapter cover only products which are in the crude state or which have been washed (even with chemical substances eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallization), but not products that have been roasted, calcined, obtained by mixing or subjected to processing beyond that mentioned in each heading. As per this Chapter Note, only products whose structure has not undergone any change after processing, remains within the Chapter. If the product has undergone structural changes on account of processing, then the product goes out of Chapter 25. 4.4 HSN Explanatory Notes for Heading 25.08 reads as follows :- This heading covers all natural clay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-6-2002, after examining the issue in depth, has clarified that activated Bentonite merits classification under CTH 3802. The Hon ble Apex Court in the case of CC v. Business Forms Ltd. [2002 (142) E.L.T. 18 (S.C.)] has held that since the Indian Customs Tariff is based on Harmonised System of Nomenclature (HSN), the Explanatory Notes to HSN have not only persuasive value but are entitled to greater consideration in classifying goods under Central Excise Customs Tariff. Therefore, the correct classification of activated Bentonite is CTH 38.02 and not CTH 25.08 and we hold accordingly. 4.7 However, when the 8 digit tariff was introduced w.e.f. 1-2-2003, in our view, an error was committed by specifically including activated Bentonite in CTH 2508 10 90 (para 4.1 above refers). This mistake was rectified only vide Notification No. 137/2006-Cus. (N.T.), dated 29-12-2006 which amended the tariff description by omitting the words activated in the said tariff entry. The said changes in the tariff description came into effect from 1-1-2007. Since classification has to be determined in terms of the headings and any relative Section or Chapter Notes, we are constrained to hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng earth would be classifiable under sub-heading 2508.20. Bentonite is stated to be a naturally occurring clay predominant in Indonesia, Germany, Japan, USA and India. India is, however, stated to be importing bentonite and its derivatives for use in cosmetics, medicinal formulations, drilling industry and food industry. HS Explanatory Notes to Heading 25.08 states that it includes all natural clay substances, but it excludes activated clay from the scope of the heading. 3. Clay Bentonite in crude form is stated to be made effective by activating it with acid or alkali. Some of the mineral acids used for acid activation are hydrochloric acid, sulphuric acid, etc. After the acid activation process, it is stated that the molecular structure undergoes modification. The acid activation process is stated to be effective in removing the deficiencies by creating voids in the crystal structure of bentonite by replacing bigger atoms or molecules, like aluminium, magnesium, iron, etc. by small atoms of hydrogen and such an activated bentonite is stated to have specific PH ranging from 2 to 5 depending on the brand and grade of the product. The activation is sometimes also done by soda ash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard s circular cited above. Nothing prevented the department from calling for the detailed specifications of the product, drawing of samples and getting them tested, to ascertain whether the product imported is activated or not. Further these items are imported on a regular basis by various traders/actual users such as foundry industry, oil exploration industry, vegetable oil industry and so on. If that be the case, the department should have been well aware of the nature of the product and its classification. As could be seen from the records, in many cases, the department itself had assessed activated clay/Bentonite/bleaching, earth under CTH 3802 for the period prior to 1-2-2003 which shows that the department was well aware of the correct classification. Yet they failed to determine the correct classification in the present appeals and accepted the claim of the importers. If that be so, for the failure and lapses on the part of the assessing officers, extended period of time is not invocable for demand of short levy. Accordingly, we hold that in all the impugned appeals, wherever the demand has been raised beyond the normal period of limitation (other than where assessments wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is a short levy or non-levy or erroneous refund of duty, then the proper officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty or interest which has not been so levied or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. Thus it is not date of issue of show cause notice but service of notice that is relevant for computing the time period. Further, as per the definition of relevant date, for reckoning the time period, it is not the date of filing of the bill of entry, but the date of payment of duty that would be relevant. If the show cause notice has been served on the party within a period of six months/one year, as the case may be, from the date of payment of duty, the demands would be valid and sustainable. The decision of the Larger Bench of this Tribunal in the case of Margra Industries Ltd. [2006 (202) E.L.T. 244 (Tri.-LB) = 2008 (10) S.T.R. 81 (Tri.-LB)] also supports this view. 5. In the light of the foregoing discussion, the outcome of the appeals before us would be as follows :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lassification correct prior to 1-1-2007. Demand time barred for subsequent period. 13 C/412/2010 26-7-2007 to 27-2-2008 19-5-2009 Allowed Demand time barred 14 C/413/2010 22-8-2007 to 6-2-2008 19-5-2009 Allowed Demand time barred 15 C/414/2010 14-7-2004 to 24-12-2007 19-5-2009 Allowed Classification correct prior to 1-1-2007. Demand time barred for subsequent period. 16 C/415/2010 7-3-2007 to 5- 12-2007 19-5-2009 Allowed Demand time barred 17 C/416/2010 3-9-2004 to 24-1-2008 19-5-2009 Allowed Classification correct prior to 1-1-2007. Demand time barred for subsequent period. 18 C/423/2010 1-4-2004 to 29- 1-2008 31-3-2009 ..... 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