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TMI Blog2025 (3) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... be classified under CETH 3307 in terms of the above test report. As such, there is nothing much left for us to dwell upon the classification dispute and accordingly, the classification of the impugned goods under CTH 3307 as proposed by the Department upheld. Invocation of Extended period of limitation - imposition of penalty under Section 11 AC of the Central Excise Act, 1944 - HELD THAT:- It is a well settled principle that invocation of larger period is not a rule but an exception, wherein, there should be ample justification to invoke the same. That too, while dealing with an indirect tax, it has to be exercised with utmost caution - It is also on record that the Appellant has disclosed all relevant information in their packaging, marketing brochures etc. It is only upon a highly technical test result, despite rival claims from both sides, the re-classification has been proposed and re-determined. The Appellant has also taken a legal opinion initially, a fact deposed before the investigation itself and taken due cognisance in the impugned order. Thus, the appellant has discharged the onus, if any, at their end and cannot be saddled with an allegation that they have suppressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose of heading 3401." A perusal of the above two Headings would reveal that, while Heading 3307 covers bath preparations, Heading 3402 covers cleaning preparations, having a basis of soap or other organic surface-active agents. 2.2 The term 'Organic surface-active agents" under Chapter Heading 3402 should be as per Chapter Note 3 of Chapter 34 which reads: - "3. For the purposes of heading 3402, "organic surface-active agents" are products which when mixed with water at a concentration of 0.5% at 20oC and left to stand for one hour at the same temperature : give a transparent or translucent liquid or stable emulsion without separation of insoluble matter, and reduce the surface tension of water 4.5 X 10-2 N/m (45 dyne/Cm) or less." 2.3 The main contention of the Department to reclassify the product from CTH 3402 to 3307 is that the impugned product is not having the basis of the organic surface-active agents (OSA), on the other hand, the contention of the Appellant is to demonstrate that the products are based on OSA. Samples were drawn by the Department and tested, and the test results were challenged by the Appellant in the Hon'ble High Court of Madras, re-test was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be seen from the records, there are test reports both in the favour of the Department as well as the Appellant, which is a testament of ambiguity in the instant case. Furthermore, in the Circular No. 52/26/2018-GST dated 09.08.2018 itself, it has been acknowledged by the Government that varied practices are being followed regarding the classification of baby wipes, facial tissues and other similar products, and references have been received requesting for correct classification of these products. As per the references, these products are currently being classified under different HS codes viz., 3307, 3401 and 5603 by the industry. Therefore, it is an interpretational issue and the intent to evade duty is absent, which is the essential element for invoking extended period. In this connection, they would place reliance in the case of Siddhartha Tubes Ltd. [2006 (193) ELT 6 (SC)] and Jaiprakash Industries Ltd. [2002 (11) TMI 92-SUPREME COURT]. v. Further, the description of the impugned product and classification has been duly mentioned in the returns since December 2014. The Department has not disputed any of declarations in returns or invoices and have not unearthed any new fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As per the directions of the Hon'ble High Court of Madras, retest was ordered, but, subsequent samples were drawn from different products as the original products were no more in production. Whereas the Department tested the sample at CRCL which has submitted its report dated 05.08.2019. On testing of "Eco Bath Towelettes Extra Large", the following test report is extracted as follows: - "Report: - The sample is in the form of wipes (10 Nos.), having pleasant odour, received in original unit packing (Ecobath Towelette). It is made of Non-woven fabric, impregnated with an aqueous solution. On the basis of Chemica, Chromatographic and Spectroscopic analysis, aqueous solution is containing Chlorehexidine, Polyethylene glycol & surfactants. 0.5% of aqueous solution at 20o C of the sample was left to stand for one hour at same temperature which did not reduce the surface tension of water to 4.5 x 10-2N/m (45 dyne/Cm) or less (actual being 54.52 dune/Cm). On the basis of above, sample does not satisfy the criteria as laid down in Notes 3, (b) of Chapter 34 relating to heading 34.02 of Central Excise Tariff." Whereas the appellant too have got tested their samples at PSGTECHS C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of limitation to demand the duty and imposition of penalty under Section 11 AC of the Central Excise Act, 1944. 10. It is not in dispute that the classification of the impugned products is contentious and based on scientific and technical parameters. The Department has itself framed its allegations only after testing the product in CRCL for the presence of OSA as per Chapter Note 3 of Chapter 34. 11. On the other hand, the Appellant had also challenged the same with rival test reports from few private accredited testing institutions like PSG TECH and IIT Madras. 12. It is a well settled principle that invocation of larger period is not a rule but an exception, wherein, there should be ample justification to invoke the same. That too, while dealing with an indirect tax, it has to be exercised with utmost caution. In this context, we find the reliance of the case laws by the Appellant are relevant and are discussed below: - i. In the case of Chemphar Drugs & Liniments [1989 (2) TMI 116-SC], the Apex Court held: - "8. Aggrieved thereby, the revenue has come up in appeal to this Court. In our opinion, the order of the Tribunal must be sustained. In order to make the demand for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." iii. In a recent decision of Northern Operating Systems Pvt. Ltd. [2022 (5) TMI 967-SC], the Apex Court has held as follows: - "62. The revenue's argument that the assessee had indulged in wilful suppression, in this court's considered view, is insubstantial. The view of a previous three judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppression / mis-declaration. Further, it has been held in the case of Lewek Altair Shipping Pvt. Ltd. Vs. Commissioner of Customs [2019 (366) ELT 318 (Tri.-Hyd.)] which has been affirmed by the Hon'ble Supreme Court that claiming an incorrect classification or the benefit of an ineligible exemption Notification does not amount to making a false or incorrect statement as it is not an incorrect description of the goods or their value but only a claim made by the assessee. In the absence of any finding of positive suppression by the Appellant in the impugned order, we find that the allegation of wilful misclassification and intention to evade duty by the Respondent is not at all tenable and misclassification could not be equated with misdeclaration within the meaning of Section 28(4) of the Customs Act, 1962. Considering the above facts that the Respondent is a regular importer of the product which is used in the manufacture of Brake pads and also considering that they were adopting the above classification consistently, we are of the opinion that attributing any malafide intention or motive for adopting such classification or claiming exemption benefit of the Notification is not just ..... X X X X Extracts X X X X X X X X Extracts X X X X
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