SUTHAM NYLOCOTS Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) The appellants are manufacturers of industrial fabrics (cotton and nylon). These goods were classified by them, respectively, under the Chapter Heading Nos. 52.08 and 54.06 of the said Schedule. The Department, however classified both the goods under Heading 59.11 of the CETA Schedule. During the period April 2001 to January, 2002, they removed the above products without payment of duty, claiming the benefit of exemption under a Notification. This was objected to by the department, who classified the goods under S.H 5911.90 and demanded duty accordingly. The Show cause notice dated 5 -4 -2002, which raised this demand, also proposed penalty on the appellants. Though this notice was contested, the party accepted the department's view on classification and accordingly paid duty on the goods for the above period during the course of adjudication of the notice. The only issue before the adjudicating authority was whether the assessee was liable to be penalised under Rules 25 and 27 of the Central Excise (No. 2) Rules, 2001. The authority answered this question in the affirmative and imposed on them a penalty of over Rs. 9 lakhs (equal to duty). In the appeal preferred by the assessee, ld. Commissioner (Appeals) reduced this penalty to Rs. 2,35,000/ -. The assessee is still aggrieved. Hence the present appeal. This appeal seeks three reliefs, viz. (i) to set aside the demand of interest on duty, (ii) to set aside the penalty, (iii) to grant Modvat credit on inputs used in the final products cleared during the period of dispute.

(2.) Ld. Consultant for the appellants submits that they had not misclassified or misdeclared the goods as alleged by the department. They had only correctly classified the goods in the light of the Tribunal's decisions. In the absence of misclassification of the goods, the department's allegation of misdeclaration cannot be sustained. It is submitted that the proposal to impose penalty and the demand of interest on duty are, both, on the ground of misdeclaration. Both the proposals are liable to be rejected for want of misdeclaration. In this context, ld. Consultant points out that, in a similar case of the same assessee for an earlier period, the Division Bench vacated a demand of duty as time -barred, after finding that, in view of the conflicting decisions of the Tribunal on the classification of the product, there was no justification to invoke the extended period of limitation vide . Ld. Consultant seeks to draw support from the decision of the Division Bench to his contention that any penalty or interest on duty is not leviable from the assessee in the above circumstances. The appellants had no intent to evade payment of duty at any point of time. Hence the penalty provisions were not invocable against them. Ld. DR reiterates the findings of the lower appellate authority and submits that 'misdeclaration' is covered by the expression 'misstatement' occurring in Section 11AB of the Central Excise Act which provides for levy of interest on duty, non -paid, nonlevied, short -paid, short -levied etc. According to the ld. DR, the acceptance, by the appellants, of the department's classification of the goods amounted admission of misdeclaration of the goods and consequently the demand for interest under Section 11AB is justifiable. Ld. DR has advanced a similar argument in relation to penalty also.

(3.) After giving careful consideration to the submissions, I find that the assessee classified their products under Heading 52.08 on the strength of certain decisions of the Tribunal. However, there were contra decisions also, rendered by some Benches. Thus the classification issue happened to arise before a Larger Bench, which held in favour of the assessee. The appellants' case is that, in these facts and circumstances, they cannot be considered to have misclassified their products or to have misdeclared the description of the goods. I am inclined to accept this logic inasmuch as, in the context of classification, there is hardly any difference between 'misstatement of description of goods' and 'misclassification of goods'. In the aforesaid circumstances, the party cannot be held to have misclassified their products with intent to evade payment of duty. Apparently, their claim to classify the goods under Chapter 52 was supported by decisions of the Tribunal. The ground raised by the department for levying interest on duty and for imposing penalty on the assessee is that they misstated the description of the goods with intent to evade payment of duty. This ground cannot be sustained in the above circumstances. In the result, the penalty and the demand of interest get set aside.