Sustainability of demand after lapse of time limit

PJ/Case Laws/2011-12/1413

Case: Ram Remedies Pvt Ltd & Anr v/s Commissioner of Central Excise, Nashik

Citation: 2011-TIOL-363-CESTAT-MUM

Issue:- Demand - issue of classification – non-drawing of samples for 3 years – demand not sustainable.

Brief fact:- During the period from 26.02.97 to February 2000, appellants were manufacturing goods like RRS-I N, RRS-II N etc. They sought to classify the said goods under heading 2710.90 as “others”. Department issued show cause notice on 28.02.2002 by contending that the product would fall under heading 2710.11 and 2710.13 on the ground that these products fulfilled the requirement of boiling point range prescribed for these headings in the tariff and the products either by themselves or in admixture with any other substance were suitable for use as fuel in spark ignition engine.

Demand was confirmed by invoking extended period of limitation under Section 11A with interest as applicable and imposed penalty under Section 11AC. Penalty was also imposed on the Ex-director.

Now, appellant-company and Ex-director are both in appeal.

Appellant’s Contentions:- Appellant contested the statement of their production in-charge by stating that this only showed the understanding of the said person but the fact remains that the appellant were selling the product as a solvent to their customers and in the absence of a proper test as regards the characteristics and its end use, mere opinion of their manager would not be sufficient to revise the classification. Reliance was placed on decision in M/s Indu Nissan Oxo Chemical Industries Ltd v/s CCE, Vadodara [1998 (101) ELT 201 (Tri). It was held therein that department is required to show that the product is suitable for use, which has been judicially determined to mean ‘actually, practically and commercially fir for use described”. It was also observed that there must be evidence of more than a casual, incidental, exceptional or possible use. The use must be substantial.

Respondent’s Contentions:-Revenue has relied upon the statement of the production-in-charge who stated that the product had boiling point within the range as per the tariff heading and the flash point was below 25 degree Celsius. He also stated that all these products were having suitable hydrocarbon mixtures for use in spark ignition engine.

Reasoning of Judgment:- The Tribunal relied upon the judgment of the M/s Indu Nissan Oxo Chemical Industries Ltd case. It was found that the Commissioner (Appeal) has wrongly held that the use of the goods cannot be criteria for determination of classification of the product. The product has to be classified based on its characteristic and properties.

The Tribunal noted that in the present case, tariff heading under 2710 itself described suitability for use as fuel in spark ignition engine as one of the requirements for classification of product under this heading. In the absence of any evidence to show any of the customers had used any of the products as a fuel in spark ignition engine or any other evidence in the form of testing of samples, the department’s case cannot be sustained as regard the classification.

It was also found that as regard, limitation also it would not be possible to sustain the impugned order. The department had not drawn samples of the products at the time of production and at the time of issue of show cause notice, the said products had become contaminated. This is because when the tariff heading clearly provides the characteristics of the products and its end use, it was duty of the departmental officers to draw samples and get the same tested and the officers have failed to do this over a period of 3 years. Having failed to do so over a period of 3 years when the appellant had filed classification declaration periodically, show cause notice invoking extended period cannot be issued after five years. Impugned order set aside.

Decision:- Appeals allowed with consequential relief.

Comments

PJ/Case Laws/2011-12/1413

Post a Comment

Query