Custom, Excise & Service Tax Tribunal
M/S. Bakelite Hylam Ltd vs Cce, Hyderabad on 15 February, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing: 22/12/2009
Date of decision:..
Appeal No.E/441/98
(Arising out of Order-in-original No.84/97 dt. 6/11/1997 passed by CCE, Hyderabad )
For approval and signature:
Honble Mr. M.V.Ravindran, Member(Judicial)
Honble Mr. P.Karthikeyan, Member(Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
Yes
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Bakelite Hylam Ltd.
..Appellant(s)
Vs.
CCE, Hyderabad
..Respondent(s)
Appearance Ms. S.L.Maithili, Advocate, for the appellant.
Ms. Sudha Koka, SDR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. P.Karthikeyan, Member(Technical) FINAL ORDER No._______________________2010 Per P.Karthikeyan 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 had been also approved. On enquiry with the assessee about the nature of the goods declared as Alkyd Resins of CSH 3907.50, the assessee filed classification list revising the classification of the Alkyd Resins under CSH 3208.40. w.e.f 1.3.1993. Eight months later, a show cause notice dt. 24/11/1993 was issued to the assessee seeking to recover differential duty due on clearances of Alkyd Resins invoking larger period under Section 11A of the Central Excise Act, 1944 (the Act) alleging mis-declaration as regards the description Alkyd Resins. Vide Order-in-Original No.84/97 dt. 6/11/1997, Commissioner of Central Excise, Hyderabad demanded an amount of Rs.17,41,328.65 for the period 1/6/1988 to 28/2/1993 and imposed penalty of Rs.10 lakhs under Rules 9(2), 173Q and 226 of CER. Vide Final Order No.485/2000 dt. 18/4/2000, the Tribunal rejected the appeal filed by BHL sustaining the finding of the Commissioner as regards mis-declaration of the classification and evasion of duty by BHL. Aggrieved by the final order, the assessee moved the Honble High Court of Madras in a Writ Petition contending that the Tribunal had passed the final order without considering several arguments it had advanced. They had made particular reference to the legality of invoking proviso to Section 11A of the Act and judgment of the Apex Court in the case of CCE, Baroda Vs. Cotspun Ltd. [1999(7) SCC 633]. On behalf of the Revenue it was submitted that all the arguments put forward by the appellants had been considered by the Tribunal before passing the final order as well as an ROM application filed by the assessee. While disposing the Writ Petition, the Honble High Court of Madras passed the following order:-
30. In view of the fact that it has been stated that the first respondent Tribunal had not considered all the issues arising for its decision, especially, the applicability of the first proviso to Section 11A of the Central Excise Act, 1944, to the petitioner, in the light of the decision of Collector of Central Excise, Baroda Vs. Cotspun Ltd. (1999(7) SCC 633), decided by the Supreme Court and the effect of the amendments brought about by the Finance Act, 2000, which was in the form of a Bill in the Finance Bill, 2000, at the time when the 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 Honble 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: Whether or not modified grade references starting with the prefix 003 or 073 and followed by any number and/or by alphabet(s) :: 3907.50
(ii) Paints & Varnishes (including enamels and lacquers) :: (a) Insulating Varnishes of various grade references starting with prefix HV or V and followed by any number and/or alphabet(s) and marketed under brand name Hyvar/Hylak :: 3208.40 In response to enquiries made by Department about the process of manufacture and composition of Alkyd Resins, BHL vide their letter dt. 16/11/1992 furnished the manufacturing process of various products; the pertinent answer as regards Alkyd Resins was furnished as follows:
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). Investigation conducted since then revealed that what was described as Alkyd Resins contained significant quantity of other resins such as phenolic resins and melamine resins. Examination of records on Alkyd Resin, Grade 003-1010 FC, Batch No.3322/558, showed the following composition:-
Raw material Weight Time Total output Loss Description (kgs.) On Off (kgs.) (kgs.) V-890 645.0 -- -- --- Batch No.9262 V-1020 260.0 Batch No.7236 260.0 156725 2.08 152110 28.0 10 16 6.00 152510 80.0 151510 30.0 1320.08 1315.0 5.08
Similar details in respect of each product were maintained by the assessee in what are called brew log sheets. The Asst. Manager, R&D, Shri S.I.Basha of the assessee-company explained in various statements recorded from him that the Alkyd Resins could be directly used as insulating varnish without adding any material. These were marketed for application as insulating varnishes. It was found in investigation that;
a. in the grades 033-1010 FC, 073-1979 etc., the total quantity of the solvents such as CIX, butenol and dipentine would be less than 50% of the resin content;
b. all these grades were manufactured by blending phenolic resins or melamine resins or both with alkyd resins in varying proportion along with solvents and stabilizers;
c. 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 melamine 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 Tribunal the appellants have argued that the impugned products fell under Chapter heading 3208 by virtue of Chapter Note 3 of Chapter 32 since the solvent weight was less than 50% of the weight of the product. The Commissioner had chosen CSH 3208.40 as the entry containing the specific description of the subject goods without substantiating the choice. The end use of product was not determinative of classification. The Revenue had no case that the impugned goods were the same as any of the several products cleared by the assessee as insulating varnishes. The department had not discharged its onus to establish the correct classification. The impugned product was a mixture and classification had to be decided under Rule 3(b) of interpretative rules which provided for classifying composite goods as the component which gave its essential characteristic. Alkyd Resins gave essential character to the subject goods.Where two headings were equally applicable, the one favourable to the assessee should be adopted in view of the ratio of the Apex Courts judgment in the case of Poulose and Mathen. The demand was barred by limitation since classification of the impugned goods had been approved repeatedly by the competent authority and the records relied upon to raise the impugned demand were always open for inspection by the Department. Therefore, there was no suppression by the assessee. Failure to disclose facts which the assessee was not legally bound to declare did not amount to suppression. The assessee was under a bonafide belief that the subject goods fell under CSH 3907.50. The assessee had adopted a classification which was more general whereas the Commissioner had adopted a classification for the subject goods which was more specific. The claim of different classification had been due to interpretation of law. Therefore, longer period could not be invoked and no penalty could be imposed. They relied upon the following case laws:-
a. Hindustan Ferodo Ltd. Vs. CCE, Bombay [1997(89) ELT 16(SC)] b. HPL Chemicals Ltd. Vs. CCE, Chandigarh [2006(197) ELT 324(SC)] It was also submitted that extended period could not be invoked where clearances were made in terms of approved classification lists. In support of this plea, they relied upon the judgment of the Apex court and Tribunal in the following cases:
a. Tata Iron & Steel Co. Ltd. Vs. UOI &ors. [1988(34) ELT 605(SC)] b. Indu Nissan Oxo Chemicals Ind. Ltd. Vs. CCE, Vadodara [2009(241) ELT 435(Tri. Ahmd.)] They relied upon the judgment of the Apex Court in the case of Pahwa Chemicals Pvt. Ltd. Vs. CCE, Delhi [2005(189) ELT 257(SC)] 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 dt. 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 material. The technical literature submitted by the appellant showed that the impugned goods were used as insulating varnishes and could be used as such. The assessee had suppressed these facts from the department. As per Section 110 of the Finance Act, 2000, short levy arising on clearances made against approved classification lists also could be demanded under Section 11A of the Act. These provisions had retrospective effect from 17/11/1980 to the date of enactment of the Finance Act, 2000. The appellants had changed the classification from 3907.50 to 3208.40 w.e.f. 1/3/1993 on their own when the department had initiated investigation. This showed that the appropriate classification was CSH 3208.40. Moreover, the appellants had paid the duty demanded for the past period before the issue of show cause notice on 24/11/1993. The impugned demand was in accordance with law. The assessee itself had classified the goods under CSH 3208.40 adopted by revenue for demanding the differential duty on Alkyd Resins cleared during the material period. The Revenue relied upon the judgment of the Apex Court in the case of CCE, Baroda Vs. LMP Precision Engg. Co. Ltd. [2004(163) ELT 290(SC)] in support of the argument that when the goods were sold under a description different from the one furnished in the classification list which was not true, the demand for differential duty was sustainable. The impugned goods were covered by the entry for insulating varnishes under CSH 3208.40. Reliance was placed on the judgment of the Apex Court in the case of Jaishri Engg. Co. P. Ltd. [1989(40) ELT 214(SC)], wherein the Apex Court upheld the finding of the Tribunal that the appellant could hardly contend that it discharged the onus of making correct declaration if it had withheld 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.
It is submitted that in the present case, the appellant manufactured and marketed the impugned product as insulating varnish, as per their own technical details; the impugned product was used as insulating varnishes by the buyers of the product; and that the appellant cleared similar products as insulating varnishes, but classified the impugned product as Alkyd Resins.In the light of the Honble Supreme Courts decision in the case of M/s. Jaishree 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 the 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 resins as ingredients in sizable quantity and therefore, classifying the product as Alkyd Resins is not appropriate. The appellants themselves classified the item under 3208.40 w.e.f. 1/3/1993 before the subject proceedings had been initiated by issuing a show cause notice on 24/11/1993. The appellants had deliberately suppressed the composition of the subject product and had not disclosed the details even in response to queries from the department when they had given a reply vide letter dt. 16/11/1992. The demand was therefore in accordance with law and deserved to be sustained.
6. We have also heard ld. Counsel for the appellants and ld. SDR for the Revenue.
7. We have carefully perused the case records and studied the rival submissions. Appellants had classified the goods manufactured by it as follows :-
(i) Alkyd Resins : Whether or not modified grade references starting with the prefix 003 or 073 and followed by any number and/or by alphabet(s) :: 3907.50
(ii) Paints & Varnishes (including enamels and lacquers) :: (a) Insulating Varnishes of various grade references starting with prefix HV or V and followed by any number and/or alphabet(s) and marketed under brand name Hyvar/Hylak :: 3208.40 The item Alkyd Resins admittedly is not Alkyd Resins but a blend of phenolic resin or, phenolic resin and melamine resin in significant proportion. Therefore, the product could not be correctly classified under CSH 3907.50. W.e.f. 1/3/1993, the appellants filed a classification list declaring the subject item against entry 3208.40. That classification list was not filed at the instance of the departmental officers. In the circumstances, it has to be held that the appellants were aware that the correct classification for the subject goods was CSH 3208.40. The following findings arrived at by the authorities on investigating the correct classification of the impugned product are not in dispute.
(i) in the grades 033-1010 FC, 073-1979 etc., the total
quantity of the solvents such as CIX, butenol and
dipentine would be less than 50% of the resin
content;
(ii) all these grades are manufactured by blending phenolic resins or melamine resins or both with alkyd resins in varying proportion along with solvents and stabilizers;
(iii) these grades are marketed for the purpose of using them as insulating varnishes as is clear from the technical data sheets and the admissions made 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 as 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 find that the impugned goods are a mixture of resins and is a solution with several other goods as shown in para 2. Therefore the item cannot be correctly described as Alkyd resin. It is not Alkyd resin, per se. From the application of the goods and the commercial practice, the goods are insulating varnishes.
8.1. The competing entries fall under the Chapter headings 3208 and 3907 which are reproduced below.
3208. Paints and varnishes (including enamels and lacquers) based on synthetic polymers or chemically modified natural polymers, or natural resins, whether or not modified, dispersed or dissolved in a non-aqueous medium; solutions as defined in Note 3 to this Chapter 3208.10 Based on polyesters 3208.20 - Based on acrylic or vinyl polymers 3208.30 - Based on cellulose nitrate or other cellulose Derivatives 3208.40 - Insulating varnish 3208.90 - Other 3907 Polycetals, other polyethers and eposide resins, in primary forms, polycarbonates, alkyd resins, polyallyl easters and other polyesters, in primary forms 3907.10-- Polyacetals 3907.20-- Other polyethers 3907.30-- Epoxide resins 3907.40-- Polycarbonates 3907.50-- Alkyd resins including maleic resins and fumeric resins 3907.60-- Polyethylene terephthalate 3907.70-- Diallylphtalate resins 3907.80-- Polybutylene terephthalate
-- Other polyesters;
3907.91-- Unsaturated 3907.99-- Other Alkyd Resins fall under chapter sub-heading 3907.50. Insulating varnishes fall under CSH 3208.40. Classification of goods for assessment is governed by the Interpretative Rules to the First Schedule to the Central Excise Tariff Act 1985. As per the interpretative rules for classification, composite articles which contain more than one material are to be classified under the entry which gives the most specific description. The relevant rules 2(b) and 3(a) read as follows:
Rule 2(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given 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 substances 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 wef 1.3.93. Chapter note 3 to Chapter 32 reads as follows:
3. Heading No.32.08 includes solutions (other than colldions) consisting of any of the products specified in heading Nos.39.01 to 39.13 in volatile organic solvents when the weight of the solvent exceeds 50% of the weight of the solution. The note clarifies that Chapter 32 includes products of Chapter Heading 3901 to 3913, if the weight of the organic solvent is 50% or more of the weight of the goods (solution). It does not say that products such as the subject ones which have solvent weight less than 50% of the product weight in all cases fall outside Chapter 32.
8.3. As the assessee itself classified the goods under CSH 320840 and paid the differential duty for the past period, there was no need for the authorities to reopen the classification issue to revise the classification of the goods under CSH 320840.Therefore the assessee is liable to pay the differential duty with reference to the revised classification approved w.e.f. 1.3.93.
8.4. Moreover, we find that the assessees claim that the classification was appropriate under CSH 390750 as the essential character of the product was imparted by Alkyd resin is not proved. It is seen from Shri.Bashas statement that other resins present import functional properties of the product as an insulating. In any case, classification of the goods with reference to the component imparting essential character of the goods is relevant only if the product as such does not figure in an entry in the tariff. As per the interpretative rules, resort to such a provision does not arise when the goods in question are covered by a specific entry in the tariff. Also, as the goods are bought and sold as insulating varnish , the question of the product being classified in an entry different from the entry insulating varnish does not arise.
9. As regards invocation of extended period, it is seen from the above discussion that there was no reason for the assessee to have entertained any belief that the subject goods were classifiable as Alkyd Resins. That the assessee knowingly classified the goods wrongly under CSH 397050 is also obvious from the haste shown by BHL in filing a revised classification for the goods without any direction from the department but immediately on the department raising queries on the classification. That the assessee described the impugned mixture wrongly as Alkyd Resins and suppressed the actual description of the goods is also obvious from the following answer to the departments 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-
(1) 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 the Central Excise Tariff Act, 1985 (5 of 1986) under which each goods fall;
c) the date of duty leviable on each such goods; and
d) such other particulars as the Collector may direct.
As per this rule, the assessee was required to furnish the correct description and classification of goods manufactured. Onus of classifying the goods under the correct entry is on the Revenue. When the assessee describes the goods in terms identical to those of a particular entry in the tariff, the enquiry envisaged in the rule is not called for. In a case where the assessee deliberately furnished a wrong description and entered a wrong classification matching such a wrong description, benefit of the classification so approved cannot be claimed by the assessee when a demand is raised under proviso to Section 11A of the Act on the ground of mis-declaration or suppression of facts. We find that the goods attracted 16% ad valorem duty under CSH 3208.40 and nil rate in terms of Notification No.52/88-CE dt. 1/3/1988 under CSH 3907.50 at the material time. We are not able to find any other reason for BHL to have wrongly classified the goods.
10. We have gone through the various case laws cited by the appellants and the Revenue. In the Hindustan Ferodo Ltd. case (supra), the Apex court held that the onus of proving that the goods are classifiable under a particular tariff entry lay on the Revenue. The said ratio does not come in the way of our finding. In HPL Chemicals Ltd. case (supra) the Apex court held that classification of goods was a matter relating to chargeability and the burden of proof squarely lay upon the Revenue. If the department were to approve a classification different from that claimed by the assessee, it had to adduce proper evidence. We find that in a case where the assessee had not declared the true and correct description of the goods and the tariff entry, department can demand duty short paid in the past when the assessee revised the declaration and declared the correct classification on its own. As regards the judgments in the case of Tata Iron & Steel Co. Ltd. (supra) and Indu Nissan Oxo Chem. Inds. Ltd. (supra), the respective assessee was not guilty of suppression or mis-statement of facts and it was held that longer period could not be invoked in those cases to demand differential duty. In the case on hand the charge found is that the appellant had deliberately declared an incorrect description. Therefore the case laws cited do not assist the appellants case.
10.1. As regards the caselaws 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 Tribunals order and it is clear therefrom that no attempt was made to describe the goods at all, let alone fully or truly. The requirement for disclosure was clear, unambiguous and categoric. There was no scope for misunderstanding or misinterpretation. The respondents reliance on diverse decisions of this Court in which it was held that there could be said to be no suppression or wilful misstatement related to cases where it was necessary to interpret a particular provision of law. Where the assessee had proceeded on a misinterpretation of a legal provision, this Court appears to have held that the bona fides could not be called into question. Those decisions are distinguishable since in this case there was no question of the assessee failing to comply with the requirement of the Rule by reason of any alleged misinterpretation of the Rule. Had the assessee given a full description of the excisable goods but claimed classification under a wrong Tariff heading, the principle enunciated by this Court and as relied upon by the respondent may have been applied but that has not happened here. In the case of Synthetics & Polymer Inds. Vs. CCE, Ahmedabad [1998(104) ELT 659(Tri.)], the Tribunal made the following observation in para 2.3:-
2.3 We are unable to accept these arguments - the? appellants who are the manufacturers of the product cannot disclaim knowledge that their product is a chemically modified phenol formaldehyde. They have not furnished any basis for their belief that the disputed product was chemically and commercially as the same phenol formaldehyde. In these circumstances, the charge of misclassification is sustainable. It is not mere inaction on the part of the appellants but a positive act of concealment of the fact that the disputed product was a chemically modified phenol formaldehyde resin. The reason for the deliberate misclassification is not far to see - the appellants intention is clear from their claim to the benefit of Notification 133/86 which prescribes rate of duty of 15% ad valorem (as against the tariff rate of 25%) which is available to only phenol formaldehyde falling under sub-heading 3909.51 and not to chemically modified variety classifiable under CETA 3909.59 which we have held to be the appropriate classification in our finding in the para above. The case law cited by the learned Counsel is distinguishable as in that case, 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 circumstances 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) ELT 214(SC)], observed as follows:-
10. The Tribunal noted that the appellant could hardly contend that it discharged the onus of making correct declaration if it had withheld 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 that in the declaration it was so described. The Tribunal was of the view, and it cannot be said not without justification that these goods should have been described as nuts because the appellant itself had treated these as nuts. .. .. We find that these case laws support the impugned demand squarely, as we hold that in the instant case, the assessee knew the composition of the goods but gave a wrong description to avail exemption benefit of Notification No.52/88-CE dt. 1/3/1988 applicable to goods of CSH 390750.
11. Before the Honble High Court of Madras, BHL had argued that their claim that differential duty arising on revision of an approved classification list could not be demanded retrospectively in terms of the ratio of the apex Courts judgment had not been considered by the Tribunal while passing Final Order No. 485/2000 dated 18.04.2000. We find that this ratio has been superseded by the provisions enacted in Section110 of the Finance Act, 2000. The case laws cited by the appellant do not cover any case where the assessee mis-declared the description and the revenue revised the classification retrospectively to demand differential duty on the basis of correct classification.
12. In cases where demands are raised contrary to the approved classification and in terms of Section 110 of Finance Act 2000, penalty is not to be imposed. Therefore the penalty imposed in the impugned order is liable to be set aside. We vacate the penalty. The impugned order is otherwise sustained. Thus the appeal is allowed in part.
(Pronounced in court on ..) (P.KARTHIKEYAN) Member (Technical) (M.V. RAVINDRAN) Member (Judicial) Nr 20