2005 (4) TMI 405 - AT - Central Excise

Waste from Tow to Tops conversion excisable under 5503.19, duty upheld. Appeal allowed on time bar.

The Tribunal found that the waste produced during the conversion of Tow to Tops is excisable and classifiable under sub-heading 5503.19, upholding the ... Waste - Excisability - Demand - Limitation Issues Involved:1. Classification and excisability of the impugned waste.2. Applicability of the extended period for duty demand under Section 11A(1) of the Central Excise Act, 1944.3. Bona fide belief and suppression of facts.Issue-wise Detailed Analysis:1. Classification and Excisability of the Impugned Waste:The primary dispute revolves around whether the waste produced during the conversion of Tow to Top is excisable and classifiable under sub-heading 5503.19. The Commissioner of Central Excise, Indore-II, confirmed the duty demand of Rs. 31,08,035/- on the basis that the impugned goods are excisable and marketable, thereby classifiable under sub-heading 5503.19. The appellants argued that the waste is not excisable as it arises from fiber while manufacturing yarn, relying on Chapter Note 3 to Chapter 55 and previous Tribunal decisions (Rajasthan Textile Mills and Mohan Woollen Mills Ltd.). The respondent countered that the waste is indeed excisable, citing Fair-Child's Dictionary of Textiles to support that both Tow and Top are forms of fibers, thus falling under the scope of Chapter Note 3 to Chapter 55. The Tribunal found that since the waste arises during the conversion of Tow to Tops, it is covered under sub-heading 5503.19 read with Chapter Note 3 to Chapter 55.2. Applicability of the Extended Period for Duty Demand:The Commissioner applied the extended period of five years under the proviso to Section 11A(1) of the Central Excise Act, 1944, on the grounds of suppression of facts by the appellants. The appellants contended that the extended period should not apply as there was no willful suppression, supported by an Assistant Commissioner's order from 1997 and the fact that departmental authorities had different views on the excisability of the product. The respondent argued that the reliance on the 1997 order was misplaced as the period in question was from 1991-92 to 1994-95. The Tribunal upheld the Commissioner's finding, stating that the appellants were aware of the excisability but chose not to file any declaration, justifying the application of the extended period.3. Bona Fide Belief and Suppression of Facts:Member (Judicial) disagreed with the majority view on the point of limitation, emphasizing that mere non-filing of a classification list does not constitute suppression. It was noted that the appellant's jurisdictional Central Excise authorities were likely aware of the waste production during the conversion process. Additionally, the appellants' belief that the waste was not excisable was supported by Tribunal decisions and a Trade Notice, contributing to their bona fide belief. The statement of the appellant's Manager did not indicate awareness of excisability. Member (Judicial) concluded that the demand was barred by limitation due to the appellants' bona fide belief and the lack of any positive action indicating an intention to evade duty.Separate Judgments:- Member (Technical) upheld the Commissioner's order, confirming the classification and excisability of the waste and the applicability of the extended period due to suppression.- Member (Judicial) set aside the order on the grounds of limitation, recognizing the appellants' bona fide belief and the absence of willful suppression.- Member (Judicial) (Jyoti Balasundaram) agreed with the view of Member (Judicial) that the demand was barred by limitation due to the appellants' bona fide belief.Final Order:In view of the majority order, the appeal was allowed on the point of time bar with consequential relief to the appellants.