2007 (1) TMI 33 - AT - Central Excise

Tribunal Upholds Classification of Parachute Coconut Oil, Penalties Set Aside

The Tribunal classified Parachute Coconut Oil under sub-heading 3305.90 as hair oil, subject to duty. Board's Circulars were deemed non-binding on lower ... Classification and dutiability- Department contended that the appellant product (coconut oil) is classifiable under Sub Heading 3305.90 and chargeable under Hair Oil but appellant can’t agree with it- Authority rejected the department contention and allow the appeal. Issues Involved:1. Classification and dutiability of Parachute Coconut Oil.2. Binding nature of Board's Circulars.3. Validity of Show Cause Notices.4. Applicability of the extended period for demand.5. Imposition of penalties.Issue-wise Detailed Analysis:1. Classification and Dutiability of Parachute Coconut Oil:The appellants claimed that Parachute Coconut Oil should be classified under Heading 15.03 as edible oil, attracting nil duty. The department argued it should be classified under sub-heading 3305.90 as hair oil, subject to duty. The Tribunal found that the product could be classified under both headings, but under Interpretative Rule 3, it should be classified under the heading that occurs last in numerical order, i.e., 3305.90. The Tribunal also held that repacking bulk coconut oil into retail packs amounts to manufacture under Chapter Note 4 to Chapter 33.2. Binding Nature of Board's Circulars:The appellants relied on Board's Circulars No. 145/56/95-CX., dated 31-8-1995, and 166/77/95-CX., dated 29-12-1995, which they claimed supported their classification under Heading 15.03. The department argued that these circulars were not issued under Section 37B of the CEA and thus were not binding. The Tribunal observed that these circulars were not binding on lower authorities and could not be considered the final word on classification.3. Validity of Show Cause Notices:The Tribunal referred to the decision in Pahwa Chemicals Pvt. Ltd. v. CCE, Delhi, and concluded that the Show Cause Notices were validly issued.4. Applicability of the Extended Period for Demand:The Tribunal found that the extended period of five years was not applicable as the department could have raised the demands in time. The case involved a disputed classification, and thus, penalties were not justified.5. Imposition of Penalties:The Tribunal set aside the penalties imposed by the adjudicating Commissioner, considering the nature of the dispute.Separate Judgments:- Member (Technical): Upheld the classification under sub-heading 3305.90, remanded the matter for re-quantifying the duty within the normal period, and set aside the penalties.- Member (Judicial): Disagreed with the remand, supported classification under Heading 15.03 based on Board's Circulars and previous Tribunal decisions, and allowed the appeals.- Third Member (Judicial): Agreed with Member (Judicial), emphasizing the binding nature of Board's Circulars and previous Tribunal decisions, and allowed the appeals.Final Order:In view of the majority, the impugned orders were set aside, and the appeals were allowed with consequential relief.