Classification under Heading 3402.90 sustained, but penalty and interest fail absent suppression or intent to evade duty.

Goods held classifiable under Heading 3402.90, and the consequential duty demand was sustained because the respondent accepted the classification and the earlier approval under Chapter 28 did not survive once the product was correctly placed under Chapter 34. However, penalty and interest were not leviable because the record did not establish fraud, suppression, or misstatement with intent to evade duty; the classification dispute arose after a Chemical Examiner's report and the earlier classification list had been approved. On that basis, interest under Section 11AB and penalty under Rule 173Q(1) were set aside.

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Issues: (i) whether the product was classifiable under Heading 3402.90 and the duty demand was sustainable; (ii) whether penalty and interest were leviable in the absence of suppression or misstatement.

Issue (i): whether the product was classifiable under Heading 3402.90 and the duty demand was sustainable.

Analysis: The respondent accepted classification under Heading 3402.90 and did not contest the duty liability. The earlier approval of classification under Chapter 28 did not survive once the product was found to be correctly classifiable under Chapter 34, and the duty confirmed by the lower authority became payable.

Conclusion: The classification under Heading 3402.90 and the consequential duty demand were upheld in favour of Revenue.

Issue (ii): whether penalty and interest were leviable in the absence of suppression or misstatement.

Analysis: The classification list had earlier been approved, and the dispute arose only after a Chemical Examiner's report led to a change in classification. In these circumstances, the record did not establish fraud, suppression, or misstatement with intent to evade duty. Since interest under Section 11AB of the Central Excise Act, 1944, as applicable during the relevant period, depended on such findings, and penalty under Rule 173Q(1) of the Central Excise Rules, 1944 required culpable conduct, neither levy was justified.

Conclusion: The penalty and interest were set aside in favour of the respondent.

Final Conclusion: The appeal succeeded only on classification and duty, while the connected penalties and interest were not sustained.

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