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of <h1>Tribunal reclassifies 'Synthetic Web Equipment (SWE)' components, reduces penalty, and remands for duty re-quantification.</h1> <h3>MKU PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, KANPUR</h3> The tribunal upheld the classification of components of 'Synthetic Web Equipment (SWE)' under Heading 4202 and Heading 6307. The duty demand was to be ... Classification of “Synthetic Web Equipment (disruptive pattern) consisting of pack with aluminium frame, haversack, ammunition pouch, frog bayonet and belt waist.” - Classification under Heading 63.07 or under Heading 4202 - Held that:- Webbing is a strong fabric woven as a flat strip or tube of varying width and fibres. It is made from cotton/flax fibre, and synthetic fibres such as nylon, polyester, polypropylene etc. Webbing fabric is used in climbing equipment, parachute equipment, personal load carrying equipment for soldiers, etc. The term “Webbing equipment” for armed forces is personal load carrying equipment made of webbing. The purpose of webbing equipment is to hold everything a soldier needs to operate for 48 hours - pouches/bags for keeping ammunition/weapon ancillaries, food, water bottle, communication equipment, layout, entrenching tools etc. The term “disruptive pattern” means camouflage pattern. Thus the synthetic webbing equipment, in question, is basically a set of containers made of disruptive pattern webbing cloth, to meet the operating requirements of a soldier on march or during combat duties. From a perusal of Heading 4202 it is clear that this heading covers various types of containers made of leather, composition leather, plastic sheet, textile material, vulcanised fibre or paperboard - Therefore ammunition pouches, and frog bayonets, in our view, would be covered by Heading 4202 - this is not a case of deliberate evasion of duty by resorting to fraud, wilful misstatement, suppression of facts, etc., in our view, penalty equal to the duty demand confirmed on the appellant-company is not called for - The matter is thus, remanded to Commissioner only for re-quantification of the duty demand on the basis - Decided in favour of assessee. Issues Involved:1. Classification of 'Synthetic Web Equipment (SWE)'.2. Demand of allegedly short-paid duty.3. Imposition of penalty on the appellant-company and its President.Issue-Wise Detailed Analysis:1. Classification of 'Synthetic Web Equipment (SWE)The primary dispute revolves around the classification of the 'Synthetic Web Equipment (SWE),' which consists of a pack with an aluminum frame, haversack, ammunition pouches, frog bayonet, and belt waist. The appellant classified SWE under sub-heading 6307.90 as 'textile made up' with an 8% duty rate, while the Department argued it should be classified under sub-heading 4202.00 as 'haversack' with a 16% duty rate. The tribunal examined the nature and use of SWE, noting its components and their functions. It concluded that 'pack with aluminum frame,' 'haversack,' 'ammunition pouch,' and 'frog bayonet' are correctly classifiable under Heading 4202 as 'rucksack and similar containers.' However, the 'belt waist' is classifiable under Heading 6307 as a 'textile made up.' The tribunal directed the Commissioner to re-determine the duty demand based on this classification.2. Demand of Allegedly Short-Paid DutyA show cause notice dated 3-5-2006 was issued to the appellant for a demand of Rs. 57,62,331/- for the period from April 2005 to March 2006, along with interest under Section 11AB of the Central Excise Act, 1944. The Commissioner confirmed this duty demand and appropriated Rs. 12,36,053/- already paid by the appellant towards this demand. The tribunal upheld the classification of certain components under Heading 4202 and directed a re-quantification of the duty demand based on the correct classification of the 'belt waist' under Heading 6307.3. Imposition of Penalty on the Appellant-Company and Its PresidentThe Commissioner imposed a penalty of Rs. 56,62,331/- on the appellant-company under Rule 25(1)(a) of the Central Excise Rules, 2002, and Rs. 50,000/- on the President of the appellant-company under Rule 26. The tribunal noted that the Commissioner did not find evidence of deliberate duty evasion or fraudulent intent. Consequently, the penalty on the appellant-company was reduced to Rs. 5 lakhs. The penalty on the President of the appellant-company was set aside, as the tribunal found no mens rea or deliberate intention to evade duty.Conclusion:The tribunal upheld the classification of 'pack with aluminum frame,' 'haversack,' 'ammunition pouch,' and 'frog bayonet' under Heading 4202, and 'belt waist' under Heading 6307. The duty demand is to be re-quantified accordingly. The penalty on the appellant-company was reduced to Rs. 5 lakhs, and the penalty on the President of the appellant-company was set aside. The matter was remanded to the Commissioner for re-quantification of the duty demand.
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