2024 (9) TMI 1729 - AT - Central Excise

Palm Stearin Tax Classification Upheld: Appellant Wins Appeal on Tariff Item 15119090 Based on Existing Circulars and Tribunal Precedents

Appellate court resolved a central excise dispute regarding palm stearin classification. The court upheld the appellant's classification under Tariff Item ... Classification of palm stearin including refined bleached deodorized (RBD) palm stearin from palm oil - to be classified under Tariff Item No. 15119090 of the Schedule to Central Excise Tariff Act, 1985 or under Tariff Item No. 38231112 of the said Schedule? - applicability of benefit of N/N. 3/2006-CE dated 01.03.2006 as amended - Applicability of extended period of limitation - HELD THAT:- It is noted that prior to the pronouncement by Hon’ble Supreme Court in CCE, C AND SERVICE TAX VERSUS JOCIL LTD. [2010 (12) TMI 24 - SUPREME COURT], the decision of this Tribunal in the case of JOCIL Ltd. [2009 (2) TMI 306 - CESTAT BANGALORE] was prevailing, wherein it was directed to classify similar goods under Tariff Item No.15119090. Further, till 26.07.2011 the guidance by Central Board of Excise and Customs for classification of similar goods was to classify under Chapter 15. Further, as stated in para 11.2 of the show cause notice, the appellant had declared the said goods in ER-1 returns filed by them. Therefore, there are no grounds for invoking extended period of limitation in the present case. It is further noted that the show cause notice was issued on 07.03.2014 and the period for which the show cause notice was issued was from February 2009 to July 2010 which falls beyond the normal period of limitation. Therefore, in the present case, Revenue did not have jurisdiction to demand the said central excise duty demanded through the said show cause notice. Conclusion - i) Classification of palm stearin by the appellant under Tariff Item No. 15119090 of the Central Excise Tariff Act, 1985 is correct. ii) The appellant had declared the said goods in ER-1 returns filed by them. Therefore, there are no grounds for invoking extended period of limitation in the present case. Appeal allowed. 1. ISSUES PRESENTED and CONSIDERED- Whether the classification of palm stearin by the appellant under Tariff Item No. 15119090 of the Central Excise Tariff Act, 1985 was correct or whether it should have been classified under Tariff Item No. 38231112.- Whether the appellant's classification under Chapter 15 was a deliberate misclassification intended to evade central excise duty.- Whether the benefit of Notification No. 3/2006-CE dated 01.03.2006, granting exemption from central excise duty on palm stearin, was rightly availed by the appellant.- Whether the extended period of limitation under sub-section (4) of Section 11A of the Central Excise Act, 1944 was invokable for recovery of the alleged duty demand for the period February 2009 to July 2010.- Whether the demand of central excise duty, penalty under Section 11AC, confiscation of goods, and imposition of interest were justified.2. ISSUE-WISE DETAILED ANALYSISClassification of Palm Stearin under Tariff Item No. 15119090 vs. 38231112The legal framework for classification is governed by the Central Excise Tariff Act, 1985, which is aligned with the Harmonized System of Nomenclature (HSN). The appellant classified palm stearin under Tariff Item No. 15119090 (Chapter 15), which pertains to animal or vegetable fats and oils. The Revenue contended that the correct classification was under Tariff Item No. 38231112 (Chapter 38), which covers residual products from the processing of vegetable fats and oils.The appellant relied on Circular No. 81/2002-Cus. dated 03.12.2002 issued by the Central Board of Excise and Customs (CBEC), which directed classification of palm stearin under Chapter 15. This circular remained operative until it was withdrawn on 26.07.2011 by Circular No. 31/2011-Cus., which reclassified palm stearin under Tariff Item No. 38231111 or 38231112.The Court noted that prior to the Supreme Court ruling on 15.12.2010 in the case of CCE vs. JOCIL Ltd., the Tribunal's decision in JOCIL Ltd. vs. CCE, Visakhapatnam-II (2009) was binding, which classified palm stearin under Chapter 15 (Tariff Item No. 15119090). Thus, the appellant's classification was in conformity with the prevailing legal position and CBEC guidance at the relevant time.Intent and Allegation of Misclassification to Evade DutyThe Revenue alleged that the appellant intentionally misclassified the goods to avail exemption under Notification No. 3/2006-CE and evade duty. However, the appellant contended that the classification was bona fide, based on the CBEC circular and consistent with the Tribunal's then-prevailing decision.The Court observed that since the appellant had declared the classification in the ER-1 returns and relied on the official circular, there was no suppression of facts or intent to evade duty. The reliance on the circular for classification of imported goods was not misplaced, as it was the authoritative guidance at the time.Applicability of Notification No. 3/2006-CE and Exemption ClaimedNotification No. 3/2006-CE dated 01.03.2006 granted full exemption from central excise duty on palm stearin classified under Tariff Item No. 15119090. The appellant claimed exemption under this notification, which was valid as per the classification followed till the Supreme Court ruling and CBEC circulars.The Revenue's contention that the exemption was wrongly availed was countered by the appellant's submission that the notification was applicable to the classification they followed. The Court accepted this position, noting that the exemption was lawfully claimed based on the classification prevailing at the time.Limitation and Invoking Extended Period under Section 11A(4)The show cause notice was issued on 07.03.2014 demanding duty for the period February 2009 to July 2010, which is beyond the normal limitation period. The Revenue invoked the extended period of limitation under Section 11A(4) of the Central Excise Act, alleging suppression of facts and misclassification.The Court analyzed the limitation issue in light of the appellant's bona fide reliance on the CBEC circular and Tribunal decisions prevailing at the time. It held that since there was no suppression of facts or intent to evade duty, the extended period of limitation could not be invoked.The Court further noted that the appellant had declared the classification in ER-1 returns, negating any suppression. Consequently, the Revenue lacked jurisdiction to demand duty for the period beyond the normal limitation.Penalty, Interest, and ConfiscationThe original authority imposed penalty under Section 11AC equal to the duty demanded, directed payment of interest, and ordered confiscation of goods. These were predicated on the finding of intentional misclassification and duty evasion.Given the Court's conclusion that the classification was in accordance with the law and no suppression was established, the basis for penalty and confiscation was negated. The Court set aside the penalty and confiscation orders along with the demand of interest.3. SIGNIFICANT HOLDINGS'Prior to the pronouncement by Hon'ble Supreme Court on 15.12.2010, the decision of this Tribunal ... was prevailing, wherein it was directed to classify similar goods under Tariff Item No.15119090.''The appellant had declared the said goods in ER-1 returns filed by them. Therefore, we hold that there are no grounds for invoking extended period of limitation in the present case.''The show cause notice was issued on 07.03.2014 and the period for which the show cause notice was issued was from February 2009 to July 2010 which falls beyond the normal period of limitation. Therefore, in the present case, Revenue did not have jurisdiction to demand the said central excise duty demanded through the said show cause notice.'Core principles established include:The classification of goods must be determined based on the law and authoritative circulars prevailing at the relevant time.Reliance on official circulars and Tribunal decisions negates the presumption of suppression or intent to evade duty.Extended period of limitation under Section 11A(4) cannot be invoked absent clear evidence of suppression or fraud.Declarations made in statutory returns (ER-1) constitute disclosure negating suppression.Penalties and confiscation orders are unsustainable if foundational findings of misclassification and suppression are not established.Final determination was to set aside the impugned order, allow the appeal, quash the demand of duty, penalty, interest, and confiscation, and hold that the Revenue lacked jurisdiction to demand duty for the period beyond the normal limitation. The appellant's classification under Tariff Item No. 15119090 was upheld for the period prior to the Supreme Court ruling and CBEC circular withdrawal.