Extended period demand for wet wipes classification rejected due to no suppression of facts or intent to evade duty

CESTAT Ahmedabad held that the extended period demand for classification of wet wipes under Central Excise Tariff Act was time-barred due to absence of suppression of facts. The appellant had categorically declared their classification claim and exemption notification to the department, and previous audits raised no objections. The tribunal found no intent to evade duty payment, citing SC precedent in Pragathi Concrete Products case. Extended period demand and corresponding penalty were set-aside, with department permitted to re-quantify normal period demand and adjust against appellant's existing payment of Rs. 40,40,709. Appeal allowed partially.

---

---

Issues Involved:
1. Classification of "KARA" brand wet wipes.
2. Limitation period for the demand of excise duty.
3. Allegation of suppression of facts with intent to evade duty.

Summary:

1. Classification of "KARA" Brand Wet Wipes:
The appellant initially classified "KARA" brand wet wipes under Chapter Sub-heading 3307.90 as other perfumery, cosmetic, or toilet preparations. From August 2009, they reclassified the product under Tariff Item 5603.9200 as nonwovens, whether or not impregnated, coated, covered, or laminated, of man-made filaments. The department, however, contended that the correct classification should be under Chapter Heading 3307.

2. Limitation Period for the Demand of Excise Duty:
The demand for excise duty was raised for the period July 2013 to July 2016. The appellant argued that the demand is hit by limitation as they had informed the department about the reclassification and exemption claim through letters dated 12.08.2009 and 28.06.2013. The Tribunal found that there was no suppression of facts since the classification and exemption claims were declared to the department, and the department had conducted audits without raising objections on classification. Therefore, the demand for the extended period was set aside on the ground of time-bar.

3. Allegation of Suppression of Facts with Intent to Evade Duty:
The Tribunal held that there was no suppression of facts or misstatement with intent to evade duty. The appellant had declared their classification and exemption claims to the department, and these facts were known during the audits. The Tribunal relied on various judgments, including Apex Electricals Pvt. Limited vs. UoI and Pushpam Pharmaceuticals Company vs. CCE, to support the view that when facts are known to both parties, suppression cannot be alleged.

Conclusion:
The Tribunal set aside the demand for the extended period on the ground of time-bar and directed the department to re-quantify the demand for the normal period. The issue of classification was left open. The appeal was partly allowed, and the impugned order was modified accordingly.

---