Xylene classification under HSN note turns on xylene isomers only; extended limitation fails absent suppression.

Mixed Xylene was held classifiable under Chapter sub-heading 2707 30 00, because for Heading 2902 only the xylene isomers identified in the HSN note can be counted toward the 95% purity threshold and ethylbenzene cannot be treated as a xylene isomer. The Tribunal also found that the assessee had disclosed the product composition and adopted classification in returns, with departmental audits already on record, so suppression with intent to evade duty was not established. On that basis, invocation of the extended period of limitation was unsustainable and penalty was not leviable, leaving the demand confined to the normal period.

---

---

Issues: (i) Whether Mixed Xylene was classifiable under Chapter sub-heading 2902 44 00 or Chapter sub-heading 2707 30 00 of the Central Excise Tariff Act, 1985. (ii) Whether the extended period of limitation and penalty were sustainable.

Issue (i): Whether Mixed Xylene was classifiable under Chapter sub-heading 2902 44 00 or Chapter sub-heading 2707 30 00 of the Central Excise Tariff Act, 1985.

Analysis: The classification turned on whether Ethylbenzene could be treated as an isomer of Xylene for the purpose of applying the HSN note to Heading 2902. The HSN explanation to Heading 2902 states that Xylene comprises only o-xylene, m-xylene and p-xylene, and that Xylene must contain 95% or more by weight of xylene isomers, all isomers being taken together. The Tribunal applied the settled view that Ethylbenzene is a different organic compound and cannot be included among xylene isomers. On the admitted composition, the product did not satisfy the 95% threshold for Heading 2902.

Conclusion: Mixed Xylene was correctly classifiable under Chapter sub-heading 2707 30 00, not under Chapter sub-heading 2902 44 00.

Issue (ii): Whether the extended period of limitation and penalty were sustainable.

Analysis: The assessee had informed the Department about the product, filed returns declaring the classification adopted, and its records had been regularly audited. The Department was aware of the product composition and no case of suppression with intent to evade duty was made out. In these circumstances, invocation of the extended period was not justified. Since the dispute was one of classification on the facts available on record and the extended period failed, penalty was also unwarranted.

Conclusion: The extended period of limitation was not sustainable and the penalty was not leviable.

Final Conclusion: The classification adopted by the Revenue was upheld, but the demand was confined to the normal period of limitation and the penalty was set aside, resulting in only partial relief to the assessee.

Ratio Decidendi: For classification under Heading 2902, only the xylene isomers specified in the HSN can be counted toward the 95% purity threshold, and where the Department had prior knowledge of the declared classification and product composition, suppression with intent to evade duty cannot be inferred for invoking the extended period.

---