1992 (1) TMI 213 - AT - Central Excise

Tribunal orders duty recalculation under Notification 175/86-C.E., penalty overturned.

LAMTUF PLASTICS Versus COLLECTOR OF CENTRAL EXCISE

The Tribunal rejected the appeal for exemption under serial No. 38 of Notification 132/86-C.E. but directed a fresh calculation of duty, considering the ... Classification Issues Involved:1. Exemption from Central Excise duty under Notification 132/86-C.E.2. Classification of Phenol Formaldehyde Pre-peg and articles of plastics.3. Interpretation of intermediate products in the manufacturing process.4. Eligibility for exemption under Notification 175/86-C.E.5. Imposition of penalty.Detailed Analysis:1. Exemption from Central Excise Duty under Notification 132/86-C.E.:The appellants sought exemption from Central Excise duty on articles of plastics under Notification 132/86-C.E. The Department contended that the exemption was only available if the goods were made from materials falling under Heading 39.01 to 39.15. The appellants argued that it was not necessary for the articles to be made directly from synthetic resins and that the use of fillers and plasticizers was a technological necessity.2. Classification of Phenol Formaldehyde Pre-peg and Articles of Plastics:The appellants classified Phenol Formaldehyde Pre-peg under sub-heading 3920.32 and articles of plastics under sub-heading 3922.90. They claimed exemption under Notification 132/86 for articles of plastics. The Department argued that the exemption was not applicable as the intermediate product, Phenol Formaldehyde Pre-peg, did not fall under the specified headings.3. Interpretation of Intermediate Products in the Manufacturing Process:The appellants contended that intermediate products like Phenol Formaldehyde Pre-peg should not preclude them from claiming the exemption. They cited various Tribunal and Supreme Court decisions to support their interpretation. The Tribunal, however, noted that Phenol Formaldehyde Pre-peg and Phenol Formaldehyde Chindies were not intermediate products but were produced by specific design to increase mechanical strength. These products were classified under sub-heading 3920.32, which did not qualify for the exemption under serial No. 38 of Notification 132/86.4. Eligibility for Exemption under Notification 175/86-C.E.:The appellants argued that they were entitled to exemption under Notification 175/86-C.E. by virtue of Explanation II, which excludes goods exempt under other notifications from the calculation of clearances. The Tribunal agreed that the Collector did not consider Explanation II and directed a fresh calculation of duty, taking into account the exemption under Notification 175/86-C.E.5. Imposition of Penalty:The Tribunal found no justification for the imposition of a penalty as the appellants had not withheld any information and had fully explained the manufacturing process in their Classification Lists.Conclusion:The Tribunal rejected the appeal for exemption under serial No. 38 of Notification 132/86-C.E. but directed a fresh calculation of duty, considering the exemption under Notification 175/86-C.E. The imposition of a penalty was deemed unjustified. The matter was remanded to the Collector for fresh calculation of duty, ensuring the appellants had the opportunity to present their viewpoint and attend a hearing before the final order.