1994 (7) TMI 209 - AT - Central Excise

Tribunal Waives Pre-Deposit; Upholds Petitioner's Claims

COSMEDICS Versus COLLECTOR OF CENTRAL EXCISE, MADRAS

COSMEDICS Versus COLLECTOR OF CENTRAL EXCISE, MADRAS - 1995 (80) E.L.T. 695 (Tribunal) Issues Involved:1. Waiver of pre-deposit of duty and penalty.2. Classification of the product under the Central Excise Tariff.3. Allegation of suppression of facts and misdeclaration.4. Invocation of the extended period of limitation.5. Violation of principles of natural justice.Detailed Analysis:1. Waiver of Pre-Deposit of Duty and Penalty:The petitioner sought a waiver of the pre-deposit of the total duty of Rs. 9,15,179 and a penalty of Rs. 1,50,000. The petitioner argued financial incapacity and undue hardship, asserting that they are a small-scale manufacturer. The Tribunal, considering the contentious nature of the issues and the financial hardship claimed by the petitioner, granted the waiver of the pre-deposit pending the disposal of the appeal.2. Classification of the Product Under the Central Excise Tariff:The petitioner initially declared the product as 'Soap in any form' under Tariff Heading 3401.10 and later as 'Organic Surface Active Agent' under Tariff Heading 3402.90. The Department classified the product under Tariff Heading 33.07 as 'Cosmetics and Toilet preparations not elsewhere specified,' attracting a higher duty rate. The Tribunal found that the product could be classified under either 3401.10 or 3402.90, both carrying a duty rate of 25%, and noted that the classification under 33.07 was contentious. The Tribunal highlighted the need for proper examination of the product's nature and commercial understanding.3. Allegation of Suppression of Facts and Misdeclaration:The Department alleged suppression of facts and misdeclaration by the petitioner, claiming that the petitioner changed the product description to evade higher duty. The petitioner argued that the change in description was based on the gate passes received from suppliers and that there was no intention to evade duty. The Tribunal found that the show cause notice did not adequately establish suppression of facts or malafides by the petitioner.4. Invocation of the Extended Period of Limitation:The show cause notice was issued on 18-6-1992, beyond the standard six-month period. The petitioner argued that there was no suppression of facts, and hence, the extended period of limitation could not be invoked. The Tribunal noted that the show cause notice did not refer to the initial declaration and was based on an incorrect assumption. The Tribunal held that prima facie, the extended period of limitation was not sustainable due to the lack of evidence of suppression or malafides.5. Violation of Principles of Natural Justice:The petitioner contended that the Chemical Examiner's report, which was relied upon in the impugned order, referred to an affidavit allegedly filed by the petitioner, which was not provided to them despite specific requests. The Tribunal found that the denial of cross-examination of the Chemical Examiner and the non-furnishing of the affidavit constituted a violation of the principles of natural justice, thereby vitiating the impugned order.Separate Judgments:The Tribunal's decision included a dissenting opinion by one member, who held that the classification under Tariff Heading 3307.90 was prima facie maintainable and that the extended period of limitation was invokable due to misdeclaration and suppression. However, the majority decision favored the petitioner, granting the waiver of pre-deposit and questioning the sustainability of the extended period of limitation and the classification under 3307.90. The matter was referred to a third member, who concurred with the majority view, leading to the final order granting the waiver of pre-deposit pending appeal.