Extended limitation and tariff classification of plastic bags: demand fails without specific suppression, and true tariff entry prevails.

An excise demand cannot be sustained under the extended limitation period without specific allegations and particulars of suppression, especially where the department already had prior knowledge of the goods and their classification. Low density polythene bags made from duty-paid polyethylene granules were treated as articles of plastic rather than a residuary item, and the Tribunal noted that the pre-1982 tariff and exemption materials supported classification under the specific plastic entry. On the recorded facts, duty under the residuary entry was not justified, and the classification and exemption claim were accepted in favour of the assessee.

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Issues: (i) Whether the demand of central excise duty was barred by limitation in the absence of particulars of suppression in the original notice and in the later notice issued beyond five years. (ii) Whether low density polythene bags were classifiable under Item No. 68 of the Old Tariff or fell under Item No. 15A(2), and whether the claimed exemption was available.

Issue (i): Whether the demand of central excise duty was barred by limitation in the absence of particulars of suppression in the original notice and in the later notice issued beyond five years.

Analysis: The original notice alleged clearance of excisable goods without payment of duty and without a valid gate pass, but it contained no particulars of suppression and no specific basis for the proposed classification. The later notice introduced allegations of wilful suppression and contraventions of several rules for the first time, and it was issued beyond the normal period. The record also showed earlier departmental knowledge of the goods and their classification, which weakened the basis for invoking the extended period.

Conclusion: The demand was barred by limitation and the finding is in favour of the assessee.

Issue (ii): Whether low density polythene bags were classifiable under Item No. 68 of the Old Tariff or fell under Item No. 15A(2), and whether the claimed exemption was available.

Analysis: The goods were manufactured from duty-paid low density polyethylene granules and were produced through an extrusion process into flexible polyethylene bags. Before the 1982 budget, Item No. 15A(2) was wide enough to cover articles made of plastics, including lay-flat tubings and similar flexible plastic products, and the departmental material also showed prior classification of similar bags under Item No. 15A(2). The exemption notifications considered by the Tribunal supported the view that plastic articles produced from duty-paid plastic material could qualify for exemption, and the demand under Item No. 68 was not justified on the facts recorded.

Conclusion: The bags were not liable to duty under Item No. 68, and the classification and exemption claim are decided in favour of the assessee.

Final Conclusion: The impugned demand and order were set aside, and the appeal succeeded on both limitation and merits.

Ratio Decidendi: A duty demand cannot be sustained on the extended period without specific allegations and particulars of suppression, and plastic bags manufactured from duty-paid plastic material must be classified on the basis of their true tariff description rather than being forced into a residuary entry.

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