1995 (12) TMI 110 - AT - Central Excise

Appeals allowed: Products not classifiable, entitled to exemption. Demand time-barred, no wilful misstatement.

The Tribunal allowed the appeals, determining that the appellants' products were not classifiable under the relevant Tariff entries, were not suitable for ... Rectified Spirit, Feint spirit etc. Issues Involved:1. Classification of ethyl alcohol under Central Excise Tariff2. Suitability of rectified spirit for use as fuel3. Applicability of exemption notifications4. Time-bar and suppression allegationsIssue-wise Detailed Analysis:1. Classification of Ethyl Alcohol under Central Excise Tariff:The appellants challenged the classification of their products (e.g., Rectified spirit, Feint Spirit) under Tariff Item 6(ii) of the old Central Excise Tariff and Heading 22.04 of the new Tariff. The Tariff descriptions included ethyl alcohol 'suitable for use as fuel for internal combustion engines' and 'spark ignition engines.' The appellants argued that their products, with 94-95% alcohol content, were not suitable for such use and provided expert opinions and technical literature to support their claim. The Collector had rejected these arguments, stating that the products were suitable for use as fuel in admixture with petrol. However, the Tribunal found that the Collector's interpretation of 'ethyl alcohol of any grade' was out of context and that the products did not meet the suitability criterion for classification under the said Tariff entries.2. Suitability of Rectified Spirit for Use as Fuel:The appellants contended that their products, with 94-95% alcohol content and a significant water percentage, were unsuitable for use as fuel in internal combustion or spark ignition engines. They cited experts' opinions and technical literature, including IS specifications and the Power Alcohol Act, which defined power alcohol as containing not less than 99.5% ethanol. The Tribunal noted that the Collector had admitted that the Government had not permitted the use of rectified spirit as fuel and that the product's suitability for such use had not been established. The Tribunal concluded that the appellants' products were not suitable for use as fuel and thus did not fall under the relevant Tariff entries.3. Applicability of Exemption Notifications:The appellants argued that even if their products were classified under the relevant Tariff entries, they were entitled to exemption under Notification Nos. 75/84 and 106/86. The Collector had denied the benefit of these exemptions on the ground that the appellants had not followed the prescribed procedure under Chapter X of the Central Excise Rules. The Tribunal found that the failure to follow the procedure was a condonable deficiency, as the goods had been cleared to specific users and evidence of their end-use was available. Therefore, the claim for concessional assessment should not have been rejected solely for procedural non-compliance.4. Time-bar and Suppression Allegations:The appellants contended that the demand was time-barred and that there was no suppression or wilful misstatement of facts. They argued that they had a bona fide belief that their products did not attract duty under the relevant Tariff entries, supported by the fact that other Collectorates were treating similar products as non-excisable. The Tribunal agreed with the appellants, noting that the practice was not uniform and that the appellants' belief was bona fide. The Tribunal concluded that the extended time limit for issuing the show cause notice was not justified, and the demand was time-barred.Conclusion:The Tribunal allowed the appeals, holding that the appellants' products were not classifiable under the relevant Tariff entries, were not suitable for use as fuel, and were entitled to exemption under the relevant notifications. The Tribunal also found that the demand was time-barred and that there was no suppression or wilful misstatement of facts by the appellants.