1996 (10) TMI 206 - AT - Central Excise

Tribunal upholds duty evasion seizure, classification ruling, time-bar decision, setting aside penalties and confiscation.

The Tribunal upheld the seizure and confiscation of goods due to a reasonable belief of duty evasion. The product was classified under Chapter sub-heading ... Pan Masala - Sugandhi Pan Masala - Demand - Limitation Issues Involved:1. Reasonable belief for seizure and confiscation.2. Classification of the product.3. Time-bar on the demand for duty.Issue-wise Detailed Analysis:1. Reasonable Belief for Seizure and Confiscation:The Tribunal found that there was intelligence suggesting the appellants were manufacturing a product not containing betelnut and liable to pay duty. Upon visiting the factory, officers discovered that the labels on the containers did not indicate the presence of betelnut, justifying the seizure. The Tribunal held that the officers' belief was reasonable, and there was no legal infirmity in the seizure of the goods.2. Classification of the Product:The primary contention was whether the product contained betelnut, which would classify it as 'pan masala' under Chapter sub-heading 2106.90, attracting a nil rate of duty, or as an edible preparation under Chapter sub-heading 2107.91, which is dutiable. The appellants argued that their product was known as pan masala in the market and contained betelnut. The Department relied on the Chemical Examiner's report, which did not detect betelnut in the sample. The Tribunal noted that the Chemical Examiner's report was not conclusive and suggested further verification by executive checks, which were not conducted. The Tribunal found that the product did not contain betelnut and, therefore, could not be classified as pan masala. Consequently, the product was classifiable under Chapter sub-heading 2107.91.3. Time-bar on the Demand for Duty:The appellants argued that the demand was time-barred, as only part of the demand fell within the permissible period. The Tribunal noted that the show cause notice alleged suppression of facts, justifying the invocation of the extended period under the proviso to Section 11A of the Central Excises and Salt Act, 1944. The Tribunal held that there was sufficient cause to extend the demand beyond six months, and the limitation of time was not applicable in this case.Separate Judgments:Judgment by Member (Technical):The Technical Member upheld the classification of the product under Chapter sub-heading 2107.91 and confirmed that the demand was not time-barred. The appeal was rejected, and the impugned order was upheld.Judgment by Member (Judicial):The Judicial Member disagreed, finding that the product should be classified under Chapter sub-heading 2106.90, as the Department failed to conclusively prove the absence of betelnut. The Judicial Member also held that the demand beyond six months was time-barred and set aside the penalty, confiscation, and redemption fine.Majority Opinion:The third Member (Technical) agreed with the Judicial Member, noting that the evidence suggested the presence of betelnut and that the extended period for demand was not justified. The majority opinion resulted in setting aside the order of confiscation, penalty, and redemption fine, and the appeal was disposed of accordingly.