2024 (6) TMI 244

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....f Act , 1985. 2.2 Both the wet wipes and dry wipes were manufactured from non-woven fabric received in rolls. For the manufacture of wet wipes, the non-woven fabric received in rolls is impregnated with liquid formulation and thereafter cut to size of 15 cm x 20 cm(approx.), before packing the same in single sachet, multi pack sachet or large pack sachets. The non-woven fabric is procured from M/s Ginni Filaments, Panoli or from the Appellants' own unit at Nagda. The liquid formulation is prepared within the factory by mixing of de-mineralized water with various ingredients, including fragrances. The non-woven fabric performs the wipe function of the product while the liquid formulation is added for increased marketability. In common parlance, the products are known and used as wipes in the market. 2.3. For the period up to August 2009, the Appellants classified wet wipes under Chapter Sub-heading 3307.90 of the First Schedule to the Central Excise Tariff Act,1985 as other perfumery, cosmetic or toilet preparations, not elsewhere specified or included. The Appellants discharged Central Excise duty at the rate of 10% on the value determined under Section 4A of the Central Excise A....

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....ailing of exemption under Sr. No. 11 of Notification No. 30/2004-CE dated 09.07.2004. 2.8. An EA-2000 audit of the Appellants was conducted by the Central Excise department during March 2014 to October 2014 for the audit period March 2012 to December 2013. Pursuant to the same, Final Audit Report No. 327/2013-14 dated 10.11.2014 was issued to the Appellants. It was observed in the audit report that the Appellants have wrongly classified wet wipes under Chapter Heading 5603 and the same were classifiable under Chapter Heading 3307 of the First Schedule to the Central Excise Tariff Act, 1985. Thus, it was alleged that the Appellants have short paid Central Excise duty by wrongly availing benefit of exemption on clearance of wet wipes. It was also alleged that prior to July 2013, the Appellants have short paid Central Excise duty on wet wipes by discharging duty on the value equal to 64.80% of the MRP of the wet wipes instead of discharging duty on the value equal to 65% of the MRP of wet wipes. 2.9. The Department vide letter dated 14.11.2014 asked the Appellants to provide their comments and reply in response to the said audit observation the audit report dated 10.11.2014. The App....

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.... on these samples. 2.13. During the course of the investigation statements of various employees of the Appellants and FCL were recorded by the Department. The proceedings then culminated into issuance of the present show cause notice dated 08.08.2018 to the Appellants as well as FCL proposing to demand Central Excise duty of Rs.5,38,76,124/- under Section 11A(4) of the Central Excise Act, 1944 on "KARA" wet wipes manufactured and cleared during July 2013 to July 2016 on the ground that the product has been misclassified under Tariff Item 5603.9200 instead of classifying under Tariff Item 3307.9090. The show cause notice also proposed to charge interest under Section 11AA of Central Excise Act, 1944 and imposed penalty under Section 11AC(1)(c) of Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002 and penalty under Section 15B of Central Excise Act, 1944. The show cause notice also proposes to impose penalty upon FCL under Section 11AC(1)(c) of Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002 and penalty under Section 15B of Central Excise Act, 1944. 3. The Adjudicating Authority after considering the appellant's submissions made in rep....

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....ng 5603 9200 and submitted a letter dated 12.08.2009 informing the department that they would be classifying the same product under heading 56.03. The said letter dated 12.08.2009 is scanned below : - The appellant came to know that the goods falling under Chapter heading 5603 9200 is exempted vide Notification No. 30/2004-CE dated 09.07.2004 (Serial No.11). Accordingly the appellant have informed their jurisdictional Central Excise authority on 28.06.2013 that with effect from 01.07.2013 the appellant would be availing the benefit of aforesaid notification on the clearance of non-woven wipes falling under Chapter heading 56.03. The said letter dated 28.06.2013 is scanned below : - 6.3 From the above correspondence it is absolutely clear that the classification, claim of exemption notification in respect of their product wet wipes was categorically declared before the department. Therefore, there is no suppression of facts on the part of the appellant with intent to evade payment of duty. Moreover, all these facts were on record while conducting EA-3 audit by Central Excise department during March 2014 to October 2014 for the audit period March 2012 to December 2013. The dispute ....