2002 (1) TMI 751 - AT - Central Excise

Summary

Issues:
1. Correct classification of Polished and Glazed Flax Yarn under Heading 53.01 or 56.07.
2. Applicability of retrospective effect of amendments in the Central Excise Tariff Act.
3. Entitlement to exemption under Notification No. 62/87-C.E.
4. Point of limitation for issuing the show cause notice and imposing personal penalty.

Analysis:

Issue 1: Correct Classification of Polished and Glazed Flax Yarn
The dispute centered around whether the Polished and Glazed Flax Yarn manufactured by the appellant-company should be classified under Heading 53.01 or 56.07. The appellant argued that the yarn should be classified under 53.01 as there was no provision in the Central Excise Tariff Act, 1985, to treat a specific decitex of flax yarn differently. The appellant contended that the HSN Explanatory Notes were wrongly relied upon by the adjudicating authority for classification. The Tribunal analyzed the Section Notes of HSN and determined that the artificial definition in the Section Note 3A(c) treated Flax Yarn of 1429 decitex or more as twine, cordage, ropes, or cables. However, as this artificial treatment was not present in the Central Excise Tariff Act during the relevant period, the Tribunal held that the Polished and Glazed Flax Yarn should be classified under Heading 53.01 and not 56.07.

Issue 2: Applicability of Retrospective Effect of Amendments
The appellant argued that the amendments aligning the Central Excise Tariff Act with HSN introduced by the Finance Act, 1995, should not be applied retrospectively to the period before 1995. The Tribunal agreed with this argument, stating that since the amendments were not given retrospective effect, they could not be applied to the period prior to 1995.

Issue 3: Entitlement to Exemption under Notification No. 62/87-C.E.
The appellant claimed entitlement to full exemption under Notification No. 62/87-C.E. if the goods were classified under Chapter 56. The Tribunal noted that the duty had already been paid on the Flax Yarn under Heading 53.01, fulfilling the condition of the exemption. Therefore, no further duty should be demanded from the appellant.

Issue 4: Point of Limitation
Regarding the point of limitation for issuing the show cause notice, the appellant argued that the notice issued in 1993 for the period from 1988 to 1992 was time-barred. The Tribunal found that the longer period of limitation was not justified as the appellant had filed proper returns, invoices, and the Central Excise Authorities were aware of the nature of the Flax Yarn being cleared. The Tribunal held that there was no intention to evade duty, and the longer period of limitation was not applicable.

In conclusion, the Tribunal set aside the impugned order, allowed the appeal, and provided consequential reliefs to the appellants based on the analysis of the issues involved in the judgment.