2002 (4) TMI 419 - AT - Central Excise

Summary

Issues Involved:
1. Classification of tyre cord fabric under Heading 59.02 or Heading 59.09 of the Central Excise Tariff.
2. Validity of the test report from National Test House.
3. Compliance with Tribunal's remand directions.
4. Applicability of extended period of limitation for duty demand.
5. Appropriateness of penalty imposed.

Detailed Analysis:

1. Classification of Tyre Cord Fabric:
The primary issue was whether the tyre cord fabric manufactured by the appellant should be classified under Heading 59.02 as "tyre cord fabrics of high tenacity yarn" or under Heading 59.09 as decided by the Commissioner of Central Excise. The appellant argued that their product should be classified under Heading 59.02, supported by documents such as Bills of Entry and certificates from their customers. However, the Commissioner classified the product under Heading 59.09, stating that the appellant did not provide sufficient evidence to prove the use of high tenacity yarn. The Tribunal upheld the Commissioner's classification under Heading 59.09, noting that the appellant failed to substantiate their claim with adequate documentation.

2. Validity of the Test Report from National Test House:
The National Test House's report indicated that the fabric's tenacity was 48.6 CN/tex, below the required 55 CN/tex as per Note 4 to Section XI of the Central Excise Tariff. The appellant contested the validity of this test report, arguing that it was not conducted properly and did not reflect the characteristics of all fabric lots. The Tribunal, however, accepted the test report, stating that it could not be discarded based on general opinions from textile consultants and other certificates that did not involve actual testing.

3. Compliance with Tribunal's Remand Directions:
The Tribunal had previously remanded the case to allow the appellant to produce documents proving the use of high tenacity yarn. The appellant presented several documents, but the Commissioner found them insufficient, noting that the Bills of Entry covered only a small fraction of the total fabric produced. The Tribunal agreed with the Commissioner's findings, indicating that the appellant failed to provide the necessary evidence as directed.

4. Applicability of Extended Period of Limitation for Duty Demand:
The appellant argued that the demand was time-barred since they had been clearing goods based on approved classification lists. The Tribunal, however, upheld the invocation of the extended period of limitation, citing that the appellant did not disclose the true characteristics of the fabric. The Tribunal referenced the case of Step Cosmetics v. CCE, emphasizing that incomplete or incorrect declarations by the assessee cannot be a valid defense against the extended period of limitation.

5. Appropriateness of Penalty Imposed:
The Tribunal found the penalty imposed by the Commissioner to be excessive and reduced it from an unspecified amount to Rs. 9 Lakhs. The Tribunal acknowledged the appellant's argument regarding the revenue-neutral nature of the duty but clarified that this situation must relate to the credit available to the assessee, not the buyer.

Conclusion:
The Tribunal upheld the classification of the tyre cord fabric under Heading 59.09, validated the National Test House's report, confirmed compliance with remand directions, supported the invocation of the extended period of limitation, and reduced the penalty to Rs. 9 Lakhs. The appeal was disposed of accordingly.