2006 (1) TMI 7 - SC - Central Excise

Demand appellant not collected duty from customers due to contradictory stands taken by Deptt. on classification of goods.

Summary

Issues:
Classification of 'Tarpaulin' under sub-heading 3926.90 or 6306.00, imposition of differential duty, and penalty waiver.

Classification Issue:
The appellant initially classified 'Tarpaulin' under sub-heading 3926.90, claiming exemption under Notification No. 36/94. However, the Assistant Collector issued a show cause notice in 1996, contending that 'Tarpaulin' falls under Heading 6306.00, demanding Rs. 10,18,116. The appellant then changed the classification to 6306.00 and filed a new classification list. Subsequently, in 1999, another show cause notice was served, demanding Rs. 2,11,26,368 for misclassification. The Commissioner upheld this demand, classifying 'Tarpaulin' under sub-heading 3926.90 and imposed a penalty equal to the duty amount. The Tribunal, citing a previous decision, affirmed the classification under 3926.90, concluding that 'Tarpaulin' using plastic granules is so classified.

Legal Dispute Issue:
The appellant argued that the re-classification was due to the initial show cause notice, and since they did not collect duty under the original classification, they should not be liable for the differential duty. The absence of a provision for duty waiver under the Act was highlighted, with only exemption notifications providing such relief. The Tribunal dismissed the appeal, emphasizing that the penalty had already been waived, but the appellant remained liable for the differential duty, as the 'Tarpaulin' was classified under sub-heading 3926.90.

Final Decision:
The Supreme Court dismissed the appeal, emphasizing that while the argument for waiving/reducing the penalty was valid, it did not warrant waiving the payment of differential duty. The absence of a provision for duty waiver under the Act meant that once 'Tarpaulin' was classified under sub-heading 3926.90, the appellant was obligated to pay the differential duty. The court upheld the Tribunal's decision, concluding the matter with no order as to costs.