2025 (7) TMI 1260 - AT - Central Excise

Extended Period of Limitation - Suppression or misdeclaration - Classification of goods - processed tyre cord fabrics - classifiable under Chapter Heading 59.02 of CET Act 1985 or not - levy of exorbitant penalty under Rule 173Q of the Central Excise Rules 1994 three times what was imposed in the first round - HELD THAT - Reliance placed in the case of MADURA COATS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE MADURAI 1999 (8) TMI 534 - CEGAT MADRAS where it was held that we notice that as the Department has for subsequent period accepted the classification therefore it is but proper that the matter has to be remanded to the Commissioner for de novo consideration in the light of the Board s circulars. The Final Order of the Bench is gone through and the Bench felt it proper to remand the matter back to the file of the Original Authority to bring on record the findings on classification in the context of such Board circulars which are invariably binding on him. The above order of the Tribunal based on the submissions was due to the trust on the Representative which prompted the Tribunal not to give any finding on the classification since apparently there were Board s circulars as pointed out setting at rest the issue of classification involved in the present case. The same having not been considered in the initial Order-in-Original a judicious remand order came to be passed the same is admittedly accepted by the both the parties as none preferred an Appeal against the Final Order. From a perusal of the impugned order it is not only in defiance to the directions of the Tribunal but the Commissioner has also not bothered to even refer to or discuss or bring on record any of the Board s circular despite the fact that there was a reference to one such circular in the order of the Tribunal itself and that even the Appellant through its representative relied on such Circular/s during the personal hearing. The Appellant has been claiming as could be seen from the observation of the Tribunal s earlier order that they have been clearing the Tyre Cord Fabric after classifying under Chapter Heading 5902 even after March 1992 which has also been accepted by the Revenue and hence in the absence of any evidence as to the existence of varying fact/s the Department cannot adopt an inconsistent view. This aspect needs to be examined in the context of observation of this Bench at para 12 (c). The said para is of importance because it is the well settled position of law that mere suppression is insufficient but the same should be with intent to evade duty . In the impugned order the Commissioner has recorded that Appellant did not disclose the correct tenacity of yarn - there are no supporting evidence placed on record; it is not his finding that there was no proper declaration in the Return filed and nor has he explained as to how the declaration in the private records amounted to deliberate misdeclaration ; the same has to be examined in the context of the pleadings. The Revenue has failed to establish suppression with an intent to evade duty and hence there is no justification for invoking larger period of limitation. Therefore the impugned order deserves to be set aside on this score alone - Appeal allowed.

Summary

ISSUES:

Whether the classification of the goods as "processed tyre cord fabrics" under Chapter Heading 59.02 of the Central Excise Tariff Act, 1985 is correct and binding on the adjudicating authority in light of Board's circulars.Whether the lower authority was justified in disregarding the binding Board circulars and the directions of the appellate tribunal while adjudicating the matter de novo.Whether there was "suppression with intent to evade duty" warranting invocation of the extended period of limitation and imposition of penalty under Rule 173Q of the Central Excise Rules, 1994.Whether the enhancement of penalty under Rule 173Q from Rs.1 lakh to Rs.3 lakhs is sustainable in the absence of supporting documentary evidence.

RULINGS / HOLDINGS:

The classification of the goods as "processed tyre cord fabrics" under Chapter Heading 59.02 is binding on the adjudicating authority as per the Board's circulars, which have "binding effect" following the Apex Court's decision in Ranade Micro Nutrients v. CCE.The lower authority's failure to consider or refer to the Board's circulars and the appellate tribunal's specific direction to adjudicate "in the light of Board's Circulars" constitutes a "blatant and deliberate defiance" of the tribunal's directions and the binding judicial precedent, rendering the impugned order unsustainable.The aspect of suppression must be examined in the light of "intention to evade duty"; mere suppression without intent is insufficient. Since the department had accepted the goods as tyre cord fabric, the invocation of the extended period of limitation on grounds of suppression is unjustified.The enhancement of penalty under Rule 173Q is "contemptuous in nature" and cannot be sustained in the absence of any "sustainable documentary evidence" supporting the finding of suppression or misdeclaration.

RATIONALE:

The Court applied the principle established in the Apex Court's ruling in Ranade Micro Nutrients v. CCE that Board circulars are "binding on the adjudicating authority" and must be followed unless stayed or set aside by a competent court.Reliance was placed on the doctrine of judicial discipline as emphasized in Union of India v. Kamalakshmi Finance Corporation Ltd., which mandates that subordinate revenue authorities must "unreservedly" follow orders of higher appellate authorities to avoid "undue harassment" and administrative chaos.The Court emphasized that the determination of suppression requires proof of "intention to evade duty," and mere non-disclosure or difference in technical specifications without such intent cannot justify extended limitation or penalty.The Court noted that the lower authority's disregard of binding circulars and appellate directions, coupled with enhancement of penalty without evidence, amounted to a "contemptuous act" and warranted setting aside the impugned order.