1998 (3) TMI 220 - AT - Central Excise

Summary

Issues Involved:
1. Classification of Insan-LE
2. Demand for duty and limitation period
3. Confiscation of plant and machinery, land, and building
4. Shortages, excess, and suppression of production

Summary of Judgment:

1. Classification of Insan-LE:
The primary issue was whether Insan-LE should be classified as Motor Spirit under sub-heading 2710.19 or as Aviation Turbine Fuel (ATF) under sub-heading 2710.21 of the Central Excise Tariff Act, 1985. The Commissioner initially classified Insan-LE as Motor Spirit, relying on test results and expert opinions indicating its suitability as fuel for spark ignition engines. However, the Tribunal found that the product did not meet the practical and commercial fitness criteria for Motor Spirit and was more appropriately classifiable under sub-heading 2710.21 as ATF, which does not prescribe any end-use criterion.

2. Demand for Duty and Limitation Period:
The show cause notice covered a period beyond six months, invoking the extended period u/s 11A of the Central Excise Act, 1944. The Tribunal held that the appellants had provided sufficient information about Insan-LE, including its process description and end use, and there was no intention to evade duty. Consequently, the demand was confined to the normal period of six months.

3. Confiscation of Plant and Machinery, Land, and Building:
The Commissioner had ordered the confiscation of the plant and machinery, land, and building under Rule 173Q(2) of the Central Excise Rules, along with imposing a penalty. The Tribunal set aside this order, finding no grounds for invoking the longer period for suppression.

4. Shortages, Excess, and Suppression of Production:
The Tribunal agreed with the Commissioner that there cannot be an automatic set-off of shortages against excess. However, it remanded the matter for re-determination, considering the margin of 1% condonation for losses due to handling and storage, as prescribed by the Central Board of Excise and Customs. The Tribunal also allowed the appellants to furnish documentary evidence to substantiate their claim of captive consumption.

Final Order:
1. Insan-LE is classifiable under sub-heading 2710.21 as Aviation Turbine Fuel.
2. The department cannot invoke the longer period for demanding duty u/s 11A.
3. The order confiscating the plant and machinery, land, and building under Rule 173Q(2) is set aside.
4. The matter regarding excess, shortages, and suppression of production is remanded to the Commissioner for re-adjudication.