2008 (12) TMI 625 - AT - Central Excise

Yarn - Taspa yarn - Classification of - Chemical examiner already given his opinion about absence of core yarn in their case

Summary

Issues:
Correct classification of Taspa yarn under Heading 5606.00 or 54.03; Application of limitation period for demand; Imposition of penalty.

Correct Classification of Taspa Yarn:
The dispute centered around the classification of Taspa yarn manufactured by the appellants. The Commissioner, in the impugned order, classified the product under Heading 5606.00, rejecting the appellant's claim that it should fall under Heading 54.03. The manufacturing process involved two types of yarns, one moving at a slower speed and the other at a faster speed, deliberately creating irregularities in the final product. The Revenue argued that the yarn running at a slower speed constituted the core yarn, qualifying the product for classification under Heading 56.06. The appellant contended that the inter-turning of the two yarns was texturizing, with no core yarn present. The appellant relied on a Tribunal decision stating that Taspa yarn produced using two yarns moving at different speeds did not have a core yarn. The Revenue, however, supported the Commissioner's classification based on the Supreme Court decision in another case.

Application of Limitation Period for Demand:
The demand for duty, raised on 5-4-88 for the period March 1983 to May 1987, was challenged as beyond the normal limitation period. The appellant argued that the dispute over correct classification, with conflicting Tribunal decisions and Board circulars, justified their belief that the product fell under Heading 54.03. The appellant contended that there was no willful suppression of facts to evade duty, supported by the Chemical Examiner's opinion. The Tribunal agreed with the appellant, holding that the demand beyond the normal limitation period was not sustainable due to the bona fide belief held by the appellant. The liability to pay duty within the limitation period was upheld, and the penalty was set aside.

Imposition of Penalty:
Considering the bona fide nature of the classification issue and the absence of mala fide intent on the appellant's part, the Tribunal deemed the imposition of a penalty unjustified. The penalty was set aside in line with the finding that the appellant had not acted with any intent to evade duty.

In conclusion, the Tribunal upheld the classification of Taspa yarn under Heading 56.06, ruled the demand beyond the normal limitation period as unsustainable due to the appellant's bona fide belief, upheld the duty liability within the limitation period, and set aside the penalty imposed on the appellant.