1999(03)LCX0121

IN THE CEGAT, COURT NO. III, NEW DELHI

S/Shri S.K. Bhatnagar, President, S.S. Kang, Member (J) and V.K. Agrawal, Member (T)

UNIPATCH RUBBER LTD.

Versus

COMMISSIONER OF CENTRAL EXCISE, BHOPAL

Stay Order No. 19/1999-C, dated 1-3-1999 in E/Stay/193/99-C in Appeal No. E/316/99-C

Cases Quoted

Madras Rubber Factory v. Collector — 1983(05)LCX0009 Eq 1987 (031) ELT 0071 (Tribunal) — Referred......... [Para 2(vi)]

Pang Rubber Products — Order dated 18-12-1996 by Commissioner Appeals — Referred [Para 2(v)]

Advocated By :   Shri V. Sridharan, Advocate, for the Appellant.

Shri K. Srivastava, SDR, for the Respondent.

[Order per : S.K. Bhatnagar, President]. - This is a stay application filed with reference to Order dated 17-12-1998 passed by the Collector (Appeals), Bhopal.

2. Learned Counsel for the applicants-appellants submitted that Asstt. Commissioner of Central Excise, Gwalior passed an order-in-original dated 16-10-1997 confirming the demand and imposed an equivalent penalty also.

2(i). The Asstt. Commissioner’s order dealt with the classification of two products (a) Tem Adhesive and (b) Criss-cross patches. Both the issues were decided against the applicants/appellants.

2(i)(a). On appeal, the Commissioner (Appeals) decided the classification of tem adhesive in applicants’ favour. Therefore, the balance duty amount after excluding the demand relating to tem adhesive comes Rs. 62,22,851/-.

2(ii). As a condition for hearing of the appeal, the Commissioner (Appeals) passed an order under Section 35F of Central Excise Act, directing the appellants to deposit 30% of the duty demanded by the Asstt. Commissioner’s order and give bank guarantee for the balance. Accordingly, the appellants have already deposited Rs. 19,02,703/- vide TR. 6 challan dated 25-9-1998 . Bank guarantee for Rs. 43,20,148/- has also been furnished and is valid up to 31st March, 1999.

2(iii). At the outset, it is submitted that imposition of penalty under Section 11AC is illegal. The appellants had filed classification list claiming classification under a particular heading. Provisional assessment under Rule 9B was ordered and duty was accordingly paid by the appellants according to the classification claimed by it. Classification list was sought to be approved by the Asstt. Commissioner under a heading different from the heading claimed by the appellants. There is no allegation of mis-statement of facts etc. The dispute was purely a classification dispute raised and decided while dealing with the Classification List filed under Rule 173 of Central Excise Rules, 1944. Clearances were also on provisional assessment basis. The imposition of penalty is therefore, illegal. It was their request that at this stage, no further deposit may be ordered as 30% of duty has already been deposited and bank guarantee has been given for the balance amount.

2(iv). Further the appellants now paying duty under protest as per the classification ordered by the Asstt. Commissioner.

2(v). The issue on merits relates to the correct classification of vulcanised rubber patches used for repairing of tyres. Revenue classifies under Heading 4008.21. The appellants claimed classification under residuary Heading 4016.99. On this very issue, the Asstt. Commissioner, Dindigul vide order dated 19-12-1991 (page 194-196 of the paper book) and the Asstt. Commissioner of Central Excise, Coimbatore vide order dated 29-11-1996 have decided the identical question in favour of the assessee. The appellants have been instructed that the respective Collectorate’s had accepted their orders and no appeal has been filed. The Commissioner (Appeals), Pune vide his order dated 18-12-1996 in the case of Pang Rubber Products has also classified the said product under Heading No. 40.16.99. The Revenue’s appeal against this order is pending in WRB.

2(vi). The criss-cross patches is not a plate, sheet or strip of rubber. The Tribunal in Madras Rubber Factory reported in 1987 (031) ELT 71 has held that the product is not covered by Item 16A(2) which covers plate, sheets and strips of rubber. Even a cursory look at the product will show that this is not a plate, sheet or strip. Hence, Heading 4008.21 is ex facie inapplicable to the commodity in question.

3. Learned SDR stated that the department’s case of classification is based on the Chapter Note (9) of Chapter 40 and it was their submission that the product in question would fall under Heading 40.08 because by virtue of this chapter Note, plate, sheet, and strips whether or not cut to shape, so as to render them for resoling or retreading of rubber tyres continue under this heading. Hence the residuary Heading 40.16 would not be attracted.

3(i). It was his submission that since the department has prima facie a strong case, they should be asked to deposit the duty in question.

4. We have considered the above submissions. We observe that the issue is arguable on merits.

5. We also observe that in so far as the question of penalty is concerned, prima facie the appellants appear to have a stronger case because it appears to be more in the nature of classification dispute .

6. We also take note at this stage that the Commissioner (Appeals) had passed an order under Section 35F of the Central Excise Act directing the appellants to deposit 30% of the duty demanded by the Asstt. Commissioner and to give bank guarantee for the balance; And the learned Counsel has assured that the bank guarantee would be kept alive and the appellants have already deposited Rs. 19,02,703/- vide TR 6 Challan dated 25-9-1998. This is apart from bank guarantee for Rs. 43,20,148/- in terms of the aforesaid order of the Commissioner (Appeals). We consider that their request for taking this fact into account is reasonable and we accept it. In view of the facts and circumstances of the case, we consider any further deposit was not called for. The stay application is disposed of in the above terms. The appellants shall ensure that the bank guarantee is kept alive during the pendency of the appeal. It is also clarified that in view of the above order, the recovery of balance of duty and the penalty is stayed.

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Equivalent 2000 (123) ELT 755 (Tribunal)