ORDER
J.H. Joglekar, Member (T)
1. M/s Visen Industries Ltd. started manufacturing Softener in 1987. On 27-1-1988, they wrote to the jurisdictional Supdt. saying that they were manufacturing three articles including Octadex EM (Softener) falling under Heading 3402. They claimed that these goods were fully exempted under Notification No. 78/86-C.E., dated 10-2-1986. It was claimed that raw materials were duty paid. In the reply dated 8-2-1988 the jurisdictional officer certified that the exemption claimed for Softener appeared to be correct. On.8-4-1988, the same classification was claimed for the same goods and the exemption was claimed under the same notification. Application was made for grant of a licence also. The classification list was filed bearing No. 1/89-90 for softener under sub-heading 3402.90. The Asstt. Commissioner changed the classification for such softener to heading 3809 and applied the Tariff rate in classification, the assessees moved the Collector (Appeals). The Collector (Appeals) in his order dated 24-9-1991 set aside the order in classification and directed chemical test to be performed to ascertain its current usage with a view to find out whether it was a softener or not. Subsequently, the Chemical Examiner’s opinion was sought and the classification of the substance Octadex EM was adjudged under Heading 3809. The benefit of Notification No. 101/66 was denied.
2. While the assessee and the department were engaged in this exercise of establishing the correct identity of the goods in terms of the Central Excise Tariff, the Collector issued a show cause cum demand notice dated 2-4-1992 alleging that the goods were classifiable under heading 3809, that the assessees had wrongly declared these goods to be falling under heading 3402 and that the assessees had misdeclared the classification to get wrong advantage of the exemption notification. On this ground, proviso to Section 11A of the Central Excises and Salt Act, 1944 was invoked, demanding duty short levied from 18-6-1987 to 31-3-1990. The Collector in the impugned order upheld the charge of misdeclaration and confirmed the duty subject to the grant of benefit of Notification No. 175/86, dated 1-3-1986, imposed the penalty and ordered confiscation of plant and machinery etc. The duty finally quantified was Rs. 5,10,605.92. Against this order the appeal has been filed.
3. I have heard Shri Vijay Nair, Director of the appellants company and Shri V.K. Suman, JDR.
4. The strong point made in the appeal memorandum is of limitation. It is claimed that at all times, the department was aware of the identity of the product. It was claimed that nowhere the assessees described the product as OSSA. It was claimed that in the letter dated 8-4-1988 the product was prescribed as a white paste used as a softener in textile finishing. This description was used by the Dy. Chief Chemist in his test report on the sample drawn on 23-6-1988. It is claimed that during October, 1991 to March, 1992, the RT12 assessment was finalised. It was claimed that during this period, the duty payable on goods falling under Chapter heading 3402.90 was higher than on goods classifiable under Heading 3809. Therefore, on the wrong classification Government gained more duty.
5. The facts narrated in the first part of the order coupled with the submissions made by the appellants very clearly show that at all times the department was aware of the exact identity of the goods and use to which the goods were put. Nothing prevented the department from drawing samples of the goods in order to check their proper classification. Rule 173B of the Rules permits and requires the Asstt. Commissioner to make due enquiry before approving the classification. In the case of chemicals where any classification dispute exists, he is expected to cause drawal of samples for classification. This was not done. This was done only when the Asstt. Commissioner passed the orders in classification dated 21-3-1991. The test report quoted by him in the order also does not lead to the presumption that this classification under Chapter heading 3402 was wrong. The Collector (Appeals) in his order dated 24-9-1991 also remarked that fresh samples to be drawn. The fresh samples lead to the final order in classification dated 5-2-1993.
6. What it shows is that when the show cause notice was issued alleging misdeclaration on the part of the assessees, the department was yet to positively establish the classification of the contested product. For sometime during the pendency of the’ classification determination proceedings, the assessments have been finalised. In such a situation, it is a travesty to allege that the assessees had misrepresented the facts to evade duty. In fact, for part of the time, the assessees would have saved some duty if the classification finally approved by the department had been invoked.
7. Therefore, on the ground of limitation alone, this appeal succeeds and is allowed. Since the appeal is so allowed, the merits are not considered. The order of the Collector is set aside. Appropriate relief is ordered.