ORDER
Jyoti Balasundaram, Member (J)
1. The twin issues are :
1. Classification of certain phenol formaldehyde resins manufactured by the appellants herein – according to the assessees, the product would fall for classification under CET 3909.51 and the benefit of concessional rate of duty in terms of Notification No. 133/86 would be applicable, while according to the Department the product is a chemically modified phenol formaldehyde resin classifiable under CET sub-heading 3909.59 attracting duty at the tariff rate;
2. Whether the demand is barred by limitation.
2. We have heard Shri K.K. Anand, learned Counsel and Shri H.K. Jain, learned SDR and record our findings herein below :-
2.1 Classification : The Chemical Examiner’s report on the samples drawn for test on 14-10-1990 confirms that the product in dispute is a chemically modified phenol formaldehyde resin. The Chief Technical Executive of the appellant company has also deposed in cross-examination that the chemical modification was brought about by use of alcohol, ethyl alcohol and resins. The appellants cannot, therefore, contend that the disputed product is not a chemically modified phenol formaldehyde resin. Note 5 to Chapter 39 provides that “the chemically modified polymer i.e. those in which only appendages to the main polymer chains have been changed by chemical reaction are to be classified in the Heading appropriate to the unmodified polymer”. However, in terms of Note 14 to Chapter 39 which states that “chemically modified polymers of the kind specified in Note 5 above are to be classified in the same Heading as the unmodified polymer provided that chemically modified polymers are not more specifically covered by any other sub-heading and that there is no residuary sub-heading named “other” in the series of sub-headings concerned,” the product in dispute will not remain for classification under sub-heading 3909.51 which covers phenol formaldehyde resin; but will move to sub-heading 3909.59 which covers “other phenol formaldehyde resins”.
2.2 Limitation : The period of demand is 1-9-1989 to 12-11-1990. The show cause notice is dated 7-8-1991. The contention of the appellant is that they had no knowledge that the disputed product was a chemically modified phenol formaldehyde resin and that they were under the bonafide belief that their product was a variety of phenol formaldehyde resin classifiable under CET sub-heading 3909.51. They contend that the extended period of limitation was not available to the Department in the face of approval of classification list and in the absence of any mis-statement or suppression or non-disclosure and they also submit that they had disclosed the various raw materials used by them, in the relevant classification list. They rely upon the decision in the case of CCE v. Muzaffarnagar Steels reported in 1989 (44) E.L.T. 552.
2.3 We are unable to accept these arguments – the appellants who are the manufacturers of the product cannot disclaim knowledge that their product is a chemically modified phenol formaldehyde. They have not furnished any basis for their belief that the disputed product was chemically and commercially as the same phenol formaldehyde. In these circumstances, the charge of misclassification is sustainable. It is not mere inaction on the part of the appellants but a positive act of concealment of the fact that the disputed product was a chemically modified phenol formaldehyde resin. The reason for the deliberate misclassification is not far to see – the appellants’ intention is clear from their claim to the benefit of Notification 133/86 which prescribes rate of duty of 15% ad valorem (as against the tariff rate of 25%) which is available to only phenol formaldehyde falling under sub-heading 3909.51 and not to chemically modified variety classifiable under CETA 3909.59 which we have held to be the appropriate classification in our finding in the para above. The case law cited by the learned Counsel is distinguishable as in that case, the Tribunal held that the respondents therein had not suppressed any material fact regarding the description of the goods, while in the present case, the appellants are guilty of concealment/deliberate non-disclosure of the description of goods as chemically modified phenol formaldehyde. We, therefore, hold that the extended period of limitation has been rightly invoked and that the demand is not hit by time bar. We also hold that penalty is warranted in the facts and circumstances, of the case. In the light of the above, we uphold the impugned order and reject the appeal.