Holding

The extended period of limitation under the proviso to Section 11A does not apply where the product is correctly classified under Chapter 39 and the revenue has not doubted the assessee's bonafide disclosure of the manufacturing process.

Summary

Punjab Laminates Pvt. Ltd. manufactured paper‑based decorative laminated sheets and classified them under Chapter 39 of the Central Excise Tariff Act, 1985. The Commissioner of Central Excise argued that the goods should fall under sub‑heading 4823.90 of Chapter 48 and that the exemption under Notification No. 135/89‑CE was obtained willfully, invoking the extended period of limitation under the proviso to Section 11A of the Central Excise Act, 1944. The assessee disclosed its manufacturing process when queried, and the revenue never doubted the correctness or bonafide nature of that disclosure. The Customs, Excise and Service Tax Appellate Tribunal held that the extended limitation could not be invoked because the classification under Chapter 39 was correct and the exemption was lawfully availed. The Supreme Court affirmed the Tribunal’s view, stating that the proviso to Section 11A is an exception and requires a specific case to attract it, which was absent here. Consequently, the demand for excise duty was rejected and the appeal dismissed.

Issues considered

Whether the proviso to Section 11A of the Central Excise Act, 1944 extending the period of limitation can be invoked when the assessee has disclosed the manufacturing process and the product is correctly classified under Chapter 39.
Whether the benefit of Notification No. 135/89‑CE was willfully availed by the assessee.

Legislation cited

Central Excise Act, 1944s. 11A, s. 11AB
Central Excise Tariff Act, 1985

Subjects

central exciseclassification of goodsextended period of limitationSection 11Aexemption notificationdecorative laminated sheetsbonafide disclosuretax demand

Judgment

A COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH
v.
M/S. PUNJAB LAMINATES PVT. LTD.

AUGUST 24, 2006

B [S.B. SINHA AND DALVEER BHANDARI, JJ.]

Central Excise Tariff Act, 1985:

Excise duty-Chapter 39 and Sub-heading No. 4823.90-Exemption
C Notification No. 135189-CE dated 12.5.1989-Benefit of - Decorative
.laminated sheets-Extended period of limitation under S. 11 A of the Central
Excise Act-Invoking of--Conditions precedent-Assessee manufactured paper
based decorative laminated sheets-Assessee classified such goods under
Chapter 39-But the Revenue contended that such goods should have been
D classified under sub-heading No. 4823.90-Manufacturing process disclosed
by the assessee when queried by the Revenue-13,85.494 sheets cleared
upon giving the benefit of the exemption notification-Excise duty short paid
demanded by invoking the extended period of limitation-Appellate Tribunal
set aside the demand--Correctness of-Held: At no point of time, the Revenue
doubted the correctness or otherwise of the manufacturing process or the
E ingredients disclosed by the assessee-The disclosure made by the assessee
was acceptable to the Revenue-Its bonafide was never questioned-Decorated
laminated sheets fell under Chapter 39 and not under sub-heading No.
4823.90-Hence, it is not permissible to invoke the extended period of
limitation-Decision ofAppellate Tribunal upheld--Central Excise Act, I944,
F S. //A.
The respondent-assessee manufactured paper based decorative
laminated sheets. The goods manufactured by the respondent were classified
under Chapter 39 of the Custom Excise Tariff Act, 1985 whereas according
to the appellant-Revenue it should have been classified as sub-heading No.
G 4823.90. The respondent-assessee disclosed the manufacturing process when
a query was raised by the appellant-Revenue. The authorities had cleared
13,85,494 sheets upon giving the benefit of the notification No. 135/89-CE
dated 12.5.1989.

The appellant-Revenue issued a show-cause notice to the respondent-
H 264
COMMR. OF CENTRAL EXCISE, CHANDIGARH 1·. PUNJAB LAMINATES PVT.LTD. 265
assessee as to why central excise duty should not be recovered from it under A
Section I IA of the Central Excise Act, 1944 by invoking the extended period
of limitation available under the proviso to the said Section as the benefit of
Notification No. 135/89-CE was willfully availed of by the respondent-assessee.

The Commissioner of Excise upheld the show-cause notice. However,
the Customs, Excise and Service Tax Appellate Tribunal allowed the appeal B
filed by the respondent-assessee. Hence the appeal.

The following question arose before the Court:-

Whether the extended period of limitation envisaged under the proviso
appended to Section llA of the Central Excise Act, 1944 would apply to the C
facts and circumstances of the present case?

Dismissing the appeal, the Court

HELD: I. A proceeding under Section I IA of the Central Excise Act,
1944 indisputably could be initiated within a period of six months, as the law D
thence stood. The period of six months has been extended to one year in the
year 2000. The proviso appended to Section I tA of the Act extending the period
oflimitation is required to be applied if the conditions precedent therefor are
satisfied. The manufacturing process indisputably was disclosed by the
respondent. It is not in dispute that the question as regards the classification E
of the decorative laminated sheets falling under Chapter 39 of the Central
Excise Tariff Act, 1985 and not under Chapter heading 48 had been operating
in the field. It is also not in dispute that the issue as regards applicability of
the exemption in terms of the notification No. 135/89-CE dated 12.5.1989 was
incidental to the basic classification of the product. [271-E-G[
F
CCE v. Bakelite Hylam ltd., (1997[ IO SCC 350 and Decent Laminates
Private Ltd. v. CCE, (2002) 146 ELT 487, relied on.
>
2. At no point of time, the Revenue doubted the correctness or otherwise
of the manufacturing process or the ingredients disclosed by the respondent.
The stand of the respondent that the industry as such had adopted the same G
manufacturing process and had been extended the benefit of the Exemption
Notification of 1989 has not been called in question. If the stand of the
manufacturer is correct, there was no reason as to why it should be singled
out. [272-A, Bl

H
266 SUPREME COURT REPORTS [2006] SUPP. 5 S.C.R.

A CCE v. Bakelite Hy/am ltd., (1997( 10 SCC 350, referred to.

3.1. It is not a case where the respondent had not disclosed the activities
of manufacturing products carried out by them by declaration or otherwise.
It responded to each and every query of the appellant, as and when called upon
to do so. The authorities of the appellant must have verified the said
B disclosures. At least they are expected to do so. The disclosure made by the
respondent was acceptable to them. Its bonafide was never questioned.
(272-C, DI

3.2. The applicability of extended period of limitation is, therefore,
C required to be considered in the aforementioned context Proviso, it is trite,
provides for an exception. It is not the rule. A case, therefore, has to be made
out for attracting the same. (272-D(

Pahwa Chemicals Private Ltd. v. CCE, (2005) 189 ELT 257, relied on.

Prime/la Sanitary Products Pvt. Ltd. v. CCE, (2005) 184 ELT 117,
D referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3632 of2006.

From the Final Order No. 491/03-B dated 26.6.2003/16.7.2003 of the
E Customs, Excise and Service Tax Appellate Tribunal, New Delhi, Bench-Bin
appeal No. E/1710/1998-NB-C.

G.E. Vahanvati, S.G., A.S. Rao, T.A. Khan and B. Krishna Prasad for the
Appellant.

Vivak Kohali, Subramonium Prasad, S.N. Jha and Abbay Kumar for the
F Respondent.

The Judgment of the Court was delivered by

S.B. SINHA, J. Leave granted.

G Whether extended period of limitation envisaged under the proviso
appended to Section 1IA of the Central Excise Act, 1944 (for short "the Act")
would apply to the facts and circumstances of the present case is the question
involved in this appeal.

Before adverting to the said question, however, we may notice the basic
H fact of the matter which is not in dispute.
COMMR. OF CENTRAL EXCISE, UIANDIGARH r. PUNJAB LAMINATES PVT.LTD. (S.B. SINHA,J.J267

The Respondent herein manufactures paper based decorative laminated A
sheets. The goods manufactured by the Respondent were classified under
Chapter 39 of the Custom Excise Tariff Act whereas according to the Appellant
it should have been classified as sub-heading No. 4823.90. The classification
for the year 1993 was approved by the Revenue. By a letter dated 6.12.1994,
it requested Respondent to intimate the manufacturing process of the product,
to which a reply was sent by it in terms of its letter dated 7.12.1994 discloseing B
the manufacturing process stating:

"Brief Manufacturing Process of Paper Based Laminated Sheets

The process of manufacture of the above products involving in three
major stages is as under: C
I. Preparation of Reactive Mixtures like (i) Melamine formaldehyde
and (ii) Phenol formaldehyde. The reactive mixture process involves
mixing of Melamine Powder with Formaldehyde and Phenol with
Formaldehyde in separate chemical reaction vessels, separately under
high steam pressure and continuous sterling. The reactive mixture are D
used for treatment of various papers, used for the manufacture of
paper based laminated sheets.

2. Paper treating process:

Under the process absorbent Kraft paper is treated with Phenol E
Formaldehyde reactive mixtur~ and Overlay Tissue paper and design
prints or colour base papers are treated with Melamine formaldehyde
reactive mixture under stream through chemical treating and drying
machine.

3. Hydraulic pressing process F
This process is the last and final one which involves hydraulic pressing
of various layers chemical mixture treated papers under high hydraulic
pressure and steam temperature. During the process the reactive
mixtures treated papers are turning into a homogeneous substance,
which is called "PAPER BASED LAMINATED SHEETS". G
The raw materials used as under:
I. Unbleached Absorbent Kraft paper
2. Plain coloured and design printed base paper
H
268 SUPREME COURT REPORTS (2006] SUPP. 5 S.C.R.

A 3. Barrier paper
4. Tissue paper
5. Polly-Propelone Filins
6. Melamine Powder
B 7. Phenol
8. Formaldehyde
9. Methanol (Mehtyl Alcohol)
10. Denatured spirit
c 11. Urea
12. Printing Inks for printing designs & base paper
BRIEF PROCESS OF MANUFACTURE

Number of layers of unbleached Absorbent Kraft paper treated with
D
Phenol formaldehyde Reactive mixtures are laid on a carrier steel plate,
on which one layer of each Melamine formaldehyde reactive mixture
treated base paper and overlay tissue paper are laid with and further
high gloss mirror finished stainless steel press mould is placed on the
treated paper. Similarly number of sets of reactive mixture papers duly
E treated are made by using polypropylene films for separating the
sheets. The above sets are then put into the flat bed of hydraulic
press for final pressing High pressure temperature upto 1800 to 3200
per sq. inch and temperature at 145 to 150 C is given. Thus the sheets
are prepared into a homogeneous mass is called paper based laminated
sheets.
F
End used

The end use of paper based laminated sheets are mainly as follows:
(i) Making furnitures
G (ii) Panelling purpose
(iii) Interior furnishing of rail coaches & passenger buses etc. etc."

Yet again, a query was raised in regard to the use of plastic as an input
for the manufacture of primal product, i.e., laminated sheets falling under sub-
H heading No. 4823.90. A reply thereto was also sent by the Respondent by a
COMMR. OF CENTRAL EXCISE, CHANDIGARH ... PUNJAB LAMINATES PVT.LTD. [S.B. SINHA, J.J 269

letter dated 22.12.1994 stating: A
"It is intimated that we are using Phenol, Melamine and Fonnaldehyde
falling under Chapter 29 of Central Excise Tariff. Further, it is clarified
that a gluing solution is obtained by mixing of phenol and fonnaldehyde
and melamine and formaldehyde. At no stage any product known as
plastic or marketable as plastic comes into existence. We are as such B
not using plastic as an input in the manufacture of paper based
laminated sheets."

The question as to whether the product manufactured by the Respondent
would fall under Chapter 39 or Chapter 48 of the Central Excise Tariff Act came
up for consideration before this Court in Collector of Central Excise, C
Hyderabadv. Bakelite Hylam Ltd, [1997] IO SCC 350 wherein it was held that
in respect of such products classification as provided for in Entry 39.20 would
be applicable, stating:

"Note (d) clearly provides that products consisting of glass fibres or D
sheets of paper impregnated with plastics and compressed together
as in the present case, if they have a hard and rigid character, would
fall under Chapter 39. If they have more the character of paper or of
articles of glass fibres, they would be classified under Chapter 48 or
Chapter 70, as the case may be. The decorative laminated sheets
which have a hard and rigid character are, therefore, classifiable under E
Chapter 39 and not under Chapter 48. The appropriate entry is 3920.31/
3920.37 which deals, inter alia, with sheets of other plastics, rigid,
laminated. Decorative laminated sheets, therefore, cannot be classified
under Tariff Entry 4818.90/4823.90. CEGAT is not right in classifying
these under Entry 4818.90/4823.90."
F
The said view was reiterated by this Court in Decent Laminates Private
limited v. Collector of Central Excise and Customs, (2002) 146 EL T 487

A notice was issued on 9.12.1997 to the Respondent to show cause as
to why:
G
"(i) central excise duty amounting to Rs. 36,37,338.00 short paid on the
goods cleared during 08.0 l.1993 to 31.03 .1994 should not be recovered
from them under Section 11 A of the Act by invoking the extended
period of limitation available under the proviso to said Section I IA
as the benefit of Notification No. 135/89-CE was willfully availed by H
270 SUPREME COURT REPORTS [2006] SUPP. 5 S.C.R.

A them by making mis-statement regarding the description of the product
manufactured by them in the classification list effective from 08.01.1993.

(ii) Interest as !eviab!e should not be recovered from them under
Section I I AB of the Act; and

B (iii) penal action should not be taken against them under Rule I 73Q
of the Rules read with Section 11 AC of the Act for the aforesaid
contraventions."

Pursuant thereto or in furtherance thereof, cause was shown by
Respondent herein bringing to the Commissioner's notice that the classification
C list was approved by the Divisional Assistant Commissioner on 8.1.1993 and
again for the year 1994. It was contended that as and when called upon to
do so, Respondent had categorically stated about the detailed manufacturing
process involved and, thus, the authorities concerned were at all material
times aware thereof. It had been pointed out that the authorities have cleared
1385494 sheets between 8.1.1993 and 31.3.1994 upon giving the benefit of the
D notification dated 12.5.1989 and in that view of the matter the extended period
of five years available under proviso to Section I IA of the Act was not
applicable.

It was stated:

E "The noticees strongly contend that they had correctly availed the
. concessional rate of duty. The noticees did not bonafide feel, at any
stage that they are using any plastic product for the impregnation of
the papersheets. They had been using phenol for formal dehyd. and
other additives for preparation of a solution with which the paper was
F being treated to obtain paper based laminated sheets. The Hon 'ble
Tribunal in the case of Meghdoot Laminates P.Ltd. v. C.C.E., (1990)
49 EL T 75 had held that the products are classifiable under Chapter
48 and not Chapter 39 and accordingly entire industry had classified
products under chapter heading 4823.90 and availed the benefit of
Notfn. 135189 dt. 12.5.89, which also referred to the products to be
G falling under sub-heading 4823.90. Since the duty had been paid by
availing the benefit ofNotfn. No. 135/89 as per practice being followed
in the industry and as per approval of classification list granted by
the competent authority it cannot be said that exemption has
incorrectly been availed."
H [Emphasis supplied]
COM MR. OF CENTRAL EXCISE. CHANDIGARH r. PUNJAB LAMINA TES PVT.LTD. [S.B. SINHA. J.J 27 J

It was further stated: A
"The solution of Phenol Formal dehyd. and Melamine was being
prepared in house and it was being considered in the industry as
Resin and was honestly described as such in the classification list."

The Commissioner of Excise rejected the said contention of the B
Respondent. Aggrieved thereby and dissatisfied therewith Respondent
preferred an appeal before the Custom Excise and Service Tax Appellate
Tribunal. By reason of the impugned judgment, the same has been allowed
opining that although the benefit of the said notification was not available
if the manufactured goods were coated with plastic but held:
c
" .... Therefore, the proper officer before approving the classification
list extending the benefit of notification, should have satisfied himself
that the product is not coated with plastic. The onus of proving the
classification list correctly is on the department as held by the Tribunal
in the case of Muzafarnagar Steel. The Assistant Collector is, indeed, D
required to make such inquiry and summon such information as may
be called for in order to arrive at the correct decision ..... "

It was opined that the entire demand pertaining to the period 8.1.1993
to 31.3.1994 was hit by the time limit specified under Section 1lA(I) of the
Act.
E
A proceeding under Section 11 A of the Act indisputably could be
initiated within a period of six months, as the law thence stood. The period
of six months has been extended to one year in year 2000. The proviso
appended to Section 1 lA of the Act extending the period of limitation is
required to be applied if the conditions precedent therefor are satisfied. The p
manufacturing process indisputably was disclosed by Respondent. It is not
in dispute that the question as regards classification of the decorative laminated
sheets ~eing falling under Chapter 39 of the Central Excise Tariff and not
under Chapter Heading 48 had been operating in the field. It is also not in
dispute that the issue as regards applicability of the exemption in terms of
notification No. 135/89 was incidental to the basic classification of the product. G

It is difficult to believe that although the Respondent, prior to 8.1.1993,
I
had been paying duty at the rate of 35% ad valorem, the benefit of notification
No. 135/89 dated 12.5.1989 had been accorded to it without any verification
...._ and only on the basis of the statements made by the Respondent.
H
272 SUPREME COURT REPORTS [2006] SUPP. 5 S.C.R.

A At no point of time, the Revenue doubted the correctness or otherwise
of the manufacturing process or the ingredients disclosed by the Respondent.
The stand of the Respondent that the Industry as such had adopted the same
manufacturing process and had been extended the benefit of the Exemption
Notification of I989 has not been called in question. If the stand of the
B manufacturer is correct, there was no reason as to why it should be singled
out.

This Court decided Bakelite Hy/am Ltd (supra) on 10th March, 1997.
The impugned notice was issued only on 9.12.1997 evidently relying on or
on the basis thereof.
c It is not a case where the Respondents had not disclosed the activities
qf manufacturing products carried out by them by declaration or otherwise.
They responded to each and every query of the Appellant, as and when
called upon to do so. The authorities of the Appellant must have verified the
said disclosures. At least they are expected to do so. The disclosure made
D by the Respondent was acceptable to them. Their bonafide was never
questioned.

The applicability of the extended period oflimitation is, therefore, required
to be considered in the aforementioned context. Proviso, it is trite, provides
for an exception. It is not the rule. A case, therefore, has to be made out for
E attracting the same.

In Prime/la Sanitary Products Pvt. Ltd v. Collector of C.Ex., Goa,
(2005) 184 ELT 117 a Three-Judge Bench of this Court was dealing with a case
where a concession ~as made by a counsel appearing on behalf of the
Revenue. The court opined that although the item was put under right
F classification list but they had not been permitted to take a different. stand
stating:

" ... As the matter of classification has proceeded on a matter of
concession of facts we do not allow the Appellants to withdraw from
that concession. They are now not permitted to argue on the question
G of classification ... "

In Pahwa Chemicals Private limited v. Commissioner of C.Ex., Delhi,
(2005) 189 ELT 257, this Court held:

"The Appellants have all along claimed that merely because they were
H
COM_MR. OF CENTRAL EXCISE, CHANDIGARH'" PUNJAB LAMINATES PVT. LTD. [S.B. SINHA, J.J 273

affixing the label of a foreign party, they did not lose. the benefit of A
Notification No. 175/86-C.E. as amended by Notification No. 1/93-C.E.
The view taken by the Appellants had, in some cases, been approved
by the Tribunal which had held that mere use of the name ofa foreign
party did not dis-entitle a party from getting benefit of the Notifications.
It is only after Larger Bench held in Namtech Systems Limited v. B
Commissioner of Central Excise, New Delhi reported in (2000) 115
E.L.T. 238 (Tribunal) that the position has become clear. It is settled
law that mere failure to declare does not amount to willful mis-
declaration or willful suppression. There must be some positive act on
the part of the party to establish either willful mis-declaration or willful
suppression. When all facts are before the Department and a party in C
the belief that affixing of a label makes no difference does not make
a declaration, then there would be no willful mis-declaration or willful
suppression. If the Department felt that the party was not entitled to
the benefit of the Notification, it was for the Department to immediately
take up the contention that the benefit of the Notification was lost." D

Keeping in view the peculiar facts and circumstances of this ·case, we
are of the opinion that it is not a fit case where this Court should interfere.
The appeal is, therefore, dismissed. The parties shall, however, pay and bear
their own costs.

v.s.s. E
Appeal dismissed.