2. The issue involved is classification of man made fabric-Polyester (not processed). Ld. Counsel for the appellant interalia made following submissions: 1. The issue in the present case relates to the classification of grey cotton fabrics, which were sold in rolls during the period December 1990 to 22^nd June 1995. The show cause notice was dated 30^th November 1995. The department contended that the said grey cotton fabrics falling under chapters 52, 54 and 55 were filter fabrics and therefore ought to be classified under heading 59.09 (upto 16^th March 1995) and heading 59.11 ( after 16^th March 1995).
2.1 The aforesaid issue is no long res integra. The Larger Bench of this Hon'ble Tribunal in the case of Jyoti Overseas Ltd. v. CCE, Indore 2001 (130) E.L.T. 446 (Tri-LB) grey cotton fabric manufactured in running length and not subjected to further processing at the hads of the manufacturer and used by buyers for making tarpaulin, tents, jeep covers, holdalls and bags etc. is classifiable under Heading 52.07 of Central Excise Tariff Act, 1985 and not under Heading 59.11. The aforesaid order of this Hon'ble Tribunal has been followed in several cases one of them, being Simplex Mills Co. Ltd v. CCE Mumbai . However, the Supreme Court has admitted the Department's appeal reported in Commissioner v. Jyoti Overseas Ltd. 2002 (142) E.L.T. A170 (S.C.)H.L. Textile Mills v. CCE 2001 (137) E.L.T. 1395 (Tri- Del.) this Hon'ble held that the impugned product is a fabric and not made up article as defined is Note 5 to Section XI of Central Excise Tariff. Merely because it is used as such by the customers of the product it cannot be termed as made up article. The department's appeal has been admitted in the Supreme Court - on Commissioner v. H.L. Textile Mills 3. However, in view of the Board's Section 37B Order No. 10/93 dated 5^th November 1993 categorically stating that grey cotton fabrics were classified under heading 52.05 the department could not have issued the show cause notice on 30^th November 1995. The sow cause notice was therefore unsustainable. This circular remained enforced till 17^th April 1997 when the CBEC issued in the subsequent circular stating that henceforth grey cotton fabrics etc. would be classifiable under heading 59.11. The circulars were binding on the Respondent. In the circumstances, the Respondent could not have confirmed any part of the demand. The Respondent has not dealt with the circular dated 17^th April 1997 at all, though in paragraph 48, page 47 he records that the said circular was produced before him.
4.1 Without prejudice to the aforesaid, it is submitted that the demand for the period December 1990 to 22^nd June 1995 by a show cause notice dated 30^th November 1995 was substantially time-barred as there was no suppression whatsoever. Every year the Appellants filed declarations under Rule 174A which were accepted. The Appellants had applied for an exemption sometime in January 1991 and were in fact granted an Exemption Code Number on 15^th September 1993. The aforesaid declarations were filed both before and after receiving the Exemption Code No. The said declarations did not prescribe any column for the end-use of the product. As the goods were cleared in bulk, i.e. in rolls for, and as they were woven fabrics which had not been subjected to any process, they were declared in the said declarations as cotton fabrics falling under chapter 52 or manmade fabrics of filament yarn or manmade fabrics of staple fibre falling under chapters 54 or 55 as the case may be.
4.2 The show cause notice contains no particulars of the alleged suppression in order that contained any particulars of any of the pre-conditions required for invoking the proviso to Section 11A(1) which is a must as laid down by the Supreme Court in CCE v. HMM Ltd. . There is no averment that the duty of Excise has been intentionally evaded or that fraud or collusion has been notice or that the Appellants were guilty of mis-statement or suppression of facts. In the absence of such averments in the show cause notice is illegal.
4.3 The Respondent has purported to invoke the longer period of limitation on a totally different ground. He is come to the conclusion that the fabrics manufactured by the Appellants had the essential characteristics of being termed as after cloth and had the quality of filter cloth and as they were known in the market as filter cloth, the Appellants should have disclosed that it was filter cloth in the declarations. It is submitted that this is a totally new ground taken in the order for the first time, which is impermissible in law.
4.4 In any event it is submitted that the fact that it product is capable of being used as filter fabrics after making it into an article falling under heading 59.11, cannot mean that the product which is a grey unprocessed fabrics falls under heading 59.11.
Further there was no column in the declaration for mentioning the end-use of the product. The advertisement is merely showed that the product was capable of being used as filter cloth after the concerned party converted the grey fabric sold in rolls into pieces cut to size and stitched to make into filter cloth articles.
4.5 In any event it is now well settled that mere non-declaration that the product was a filter fabric cannot lead to the conclusion that there was any suppression of facts with intent evade duty. The Appellants were clearly under the bona fide belief that the products were not filter fabrics and were correctly classifiable under chapters 52, 54 and 55 in view of the Section 37B order issued in 1993.
4.6 This Hon'ble Tribunal in Suthan Nylocots v. CCE and in a similar case held that the period of limitation cannot be invoked when the classification of the product was itself in doubt and several benches of the Tribunal had passed different orders and had not accepted the CBEC circular of 1997. The Tribunal also held that when declarations were issued in accepted it is untenable for the department to allege that they were not aware that these were used as filter fabrics. Similarly, the Supreme Court in Densons Pultretakniko v. CCE held that when there is a classification dispute the longer period of limitation cannot be invoked.
4.7 The Department had repeatedly drawn samples and submit that the same for testing. Some of these fabricxs had been cleared to processors, who in turn is submitted the samples for testing. At no stage did either the department or the Deputy Chemical Examiner or Chief Chemist ever state that these fabrics were filter fabrics. In fact, after making all necessary injuries, the Department granted the Appellants an Exemption Code No. in 1993, two years after the Appellants made the application. The contention therefore of the Respondent that the Appellants had not produced evidence to show that the department had inquired into before granting the exemption code is manifestly untenable.
5. The imposition of interest under Section 11AB is manifestly untenable as the show cause notice was issued in 1995 before the said section was introduced.
6. There is no justification given for the confiscation of goods. It is clear from the show cause notice itself that the 2802.90 L metres of cloth that were seized represented online production and were not finished goods and hence could not be entered in the RG-1 register.
These goods were seized only on the ground that they were filter cloth. Similarly the balance of fabrics amounting to 26,863.70L metres were seized only on the ground that these fabrics were allegedly classifiable under heading 59.11. These fabrics had been entered in the RG-1 register and had not been removed.
3. The ld. Jt. CDR appearing on behalf of the Revenue has reiterated the impugned order. After hearing both sides, perusal of the records, we find that many of the points raised by ld. Counsel do not appear to have been considered by the Commissioner in his order and findings recorded thereon.
4. We, therefore, consider it is reasonable to remand the matter to the Commissioner for fresh adjudication and pass a fresh speaking order in the matter after taking into consideration all the points raised by the ld. Counsel.