1. By a notice dated 7-6-1979, . the appellants herein who are manufacturers of laminated jute bags, were called upon to show cause why the said goods should not be classified under Tariff Item 68 of the First Schedule to the Central Excises and Salt Act, 1944, why Central Excise duty should not be demanded in respect of goods cleared from May 1975 without payment of duty and why a penalty should not be imposed upon them for contravention of the Central Excise Rules. The Assistant Collector, by order dated 28-1-1980 held that the appellants were liable to pay duty on the goods under Item 68, CET, for the period from 1-3-1975 to 5-6-1979. In appeal, the Appellate Collector upheld the order of the Assistant Collector. It is this order that is being challenged in the present appeal.
2. We have heard Shri N. Mukherjee, the learned advocate for the appellants and Shri J. Narayanan Nair, JDR for the respondents.
(i) laminated jute bags are jute products falling under Tariff Item 22A, CET ("Jute manufactures, all sorts") but are exempted from duty under Notification No. 53/65-C.E., dated 20-3-1965 as amended and this position has been accepted by the Andhra Pradesh High Court in the case of International Packing Industry v. CBEC and Ors., 1987 (32) ELT 317 (A.P.) and by this Tribunal in the case of Calcutta Laminators v. CCE Calcutta (Order No. 568/1988-D) (ii) As regards the period prior to 6-12-1978, the demand is barred by limitation.
4. We have gone through the judgments cited above. The aspect of predominance of jute in laminated jute bags was considered by the Hon'ble Andhra Pradesh High Court wherein the Court held that laminated jute bags in which jute predominated answered to the description of "jute manufactures" in Item No. 22A, CET. The text of predominance of jute was introduced into the Tariff entry by the Finance Bill of 1977 and it is this entry which was considered by the Andhra Pradesh High Court. The judgment of the Andhra Pradesh High Court is subsequently followed by this Tribunal in the case mentioned above. At this stage the learned DR urges that as the test of predominance of jute in the appellants' products has not been carried out, the matter may be remanded for the purpose of ascertaining whether jute in fact did predominate. We are not inclined to accept the prayer for remand. The authorities below have all along proceeded on the basis that the bags have been made from jute and only laminated with polythene. It is not the case of the department that jute was not the major constituent in the bags manufactured by the appellants. Therefore, respectfully following the ratio of the decisions of the Andhra Pradesh High Court and the earlier order of this Tribunal (Supra) we hold that the goods are classifiable under Tariff Item 22A, CET after 1-3-1977 (on which date the predominant test was introduced in the Tariff entry) and the subject goods were eligble for the benefit of Notification No. 53/65 dated 20-3-1965.
5. On the issue of demand of duty for clearances of the goods prior to 1-3-1977, the demand is hopelessly barred by limitation. The contentions of the Dept. that there has been wilful suppression in as much as the appellants have been wilfully mis-declaring their product as jute manufacture does not hold water in the light of Dept's own clarification dated 4-8-1975 and 14-5-1976 that the laminated jute bags will not fall for classification under Tariff Item 68 but under Tariff Item 22A. The demand of duty for the period from 1-3-1975 to 1-3-1977 is therefore not sustainable on the ground of limitation. As a result the entire demand is set aside and the appeal is allowed with consequential relief to the appellants.