Andhra HC (Pre-Telangana)
Reckitt & Colman Of India Ltd. vs Assistant Collector Of Central Excise, ... on 9 March, 1994
Equivalent citations: 1994(72)ELT263(AP)
Author: T.N.C. Rangarajan
Bench: T.N.C. Rangarajan
JUDGMENT T.N.C. Rangarajan, J.
1. This petition is directed against the re-classification of the excisable goods manufactured by the petitioner.
2. The petitioner is a Company engaged in the manufacture of a product called 'Ultramarine Blue'. The petitioner has a factory at Dhadka in Asansol in the State of West Bengal. It produces Ultramarine Blue in two grades - technical grade and laundry grade. While the technical grade Ultramarine Blue is sold in bulk at that factory to industrial consumers for use in manufacture of textiles, tyres, printing ink, paints and in manufacture of plastic articles, the laundry grade Ultramarine Blue is sold in small packs for household purposes. The petitioner has another factory in Behala at Calcutta, where the laundry grade Ultramarine Blue manufactured in Dhadka factory was taken and packed into small packs using the facility granted under Rule 56B for removing the goods without payment of excise duty from Dhadka factory to Behala factory. Similarly, in March, 1986, the petitioner set up a factory at Hyderabad to which the Ultramarine Blue manufactured at Dhadka factory was brought following the process under Rule 56B of the Central Excise Rules, and packed in small packs and sold at the Hyderabad factory after paying excise duty thereon. From the inception, the petitioner had been submitting the list of goods for approval of the Proper Officer classifying the product under Heading 3206.19 attracting excise duty at 10% ad valorem under the Central Excise Tariff Act, 1985. The assessee had been following the assessment procedure and the assessments have been made accepting the monthly returns on that basis. On 26-7-1990, the Assistant Controller of Central Excise made on order stating that the Ultramarine Blue packed in small packets for retail sale for domestic use was correctly classifiable under the Heading 3212.90 attracting duty at 10% ad valorem, and until the issue of classification was finalised, the list submitted by the petitioner would be approved provisionally and the assessments would be made provisionally under Rule 9B of the Central Excise Rules, 1944. The petitioner protested. On 3-8-1990, the Assistant Collector issued a show cause notice stating that the Ultramarine Blue packed and sold in small packets for household use was correctly classifiable under 3212.90 chargeable to duty at 20% ad valorem, and since the petitioner had, during the period January to July, 1990, cleared the excisable goods after paying the duty at 10%, differential duty of Rs. 56,53,972.57 ps. was required to be paid and to show cause why it should not be collected. The petitioner gave a reply dated 23-10-1990 pointing out that the Ultramarine Blue in small packets had always been assessed under the Heading 3206.19 and that the Assistant Collector had no jurisdiction for invoking the provisions of Section 11A of the Central Excise Act to revise the approved list. The petitioner, thereafter, filed this writ petition challenging the said show cause notice claiming it to be arbitrary, illegal and without jurisdiction, besides being discriminatory, as the other manufacturers of the same product in small packs were not charged the higher rate.
3. In the counter-affidavit, it is accepted that the assessee had filed the classification list in March, 1986 with the Assistant Collector of Central Excise, Hyderabad Division, and since the factory then was situated in Bollarum. Subsequently, when the factory was shifted from Bollarum to Jeedimetla, a fresh classification list was filed with the Assistant Collector, Central Excise, Division IV, Hyderabad, for approval, and it was approved with effect from 24-7- 1989. It is stated that another classification list was filed on 1-4- 1990, and the order dated 26-7-1990 was made only to emphasise the fact that the list was approved only provisionally and show cause notice was issued to adjudicate the matter of classification finally. According to the counter-affidavit, the earlier approvals were taken to be provisional and hence, the issue of classification had to be decided finally under Rule 173B read with Rule 9B, and the Proper Officer had ample jurisdiction to decide the issue. It is mentioned in the counter-affidavit that there was an appeal by the Department to the Collector (Appeals) under Section 35C. This is obviously incorrect, as Section 35C refers to the appeal to the Appellate Tribunal and there is no provision for appeal by the Department to the Collector (Appeals).
4. The petitioner has filed a reply-affidavit pointing out that the product remained the same and classification lists were filed by the petitioner as and when similar packs were introduced, but those lists are being approved accepting the classification until 23-12-1990 when the Assistant Collector had re-classified the product. It is also stated that after filing of the writ petition, the petitioner came to know that a Circular No. 62/90-CX.3., dated 7-12-1990 had been issued by the Secretary, Central Board of Excise and Customs stating that Ultramarine Blue in small packs would fall under Heading 3212.90 and all the Collectors of Central Excise should assess the same under that head. It is pleaded that this circular interfered with the quasi- judicial powers of the Assistant Collector in adjudicating the issue of classification of good and therefore, the action of the Assistant Collector, re-classifying the goods in pursuance of the circular stood vitiated.
5. We may also note the further developments in the matter. On 4-2- 1991, interim stay was granted, which was made absolute on 12-8-1991, with reference to the levy of differential duty for the period January, 1990 to July, 1990. In respect of the subsequent period - August, 1990 to December, 1990, the petitioner has paid the duty at the rate of 20%. For the further period - January, 1991 to December, 1991, the show cause notice was issued under Section 11A, and the matter is pending. For the next period - October, 1991 to January, 1992 an assessment was made on 23-4-1993, which was confirmed by the Collector (Appeals) on 30-11-1993, and an appeal is stated to be pending before the Tribunal. Thereafter, the duty had been reduced to 10%, and the issue does not arise for consideration.
6. We may also note the basis of the orders passed by the Assistant Collector of Central Excise and the Appellate Collector of Central Excise. The Assistant Collector, in his order dated 22-11-1991, said that the Ultramarine Blue will fall under 'colouring matter' in Chapter Heading 32.12 within the expression "other colouring matter put up in retail packings". The Appellate Collector in his order dated 29-10-1993 observed that it was nobody's case that Ultramarine Blue is a dye and that it was to be classified only as "other colouring matter". It was stated that even though the expression "other colouring matter" appears to fall both under 32.06 and 32.12, it has to be classified under 32.12, because it is packed in small packets. Both these authorities expressed the view that nothing prevented the re-classification of the goods expressed if the goods have been classified under a different heading earlier.
7. The learned counsel for the petitioner argued that Ultramarine Blue which is a recognised commercial product was not a pigment and therefore, would not fall under 32.12. It was pointed out that the heading refers only to pigments used in paints and Ultramarine Blue manufactured by the petitioner was not used in paints. Secondly, it was argued that the duty was only on manufacture, and repacking in small packets, by itself, would not amount to manufacture, unless particularly specified in the Tariff. Thirdly, it was argued that the nature of the goods, whether in bulk or in small packs, being the same, it cannot suffer different rates of duty. Fourthly, it was argued that proceedings under Section 11A were illegal, and the authorities have no jurisdiction to re-classify the goods in the absence of any change in the facts or in the law. According to the learned counsel for the petitioner, only Courts can interpret the Law and any view expressed by a circular or other authority do not grant the jurisdiction to the authorities to review the earlier approval and re-classify the goods.
8. The learned counsel for the respondents raised a preliminary objection that there being an alternative remedy which had also been resorted to by the petitioner, this writ petition should not be carried through. Reliance was placed on the decision of this Court in Procter & Gamble India Ltd. v. Union of India - 1994 (69) E.L.T. 442 (A.P.). We are unable to accept this objection for two reasons. The first is, the question of the existence of an alternative remedy has been already considered by the Bench while admitting the writ petition and they have decided to entertain this writ petition and therefore, it is not proper for us to review that decision and reject it after keeping the matter pending for three years. Secondly, the proceedings of the Appellate Collector related to subsequent period and not to the period with which this writ petition is concerned. Therefore, the argument of the learned counsel that the petitioner is maintaining parallel proceedings, is not correct on facts.
9. The learned counsel for the respondents submitted that when the procedure under Rule 56B was followed, it was on the basis that the manufacture was incomplete and therefore, when the goods were packed in small packets, the taxable event occurred only at that stage. According to the ld. counsel for the respondents "other colouring matter in small packets" fell within the Heading 32.12 only, and commercially the same goods in bulk may be a different commodity and could be taxed under a different heading. It was submitted that the distinct character, use and name of the goods determine the taxability and therefore, Ultramarine Blue in small packets should be considered as a distinct commercial product different from the same goods in bulk. The other objection taken was that there was no estoppel against the Statute and therefore, if in law the goods were taxable only under 32.12, the subsequent Officer must have the jurisdiction to rectify the mistake committed earlier in classifying the goods under 32.06. It was submitted that the approval for classification was a matter of routine without application of mind to adjudicate the issue and the subsequent Officer could, on a fresh application of mind, come to a different conclusion, particularly when the classification list is submitted from time to time, and each return should be considered as a fresh point of adjudication.
10. In reply, it was submitted by the learned counsel for the petitioner that the assessment under Rule 56B was given only if there is any change in classification and such permission had also been withdrawn subsequently on 14-1-1992. It is further pointed out that the higher rate of duty had been levied only on the petitioner, and the allegation that such a levy had not been made on any other manufacturer of Ultramarine Blue in small packets, had not been denied in the counter-affidavit.
11. We have carefully considered the submissions of both sides and perused the relevant provisions of the Act and Rules and the orders passed by the authorities concerned. The main issue is of classification and it is also a jurisdictional fact. In deciding this issue, we have to keep in mind two aspects of the matter. The first is that classification is a question of fact as held by the Supreme Court in the case of C.I.T. v. Nirlon Synthetic Fibres and Chemicals Limited - 130 I.T.R. 14. The second is that the pattern of classification under the Central Excise Tariff Act is based on the principle that each heading is mutually exclusive from the other headings i.e., goods classifiable under one heading would not be considered as falling under another heading.
12. Keeping these principles in mind, let us now look at the Heading 32.12, which is sought to be relied on for levying the excise duty under the impugned orders :
32.12 Pigments (including metallic powders and flakes) 15% dispersed in non-aqueous media, in liquid or paste form, of a kind used in the manufacture of paints (including enamels); stamping foils, dyes and other colouring matter put up in forms (for example, balls, tablets and the like) or small packings (for example, sachets or bottles of liquid) of a kind used for domestic or laboratory purposes.
3212.10 - Stamping foils 15% 3212.20 - Aluminium paste 15% 3212.90 - Other 20%
Reading this heading, it would be apparent that the main item is "pigments". It is also described as dispersed in non-acqueous media, in liquid or paste form, of a kind used in the manufacture of paints. Since there are semi-colons in the entry, "stamping foils" becomes another sub-heading, and the third sub-heading is "dyes and other colouring matter" put up in forms or small packings of a kind used for domestic or laboratory purposes. Reading this entry, it is obvious that the other colouring matter must be in the nature of a dye, because the expression "other colouring matter" cannot be read independent of the word "dyes" and it must also be a "pigment" as it comes in the main category of "pigments". It follows that Item 3212.90 could refer only to other pigments or other colouring matter in the nature of a dye.
13. This very issue, whether Ultramarine Blue is a pigment, came up for consideration in a suit filed by C.M.C. India, Ahmedabad against Union of India reported in 1979 (4) E.L.T. (J 298). In that case and at that time, the Central Excise Department sought to levy duty on Ultramarine Blue under entry 14I(5) of the Schedule to the Central Excises and Salt Act, 1944, which was "pigments, colours, paints and enamel not otherwise specified". The Gujarat High Court held, on a consideration of the evidence before it, that even if according to the Chemical Test Ultramarine Blue can be said to be a pigment, it is not known as such in business community or by persons who are dealing with it. It was found that the product in question was known only as Ultramarine Blue in the market and that even the excise authorities started treating it as a pigment only after it was analysed at the Customs Laboratory in the year 1963, and sought to levy duty on the basis of the report of the Chemical Examiner. Ultimately, the Gujarat High Court held that the product in question was known only as Ultramarine Blue not only to the manufacturers and traders, but even to common people and hence, it could not be taxed as pigment. That decision went in appeal to the Supreme Court, and by order dated 15-3- 1990, the Supreme Court disposed of the appeals in the following manner :
"On the facts found, we do not want to interfere with the conclusion reached by the High Court stating that the product (Ultramarine Blue Tinopal) is not chargeable with a duty under Item No. 14I(5) of the First Schedule of the Central Excise Act. The appeals are dismissed. No costs".
We find this extracted in the decision of the Calcutta High Court in Seth Chemical Works Pvt. Ltd. v. Union of India - 1993 (67) E.L.T. 48 (Cal.), where, against it was held, after noting that Rajasthan High Court, Allahabad High Court and Madhya Pradesh High Court had also considered that Ultramarine Blue is not recognised as a pigment, that it could not be taxed as a pigment. That decision also points out that a circular was issued by the Central Excise Department on 30-7-1990 stating that the judgment of the Supreme Court had been accepted and in para 12 it is mentioned that Item No. 14I(5) of the First Schedule to the Central Excise corresponds to Item No. 32.06 of the Central Excise Tariff Act, 1985. However, the petitioner has not taken advantage of this to claim that the goods are not taxable even under 32.06, because the reference to 32.06 in that judgment is perhaps a mistake for 32.12, which seems to correspond to 14I(5) of the old Act, inasmuch as both of them refer to manufacture of paints, unlike 32.06 which does not refer to paints. In view of this, it is now well settled that Ultramarine Blue is not a pigment and accordingly, it cannot fall under 32.12 or 3212.90. It is significant that in the present case also, a circular was issued on 7-12-1990 referring to the report of the Chief Chemist giving his finding that the goods in question in bulk form is classifiable under 32.06 and the same being put up in small packets, falls under 32.12. The opinion of the Chief Chemist cannot override the decision of the Supreme Court that Ultramarine Blue is not a pigment. Moreover, the respondents cannot dispute the fact that the nature of the goods, whether bulk or in small packets, remained the same viz., Ultramarine Blue as a commercially known product could not fall in two headings merely on the basis of the packing. Our attention has been drawn to Chapter 9 relating to coffee, tea and spices, where differential rates are given for packings not exceeding 25 grams intended for consumers, and packing exceeding 20 kilos not intended for consumers. Similarly, in Chapter 24 relating to tobacco, there is a differential rate for cigarettes in different packings. This indicates that such differential rates have to be given under the same heading, and a product will not fall under two different headings only with reference to quantity packed, when the nature of the goods is the same.
14. The learned counsel for the respondents sought to justify the classification in 32.12 on the ground that the manufacturer itself was complete only when it was in small packings and therefore, it will decide the scope of 32.06. This again assumes that the packing itself changes the product, which is not correct. No doubt, an excisable goods is considered on the basis of its distinct character, which again depends upon the use and name. But the trade-name or the use by the consumer cannot alter the intrinsic nature of the goods. Moreover, Rule 56B provides for movement of goods in the course of processing, and it is specifically stated in Departmental Classifications [1988 (35) E.L.T. - T32] that requests for such permission would be considered only where the sub-heading of the semi-finished goods will not change after undergoing further manufacturing process. Of course, Section 3(3) authorises the Government to prescribe different rates in respect of the same excisable goods, if sold to different classes of buyers. But, such a sub-classification must come under the same heading, as for instance a particular goods coming under the main heading having a sub-classification as "industrial use" and "for domestic use". Since in the present case there is no such classification as is found in certain other headings, the contention of the learned counsel for the respondents cannot be accepted. To say that the Ultramarine Blue packed in small packets was not the same as the Ultramarine Blue sold in bulk, it is necessary that the Department should establish that the end-product which came into existence had a different name and was put to different use and the commodity was so transformed so as to lose its original character, as this is the test prescribed by the Supreme Court in Inandas v. Anant Ramchandra - AIR 1982 SC 127. Applying that test, it is impossible to say that the Ultramarine Blue packed in small packets was a different commodity from the Ultramarine Blue sold in bulk, as the product did not lose its character by being packed in small packs. It is interesting to note that in the latest Finance Bill, 1994, the following amendment is proposed.
"in Chapter 34, -
(a) after NOTE 5, the following NOTE shall be inserted, namely :-
6. In relation to products of sub-heading No. 3402.90, packing or repacking into smaller packs, including packing or repacking of bulk packs to retail packs or adoption of any other treatment to render the product marketable to the consumer shall amount to "manufacture".
This should set at rest any controversy on this point.
15. The learned counsel for the respondents submitted that 32.12 is a new heading different from Item 14I(5) in the old Act and therefore, should be freshly construed. Even if we take a fresh look at this heading as we have noted above, the very reading of that heading indicates that the other colouring matter should be a pigment in the nature of a dye and since acceptation of the word "Ultramarine Blue" contradicts its nature as a pigment or a dye, it cannot fall under the Heading 32.12.
16. We may now consider Item 32.06, which is as follows :
32.05 3205.00 Colour lakes; preparations based 20% on colour lakes as specified in Note 2 to this Chapter.
32.06 Other colouring matter; preparations as specified in Note 2 to this Chapter, other than those of Heading No. 32.03, 32.04 or 32.05; inorganic products of a kind used as luminophores, whether or not chemically defined.
3206.10 - Pigments 10%
3206.20 - Inorganic products of a kind used 10%
as luminophores.
3206.90 - Other 10%
Note (2) to this Chapter reads as follows :
2. Heading Nos. 32.03, 32.04, 32.05 and 32.06 apply also to preparations based on colouring matters (including in the case of Heading No. 32.06, colouring pigments of Heading No. 25.05 or Chapter 28, metal flakes and metal powders), of a kind used for colouring any material or used as ingredients in the manufacture of colouring preparations. The headings do not apply, however, to pigments dispersed in non-aqueous media, in liquid or paste form, of a kind used in the manufacture of paints, including enamels (Heading No. 32.12) or to other preparations of Heading No. 32.07, 32.08, 32.09, 32.10, 32.12, 32.13 or 32.15.
That note specifically indicates that what falls under 32.06 will not fall under 32.12, making it clear that they are mutually exclusive. Here also, 3206.10 refers to pigments and since Ultramarine Blue is not a pigment, it does not fall under that item. Therefore, it has to fall under 3206.90.
17. In understanding these chapter headings under the Central Excise Tariff Act, we may refer to the fact that it is based on a system of classification derived from international convention of "Harmonised Commodity Description" and "Coding System" (HSN). The excisable goods under the new Central Excise Tariff Act, 1985 has been classified basically using four digit system, with two more digits added for further sub-classification wherever needed. The scheme has been outlined in the General Explanatory Notes contained in the Schedule to the new Central Excise Tariff Act. The Rules for the interpretation of Schedule state that the titles of Sections and Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such Headings or Notes do not otherwise require, according to the provisions hereinafter contained. Rule 2(a) specifies that any reference in a heading to goods shall be taken to include a reference to those goods incomplete or unfinished, provided that, the incomplete or unfinished goods have the essential character of the complete or finished goods. Thus, Ultramarine Blue has the essential character of the completed goods even in bulk and therefore, has to be considered for classification in that stage notwithstanding that it may be packed in small packets subsequently.
18. As mentioned earlier, the new Tariff Act was based on the Harmonised Coding System. This system was evolved by the international convention to which India became a party at Brussels on 14-6-1983. The convention agreed to the introduction of headings, sub-headings, Notes and the Harmonised Coding System and also to the incorporation of the General Interpretative Rules. In fact, it constitutes an international economic language and code for identifying and describing goods which should considerably reduce the difficulties in redescribing and recording the goods as they pass from one country to another in international trade, as stated in the objects and reasons, when both the Excise Tariff and Customs Tariff Bills were introduced in 1985. One of the obligations of the contracting parties stated in Article 3 of the Convention was that each contracting party should use headings and sub-headings of the Harmonised System without addition or modification and shall apply the general rules for the interpretation and follow the numerical sequence of the Harmonised System. The developing countries were allowed to omit the sub-headings, that is the last two digits of the six digit headings. Since the Government of India has declared the adoption of that system, it is binding on the department. Even otherwise, unless there is any conflict, the interpretation consistent with the international convention and treaties has to be adopted, as pointed out by the Supreme Court in Gramophone Co. of India Ltd. v. Birendra Bahadur Pandey . This is currently of a great significance at a time when India seeks globalisation of its markets. Unless the classification of goods is in accord with international system and is clear and certain to the trade, the very purpose of adopting the international standards would be defeated. It is a pity that the Finance Minister had to lament that confusion still persists in his observation in Para 55 of the budget speech for 1994-95 in the following words :
55. Over the years, our indirect tax structure has grown into a complex maze of high and multiple rates, with numerous exemptions, and different rates being applicable for the same product for different uses and users. This has resulted in unnecessary complexity leading to administrative abuse, mounting litigation and uncertain economic impact. All this has effectively eroded the tax base and buoyancy of the system and created serious economic distortions.
Therefore, we are entitled to look into the explanatory notes of the HSN which forms part the Harmonised System to understand the scope of the chapter heading which is identical with that code. In that explanatory notes under the heading "other colouring matter" in 32.06, we find "Ultramarine Blue and preparations based thereon" as 3206.41. Obviously, the Tariff Act has, instead of having a separate sub- heading for Ultramarine Blue as in the international code, lumped them together as "other" in 3206.90. In contrast, in 32.12, it is mentioned that other colouring matter would fall in item "Dyes and other colouring matter", only if it is in small packings for retail sale and is used for domestic purposes and was sold as household dyes. We are therefore, fortified in our decision that other "colouring matter" in 32.12 must be in the nature of a dye and that Ultramarine Blue falls only under 32.06.
19. The second issue in this case relates to the jurisdiction of the respondents to re-classify the goods. In order to understand the powers of the authorities, we have consider the scheme of the Act and the Rules. Section 3 is the charging section levying duty on all excisable goods manufactured in India and it provides for duty for different classes or descriptions of the excisable goods. Different duties may be imposed under Section 3(3) in respect of different descriptions of the same goods or intended for sale to different classes of buyers following the normal practice of wholesale trade in such goods. The method of assessment is provided under the rules. Rule 173 provides for the self-assessment procedure. Under Rule 173B, the assessee has to file a list of goods for approval, giving the description of the goods and the chapter heading number and sub- heading number of the Schedule to the Central Excise Tariff Act, 1985, under which such goods fall as well as particulars of the goods and the rate of duty leviable thereon. The Proper Officer has to approve the list with such modifications as may be considered necessary, and determine the duty payable on the goods. Sub-rule (2) provides that all clearances of the goods can be made only after the approval of the list by the proper officer. If the proper officer directs an enquiry to be made, the assessee may avail the procedure by a provisional assessment under Rule 9B. Under Rule 173F, the assessee has to determine the duty payable on the goods and shall not remove the goods until after paying the duty so determined. Under Rule 173G, a monthly return has to be filed showing the value of the goods removed and the duty paid. Under Rule 173-I, the proper officer, on the basis of the information contained in the return filed by the assessee, (shall) assess the duty due on the goods removed and complete the assessment memorandum on the return, and send a copy of the same to the assessee. He can make certain adjustments and determine the net shortfall in the duty payable. Section 11A provides that when any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, call upon the assessee for making good the shortfall. However, in case there is a fraud or misrepresentation, the time limit will be five years instead of six months. The relevant date is defined as the date of monthly return in case where monthly return in filed. In this scheme of self-assessment procedure, the contention of the Revenue is that in respect of every monthly return there is a fresh list and even though the earlier returns had been accepted, nothing precludes the proper officer from coming to a different conclusion as there is no estoppel against Statute and the earlier assessments under Rule 173-I will not operate as res judicata. The alternative contention is that even if the monthly return is accepted, Section 11A grants the jurisdiction to re-open the same within six months from that monthly return and within five years, if there is any fraud or misrepresentation. In the present case, it is stated in the counter-affidavit that there was no fraud or misrepresentation and therefore, it is claimed that within six months from every monthly return, the matter of classification can be reopened under Section 11A. According to the learned Counsel the subsequent proper officer had, on his own application of mind to the facts on record, come to a different conclusion, as otherwise he cannot exercise the powers vested in him under Section 11A, or even under Rule 173-I. The learned counsel for the petitioner submitted that Rule 173-I and Section 11A, no doubt, empower the proper officer to make an assessment or revise the assessment, but the exercise of that power was circumscribed by the requirement of change in the facts or law. In other words, it was contended that if the factual and legal situation remained the same, the proper officer could not, on a mere change of opinion, re-classify the goods even if he had the power to invoke Section 11A or could exercise the power of assessment under Rule 173- I. This very issue came up for consideration in the Delhi High Court in J.K. Synthetics Ltd. & Another v. Union of India & Others - 1981 (8) E.L.T. 328 (Del.). After referring to several decisions under the Income Tax Act with regard to the principle of res judicata and estoppel, the Delhi High Court came to the conclusion that for the rule of non-applicability of the principles of res judicata and estoppel, there must be imported a limitation that while the earlier decision is not conclusive or immutable, it can be brushed aside or departed from, only for good and cogent reasons. The question posed was - Will it be open to the department, without any cogent reasons and merely at its own caprice, to refuse to follow the conclusion reached on the earlier occasion and to take up a totally different stand in a subsequent year ? The answer given was that the department should not be permitted to take a different stand unless there is any good or cogent reason for the change of the view i.e., if the facts are different or if further or fresh facts are brought on record or if the process of manufacture has changed or if the relevant entries in the Tariff have undergone a modification or if, subsequent to the earlier decision there has been the pronouncement of a High Court or the Supreme Court which necessitates re-consideration of the issue, then alone the department can be allowed to take a different view. The learned counsel for the respondents sought to distinguish that case by pointing out that in that case the Government of India had given a decision earlier and therefore, it was not allowed to go back on it, whereas in the present case, the authorities concerned had ample jurisdiction under Rule 173-I and Section 11A to assess and re-assess which include re-classification. We are unable to accept this distinction because even when exercising the power to assess or re- assess, the Revenue seeks only to the application of the rule of estoppel and res judicata for not following the earlier decision. At the same time, it cannot be disputed that the earlier decision even if it is not to be taken as conclusive was a relevant fact and cannot be ignored. As pointed out earlier, the question of classification is a question of fact. That finding of fact is vitiated, only if it has taken into account irrelevant material or has ignored a relevant material or is contrary to any legal provision. In the present case, a fresh finding re-classifying the goods will be clearly vitiated, for it ignored the earlier decision which is a relevant fact.
The contention of the Revenue that the earlier decision was a routine approval without application of mind cannot be countenanced in view of Section 114, illustration (c) of the Indian Evidence Act, under which it can be presumed that judicial and official acts have been regularly performed. Therefore, if the earlier approval should be ignored as irrelevant, the only manner in which it can be done is to show that the facts on which the earlier decision of approval was given have changed or that the earlier approval was contrary to any new provisions of law or any change in the Tariff notification. In the present case, admittedly, there has been no change in the facts since the same goods have been manufactured in the same manner and packed in the same small packets and sold, attracting duty at 10% under 3206.90, and there has been no re-classification in the Tariff Act. The department could, therefore, rely only on the circular of the department dated 7-12-1990 referring to the opinion of the Chief Chemist. As held by the Supreme Court in Indian & Eastern Newspaper Society v. C.I.T., 119 I.T.R. 996, only the Court can interpret the law, and the opinion of any other person is not a relevant fact. The respondents are caught in the horns of a dilemma in this regard. If they rely on the circular, they would be abdicating their functions as an independent adjudicating authority; if they do not rely on the circular, they do not have any relevant material other than the facts already on record to take a different view with regard to the classification of the goods.
20. That leads us to the question whether the proper officer is bound to follow the circular issued in Section 37B by the Central Board of Excise and Customs. This section itself says that for the purpose of uniformity in the classification of excisable goods, instructions may be issued, and the officers shall follow such orders. The proviso states that no such orders, instructions or directions shall be issued so as to require an officer to make a particular assessment or to interfere with the discretion of the Collector of Central Excise (Appeals) in the exercise of his appellate functions. A similar provision in the Income Tax Act is Section 119. Construing that Section, the Supreme Court held in the case of K.P. Varghese v. C.I.T. - 131 I.T.R. 597 that the Board has the power to issue circulars, but those circulars will not be binding if they are against any provision of law. However, it was clarified that if the circular gives beneficial treatment to the assessee, such circulars will be binding even if they are contrary to law. In other words, though the circulars bind the office concerned, they do not bind the assessees and any order made in pursuance to such a circular could be agitated; at the same time, if the circular had been issued to benefit the assessees, then the department would not be able to disregard that. There are also similar decisions under the Central Excise Act, such as Oriental Paper Mills Limited v. Union of India - 1978 (2) E.L.T. (J 345) (SC). In view of this position, it is apparent that inasmuch as the circular re-classifying the goods is not binding on the assessee, it would not be a relevant material for revising the assessment if it is shown to be contrary to law. In the present case, we have already found that the Ultramarine Blue can be classified only under 3206.90, since the Supreme Court has held it not to be a pigment and therefore, the circular which is contrary to that legal position will be an irrelevant material for the purpose of revising the assessments either under Rule 173-I or Section 11A.
21. To sum up our finding on the classification is that Ultramarine Blue falls to be taxed under 3206.90. This is also a jurisdictional fact, and unless there is material to give a finding that the Ultramarine Blue can be classified under 32.12, the authorities concerned will have no jurisdiction to revise the classification in exercise of powers under Rule 173-I or Section 11A. They may initiate proceedings, that is, every time the monthly return comes up for consideration, under Rule 173-I, the assessing officer is entitled to look into it, but he cannot come to a different conclusion in the absence of any other material showing a change in the facts or in the law. Again, under Section 11A, the authority concerned may initiate an enquiry, but it would be an exercise in futility if there is no material other than that on record to indicate any change in facts or in law to come to a different conclusion. The Supreme Court has observed under similar provisions of the Income Tax Act in the case of C.I.T. v. Simon Carves Limited - 105 I.T.R. 212, that the officer ordering re-assessment does not sit as a Court of Appeal over the Officer making the original assessment; nor is it open to the officer ordering re-assessment to substitute his own opinion over the decision of the officer who made the original assessment as long as it was legally correct and was not vitiated by any error. Since such a revision cannot be done only on the ground that the incumbent has changed, it follows that it cannot also be made by the same officer merely on the basis of a change of opinion by taking a fresh look at the same material on which he had given a decision earlier. We are, therefore, of the considered opinion that the proceedings initiated by the respondents were wholly without jurisdiction and was unsustainable.
22. The petitioner has also filed an application to modify the prayer in view of subsequent events mentioned earlier. However, we do not think it necessary to give any specific direction, as the authorities are bound to follow this judgment, being parties to this petition, in dealing with the subsequent periods also. It would therefore, suffice if the show cause notice is quashed and it is declared that Ultramarine Blue is taxable only under 3206.90. Writ petition is allowed with costs.