Customs, Excise and Gold Tribunal - Delhi
Ideal Printers (P) Ltd. vs Collector Of Central Excise on 25 April, 1995
Equivalent citations: 1995(78)ELT550(TRI-DEL)
ORDER K.S. Venkataramani, Member (T)
1. These two appeals arise out of common order-in-appeal dated 24-2-1983 passed by the Collector of Central Excise (Appeals), Bombay. The appellants, herein, manufacture printed cartons. The assessee was paying duty of excise on such cartons under Tariff Item 68 of C.E.T. since 18-6-1977. The appellants disputed the classification of their product and started paying duty of excise under protest from 7-1-1978. They also filed revised classification list claiming exemption from the whole of duty of excise on printed cartons under Notification No. 122/75, dated 5-5-1975 (which amended Notification 55/75, datded 1-3-1975) treating the printed cartons as product of printing industry. The classification list was accordingly approved. Therefore, the licencee preferred a refund claim requesting refund of excise duty amounting to Rs. 2,27,708.22P paid on printed cartons from 18-6-1977 to 31-12-1978. The refund claim was sanctioned on 31-1-1979 and was paid by cheque dated 31-1-1979.
2. On reconsideration about the classification of the printed cartons, a show cause notice dated 1-6-1979 was issued to the appellants as to why the aforesaid amount of refund, erroneously given, should not be recovered from them under Rule 11 of the Central Excise Rules, 1944. Since Rule 11 was wrongly mentioned, a corrigendum dated 24-8-1979 was issued invoking Rule 10 instead of Rule 11 for demand of the refund erroneously given earlier on 31-1-1979.
3. In the meantime, another show cause notice dated 17-7-1975 was also issued to the appellants requiring them to show cause why exemption from payment of duty to printed cartons granted to them earlier vide Department's letter No. FI V (MISC) 68/CL/78, dated 31-12-1978 should not be withdrawn. The Range Supdt. also wrote to the appellants directing them to apply for a fresh licence which had been surrendered w.e.f. 1-1-1979. He also directed the appellants to furnish the particulars such as duty, value in respect of the printed cartons produced and cleared from Jan., 1979 to July, 1979. The agpel-lants, however, are alleged to have acted evasively in response to the said direction from the department and subsequent reminders thereto. A show cause notice, therefore, was issued on 16-8-1979 as to why duty for period 1-1-1979 to July, 1979 should not be demanded. The duty could not be specified as the appellants had failed and refused to produce the invoices in respect of printed cartons cleared during the period in question. Ultimately, on production of relevant records by the appellants in Oct., 1981, the amount of duty was calculated and the corrigendum dated 17th Oct., 1981 was issued to the appellants specifying the amount of duty at Rs. 1,89,592/-. The impugned order is a common order-in-appeal confirming both the orders passed by the Assistant Collector. The Assistant Collector confirmed the two demands by separate orders-in-original vide orders dated 27-11-1980 and 27-3-1982 respectively. In other words, the order dated 27-11-1980 confirms a demand of Rs. 2,27,708.22p of erroneous refund and the order dated 27-3-1982 confirms the demand of Rs. l,89,592.40p for the period January 1979 to July 1979.
4. Two issues were raised before the Tribunal. Firstly, when an order on refund has been passed by the Assistant Collector, he is not competent, according to the appellants, to issue a notice under Rule 10 and for demanding back the said amount of refund. The appellants' contention is that such an order could only be reviewed under Section 35A Central Excises & Salt Act, 1944. The second issue was whether the printed cartons are to be treated as products of the printing industry and hence to be held eligible for exemption in terms of Notification No. 55/75 as amended. The question on the merits of the case whether the goods are products of printing industry, was referred to a Larger Bench. The Larger Bench by its final order 337/94-C, dated November, 1994 found that the issue was fully covered by the Supreme Court decision in the case of Rollatainers Ltd. v. Union of India reported in 1994 (72) E.L.T. 793 (SC) and held that the printed cartons are to be classified as product of packaging industry and not product of the printing industry. On the other issue about the competency of the Assistant Collector, to issue demand notice under Rule 10 of the Central Excise Rules demanding the repayment of the refund amount and whether it could only be subjected to review under Section 35A Central Excises & Salt Act, 1944 was left to be considered by the concerned Bench as this question was not referred to the Larger Bench. In these circumstances, the matters have now come up before this Bench to decide the remaining issue in these appeals.
5. Shri M.A. Rangaswamy, ld. Counsel alongwith Ms. Radha Rangas-wamy, ld. Counsel for the appellants submitted that these appeals involve two different amounts. In one case there is a demand of Rs. 2,27,708.22 being demanded under Rule 10 holding that it was a case of erroneous refund. In the other appeal, the amount involved is Rs. 1,89,592.40 which is a demand of duty on the goods for having availed of the exemption wrongly during the period January, 1979 to July, 1979. In respect of former amount, the ld. Counsel submitted that the Collector (Appeals) was in error in considering the case as one falling under Rule 173B relating to classification list whereas according to the appellants, it is a case of refund of amount paid as excess duty, which is being demanded under Rule 10 as erroneous refund. It was, further, argued that at the point at which the show cause notice was issued, the Assistant Collector was not competent to issue such show cause notices. The ld. Counsel submitted that the Assistant Collector was also bound by the Govt. of India order in revision reported in 1978 (2) E.L.T. (J 145) holding the cartons as products of printing industry. This is binding on Assistant Collector. The ld. Counsel relied upon the Delhi High Court decision reported in 1981 (8) E.L.T. 328 in the case of J.K. Synthetics Ltd. and Anr. v. Union of India and Ors. that the department cannot change its stand on classification capriciously and re-open past assessments. It is also not the case of the department that there had been any judgments of the High Courts or the Supreme Court to justify this change. The ld. Counsel, further, assailed the show cause notice issued by the Assistant Collector as it did not disclose any reasons why the Department was changing its earlier stand taken and the basis for the department to say now that the printed cartons are not products of the printing industry. Further argument submitted by the ld. Counsel was that Rule 10 of the Central Excise Rules for demanding the erroneous refund, had been deleted without any saving clause nor can recourse be had to provisions of General Clauses Act. According to the appellants, the General Clauses Act would cover only Acts and not Rules. Rules are subordinate legislation and stand by themselves. The ld. Counsel submitted that in this regard his arguments before the original Bench may be recalled especially to the effect that the decision of the Allahabad High Court reported in 1982 (10) E.L.T. 201 in the case of Ajanta Paper Products v. Collector of Central Excise, Kanpur and Anr. in appellants' favour and the S.L.P. filed by the Union of India against the judgment was dismissed by the Supreme Court. It was reiterated that the classification once approved can only be changed by taking recourse to review provisions and the Assistant Collector is not competent himself to change it. As regards the second appeal in which latter amount of demand is involved, the ld. Counsel urged here also the show cause notice has the same infirmity. The ld. Counsel, further, pleaded that the department cannot find fault that the appellants have not responded to notice because the appellants have been earlier granted refund by the department nor has the department taken steps in exercise of the powers given to them for the purpose to obtain the necessary information from the appellants if they themselves had not come forward with it. The ld. Counsel, further, contended that in any case a change in the classification from the past practice can only be prospective for which he relied upon the Supreme Court decision in the case of C.C.E. v. Indian Oxygen reported in 1991 (51) E.L.T. A-36 confirming Tribunal's order reported in 1990 (47) E.L.T. 449 in the case of Indian Oxygen v. C.C.E. Further, since there was no clandestine removal of the goods, the Department cannot seek to recover the duty under Rule 9 for which he relied upon Madras High Court decision in the case of Murugan & Co. v. Deputy Collector of Central Excise, Tiruchirapalli and Ors. reported in 1977 (1) E.L.T. (J 193). The Tribunal decision in the case of Micro Labs Ltd. v. Collector of Central Excise reported in 1992 (57) E.L.T. 446 (Tribunal) was also cited and relied upon to say that the change in classification can only be prospective. The Supreme Court decision in the case of Padmini Products v. Collector of Central Excise reported in 1989 (43) E.L.T. 195 (SC) was cited to argue that when the appellants have bona fide belief about the exemption to their product, the demand for the past period cannot be raised. The ld. Counsel, further, pointed out that in the impugned order of the Collector (Appeals), there is a reference to the limitation running from the end of the financial year, which is not clearly understandable.
6. Ld. D.R., Sh. J.P. Singh, contended that Rule 10 of the Central Excise Rules and Section 11A are identically worded and both cover specifically the situation of recovery of erroneous refund. He also relied upon the case law reported in 1985 (22) E.L.T. 751 in the case of Shyam Sunder U. Nichani v. Assistant Collector of Central Excise, Bangalore and Anr. and also in the case of Mysore Rolling Mills (P) Ltd. v. Collector of Central Excise, Belgaum reported in AIR 1987 SC 1488 to say that there was no infirmity in the Assistant Collector issuing show cause notice to seek recovery of the amount granted as erroneous refund. The ld. D.R. referred to the show cause notice issued in this case and pointed out that the reason for the recovery has been spelt out therein. The ld. D.R. particularly referred to the narration in the Assistant Collector's order to say that the appellants, herein, had refused to respond even to the summons issued under the Central Excises & Salt Act to them and had consistently evaded furnishing the information called for by the department. They cannot, therefore, urge in these circumstances that the show cause notice was invalid where it does not specify the amount demanded. The ld. D.R. referred to the annexure to the show cause notice giving the detailed grounds for the recovery.
7. The submissions made by both the sides, herein, have been carefully considered. On the question of the continuance of proceedings under Rule 10 after its deletion, has been fully considered by the Larger Bench of the Tribunal in the case of Atma Steels cited supra -1984 (17) E.L.T. 331 (Tri.). The Larger Bench has held therein that proceedings initiated with reference to Rule validly subsisting at the time of initiation of proceedings can continue in spite of repeal or substitution of the original provision. While doing so, the Tribunal had considered the Allahabad High Court judgment cited by the ld. Counsel before. The Tribunal had followed the decision of the Madhya Pradesh High Court in the case Gwalior Rayon Mfg. (Wvg.) Co. v. Union of India - 1982 (10) E.L.T. 844 (M.P.) and also the Bombay High Court judgment in the case of Maneklal Chunilal and Sons Ltd. v. Commissioner of Income-tax (Central), Bombay reported in AIR 1954 Bombay 135. The Larger Bench, therefore, found that it will be more appropriate to take the views of the Madhya Pradesh High Court and Bombay High Court as they contain more detailed reasoning supported by considerable case law. We are bound to follow that decision of the Larger Bench and, accordingly, hold that there was no infirmity in the show cause notice under Rule 10 in this case. The further question that approved classification can be modified only by following the review proceedings under the Act and that the Assistant Collector has no power to modify the approved classification list, is no more good law. This is because of the necent pronouncement of 3 Judges Bench of the Supreme Court presided over by the Chief Justice of India in the case of Ballarpur Industries Ltd. v. Assistant Collector of Customs & Central Excise reported in 1995 (76) E.L.T. 499 (S.C.). Para 5 of the Supreme Court decision is reproduced below:
"The second contention urged on behalf of the appellant is that the Department having accepted the classification of goods and the price list year after year was estopped from questioning the same as Rule 10 of the Rules did not permit change in the classification list retrospectively. Reliance was placed on the decision of the Court in Rainbow Industries (P) Ltd. v. Collector of Central Excise, Vadodara - 1994 (74) E.L.T. 3 (S.C.) wherein this Court held that once the Department accepted the price list, acted upon it and the goods were cleared with the knowledge of the Department, then in the absence of any amendment in law or judicial pronouncement, the reclassification should be effective from the date the Department issued the show cause notice. The reason for it is, say their Lordships, clearance with the knowledge of the Department and not intentional evasion of duty. On this line of reasoning it was held in that case that the appellant was not liable to pay duty in respect of the past period prior to the issuance of show cause notice to the appellant. We find it difficult to persuade ourselves to this line of reasoning. Although, in that case the Court did not notice Rule 10 as it stood prior to 6th August, 1976 even though the show cause notice in that case was dated 16th October, 1976, reference was made to Section 11A of the Act which is more or less (substantially) the same. Under the said provision when any duty of excise is found to have been not levied or paid or has been short-levied or short-paid or erroneously refunded, a show cause notice could be issued on the person chargeable with the duty within six months from the relevant date requiring him to show cause why he should not pay the amount specified in the notice. The expression "relevant date" has been defined in clause (ii) of Sub-section (3) of Section 11A. On the plain reading of the said provision as also Rule 10 as it stood prior to 6th August, 1976 the show cause notice which could be issued within the time limit prescribed under the relevant provision could only be in relation to the duty of excise for a period prior to the issuance of show cause notice. There could be no reason for the issuance of a show cause notice for the period subsequent to the notice as in that case the necessary corrective action could always be taken. But Rule 10 with which we are concerned as well as Section 11A to which a reference is made in the case of Rainbow Industries, the show cause notice which must be issued within the time frame prescribed in the said provisions must relate to a period prior thereto as the purpose of show cause notice is recovery of duties or charges short-levied, etc. We, therefore, find it difficult to accept the contention that the ratio of the decision in Rainbow Industries is that under Section 11A past dues cannot be demanded. We must, therefore, reject that contention. The observations in the said decision must be confined to the facts of that case."
8. On this account also, applying the Supreme Court decision above, we do not find any substance in the appellants' contention before us, which are accordingly rejected. Further a perusal of the Assistant Collector's order dated 6-1-1981 says that besides the issue of the show cause notice, the appellants were also given clarification vide Assistant Collector's communication dated 6-12-1979 giving reasons that the printed cartons could not be classified as products of the printing industry, clarifying that the printed cartons are the products of box making or packaging industry. A further letter dated 12-11-1980 was sent to the appellants requesting them to file their reply to the show cause notice asking whether they want a personal hearing. The appellants did not reply to the show cause notice even after the clarification and further communication. Therefore, it would appear that there is no substance in the appellants' plea of non-compliance with the principles of natural justice in this regard. In the result, it is held that there was no infirmity in the order passed by the Assistant Collector for recovery of the amounts in this case. There is no ambiguity in the Collector (Appeals) order referring to the limitation to run from the end of the financial year because the Collector (Appeals) apparently is referring to the provisions as they existed under Rule 173PP which has also been invoked in the relevant show cause notice in this case. There is, thus, no reason, to interfere with the order passed by the Collector (Appeals) both on merits of the case and the decision of the Larger Bench and on the other issue regarding competency and validity of the notice issued by the Assistant Collector for recovery of the amounts. The appeals are, therefore, rejected.