Customs, Excise and Gold Tribunal - Delhi
H.M. Bags vs Collector Of Central Excise on 20 October, 1994
Equivalent citations: 1994ECR486(TRI.-DELHI), 1995(75)ELT171(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. This is an appeal against the order passed by the Collector of Central Excise (Appeals), New Delhi. Briefly stated the facts of the case are that the appellants who are engaged in the manufacture of HDPE/PP Woven Sacks, filed a Classification List seeking the classification of HDPE/PP Woven Sacks under sub-heading 6301.00 of the Central Excise Tariff. On the basis of the order No. 8/92, dated 24-11-1992 issued by the Central Board of Excise & Customs under the provisions of Section 37-B, the appellants were served with a Show Cause Notice seeking the recovery of differential duty amounting to Rs. 4,31,838/- in respect of the clearances of the said goods effected from the factory during the period June, 1992 to November, 1992 on the grounds that the goods in question were classifiable under sub-heading 3923.90. The appellants contested the demand on the ground that the clearances during the relevant period having been effected on the basis of an approved Classification List no demand could be raised for the past period until the Classification List was revised and any revision of the Classification List could have only prospective effect. However, by his order dated 25-2-1993 the Assistant Collector confirmed the demand. Being aggrieved by the order passed by the Assistant Collector, the appellants preferred an appeal before the Collector (Appeals) who confirmed the order passed by the Assistant Collector on the grounds that Boards instruction dated 24-9-1992 stating that HDPE/PP Woven Sacks were classifiable under subheading 3923.90 having been issued under Section STB was binding on the Assistant Collector and on this account demand for a period not exceeding six months from the date of the said instruction was sustainable.
2. On behalf of the appellants, Shri A.S. Sundar Rajan, the Ld. Consultant appeared before us. He contended that the Assistant Collector's order confirming the demand for the period 24-9-1992 to 15-11-1992 was illegal since the assessments made during that period were on the basis of an approved Classification List. He added that on the basis of the Boards Instructions F. No. 54/12/91-CX. I, dated 24-9-1992 (Order No. 8/92) under Section 37-B of the Central Excises and Salt Act advising the field formations that HDPE/PP Woven Sacks were classifiable under sub-heading 3923.90 the Collector had issued a Trade Notice on 5-11-1992. He contended that the classification of HDPE/PP Woven Sacks under sub-heading 6301.00 could be changed only after the revision of the approved Classification List of the appellants and on this account any demand issued for the period prior to the revision of the Classification List would not be legally sustainable. He stated that in the case of Steel Authority of India Ltd. v. Collector of Central Excise, West Bengal, reported in 1985 (22) E.L.T. 487 it has been held that demand due to change in Departments stand regarding their earlier approved practice can be only prospective from the date of the Show Cause Notice. He added that as reported in 1990 (48) E.L.T. A24 the Supreme Court had confirmed the Tribunal's decision. In support of his contention he also placed reliance on the following case law:
Union of India v. Madhumilan Syntex P. Ltd. -1988 (35) E.L.T. 349 Brakes India v. Collector of Central Excise -1987 (31) E.L.T. 1030 CCE, Bombay v. Nat Steel Equipment P. Ltd. - 1987 (31) E.L.T. 951 Nat Steel Equipment P. Ltd. v. Collector of C. Excise -1988 (34) E.L.T. 8 (SC) Steel Authority of India v. CCE, West Bengal -1985 (22) E.L.T. 487 Shri Sundar Rajan submitted that it is now well settled that Notification and Departmental orders take effect form the date from which they are made available to the public. He stated that under these circumstances, the demand of differential duty for the period prior 5-9-1992 i.e. the date on which the Trade Notice based on Board's Instructions under Section STB was issued, would be illegal. In support of his contention he placed reliance on the following case law:
Haryana Plywood Indus, v. Collector of Central Excise -1993 (63) E.L.T. 235 Union of India v. Asia Tobacco Co. Ltd. -1990 (50) E.L.T. 29 (Mad.) The Ld. Consultant referred to the Show Cause Notice and contended that it did propose the review of the approved Classification List. He contended that under these circumstances the confirmation of the demand with retrospective effect was illegal. Continuing his submissions Shri Sunder Rajan stated that in case it is held that the classification could be revised by the Department with retrospective effect from the date of the Show Cause Notice the appellants would be entitled to the MODVAT benefit.
3. On behalf of the respondents, Shri Sidarath Kak, Ld. Jt. CDR stated that it is well settled by a number of judgments of the Supreme Court, High Courts and the Tribunal that even if there is an approved Classification List, assessments can be revised upto a period of six months from the date of Show Cause Notice. In support of his contention he cited the following case law :-
(i) Nat Steel Equipment Put. Ltd. v. Collector of Central Excise - 1988 (34) E.L.T. 8 (S.C.)
(ii) Guru Priya 'Tele Auto Pvt. Ltd. v. Suptd. of Central Excise - 1992 (58) E.L.T. 361 (Kar.) Shri Kak further submitted that as held by the Collector (Appeals) Board's Instruction dated 24-9-1992 having been issued under Section 37-B, the demand for recovery of differential duty could be issued from 24-9-1992 onwards. He contended that Shri Sunder Rajan's claim that the Show Cause Notice, did not seek to review the Classification List, was erroneous. He stated that on a plain reading of the contents of the Show Cause Notice, it follows that it did seek to review the approved Classification as well. He added that the appellants would not be entitled to MODVAT since this point was not raised before the lower authorities and they had also not raised it in the grounds of appeal.
4. In .his reply Shri Sunder Rajan stated that even if admissibility of MODVAT credit has not been taken up in the grounds of appeal in the event of revision of Classification List the appellants would be eligible for MODVAT on the ratio of the Tribunal's decision in the case of Shri Rama Machinery Corporation (P) Ltd. v. C.C., reported in 1992 (57) E.L.T. 369 (SC).
5. We have examined the records of the case and considered the submissions made on behalf of the both sides. It is seen that the main point that arises for consideration in this case is whether the Department can raise a demand under Section 11A of the Central Excises and Salt Act by taking a view different from the approved classification list. In this regard we find that it is now well settled that even when there is an approved Classification List, the Excise Authorities are not barred from re-opening the classification and raising the demand under the provisions of Section 11A of the Central Excises and Salt Act, 1944. In the case of Elson Machines Pvt. Ltd. v. Collector of Central Excise, 1988 (38) E.L.T. 571 (SC), the Supreme Court has held that "Excise Authorities are not estopped from taking a view different than in the approved Classification List. Plainly these can be no estoppel against law. The claim raised before us is claim based on legal effect of a provision of law and therefore, this contention must be rejected."
6. We find that a similar view has been taken by the Calcutta High Court in the case of I.T.C. Limited v. Union of India, reported in 1988 (34) E.L.T. 473 (Cal.) wherein it has been held that Sections 11A and 11B of the Central Excises and Salt Act would be applicable even if no appeal is filed against approval of price list or classification list.
7. In this regard it is seen that in the case of Shyam Sunder & Nichani v. Assistant Collector of Central Excise, Bangalore, reported in 1985 (22) E.L.T. 1751 Karnataka High Court has also held that the Classification List approved by the Assistant Collector can be reopened since Section 11A of the Central Excises and Salt Act is not only a recovery provision but enables the original authority to reopen the Classification List and re-assess the goods. Paras 33 and 34 of the said judgment being relevant are reproduced below :
"33. As is clear from the Show Cause Notice, the Assistant Collector proposed to withdraw the approval to the Classification list and assess the clearances of the petitioner clubbing it with the clearances of its predecessor. It was also proposed to apply the Notification No. 80/80 to the facts of the case and take the production of the full year 1981-82 from the 'factory'. This was clearly a matter falling within the purview of Section 11A of the Act.
34. But, it is contended on behalf of the petitioner that 11-A is only a recovery provision and it does not enable the original authority under the Act to reopen and re-assess. This argument is no longer open to the learned Counsel for the petitioner to press this contention in view of the Supreme Court decision in Kohil's case."
8. In the case of Steel Authority of India Ltd. v Collector of Central Excise, reported in 1988 (38) E.L.T. 488 the Tribunal has also taken the same view while holding that withdrawal of approval of classification list does not amount to review and classification list approved by the Assistant Collector being re-openable, demand of duty under Section 11A of the Act for six months prior to the date of issue of Show Cause Notice would be valid.
9. We find that in the case of Guru Priya Tele Auto (P) Ltd. v. Supdt. Central Excise the Karnataka High Court while referring to a catena of judgments of the Supreme Court and various High Court has, once again held that Section 11A of the Central Excises and Salt Act, 1944 embraces an implied power to resort to the process of assessment to enable the recovery of duty by undoing the approved classification list where considered necessary. Para 28 of the said judgment being relevant is reproduced below : -
"Power of review should be specifically conferred, but the process of reopening an earlier assessment to assess the escaped subject of taxation necessarily involves and implies a power to review the earlier order. An implied power has been read into Rule 10A by the Supreme Court, whereby the process of assessment can be resorted to enable the recovery of duty thereunder and there is no warrant to deny a similar power to the revenue under Section 11A of the Act. The undoing of the approved classification list may be necessary to exercise the power under Section 11A effectively having regard to the scheme of the Act and the Rules framed thereunder. Approval of the list by the proper officer in no way operates as estoppel, if the circumstances state in Section 11A are attracted. The Rules regulating the approval of the list and the making of the assessment order under Rule 173-1 are to be read together not only as part of one system, but as a step in the process of making the assessment order."
10. In view of the above discussion, we do not find any force at all in contention of the learned Consultant that in view of the confirmation of the classification of HDPE/PP Woven Sacks under sub-heading 6301.00 on approval of the appellants Classification List with effect from 1-4-1992 on the basis of the Instruction E No. 54/12/91-CXI dated 24-9-1992 (Order No. 8/92) issued by the Board under Section 37B stating that sacks made out of HDPE/PP Strip and tapes not exceeding 5 mm would henceforth be classified under sub-heading 3923.90 of the Central Excise Tariff the Assistant Collector could have revised the classification only prospectively from the date of the Show Cause Notice issued on 8-12-1992. Since the Show Cause Notice dated 8-12-1992 while proposing to assess the goods in question under sub-heading 3923.90 clearly referred to the Classification List with effect from 1-4-1992, the appellants contention that Show Cause Notice did not seek to review the approved Classification List has also to be rejected.
11. The appellants have contended that the relevant instructions issued by the Board under Section STB having been communicated to the Public through Trade Notice No. 29 dated 5-11-1992, the demand, if any, could have been raised for the period subsequent to the date of the Trade Notice. In this regard reliance had been placed in the judgment of the Madras High Court in the case of Union of India v. Asia Tobacco Co. Ltd. (supra) wherein it was held that a notification withdrawing an exemption is enforceable only from the date on which it is made known to the public. This decision in our view cannot help the appellants since the demand raised in this case was not on account of withdrawal of any notification and also if in view of our finding that a demand can be issued under Section HA with retrospective effect to reopen the assessments which may have been made on the basis of an approved classification list.
12. While making his submissions on behalf of the appellants the Ld. Consultant had pleaded that in case the revision of the Classification of the appellants product viz. HDPE/PP Woven Sacks a question under sub-heading 3923.90 in terms of the impugned order is upheld, then the benefit of MODVAT in respect of the duty paid on the raw materials used as inputs in the manufacture of the finished excisable goods may be extended. In this regard we find from the case records that the appellants had filed a Miscellaneous Application dated 22-6-1992 under Rule 10 of the CEGAT (Procedure) Rules, 1982 for being allowed to urge the following additional ground in their appeal :-
"a. Because Collector failed to appreciate that in the event the goods are classifiable under Chapter 39 of the Central Excise Tariff the appellants are entitled to benefit of MODVAT in respect of raw materials used in the manufacture of finished excisable goods, which would reduce the effective duty liability substantially. To this extent, the demand of duty quantified is erroneous and has to be scaled down to the extent of MODVAT eligible in this case."
The Miscellaneous application filed by the appellants was numbered E/MICS/93-C by the Registry of the Tribunal. It is seen that para 41 of the order No. 125/93-C, dated 23-8-1993 passed on the Stay Application No. 656/93-C filed by the appellant reads as follows :
"The applicants had pleaded that they did not avail of the MODVAT credit. The matter related to the demand of duty and had no effect on the Modvat Scheme. We find that this point has not been raised by them in their ground of appeal or prayers."
It is thus seen that the Miscellaneous Application filed by the appellants seeking permission for urging additional ground, was not taken up for consideration. However, it is seen at the time of the hearing of the Stay Application filed by the appellants and also during the arguments on the appeal the learned Consultant had urged that in the event of the goods being found as classifiable under Chapter 39 the benefit of Modvat in respect of duty paid on the inputs used in the manufacture of the final products may be extended. Having regard to these facts and the overall facts and circumstances of the case we hold that the differential duty recoverable from the appellants has to be worked out taking into account the Modvat Credit if any, that may be admissible on the inputs used in manufacture of the final products.
13. In view of the foregoing, we uphold the impugned order confirming the Classification of the appellants product under sub-heading 3923.90 and recovery of differential duty for the period 24-9-1992 to 15-11-1992. However, in the interest of justice, we remand the matter to the Assistant Collector having jurisdiction to work out the exact quantum of differential duty recoverable in respect of the clearances during the said period, having regard to the Modvat Credit that would have been admissible to the appellants. For this purpose the appellants are directed to file the necessary duty paying documents and other records where they may be required by the Assistant Collector to arrive at a finding in this regard.
14. The appeal is disposed of in the above terms.