TMI Blog1990 (8) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... e Central Excise Rules, 1944, the Central Government hereby exempts mineral fibres and yarn and manufactures therefrom, falling under Item No. 22-F of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), specified in column (2) of the Table hereto annexed, from the whole of the duty of excise leviable thereon. TABLE Sl. No. Description (1) (2) 1. Rock wool 2. Yarn spun wholly out of glass fibres 3. Glass fabrics" By the Notification No. 206/81-C.E., dated December 30, 1981 an explanation was added. "Explanation: In the notification "Yarn spun wholly out of glass fibres shall not include continuous filament yarn." When the Central Excise Tariff Act, 1985 came into force on February 28,1986, glass fibre products were categorised under Item 7014.00 which reads as follows : TABLE Heading No. Sub-Heading No. Description Rate of Duty (1) (2) (3) (4) 70.14 7014.00 Glass fibres (including glass wool and Glass filaments) and articles thereof (for example, yarn, woven fabrics), whether or not impregnated, coated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to the benefit of the notification ...." Referring to the order of remand passed by the Appellate Collector, the Assistant Collector pointed out in his order granting exemption in favour of the petitioner-company as follows: "The Appellate Collector in his order-in-appeal No. 376/82(H) dated 23-10-1982 had advised that the matter was to be re-examined after making a fresh reference to the Chief Chemist giving all the details. With due respects to the order of the Appellate Collector, it is felt that a further reference to the Chief Chemist is not necessary because the issue is to be examined on two points, that whether the yarn is made wholly out of glass fibre and whether the yarn is spun. Both these points can be dealt with after a thorough observation and examination of the manufacturing process of the assessee. Observation and examination of the manufacturing process in any other spinning mill as well as references contained in books on the subject, as well as dictionaries can also prove helpful." (emphasis supplied) Consequent to that order, the Assistant Collector granted refund to the petitioner-company for the entire period up to May 16,1985. 5. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52/86-C.E., dated February 10,1986 holding that the exemption under the said notification "would not be available to glass fibre yarn". It is further stated that the impugned show cause notice had been issued pursuant to the letter of the Board. In the Board's letter dated May 31,1988 it was mentioned that while both the filament yarn and spun yarn were covered by the description 'yarn spun wholly out of glass fibre' the specific exclusion of continuous filament yarn of glass fibre would obviously leave only the spun yarn of glass fibres for enjoying the benefit of exemption specified against the relevant entry in Notification No. 52/86-C.E., dated February 16,1986. 10. It is submitted by the learned counsel for the petitioner-company: (1) The impugned action of the respondents in issuing the show cause notice is an attempt to review the order of the Assistant Collector, Central Excise, Hyderabad-11 Division dated May 17,1985 approving the classification list which had become final and thereby take away the exemption granted under that order. (2) The classification list approved on July 19,1988 by the Assistant Collector related to the goods in respect of which, special excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, is prescribed. That chapter is applicable in the instant case. ; Rule 173-B to the extent relevant is as follows: "(1) Every assessee shall file with the proper officer for approval a list in such form as the Collector may direct (in quintuplicate), showing - (a) the full description of (i) all excisable goods produced or manufactured by him, (ii) all other goods produced or manufactured by him and intended to be removed from his factory, and (iii) all the excisable goods already deposited or likely to be deposited from time to time without payment of duty in his warehouse; (b) the item number and sub-item if any, of the First Schedule to the Act under which such goods fall; (c) the rate of duty leviable on each such goods; and (d) such other particulars as the Collector may direct. (2) The proper officer shall, after such inquiry as he deems fit, approve the list with such modifications as are considered necessary and return one copy of the approved list to the assessee who shall, unless otherwise directed by the proper officer, determine the duty payable on the goods intended to be removed in accordance with such list. (2A) All clearances shall, subject to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lised and this constitutes the fourth part. If any alteration of the approved classification list becomes necessary because of one or the other of the circumstances mentioned in sub-rule (4), the assessee is required to file a fresh list or an amendment of the list already filed, and that is the fifth part. The sixth part relates to the power of the proper officer to modify the approved classification list for any reason affecting the rate or rates of duty. "Section 11-A. RECOVERY OF DUTIES NOT LEVIED OR NOT PAID OR SHORT-LEVIED OR SHORT-PAID OR ERRONEOUSLY REFUNDED. - (1) 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, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. Proviso ................... Explanation.................. (2) The Assistant Collector of Central Excise or, as the case may be, the Collector of Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of facts on the part of the assessee, the period is extended to five years instead of six months. 15. In the instant case, the impugned notice had been issued to the petitioner-company calling Upon it to show cause why the approval given for a classification exempting yarn produced by it from payment of excise duty should not be revoked and why the product should not be classified under Tariff Item No. 7014.00 attracting 20% ad valorem duty. This notice does not specify the amount of excise duty payable by the petitioner-company. Therefore, it is evident that the impugned notice had been issued only for revocation of the approved classification list and re-classification of the product. 16. One of the main contentions advanced on behalf of the petitioner-company is that when the classification list had been approved by the Assistant Collector under Rule 173-B granting exemption as long back as on May 17,1985 and that order had become final, such an order cannot be modified or revoked by the very same authority which had granted approval. Under Section 35 of the Act, a right of appeal to the Collector (Appeals) is provided against any decision or order passed by a Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approved classification list, the assessee is entitled to determine the excise duty in accordance with the classification and clear the goods on the payment of such duty unless the proper officer directs otherwise. Thus, the classification list once approved continues to be effective till it is modified or revoked under sub-rule (5) of Rule 173-B. Thus, the determination and payment of excise duty in accordance with the approved classification list is a continuing process. If, at any stage, the proper officer notices that the goods had been wrongly classified either due to mistake of fact or law, it is difficult to understand as to why the proper officer cannot issue notice to the assessee pointing out the mistake committed in the classification of the goods and asking him to show cause why the mistake committed in that regard shall not be rectified. It cannot reasonably be urged by any assessee that though the goods have been wrongly classified, the mistake cannot be corrected even after its detection. In this context, it would be useful to recapitulate the provisions of Section 11-A referred to above. Wrong classification of the goods either due to a mistake of fact or law will r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) is of opinion that any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, no order requiring the appellant to pay any duty not levied or paid, short-levied or short-paid or erroneously refunded shall be passed unless the appellant is given notice within the time limit specified in Section 11A to show cause against the proposed order." To the same effect is sub-section (6) of Section 35EE which confers revisional jurisdiction on the Central Government. 21. We are unable to accept the contention of the learned counsel for the petitioner that Section 11-A is merely a machinery provision and it can be invoked only when an approved classification list has been set aside either in appeal or revision. The same period of limitation has been prescribed under Sections 11-A, 35-A and 35-EE for the recovery of the excise duty not levied or not paid or short-levied or short-paid. But the powers under those three different provisions have been conferred on three different authorities viz., the original authority, the appellate authority and the revisional authority. Prescription of the same period of limitation under those three prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been approved, initiate proceedings for modification or revocation of the approved list subject to the condition that reasonable opportunity shall be given to the affected party before such modification or revocation. To hold otherwise would lead to an anamolous situation which would result in perpetuation of non-levy or non-payment or short-levy or short-payment of excise duty even in such cases where the classification of goods had been made under an obvious mistake of fact or law. As the determination of duty and clearance of the goods is a continuing process, the proper officer can correct the mistake committed either by him or his predecessor in office, in classifying the goods, at any time. Therefore, reference made to the approved classification list dated July 19,1988 relating to special excise duty is not relevant. 23. In this case, it is not necessary to go into the question whether the recovery proceedings under Section 11A shall be prospective or limited for the past period of only six months or five years, as no notice has yet been issued under that section for the recovery of the excise duty. So far as the impugned notice is concerned, the petitioner company has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the schedule annexed to the notification. The assessee wrote a letter dated December 22,1961 to the Superintendent of Excise, Bulsar, the relevant portion of which reads as follows : "During the course of discussions we had on the 20th December, 61 with the Collector of Central Excise and yourself, we pointed that we purchase Fast Colour Bases, required in production of Rapidogenes/Rapid fasts either from the manufacturer in Bombay or from the open market. The material which the local manufacturer has offered us was produced before the imposition of excise duty on dyes. He is, therefore, willing to sell us the material without the recovery of excise duty. We now propose to pay the excise duty on the fast colour bases which we will purchase from the local manufacturer so that we do not have to pay excise duty on the final products produced viz., Rapidogenes/Rapid fasts. Similarly we propose to purchase some quantity of imported fast colour bases from the open market. We will present the materials thus purchased to you for the recovery of excise duty @ 15%. We have now to request you to advise your Inspector at Atul to accept the excise duty on the fast colour Bases, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dified by issuing notice to the affected party. 28. In Nat Steel Equipment Private Limited v. Collector of Central Excise -1988 (34) E.L.T. 8, a case decided by the Supreme Court, the appellant was a manufacturer of hospital and pharmaceutical appliances and heavy duty industrial canteen equipment. 14 items were classified by him under Tariff Item No. 68 of the Act in the classification list dated March 27, 1979. The Assistant Collector held that the products 2 to 14 were classifiable under Tariff Item No. 33-C. After giving the notice, the Assistant Collector demanded differential duty. On appeal, the Collector accepted the appellant's contention that the goods were classifiable under Tariff Item No. 68 and not under Tariff Item No. 33-C. However, on further appeal, the Tribunal reversed the decision of the Collector and held that the items could only be classified under Tariff Item No. 33-C. Further, the Tribunal held that the modification of the classification list could only be prospective and not retrospective. On appeal, the Supreme Court confirmed the judgment of the Tribunal, holding that the modification of the classification list could only be prospective and not retros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of show cause notice. Thus, in that case, the Supreme Court upheld the initiation of proceedings for the recovery of the excise duty under Section 11-A in a case where the classification list was already approved and the manufacturer was paying duty on the basis of the approved classification list. 30. In a subsequent case Elson Machines Private Limited v. Collector of Central Excise [1988 (38) E.L.T. 571] a question had arisen before the Supreme Court whether the exemption granted in favour of the manufacturer from payment of excise duty under an exemption notification issued by the Central Government was valid or not. The appellant availed the exemption under the notification for the periods 1 April 1980 to 30 November 1980 and 1 April 1981 to 30 September 1981 claiming that the clearances were confined to the stipulated period specified in the notification. A notice was issued to the appellant by the Excise Officer to show cause why the differential duty should not be recovered as he had wrongly availed of exemption as its clearances exceeded the limit of Rs. 15 lakhs. The Tribunal held that the appellant was not entitled to the exemption as it had exceeded the limit stipula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the technology of man-made fibres, the process of making filament by extruding molten polymer of glass is no doubt known as spinning. The filaments can be assembled with or without twist to make "filament Yarn". The filaments can be cut into staple fibres and then the staple fibres can be spun into a yarn known as spun yarn. While both filament yarn and spun yarn of glass are covered by the description 'yarn spun wholly out of glass fibres', the specific exclusion of continuous filament yarn of glass fibre will obviously leave only the spun yarn of glass fibres for enjoying the benefit of exemption specified against the relevant entry in notification. The Board agrees with the above views and accordingly holds that the benefit of exemption under Notification No. 52/86-C.E., dated 16-2-1986 as amended would not be available to glass fibre yarn." In that letter, it was clearly mentioned that the issue was discussed in the West Zone Collectors' Conference held at Pune on October 18,1987. Thus, what was discussed at that conference was mentioned in the letter and the Board had expressed its agreement with the views expressed in that conference regarding the classification of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd levied duty under Item 17(3) at the rate of 22 paise per kilogram. Subsequently, the excise authorities treated that paper as packing and wrapping paper and insisted upon the manufacturer to pay the duty thereon under Item 17(4). The manufacturer paid duty at that rate under protest and applied to the Assistant Collector who rejected the claim. Aggrieved by that order, the manufacturer preferred appeal to the Collector. The Collector rejected the appeal mainly on the ground that the question was covered by the direction issued by the Central Board of Revenue. That order was confirmed by the Central Government in revision. In those circumstances, the Supreme Court held that the order passed by the Collector who was a quasi-judicial authority was vitiated as he merely relied on the direction issued by the Board. 36. Reliance is also placed by the learned counsel for the petitioner on a decision of the Delhi High Court in Indian Aluminium Company Limited v. Union of India -1983 (12) E.L.T. 349. In that case, a notification was issued exempting "Aluminium in any crude form produced wholly out of girgin metal" from levy of excise duty with effect from July 1,1976. Certain amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1986. It is for the proper authority to decide on the basis of the explanation submitted by the petitioner-company to the show cause notice, after taking into consideration the relevant material relating to the manufacturing process, whether the yarn manufactured by the petitioner-company is out of continuous filament or spun wholly out of glass fibre. 38. We have already held that it is open to the proper authority to modify or alter the approved classification list at any time when duty of excise has not either been levied or short-levied due to wrong classification of a product. In exercise of that power, the impugned show cause notice has been issued. Though the learned counsel for the petitioner has vehemently urged on merits that the yarn manufactured by the petitioner is yarn spun wholly out of glass fibre and it is not continuous filament yarn, it would not be proper for us to go into the merits of the case at the show cause notice stage. It is for the concerned authority to consider the matter and render a decision. We make it clear that the Assistant Collector shall decide the matter on merits without taking into consideration the views expressed by the Central Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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