CX - Since s.11A amended by s. 110 of FA, 2000 making provision for reopening of approved classification list is valid piece of legislation, differential duty can be recovered even in respect of approved classification list: HC
By TIOL News Service
MUMBAI, JAN 01, 2017: THIS is a Writ Petition filed in the year 1986 and which was decided recently.
The petitioners state that they have a valid licence required under the CEA, 1944 for manufacture of Internal Combustion (I.C.) Engines of various horsepower. They manufacture these I.C. Engines designed for use as prime movers for transport vehicles and those for stationary use. The special type of I.C. Engines manufactured were classified under Tariff Item No.29.
The petitioners supplied these Engines to M/s. Bharat Earth Movers, Bangalore and they filed a classification list. Then, the Assistant Collector of Central Excise, Pune, by his order of 5-7-1966, classified these Engines for Dumper Application as falling under sub-item (i) of Tariff Item No.29. Being aggrieved and dissatisfied with that order, the petitioners approached the Collector of Central Excise, in appeal. That appeal was dismissed on 29-9-1966. Thereafter, a revision application was filed with the Government of India. The revision application was allowed with consequential relief of refund of duty.
Thereafter, the classification list was approved and the petitioners also obtained a refund. However, once again dispute was raised by the Department about the classification of these Engines. The issue was again taken up and in 1981, eventually, the Government of India accepted the version of the petitioners.
The petitioners paid duty as per the approved classification list and the approved price list. Their monthly returns were assessed for the period February, 1985 to August, 1985. Respondents did not make any allegation with regard to any short levy of duty.
However, on 18-11-1985 a show cause notice was received alleging that the petitioners have contravened the provisions of the Act and the Rules in the manner stated in the show cause notice. The petitioners filed their reply and were also served with the adjudication order impugned in this writ petition. The amount demanded, namely, Rs.64,03,582.24 is already paid and there is no penalty imposed.
The argument of the petitioners is that the classification of the I.C. Engines for Dumper Application has been an issue consistently raised but, throughout, the petitioners have succeeded in satisfying the Authorities that the attempt to classify them under a distinct special item cannot succeed.
In assailing the impugned order, it is submitted that there is total non-application of mind on the part of the Authorities and they could not have raised the same issues again and again.
The counsel for the Revenue submitted that it is incorrect to urge that this is a relook at the same issue and on the same cause of action. It is submitted that Dumpers are motor vehicles and the I.C. Engines cleared for fitment to Dumpers attract duty under Tariff Item No.29(i), yet, the petitioners insisted on sub-item (ii) and that is not correct.
The High Court observed that in the case of Cotspun Limited, - 2002-TIOL-187-SC-CX-CB the Supreme Court held that the words "short levy" cannot be understood as meaning and covering the levy of excise duty on the basis of an approved classification list. Inasmuch as levy of excise duty on the basis of an approved classification list is the correct levy, at least until such time as to the correctness of the approval is questioned by issuance to the assessee by a show cause notice and that it is only when the correctness of the approval is challenged that an approved classification list ceases to be such. Furthermore, it is held that differential duty cannot be recovered on the ground of short levy when the duty levied is on the basis of the approved classification list.
However, in the latter Judgment in the case of ITW Signode India Ltd. - 2003-TIOL-38-SC-CX-LB, the Supreme Court held therein that Section 11A of the Central Excise Act, as amended by Section 110 of the Finance Act, 2000 making a provision for reopening of the approved classification list is a valid piece of legislation.
Noting that there is now an authoritative pronouncement by the Supreme Court of India, the High Court held that it could not sustain the challenge raised in the writ petition.
The petitioner requested the High Court for an appropriate order protecting the petitioners as against the quantum of interest that would be attracted in terms of Section 11AA of the CEA, 1944. Inasmuch as it is submitted that in the facts peculiar to this case and having noted that the amount has been paid and there being a reference to a Larger Bench and that reference having been decided in the year 2003, on 19-11-2003, the interest be scaled down from this date to 22-1-2004, i.e. the date of payment.
The High Court viewed - in the light of the peculiar facts and circumstances, when the petitioners had succeeded throughout until the impugned adjudication order, the writ petition was pending in this Court for a considerable period, the amounts having been paid during the pendency and now the interest also secured from November, 2003 to January, 2004, no further recoveries be made in terms of the impugned order.
The writ petition was dismissed, subject to the above.
(See 2017-TIOL-01-HC-MUM-CX)
