IMPORTANT POINT
The demand of excise duty made by Revenue or products manufactured by appellants under alleged Tariff Item No. 68 are barred by limitation under Section 11A of Central Excise and Sale Act, 1944. As no show cause notice was issued by revenue it was not open to revenue to make a demand on the appellants.

Headnote:Central Excise & Salt Act, 1944-Section 11A-Demand of Revenue on products manufactured by the appellant under Tariff item 68-No show cause notice issued-Whether it is open to revenue to make a demand? (No)-Bar of limitation applies-Impugned orders are set aside-Appeals allowed.
       Held : From the above, it is clear that to establish that the clearances were made on a provisional basis, there should be first of all an order under Rule 9B of the Rules, and then material to show that the goods were cleared on the basis of said provisional basis, and payment of duty was also made on the basis of said provisional classification. These facts in the instant case are missing, therefore, in our opinion there is no material in the instant case to establish the fact that either there was a provisional classification or there was an order made under Rule 9B empowering the clearance on the basis of such provisional classification. In the absence of the same, we cannot accept the argument of the revenue that in fact the order of the Assistant Collector dated 21.1.1976 is a provisional order based on which clearance was made by the appellants or that they paid duty on that basis. On the contrary, as held by the Judicial Member the said order of classification was a final order, therefore, the Revenue cannot contend the limitation prescribed under Section 11A does not apply. (Para 14)
       Held further : In our opinion the above judgment in Gokak Patel Volkart s case (supra) clearly goes against the argument of the revenue with reference to the interim order made by the Delhi High Court in this case. As notice above, what was stayed by the High Court was the operation of the order of the Union of India made in a revision filed by the appellants. That order did not restrain the authorities from issuing a show cause notice as required by law. Therefore, it is not open to the revenue to contend that the period covered by the interim order of the High Court is available to the revenue to avoid limitation. The above view of ours is also supported by another judgment of this Court in J.K. Cotton Mills case (supra) wherein also this Court has held that the provision for extension of time limit for issuance of notice by excluding the period of stay granted by an order of court is to be construed strictly. In the said view of the matter the above contention of the revenue should also fail. For the reasons stated above, we are of the opinion that in the absence of a show cause notice it is not open to the revenue to make a demand on the appellants even assuming that the contention of the revenue in regard to classification as held by the tribunal is correct. In view of our finding on this question of limitation which precludes the revenue from making a demand on the appellants because of the bar of limitation, we think it unnecessary to go to the first question as to the correctness of the classification made by the tribunal in the impugned order. For the reasons stated above, these appeals succeed and the same are allowed. The impugned orders are set aside. (Paras 18, 19, 20 and 21)

JUDGMENT

Santosh Hegde, J.-The appellants herein are the manufacturers of forged steel products which was assessable to central excise duty under Tariff Item 26AA(ia). On the introduction of Tariff Item 68 in the first Schedule to the Central Excises & Salt Act, 1944 (the Act) w.e.f. 1.3.1985, a question arose whether the said product manufactured by the appellants by forging became liable for further duty under Tariff Item 68 because after the forging, the appellants are said to have subjected this product to certain other manufacturing processes like polishing and trimming to make the product suitable for its ultimate use. This dispute between the appellant and the Revenue had a chequered career going through the process of appeals, revision, writ petition before the Delhi High Court, then a remand, another round of appeal before the authorities and then ultimately another appeal to the Central Excise & Gold (Control) Appellate Tribunal ( the tribunal ) which was by then constituted, and from there to this Court by way of this statutory appeal. Thus, this litigation which started by virtue of an order made by the Assistant Collector on 21.1.1976 is now before us in the year 2002.

2. Before the tribunal, two questions arose for consideration. They are: whether the products manufactured by the appellants are classiflable under Tariff Item 68 ? If so, the demand made by the revenue for collection of duty under that head was within the period of limitation. A Bench of the tribunal which heard the appeal, could not come to a unanimous decision on these questions. The Judicial Member came to the conclusion that the Department was right in classifying the goods under Tariff Item 68 while the Technical Member was of the opinion that the matter should be remanded to the lower appellate authority for deciding the classification of the products after taking into account the entire material brought on record by the appellants before the appellate authority and not by merely relying on the judgment of Delhi High Court.

3. In regard to the question of limitation, the Judicial Member held that even though the order of the Assistant Collector dated 22.1.1976 was not provisional but final, even then certain letters and orders issued or made during the course of the proceedings could be treated as required show cause notice, hence, the Department could determine the amount of duty payable by the party at least from 25.1.1985 till the end of 1985 hence partly allowed the claim of the revenue, while the Technical Member came to the conclusion that the clearances made by the appellants for the relevant period should be treated as provisional clearance which does not require issuance of show cause notice and also because of the interim order made by the High Court of Delhi on 19.2.1981, the Department was restrained from issuing the required show cause notice, therefore, the bar of limitation cannot be put against the revenue. On that basis the contention of the appellants of lack of show cause notice and bar of limitation came to be rejected. Thus, upholding the demand made by the revenue in its entirety.

4. The matter was then referred to a third member of the tribunal who interestingly agreed with the Judicial Member on the question of classification and came to the conclusion that the goods manufactured by the appellants are classifiable under Item 68, while on the question of limitation, he agreed with the Technical Member that the clearance of the goods by the appellant was made on a provisional basis, therefore, the question of limitation does not arise.

5. Consequently, the case of the appellants both in regard to classification as also limitation failed before the tribunal because of the majority view.

6. Hence, the appellants are in these appeals before us.

7. Mr. S Ganesh, learned senior counsel for the appellants, contended that the activities like removal of superfluous extra skin of forging or polishing and trimming the forged prod

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2002 Supreme(SC) 1143

Cases Referred (4)