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1993 Supreme(Cal) 287
High Court Of Calcutta
Ruma Pal
ASSOCIATED PIGMENTS LTD - Appellant
Versus
SUPERINTENDENT OF CENTRAL EXCISE - Respondent
Matter 2251 Of 1991
Decided On : 06/21/1993
PARTHA BANERJI, PRANTOSH MUKHERJI, S.K.BAGARIA
When there is a bona fide doubt regarding classification of goods for the purpose of levy of Excise duty, non-payment of Excise duty could not be described as having been made with an intention to evade duty.
Headnote:
CENTRAL EXCISE - CLASSIFICATION - LEAD OXIDE GREY - WHETHER CLASSIFIABLE UNDER SUB-HEADING NO. 2804. 60 AS LEAD OXIDE, RED LEAD AND ORANGE LEAD OR SUB-HEADING NO. 3823. 00 AS PREPARED BINDERS FOR FOUNDRY MOULDS OR CORES, CHEMICAL PRODUCTS AND PREPARATIONS OF THE CHEMICAL OR ALLIED INDUSTRIES - HELD, LEAD OXIDE GREY IS CLASSIFIABLE UNDER SUB-HEADING NO. 3823. 00.
Fact of the Case:
The petitioner company manufactured Lead Oxide Grey. Dispute arose as to whether it was classifiable under sub-heading No. 2804. 60 as Lead Oxide, Red Lead and Orange Lead or sub-heading No. 3823. 00 as prepared binders for foundry moulds or cores, chemical products and preparations of the chemical or allied industries. Petitioners paid Excise duty under protest and filed an application for refund of the difference between the excise duty claimed and the excise duty in fact payable on the product. Refund was made. Subsequently, the Tariff Item number was changed, and the petitioners filed a classification list claiming classification of Lead Oxide Grey under sub-heading No. 2824. 00, which was approved by the Assistant Collector. A Show Cause Notice was issued for the period from 1-3-1986 to 30-6-1987, alleging that lead oxide grey was not covered by Tariff Sub-heading 2824. 00 but was classifiable under the residuary item. Two more Show Cause Notices were issued, one for the period from 1-3-1988 to 1-3-1991, and the other for the period from July 1987 to February 1988, claiming the difference of duty arising from classification of lead oxide grey under Tariff sub-heading 2824. 00 and Tariff sub-heading 3823. 00.
Finding of the Court:
The impugned Show Cause Notice dated 2-5-1989, the order dated 25-2-1991, and the Show Cause Notice dated 2-4-1993 are set aside and quashed.
Issues: 1. Whether Lead Oxide Grey is classifiable under sub-heading No. 2804. 60 as Lead Oxide, Red Lead and Orange Lead or sub-heading No. 3823. 00 as prepared binders for foundry moulds or cores, chemical products and preparations of the chemical or allied industries? 2. Whether the Show Cause Notices and the order passed were valid?
Ratio Decidendi: 1. The Chief Chemist, Central Revenue Chemical Laboratory, submitted a report stating that lead oxide grey was classifiable under Tariff Heading 3823. 00 and not under 2824. 00. The Board agreed with the view of the Chief Chemist and issued a clarification on 14-9-1990 to the effect that lead oxide grey was appropriately classifiable under sub-heading 3823. 00 of the Tariff and not as lead oxide falling under 2824. 00. 2. The Show Cause Notice dated 2-5-1989 was issued beyond the period of 6 months from the relevant date and did not contain any allegation of fraud, collusion, or wilful mis-statement or suppression of facts justifying extension of the period of 6 months. 3. The impugned order dated 25-2-1991 relied upon a report, no copy of which was admittedly made over to the petitioners, violating the principles of natural justice. 4. The Show Cause Notice dated 2-4-1993 did not contain any positive act on the part of the assessee to justify invocation of the proviso to Section 11A. Non-payment of Excise duty could not be described as having been made with an intention to evade duty when there was a bona fide doubt regarding classification.
Final Decision: The writ application is allowed. All impugned notices and orders are set aside and quashed.
( 1 ) THE petitioner company manufactures Lead Oxide Grey. The dispute in this case is whether Lead Oxide is classifiable under sub-heading No. 2804. 60 as per the Central Excise Tariff Act, 1985 as Lead Oxide, Red Lead and Orange Lead or whether it is classifiable under sub-heading No. 3823. 00 as follows :-"prepared binders for foundry moulds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included; residual products of the chemical or allied industries, not elsewhere specified or included. ".
( 2 ) WITH effect from 28th February, 1986 Tariff Items under sub-heading No. 2804. 60 were introduced as separate items which read as follows :-"lead Oxide, Read Lead and Orange Lead -10%"
( 3 ) SUBSEQUENT to such introduction the petitioners paid Excise duty on the products manufactured by it under protest on the basis that the products manufactured by it were classifiable under sub-heading No. 2804. 60 and not under the residual item of Tariff.
( 4 ) ON 19th March, 1986 the Excise authorities drew samples from the petitioners' product Lead Oxide Grey. The Chemical Examiner submitted a report to the effect that it was Lead Oxide (Lead Sub-Oxide ). The petitioners thereafter wrote letters to the Ministry of Finance as well as to the Central Board of Excise and Customs contending that Lead Oxide Grey was classifiable only under sub-heading No. 2804. 60. The Ministry of Finance wrote to the petitioners stating that necessary instruction had been issued to the Collector of Central Excise with regard to classification of the product. A trade notice was thereafter issued on 5-6-1986 to the effect inter alia that Lead Oxide Grey, which is Lead Sub-Oxide, falls for classification under sub-heading No. 2804. 60. Because the petitioners had been paying excise duty under protest in respect of the product as claimed by the Excise authority, they filed an application for refund of Rs. 31,786/- being the difference between the excise duty claimed and the excise duty in fact payable on the product. The petitioners' claim was allowed and refund was made.
( 5 ) ON 10th February, 1987 the Tariff Item number was changed. The old sub-heading No. 2804. 60 was renumbered as sub-heading No. 2824. 00. The Tariff item's description however continued to be identical. The petitioners filed a classification list on 2nd March, 1987 claiming classification of Lead Oxide Grey under sub-heading No. 2824. 00. This was approved by the Assistant Collector. The petitioners then filed a second classification list effective from 1-3-1988 similarly claiming classification of Lead Oxide Grey under subheading No. 2824. 00. During the pendency of the approval of the Classification List for the period effective from 1-3-1988, a notice to show cause was issued by the Collector in respect of the previous period, namely, from 1-3-1986 to 30-6-1987 on the allegation that lead oxide grey was not covered by the Tariff Sub-heading 2824. 00 but was classifiable under the residuary item. A few months after the issuance of this Show Cause Notice by the Collector for the period from 1-3-1986 to 30-6-1987, two notices to show cause were issued by the Assistant Collector. The first Show-cause Notice was dated 17-3-1989 and related to the approval of the Classification List effective from 1-3-1988. The second Show-cause Notice, issued by the Assistant Collector, was dated 2-5-1989 by which proceedings were sought to be initiated for claiming the difference of duty arising from classification of lead oxide grey under Tariff sub-heading 2824. 00 and Tariff sub-heading 3823. 00 for the period from July, 1987 to February, 1988. The Show Cause Notice dated 2-5-1989 has been impugned in this proceeding.
( 6 ) SUBSEQUENT to the issuance of the impugned notice the Collector of Central Excise disposed of the Show Cause Notice dated 6-1-1989 relating to the per
