( 1. ) THE petitioner No. 1, Madhumilan Syntex Private Ltd. which is a company registered under the Companies Act, 1956 and of whom petitioner No. 2 is the Managing Director owns a factory at Biora wherein they manufacture spun yarn. This product is covered by Item 18, Schedule 1 of the Central Excises and Salt Act, 1944.

( 2. ) ACCORDING to the petitioners in the manufacture of their product, they use as raw material cellulosic fibre and non-cellulosic waste. By blending and processing of these raw materials, the final products spun yarn is produced.

Therefore, the product falls in para (i) of Item 18-III of the First Schedule of the Central Excises and Salt Act. Further according to the petitioners their product does not contain any man-made fibre of non cellulosic origin and, therefore, they have been classifying the product by paying the duty in accordance with the Tariff Item 18-III (i) of the said Act.

( 3. ) THAT respondent No. 4 by a demand notice dated 7th February, 1984 (Annexure A) without any prior notice or hearing, raised a demand asking the petitioners to pay within 10 days a sum of Rs. 26,47,749. 39 on the assumption that the product cleared by the petitioners during the period from 15th August, 1983 to 6th February, 1984 was covered under Tariff Item No. 18-III (ii); that on the same day i. e. 7th February, 1984, vide Annexure B respondent No. 4, Superintendent of Central Excise, Ujjain sent a memo to the effect that the product classified by the petitioners is in reality an item falling under Tariff Item No. 18-III (ii) and shall be cleared only on payment of duty accordingly. The petitioners have therefore, filed this petition challenging the said order.

( 4. ) THE grievance of the petitioners has been that no prior notice or any opportunity of hearing was afforded to the petitioners before issuing the memo Annexure B and, therefore, the demand and the order applicable to future clearance is against the principles of natural justice and is clearly without jurisdiction.

( 5. ) FURTHER, according to the petitioners they have been and are manufacturing yarn out of cellulosic fibre and non-cellulosic waste; that they do not use any cellulosic fibre as raw material for the said product; that the petitioners have been filing classification lists under Rule 173-B of" the Central Excise Rules, in which full description of each item of the goods produced is given as also the tariff item under which the goods are covered. These classification lists have been approved by the respondents and the goods are cleared only after the classification lists are approved; that even after such approval the Department feels that due to some error on their part the duty has been short levied. The only course left open to them by law is to follow the procedure prescribed by Section 11-A of the said Act which provides for service of notice of show cause as to why the duty alleged to be short levied be not recovered from the assessee. Therefore, the demand notice dated 7th February, 1984 (Annexure A) is without jurisdiction and illegal for the reason that neither show cause notice as provided by Sub-section (1) of Section 11-A of the Act was given before the issue of the demand nor any opportunity of making a representation was given to the petitioners; that the Assistant Collector of Central Excise has not determined the amount of duty of excise due from the petitioners in accordance with Sub-section (2) of Section 11-A of the Act. He has, therefore, no jurisdiction to demand any amount on account of short levy.

( 6. ) FURTHER according to the petitioners the non-cellulosic fibre and non-cellulosic waste are two different things and if a product is made out of non-cellulosic waste it cannot be classified under Tariff Item No. 18-III (ii); that the very fact that non-cellulosic waste of all sorts has been classified separately as sub-item IV of Item 18 shows that non-cellulosic waste is not the same thing as non-cellulosic man-made