S. Kalyanam, Member (J)

1. This appeal is directed against the order of the Collector of Central Excise (Appeals), Madras dated 11-8-1986. On 19-8-1985 the Superintendent of Central Excise, Anti-Evasion, Guntur visited the appellant's factory and noticed that 140.200 M.Ts. of Acid Oil manufactured by the appellant had been cleared without payment of duty. On enquiries it was ascertained that the acid oil manufactured by the appellant was captively consumed and was classified under Item 68 of the Central Excise Tariff and therefore, was not assessable to any duty. The Special Bench of the Tribunal by judgment dated 13-11-1984 in Appeal No. 732/81-C in the case of 'M/s. Kusum Products, Calcutta', MANU/CE/0207/1984 : 1985 (19) ELT 479 (Trib.) held that acid oil is classifiable under Item 12 of the C.E.T. and not under T.I. No. 68 and on the basis of this ruling a show cause notice Under-Section 11A was issued on 29-8-1985 directing the appellant to show cause to the Asstt. Collector of Central Excise, Eluru as to why duty of Rs. 14,020/-should not be demanded under Section 11A of the Central Excises and Salt Act, 1944 (the Act for short) on the quantity of the said 140.200 M.Ts. of acid oil cleared by the appellant during the period February 1985 to July 1985. The proceedings ultimately resulted in the present impugned order.

2. Shri Somayajalu, Assistant Executive Officer of the appellant-company appearing for the appellant submits that the reasoning of the first appellate authority under the impugned order that a change in the classification list which was approved earlier need not be proceeded by the issue of a show cause notice in terms of Rule 173B of the Central Excise Rules, 1944 and proceedings could be instituted on grounds of short levy or non-levy under Section 11A of the Act, is not legally sustainable. Shri Bhatia, the learned SDR fairly conceded that an approved classification list can be revised only in terms of Rule 173B Sub-clause (v) of the Central Excise Rules, 1944 by giving a show cause notice in conformity with the principles of natural justice. In the present case admittedly the classification list of the appellant classifying the product under Item 68 of the C.E.T. has been approved by the department and the department cannot initiate proceedings under Section 11A of the Act on grounds of short-levy or non-levy without change of classification in terms of Rule 173B Sub-clause (v) of the Central Excise Rules,

3. I have carefully considered the submissions urged before me. It is admitted before me that the original classification was under Item 68 CET which had the blessings of the Department as it were. Even in such circumstances like the ruling of the Special Bench, CEGAT warranting change in the classification the same could be done only in a manner known to law. As rightly conceded by the learned S.D.R. Rule 173B Sub-clause (v) provides that when the dispute about the rate of duty has been finalised or for any other reason a modification of the rate is necessitated, the proper officer shall make such modification and inform the assessee accordingly. When on the basis of the ruling of a Court or a Tribunal that a modification or change in the classification becomes necessary, particularly to the detriment of the party like the appellant in conformity with the principles of natural justice, the Department should issue a show cause notice and hear the party concerned. In the present case admittedly no show cause notice was issued to the appellant in respect of the change in the modification of the classification and without the appellant being heard, the Department suo motu effected a change in the classification to the detriment of the appellant and on such basis the Department issued a show cause notice in terms of Section 11A of the Act seeking recovery of the amount payable by reason of such suo motu revised classification. In my opinion, such a course is not permissible. As a matter of fact Section 1