1. This appeal dated 14th November, 1983 has been filed by the Collector of Central Excise, Madras against Order-in-Appeal No.290/83(M) dated 26-8-1983 passed by the Collector of Central Excise (Appeals) Madras.
2. M/s. Addisons Paints & Chemicals Ltd. of Madras received nitrocellulose and chlorinated rubber, assessed under Item 68, into their factory for the manufacure of paints etc. They were given duty credit for the duty paid on the nitrocellulose and chlorinated rubber under the terms of Notification 201/79-C.E. From 1-3-1982, nitrocellulose and chlorinated rubber became assessable under Item 15A.The Central Excise found that on that day M/s. Addisons Paints & Chemicals still had in stock unutilised stocks of nitrocellulose and chlorinated rubber. They came to the conclusion that as the assessment of nitrocellulose and chlorinated rubber had changed from Item 68 to Item 15A, the raw materials still in stock on 1-3-1982 wore not entitled to duty credit under Notification 201/79-C.E. as this exemption covered 68 but not 15A. The Central Excise demanded duty of Rs. 56,310.35 because they said this was the duty that M/s. Addisons Paints & Chemicals has wrongly taken as credit for the raw materials that still had not been used when assessment changed from Item 68 to 15A.3. The Assistant Collector gave an order that said that Notifications 136/82-C.E. and 137/82-C.E. dated 22-4-1982 were not retrospective and so the factory would have to pay the duty that has been demanded. [We note here only that the Asstt. Collector's order could have been a little more lucid in narrating the facts. For example, it does not say categorically that the raw materials reached the factory before 28-2-1982; this vital piece of fact is found in the appeal].
4. The Collector (Appeals) decided in favour of the appellants and ordered that the amount credited by them by cash payment be refunded to them and that the amount paid by debit adjustment in the R.G. 23 be recredited in the same account.
5. The learned Counsel for M/s. Addisons Paints said that there was no law under which the demand of duty can be recovered because the raw materials had been cleared from the manufacturing factory before the change in assessment was brought in by the budget of February, 1982.
The action of the Appellate Collector was correct.
6. The learned Counsel for the department said that after 1-3-1982 the raw materials were covered by a different tariff heading; so they were no longer entitled to the credit they had been enjoying. Therefore in respect of goods which were still to be taken into manfacturing process, it was correct to deny the credit and to recover whatever the assessee had taken into R.G. 23 as credit.
7. The Central Excise are in error when they demanded the duty from M/s. Addisons Paints & Chemicals merely because the classification had changed from one item to another. It must be remembered that the raw materials of dispute had been assessed under Item 68 from their (goods') factory and, in that assessment, cleared. Once goods are assessed and cleared, the assessment cannot be changed except in a regular process, as for example, by issuing a demand under Section 11A; that process, however, must be initiated against the manufacturing factory and not against the purchaser. In this case, there was no question of issuing a demand against the manufacturer of the nitrocellulose and chlorinated rubber as the assessment under Itera 68 was in order and correct till 28- 2-1982. But the Central Excise would still argue that the assessment had been changed for such goods and therefore the credit must not be taken. If they were logical, they should also have demanded duty from the nitrocellulose and chlorinated rubber manufacturer; this they obviously could not do because the assessments on the materials, all before 28-2-1982, were correct.
Therefore, if the assessment under Item 68 was correct for these materials, it follows that duty credit was to be permitted under 201/79-C.E. The action to demand and recover the credit duty was wrong and we, accordingly, reject this appeal.
8. The Central Excise shall make suitable preparations within three months by restoring whatever it took or recovered from M/s. Addison Paints & Chemicals in the orignial proceedings.