1. Appeals Nos. ED(SB) 2870/83-B to 2874/83-B have been filed by the party challenging the order of the authorities below and demanding a duty in all Rs. 16,04,753.63 P. for the period from 23-7-79 to 21-1-83.
The department has filed Appeal No. ED (SB) 166/84-B in respect of the amount disallowed for the period from 1-3-75 to 22-7-79. As common questions of facts and law are involved in all these appeals they were taken up together and are being disposed of by this common order. M/s.
Indian Metals & Ferro Alloys Ltd., Guttack are being referred to as Appellants and the Collector of Central Excise, Bhubaneshwar as Respondent for the purpose of all the above six appeals.
2. All the appeals are directed against the order dated 13-9-83 of the Collector (Appeals), Central Excise, Calcutta. The appellants manufacture pipes, tubes, poles, etc. Tariff Item No. 26AA was introduced to the First Schedule of the Central Excises and Salt Act, 1944 on 24-4-1962. Excise duty was collected from the appellants on steel tubes and poles manufactured by them on and from that data. On 1-3-63 Notification No. 41/63 was issued by the Government of India under Rule 8 of the Central Excise Rules wherein "telegraph, telephone and electric lighting and transmission poles" were described as falling within the T.I. No. 26AA of the First Schedule to be fully exempted from excise duty on satisfying certain conditions. On 10-5-63 the appellants made an application to the Assistant Collector claiming exemption from the duty, on the basis of the said Notification. The Assistant Collector of Central Excise, Cuttack Division disallowed the claim on 25-5-63 on the ground that the conditions attached to the Notification have not been fulfilled. The appellants filed an appeal to the Collector of Central Excise, Calcutta who allowed the appeal.
Thereafter the appellants were releasing the poles manufactured by them without payment of excise duty.
3. Tariff Item No. 68 was introduced to the First Schedule on 1-3-75 prescribing the rate of all other goods "not elsewhere specified". The appellants submit that tubes, pipes and poles being elsewhere specified would not come under T.I. 68. They made a declaration on 28-2-75 and furnished a classification list bearing No. 139/75 (which was approved by the proper officer to be effective from 1-3-75) stating that the products would fall under T.I. 26AA. Further classification list No.192/77 was filed showing that these exempted items fell under T.I. 26AA and it was approved with effect from ] 8-6-77. The appellants were despatching the electric poles without payment of duty till August 1982. On 8-12-77 a notice was issued by the Superintendent, Central Excise holding that the poles manufactured by the appellants are classified under T.I. 68 and duty on such goods manufactured after 1-3-75 till 8-12-77 had to be realised. The appellants sent a reply on 12-12-77. They followed it up by filing a Writ Application No. O.J.C.1072 of 1977 before the Hon'ble Orissa High Court. Among others they prayed for injunction restraining the department from in any way acting under letter dated 8-12-77 (supra). They also prayed for an interim order. On 26-12-77 interim stay was granted. The appellants filed another classification list No. 1 of 79-80 on 9-10-79 with effect from 23-7-79 in the same manner as on the earlier occasions. The same was not approved but a show cause notice was issued. The appellants replied to the same. Later notice was issued by the Superintendent with the finding that the swaged poles produced by the appellants were taxable to excise duty falling under T.I. 68. The appellants challenged the action by filing another Writ Application No. 329 of 1982. But they paid duty under protest. Both the Writ applications were disposed of on 6-10-82 by the Hon'ble Orissa High Court directing that the dispute already raised be adjudicated in accordance with law. On 16-9-82 the appellants submitted a classification list claiming exemption of the poles from the central excise duty. On 31-12-82 the Superintendent directed them to file another list. A fresh classification list was filed on 13-1-83. On 15-1-83 the Superintendent, Central Excise indicated that the effective date of the classification list should be shown as from 1-3-75. The appellants re-submitted the classification list after complying with the above directions. A show cause notice was issued on 4-2-83 as to why the poles should not be classified under T.I, 68. The appellants challenged the claim.
4. Two show cause notices were issued by the Assistant Collector on 2-3-83 under Section 11-A as to why an amount of Rs. 21,47,940.95 being the alleged non-levy relating to the period from 1-3-75 to 21-1-83 should not be paid. The Assistant Collector by his order dated 30-3-83 held that the classification list No. 139/75, dated 10-3-75, the supplementary classification list No. 18/76, dated 10-1-76 and the supplementary classification list No. 192/77 had been approved, that these classification lists had not been reviewed prior to 22-3-79 and that the goods had to be classified under T.I. 68. It was also held that the demand of duty of Rs. 21,47,940.95P. was in order. There was an appeal to the Collector of Appeals, Central Excise, Calcutta who confirmed the findings but restricted the demand to Rs. 16,04,753.63P.The appellants have filed the present appeals challenging the findings.
5. The Department has filed Appeal No. ED/SB/166/84-B in respect of the amount disallowed by the lower authorities.
(i) whether the classification of the goods in question under T.I. 68 is valid (ii) whether the appellants are liable to pay the duty demanded and (iii) whether the claim for the period disallowed is recoverable 6. The appellants manufacture electric lighting and transmission poles.
The department contends that their product would attract duty under T.I. 68. The appellants contend to the contrary. T.I. 26AA refers to iron and steel products and Tariff Item (iv) to pipes and tubes all sorts (other words not relevant). The appellants mainly relied on a rescinded Notification No. 41/63, dated 1-3-63 which exempted transmission poles from the purview of T.I. 26AA. In January 1964 when there was a dispute regarding the claim for the exemption, the Collector of Calcutta accepted that contention. But we do not agree that the classification of the products can be decided on the interpretation of the earlier Notification. The mere fact that the authorities have not questioned the description in the classification list on earlier occasions would not be a ground to prevent them from levying duty whenever they come to the conclusion that the classification was not correct and that the duty was leviable according to the correct description. Moreover, the prior instance was only about the compliance of the conditions set out in the Notification. Above all, the Notification itself had been rescinded subsequently.
7. We have now to assess the product on the basis of the Tariff Entry.
T.I. 26AA talks of pipes and tubes. We have to find out whether the product in question could be classified as pipes and tubes. The Assistant Collector has dealt with the process in paragraph 4. It is seen from the description that the mother tube is heated to a substantially high degree and shapes and forms are given by a series of processes, The ISI Booklet for tubular steel poles for over-head power lines has distinguished stepped poles and swaged poles. It is therefore manifest that the poles have a distinct name, character and use than the pipes and tubes.
8. We also find that pipe is generally understood in trade parlance as one intended for conveying fluids. Pipeline, for example, is considered a long continuous line of piping to carry water from a reservoir, oil from an oil field or to carry solid material. It cannot be said that the products manufactured by the appellants are pipes or tubes. The products conform to ISI specification of poles. If the products do not fall under T.I. 26AA there is no other heading than the residuary heading of T.I. 68. We hold that the nature of the products does not conform to Item 26AA and that duty is not attracted under that heading.
The Appellate Collector has rightly held that poles made of steel tubes and steel pipes are distinct products and cannot be treated as pipes and tubes occurring in sub-item (iv) of Item 26AA. From 1-3-75 T.I. 68 was introduced and the department rightly sought to levy duty under Item 68. Shri N.I. Ramanathan, SDR argued that the operations carried out on the poles like drilling holes etc., indicated that they are not merely tubes or pipes, but electric transmission poles attracting duty under T.I. 68.
9. Shri B.K. Mohanty, the learned Counsel for the appellants submitted that the department was in error when they called upon the appellants to classify the product retrospectively. He argued that the classification lists were approved on earlier occasions and the department cannot re-open approved classification lists. We do not wholly accept this contention. It is well settled that if facts are different, further and fresh facts are brought on record, process of manufacture is changed, relevant entries in the tariff have undergone a modification or if there had been pronouncement of a High Court or Supreme Court, the classification approved may be reconsidered and reopened. [ Nitchem Plastics Ltd., Faridabad v. The Collector of Central Excise, Delhi-1983 ECR 1888-D (CEGAT) following J.K. Synthetics Ltd. and Anr. v. Union of India and Ors.-1981 E.L.T. 328 (Delhi)]. In the instant case, after the approval by earlier classification lists, Tariff Item 68 had come on the Tariff. Due to this change in law, Excise authorities could enquire what would be the more appropriate classification of the goods in question. It was thus open to the authorities to modify the classification subject, however, to the demand being restricted to the time-limit, as may be applicable, and stipulated in Section 11-A of the Central Excises and Salt Act, 1944.
We therefore hold that the classification sought under Tariff Item 68 is valid.
10. The next question to be decided is about the time-bar. Shri Mohanty argued that the show cause notice was issued on 2-3-83 and the assessment can only be for six months from the date backward, that is, 1-9-82. He relied on Section 11-A in support of this contention. Shri N.I. Ramanathan, SDR submitted that the Appellate Collector should not have restricted the levy from 23-3-79 but should have approved the demand from 1-3-75 when T.I. 68 came into force.
11. On the facts of the case, we find that period from 26-12-77 to 16-3-78 could only be excluded while computing the period of limitation and not from 26-12-77 to 6-10-82 as has been done by the lower authorities. The Hon'ble High Court granted interim stay on 26-12-77.
On 2-1-78, the stay order was modified and time granted to the Department to file the counter within one month. Stay granted was to continue till filing of counter by the Department. The Department filed counter on 16-3-78. This would mean that stay stood vacated from 16-3-78 as the stay itself was interim. Nothing prevented the Department if they were in doubt from getting a clarification from the High Court as to whether stay continued to operate even after filing the counter. Moreover, this stay was only with respect to notice dated 8-12-77 and not with respect to other notices issued in the case. With respect to this notice, only time between 26-12-77 to 16-3-78 should be excluded and not 26-12-77 to 6-10-82 as found by the lower authorities.
12. In this case we find that the classification list filed on 14-7-75 (139/75) was approved. A supplementary classification list No. 18/76 filed on 10-1-76 was approved on 9-4-76. Another supplementary classification list No. 192/77 which was filed on 22-10-76 was approved on 4-8-77 effective from 21-3-79. Though it is open to the department to modify the classification, it cannot be said that there can be a retrospective levy of duty by disregarding the past decisions and the time-bar. The Appellate Collector rightly held that the levy could be sustained only from 23-7-79 when the classification list was not approved. In this connection, it must be said that the Assistant Collector has also referred to the prior approval of classification lists by the authorities though she did not consider its effect on the later classification lists. The department contends that under Section 11-A of the Central Excises and Salt Act, 1944 demand notices can be issued within a period of 5 years. On the present facts, it is manifest that there was no mis-declaration or suppression of facts and the appellants have been disclosing to the authorities the nature of the products.
13. We are, therefore, of the view that the Appellate Collector was right in restricting the demand to the period of six months and not enlarging it to a period of five years. The demand shall now be reworked out limiting it to a period of six months excluding the period of 26-12-77 to 16-3-78 with respect to the show cause notice dated 8-12-77 and not 26-12-77 to 6-10-82 as had been earlier done.