1. By his impugned Orders Nos. 747/Cal/84 dated 23-5-1985 and 53-54/Cal.II/84 dated 17-9-1984 the Collector of Central Excise (Appeals), Calcutta allowed the appeals filed before him. The case of the Department was that the aluminium paste and the medium packed in a dual container at the time of clearance and marked and sold as Aluminium paint, should be treated as ready-mixed paint. Aluminium paste falls under Sub-item I(1)(i) and Varnish under Sub-item II(i) of item No. 14, Central . Excise Tariff Schedule (GET). The Assistant Collector held that the pack was ready-mixed paint falling under Sub-item I(3)(iii) of item 14 GET. The Collector (Appeals) set aside this order and held that the pack could not be treated as ready-mixed paint. The appeal before us is against this Order.
2. The prayer in the appeal is that the impugned order be set aside and the Assistant Collector's order restored, i.e. the classification of the goods be declared to be under item 14-I(3)(iii) GET as ready-mixed paints.
3. In appeal No. 2349/84-C, the appellant has moved an application for modification of the appeal memorandum. It is stated that the issue has been examined in detail and that it is considered that the goods are correctly classifiable as "Paints and enamels, not otherwise specified" under item 14-1(5), GET. The prayer is that this classification may be considered.
4. In some of the appeals, the above additional ground is moved by way of separate application and in others, it is incorporated in the "grounds of appeal".
5. At the hearing before us, Shri R.N. Bajoria objected to the application in appeal No. 2349/84-C and the additional ground (G) in appeals Nos. 324 and 325/85-C since classification of the goods under item 14-1(5) GET was not an issue before the lower authorities. The learned Counsel said that the introduction of this new ground would mean that the Department has given up the claim to classification under item 14-I(3)(iii). If this be so, nothing survived for the Tribunal's consideration, since the Collector (Appeals) had already held that that classification was incorrect. The Respondents had no opportunity to put forth their case against the newly proposed classification before the lower authorities. In this context, the Counsel relied upon the Delhi High Court decision in Commissioner of Income-tax, Delhi v. Anand Prasad and Ors. - (1981) 128 ITR 388.
6. Pressing for the admission of the additional ground, Shri S.N.Khanna, learned Deptl. Representative, submitted that the Department's stand had always been that the goods were aluminium paint under item No. 14 CET. In this connection, he drew our attention to the show cause notice in which the objection was that aluminium paint was cleared "in 2 packs system" without payment of duty as aluminium paint but only on payment of duty separately on the aluminium paste and varnish.
7. We have carefully considered the submissions of both sides. In the case before the Delhi High Court - (1981) 128 ITR 388 - a new point was sought to be raised at the second appellate stage which was not permitted to be raised by the Income Tax Appellate Tribunal. The High Court considered Sections 33(1) and (2) of the Income Tax Act, 1922 which read as follows - (1) Any assessee objecting to an order passed by an Appellate Assistant Commissioner under section 28 or section 31 may appeal to the Appellate Tribunal within sixty days of the date on which such order is communicated to him.
(2) The Commissioner may, if he objects to any order passed by the Appellate Assistant Commissioner under section 31, direct" the Income-tax Officer to appeal to the Appellate Tribunal against such order, and such appeal may be made within sixty days of the date on which the order is communicated to the Commissioner by the Appellate Assistant Commissioner." The Court rejected the Department's contention that its right of appeal was different from that of an assessee. In both cases, the right of appeal was the same, held the Court. When the question of capital gains was never urged before the Appellate Assistant Commissioner, he could not have said anything on the matter and that could not, therefore, be a ground for attacking the Order. A point not taken before the Appellate Assistant Commissioner could not be taken before the Income Tax Appellate Tribunal.
8. The above decision was rendered in the context of the provisions of the Income Tax Act, 1922. In so far as this Tribunal is concerned, Rule 10 of the Customs, Excise & Gold (Control) Appellate Tribunal (Procedure) Rules, 1982 reads as follows:- The appellant shall not except by leave of the Tribunal, urge or be heard in support of any grounds not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or those taken by leave of the Tribunal under these rules: Provided that the Tribunal shall not rest its decision on any other grounds unless the party who may be affected thereby has had a sufficient opportunity of being heard on that gounds" The above rule empowers the Tribunal to grant leave to the appellant to urge or be heard in support of any grounds not set forth in the appeal memorandum. Of course, the Respondent, in that case, has to be heard on that grounds(s).In Cynamid India Ltd. v. Collector of Central Excise, Bombay -1984 (15) ELT 186, Special Bench 'D' of this Tribunal held that since the appeal (before it) involved the question of correct classification of goods, on which a ruling would have to be given, it would not be in the interest of justice or conduce to a proper disposal if the appellants were prevented from raising the new ground. Of course, in that case, in view of the fact that the new ground had not been agrtated at lower levels, and that it would also require a detailed enquiry into questions of fact, the Bench remanded the matter to the lower authority for a full decision in the light of the additional ground.
10. Disputes on classification matters are not of the nature of disputes between two individuals affecting their respective rights in that particular action. A decision on a classification dispute rendered solely on the basis of the grounds urged before the lower authorities, shutting out any new ground(s) even if that ground(s) has(have) relevance to a proper and correct determination of the dispute, could, in our view, conceivably lead in some cases to a less than proper or correct are even a wrong determination. And, often these decisions have a significant and, recurrent implication for revenue, or the assessee or both. Not only that, such decisions being decisions on matters of classification, are bound to be followed by the lower authorities in similar disputes relating to other parties. The need, therefore, not to shut out now grounds solely for the reason that they were not raised before the lower authorities is apparent when it can be shown that such grounds are relevant for a proper and correct determination of the classification dispute.In Commissioner of Income Tax, Madras v. Mahalakshmi Textiles Mills Ltd. "By the first question the jurisdiction of the Tribunal to allow a plea inconsistent with the plea raised before the departmental authorities is convassed. Under Sub-section (4) of Section 33 of the Indian Income-tax Act, 1922, the Appellate Tribunal is competent to pass such orders on the appeal "as it thinks fit". There is nothing in the Income-tax Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal. If for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him." Section 35-C of the Central Excises & Salt Act, like the above referred to Section of the Income Tax Act, provides that the Appellate Tribunal may pass such orders on the appeal as it thinks fit. While in the case before the Supreme Court, it was the right of the assessee to raise a new plea not put forth before the lower authorities which was upheld, in the case Before us it is the Department's (the appellant here) right to raise a new Area not put forth before the Appellate Collector that is under consideration. This, however, should not, in our view, make for any difference to the replication of the ratio of the Supreme Court decision. For, in the proceedings before us, the Department is as much a party as the assessee and there is no warrant to treat the Department differently from the assessee in so far as the present question is concerned.
12. In the present instance, the show cause notice in one of the cases says that the goods are aluminium paint, though cleared "in 2 packs system". What is urged by way of additional ground before us is that as aluminium paints, the goods should be classified under item No. 14-1(5) as "Paints... not otherwise specified". Though this particular tariff entry did not figure in the proceedings before the lower authorities, we fail to see how it is not relevant for a proper and correct determination of the classification of the goods. We, therefore, allow the additional ground to be raised and argued.
13. These appeals shall be listed for hearing on 10th July, 1985.New Delhi, Sd/-29th April, 1985.
(G. Sankaran) Member 14. The department now wishes this Tribunal to admit a new item, item 14-I(5)-CET which they say is a correct item for the goods and pray that this classification may be considered. The learned counsel for M/s Shalimar Paints Limited, Howrah, in all the three appeals said that this was a new ground which meant that the department had come to the conclusion that item 14-I(3)(iii) was incorrect. In his order, my learned brother Shri Sankaran proposes to permit this new ground to be raised and aruged. If the Tribunal comes to the conclusion that the new item 14-I(5)-CET was correct, the assessment would have to be made under this heading. By doing so, the assessment would be made by the Tribunal that can only be made by the proper assessing officer at the proper time. Nor has the manufacturer ever had any opportunity to argue, if he wanted to argue against such assessment.
15. In my opinion it is not so much a new ground as a new demand under a new item. I consider that whenever the department wants to make a new ground or an assessee wants to make a new claim, which had never been made before, that demand or claim cannot be presented before the Tribunal in appeal, but only before the original assessing authority.
The party that wants to make a new claim of refund must present its claim before the Assistant Collector of Central Excise, while the Collectorate should follow the prescription of Section 11A of the Central Excise Act, if a demand of duty is to be made. Neither party can, while the proceedings are in progress before a higher authority like the Tribunal, presents a new item under which it seeks to recover money it thinks is due to it, after it comes to feel that its old claim or demand may not succeed. To accept a party's making different claims at the appeal stage is to open doors of abuse and enable one party to make undue exaction and recoveries from the other which would not be in accordance with the law.Hon'ble Supreme Court, Commissioner of Income Tax, Madras v. Mahalaxmi Textile Mills 1967 3 SCR 957 ruled that the relief should be granted if another ground is raised before the departmental authorities under the Tribunal. In the words of the Hon'ble Court: "if for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee grant of relief to him on another ground is justified, it would be open to the departmetal authorities and the Tribunal, and indeed they would be under a duty to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him". The court there was considering grant of relief to assessee on another ground which, for reasons recorded by the departmental authorities was justified. The Hon'ble court speaks of a ground which was justified and recorded as being so by the departmental authorities. Such a principle will certainly meet the approval of all right thinking men, and I for one respectfully agree with this dictum. But the case before us is not a ground that is justified on reasons recorded by the departmental authorities but is a new claim and a new item for assessment by the department.
17. It may not perhaps be a question of our allowing or not allowing a new ground but of how the ground will operate against the opposite party under the law. We may allow new grounds if we must, but can we, by that reason, order assessment and consequential recovery under that new item irrespective of the fact that the recovery under the new item may be time barred under the law. Now, can this Tribunal engage itself in the original work of assessing goods? In my opinion it cannot, because this would usurp the duty of the assessing officers. Usurping a lower authority's powers is as bad as exceeding one's own powers.
18. It might be said that there can be nothing wrong if the new item does not involve more recovery than was recovered or recoverable in the previous proceedings. This is not the full truth. We cannot protect the new assessment from the time bar simply because it involves less money than the assessment thought to be wrong. The Tribunal has powers to confirm, modify or annul the decision or order appealed against or may refer it back to the authority which passed it with such directions as it may think fit and, if necessary, taking additional evidence. It has no powers to reassess under a new assessment whether such reassessment involves a higher or lower amount of duty than originally involved.
Even the fresh adjudication that the Tribunal can order is a fresh adjudication within the old proceedings, with of course, additional evidence, if necessary. But it must be clear, that the additional evidence has to be additional evidence in respect of or bearing on the old proceedings. The additional evidence cannot be a new item of assessment. This becomes clear when we think of a new item introduced into the proceedings but as part of the first demand notice, the new item will usually be a factor that arise when it is already excluded by the time bar. If it is treated as a new evidence but part of the old demand notice, it will enable recovery of a time barred money. If it is not a part of the old proceedings or demand notice, it becomes time barred and no recovery can be legal through this new assessment.
19. The additional evidence, therefore, is not for starting a new process under the old notices. This however, does not mean the party, whether government or private, cannot present a claim under the new item of assessment. Such new item, however, will undergo all the trials and tests that the law has devised for the regulation and control of claims made by one side on the other.
20. It is necessary for an assessee to be able to present his case in all the forums before which he may want to go or may have to go in pursuit of his case. If it is an assessment he must have the opportunity to present his side of the dispute before the Assistant Collector, before the Appellate Collector and before the Tribunal. It would not do for the Tribunal to decide as assessment and thereby shut out one or the other party from the benefit of consideration of the competent authorities below it. The assessee cannot demand new assessment by making a new claim before the Tribunal, pleading that his claim to an amount of money is within the amount claimed already but which has been rejected and that since the new amount is the same or is less than the old amount the Tribunal can allow the amendment of the claim under a new assessment so that he can be given the refund. Such an amendment would be not only a new ground but would be a new claim and a new assessment. Both for the government and for the party the assessment must be subject to all the processes of the law and should stand and fall on its merits after all the rigours of the law had been applied to it.
21. I hold that the department cannot raise this new assessment ground.
However, the Assistant Collector may initiate the new assessment in accordance with law and after following all due process.
22. I agree with brother Shri G. Sankaran, Member Technical in allowing the department-appellant to raise additional ground in the appeal filed before us but I would like to add as under:- 23. Undisputed facts of the case are that M/s Shalimar Paints Limited, Howrah, (hereinafter called the respondents) are the manufacturer of paints and varnishes. They bring Aluminium paste from the other manufacturers under Rule 56-A and avail proforma credit. The media-varnish is manufactured by the respondents in their own factory.
They pack Aluminium paste brought from outside in a separate container whereas media-varnish is packed in another container and these items after being put in duel container are removed from the factory after paying the excise duty on the media-varnish manufactured by the respondents in their factory.
24. The department objected to this practice of the respondents and issued Show Cause Notices raising the demand of differential duty. The charge against the respondent was that the Aluminium paints cleared in 2 packs system were required to pay duty under Tariff advice No. 23/81, dated 23-2-1981 and Trade Notice No. 67/PV/81, dated 3rd March, 1981 whereunder duty was to be paid as composite product.
25. The Assistant Collector, VIII Division, Calcutta confirmed the demand of the short recovery and held that Aluminium paste which is one of the constituent of Aluminium Paint is to be classified under Tariff Item 14-1(3)(iii) C.E.T. i.e. ready mixed paints and enamels. The Assistant Collector observed as under :- "The assessee can never say that there is any commercial usage of Paste and medium as it is, if not mixed. The tariff of Aluminium Paste would have changed if the mixing with the medium would have been done before clearance. No paint company sells only paste or only medium. Moreover, clearance of Paste and medium in correct proportion as per the mixing ratio, admit itself as Ready Mixed Paint. In the dual pack, Aluminium Paste is labelled as "Paste for Aluminium Paint" and Medium is labelled as "Medium for Aluminium Paint". To repeat again containers are marked as 'Aluminium Paint though in dual containers there exists two chambers of two components, not mixed for technical reason and people but it as Aluminium Paint together and not as anything else." 26. On appeal before/ the Collector, Central Excise (Appeals) Calcutta, the decision of the Assistant Collector was set aside by the said Collector (Appeals) by observing as under:- "Since the aluminium paste and the medium are cleared by separate containers, even they are cleared as Aluminium Paint, duty cannot be demanded on it as a ready mixed paint because the Aluminium Paste and the medium are not yet mixed at the time of clearance." 27. On appeal before this Tribunal the department i.e. appellant took up the stand that Aluminium paint cleared in dual container containing (Aluminium paste and Medium) is not a ready mixed paint. But such Aluminium paste and medium cleared in dual container is commercially marketed as "Aluminium Paint" and the buyers also purchase the product knowing it as Aluminium paint and accordingly it is correctly classifiable under Sub-item No. 5 of Item No. 14 of C.E.T. as "Paints and enamels not otherwise specified".
28. The respondents objected to this plea being taken now on the ground that the appellant is trying to make out a completely new and different case than the case considered and decided by the lower authorities and this is not at all permissible under the relevant provisions of law.
Before the lower authorities, the case of the Central Excise Department was that the goods in question are ^ready mixed paints falling under Item 14-1(3)(iii) of the first schedule of the said Act. It is never the case of the Central Excise department that the goods in question are "Paints and enamels not otherwise specified" falling under Tariff Item No. 14-1(5) CET.29. No doubt it is true that the department cannot change classification of a product abruptly without issuing show cause notice to the assessee, and he cannot be asked to meet a new cause which he had no opportunity to meet earlier but if an appeal involved the question of correct classification of goods, on which a ruling would have to be given, it would not be in the interest of justice or conduce to a proper disposal if the appellant were prevented from raising the new ground but in that case there should not be any dispute about the facts. Special Bench 'D' of this Tribunal took this view in the case of Cynamid India Limited v. Collector of Central Excise, Bombay 1984 (15) ELT 186. Hon'ble Supreme Court in the case of Commissioner of Income Tax v. Mahalakshmi Textiles Mills Ltd. (1967-3-SCR-957) held that the Income Tax Tribunal has jurisdiction to permit the assessee to raise a new contention which was not raised before the departmental authorities but in that case the Tribunal had the evidence before it to give the decision on that new ground.
30. In the appeal before us, the admitted facts are sufficient enough to decide whether the goods i.e. Aluminium Paste and medium-varnish packed separately in dual container in a fixed proportion are correctly classifiable under Tariff Item No. 14-1(3)(iii) as 'ready mixed paints and enamels' or under Tariff Item 14-1(5) CET as "paints and enamels not otherwise specified". It is not a case where the 'assessee' can allege that he had no opportunity to meet the case which is sought to be built up against him. Show cause notice issued against the assessee clearly show that the allegations which the assessee was to meet' was that the Aluminium Paint cleared in 2 packs system are required to pay duty under Tariff Advice No. 23/81 dated 23-2-1981 and Trade Notice No.67/PV/81, dated 3rd March, 1981 i.e. duty is to be paid on the composite product. It is not a new case which the department is seeking to raise now. It is duty of the Tribunal to decide the correct classification of the goods if that issue is before it. The Hon'ble Supreme Court in the case of Commissioner of Income Tax, Madras v.Mahalakshmi Textiles Mills Ltd. (Supra observed" that all questions whether of law .or of fact which relate to the assessment of the assessee may be raised before the Tribunal.
31. Under these circumstances, following the decisions of the, Hon'ble Supreme Court in Mahalakshmi Textiles Mills Ltd. (Supra) and that of Special bench 'D' of the Tribunal in the case of Cynamid India Ltd. (Supra) and agreeing with Shri G. Sankaran, Member Technical, I allow the department i.e. appellant to raise this new ground i.e. the proper classification of the goods in dispute is under Tariff Item 14-1(5) as "Paints and Enmels, not otherwise specified".