1. This is an appeal filed by the Assistant Collector, Customs and Central Excise, Ludhiana, authorised by the Collector of Customs and Central Excise, Chandigarh, under Sub-section (2) of Section 35B of Central Excises and Salt Act, 1944, against the Order of the Appellate Collector of Central Excise, New Delhi.
2. The appellant is represented by S/Shri K.D. Tayal and V.Lakshmikumaran, SDRs, and the respondents are represented by Mrs.
Shyamla Pappu, Senior Advocate, and Shri S.C. Mittal, Advocate.
3. The Department claims that the correct classification of the products manufactured by the respondents is under Tariff Item 52 of Central Excise Tariff as nuts and bolts @ 15% ad valorem, whereas, as per the contention of the respondents, which has been upheld by the Appellate Collector, the products in question are unspecified motor vehicle parts, classifiable under Tariff Item 68 and chargeable to duty la) 10% ad valorem.
4. On behalf of the appellants, it is stated that the respondents got approved the classification list No. 23/79 dated 7-9-1979, categorising their products as unspecified motor vehicle parts falling under Tariff Item 68 of the CET. On subsequent scrutiny, however, the department came to the view that some of the products listed were not unspecified motor vehicle parts and were, in fact, nuts and bolts, to be used in motor vehicles. It is felt that these were, therefore, liable to duty under Central Excise Tariff Item 52, as their primary function was fastening. The respondents were, therefore, issued a show cause notice on 19th February, 1982, to show cause why the approved classification list should not be modified and why the items in question should not be classified under Central Excise Tariff Item 52. In his order, issued in consequence of these proceedings, the Assistant Collector, Central Excise, Ludhiana, came to the finding that the items in question were nothing but nuts and bolts, as their primary function was fastening and, accordingly, ordered their classificatign under Tariff Item 52.
This order was challenged by the respondents before the Collector (Appeals), Central Excise, New Delhi, who set aside the order of the Assistant Collector and directed that the goods were classifiable under Central Excise Tariff Item 68. It is against this order of the Collector (Appeals) that this matter has come up before us.
5. The appellants have argued before us that the classification under Central Excise Tariff 'Item 52, what is necessary is that the parts should be primarily fasteners, designed to secure certain parts in a particular position by fastening or keeping parts in alignment. It is conceded that it is also necessary that they should be commercially known as such. It is the department's contention that the goods in question fulfil both these criteria.
6. The department emphasises the importance of the change in the Tariff Item No.34-A with effect from 1st March, 1979. It is stated that in consequence of this amendment only specified motor vehicle items are covered under this head whereas other motor vehicle parts are classifiable on merits under other Items of the CET. The respondents' case is that all these parts should be classifiable under the residuary Item 68, but the department has taken the stand that resort to the residuary Item can be taken only if the said goods are not classifiable under any of the Central Excise Tariff Items from 1 to 67. They have cited before us the decision of the Supreme Court in the case of Dunlop India Ltd. v. Union of India (1983 ELT 1566 S.C.) in which the Supreme Court has inter alia observed as under:- "When an article is by all standards classifiable under an enumerated item in the Tariff Schedule, it will be against the very principle of the classification to deny it the parentage and consign it to an orphange of the residuary clause".
The department has, therefore, urged in the appeal that "a specific Tariff Item will get preference over a residuary item".
7. The department have stated in the appeal that in coming to his decision, the Collector (Appeals) has merely relied upon earlier decision of Government of India and has thus failed to apply his mind independently. Acting in the exercise of quasi judicial powers, he should have examined the matter on merits. It is also stated that the Collector (Appeals) has, in another case, earlier given a different finding. This was in his Order dated 7-1-1978, relating to the case of M/s Oswal Vanaspati & General Industries, Ludhiana.
(1) Delhi High Court decision in the case of J.K. Synthetics Lid.
and Anr. v. Union of India and Ors. (1981 ELT 328).
(2) Bombay High Court decision in the case of Simmonds Marshal Ltd. v. M.R. Baralikar, Asstt. Collector, Central Excise, Pune & Others (1984 2 E.C.C. 42).
(a) Nuchem Plastics Ltd., Faridabad, v. CCE, Delhi (1983 ECR 1888 D).
(b) Sri Ramdas Motor Transport Ltd., Kakinada v. CCE, Madras (1983 E.L.T. 2067).
(c) Fit Tight Nuts & Bolts v. CCE, Rajkot (CEGAT 'D' Bench Order No.661-63/84 dated 28-11-1984, 1985(21) ELT 717 (Tribunal).
9. On behalf of the respondents, Smt. Shyamla Pappu, learned Advocate, stated that the disputed goods had been cleared by the respondents on payment of duty as per classification list approved by the department.
Demand for differential duty as per a different classification by the same authority, which had earlier approved the classification, is not only unjustified but has no basis in law. There was no change in Central Excise Law or Tariff to justify the proposed change in classification.
10. It is urged by the respondents that prior to 1st March, 1979, all motor vehicle parts were excisable under Central Excise Tariff Item 34A. Even at this stage, the department's stand was that, in so far as the products in dispute are concerned, they would be classifiable only under Item 68 of the Central Excise Tariff and not under CET Item 52.
With effect from 1st March, 1979, CET Item 34A was amended and, as a result of this amendment, the Item was limited to parts and accessories of motor vehicles and tractors, including trailers, which were specified. It is pointed out that there was no amendment either in the CET Item 52 or under 68, which could justify the disturbing of accepted classification under those Tariff Items in so far as specified parts and accessories of motor vehicles, tractors and trailers were concerned.
11. The respondents have questioned the reference to the function of nuts and bolts in the present appeal. It is stated that Item 52-CET makes no reference to function of the products falling under the Item.
However, meeting the arguments of the department on this ground, it is stated that the auto parts in dispute are not ordinary fasteners but have essential functions to perform in the mechanics of motor vehicles.
12. It has been emphasised before us that the expression nuts, bats and screws, not being defined under Item 52 of CET is to be understood in the sense in which the trade concerned understands it. In support of this, the respondents have cited the decision of the Supreme Court in Dunlop India Ltd. and Madras Rubber Factory Ltd. v. Union of India and Others (1983 ELT 1566 S.C.) and Bombay High Court decision in the case of Sudeshi Mills Ltd. v. Union of India and Ors. (1982 ELT 237).
13. It is urged on behalf of the respondents that the issue is about the scope of Item 52 of Central Excise Tariff. The onus of establishing that there are grounds for disturbing the existing classification in this case from Central Excise Tariff Items 68 to 52 is entirely on the department. This onus is not discharged.
14. The respondents also urged that quasi judicial decisions given in their case by the Collector (Appeals), Central Excise, Delhi, in his order No. 153-CE/72 and by the Government of India in their order in Revision No. 841 of 1973, are binding on the appellant. There is no change in law, no new facts, nor any contrary decision by any High Court or by the Supreme Court to warrant re-opening of the matter.
15. It is further urged before us that while in this matter the show cause notice for modification of the classification list has been issued under Rule 173B(5), the action, in fact, amounts to assuming by the Assistant Collector the power of review of decision taken at his own level, which has no basis in law. It has been urged that powers of review cannot be inferred. They must be specifically vested under the law. The Rules must be subservient to the Act. Under Section 11 A, the powers vested are limited in nature and these cannot be exceeded by the interpretation given by the department to the scope of Rule 173B(5).
16. Contrary to the claims of the department, it is pointed out that the products in question are not commonly known or available as nuts, bolts and screws, but known to the trade as auto parts. In this connection, it is also mentioned that the Import-Export policy also refers to these goods as automobile parts.
17. The following case law has been cited by the respondents in their favour :-Patel Narshi Thakershi and Ors. v. Pradyurnansinghji Arjunsinghji AIR (2) Decision of Andhra Pradesh High Court in the case of Dr. N.V. Subha Rao and Ors. v. the Government of Andhra Pradesh and Ors. (AIR 1968 AP-98) (3) Decision of Allahabad High Court in the case of Jagdish Prasad Pradhan v. Distt. Board, Farrukhabad (AIR 1966 Allahabad 26).
(4) Decision of Bombay High Court in the cage of Bombay Chemicals Pvt. Ltd. v. Union of India & 14 Others (1982 ELT 171).
(5) Decision of Government of India in the case of Vijoy Industrial Works 1982 ELT 607 (GOI).
(6) Decision of Madras High Court in the case of Indian Organic Chemicals Ltd. v. Union of India and Ors. (1983 ELT 34).
18. We have carefully considered the facts of the case and the submissions made before us. The first issue for decision before us is whether the proceedings initiated by the department, relating to classification approved on 10-9-1979, by issue of a show cause notice dated 19th February, 1982, under Rule 173B(5), are in order. The respondents have pleaded that the invoking of the Rule 173B(5) by the department, in fact, amounts to assuming the power of review of decision taken by the Assistant Collector's own predecessor. It is stated that there is no basis for this in law. It is also stated that there was no change in Central Excise Law or Tariff to justify reopening of a classification approved by the department. It is further submitted that the classification of the goods in question had been settled not merely at the level of the Assistant Collector but, subseguently, at the level of Collector (Appeals), Central Excise, delhi, and the. Government of India. The issues involved on this point have been gone into at great length in the decision of the High Court of Delhi in the case of J.K. Synthetics Ltd. and Another v. Union of India and Others (1981 ELT 328). In this matter, it was held that it is not open for the Central Excise authorities to change their stand capriciously and to put the assessee to avoidable inconvenience and harassment if the position is exactly the same legally and factually as it was at earlier occasion. In saying so, it is not meant that an authority cannot revise its earlier stand if there are cogent reasons such as fresh facts or changes in the relevant Tariff Entry, etc.
19. We refer here to the case of Dwarika Das Keshav Dev Morarka v. CIT (1962 44 ITR 529), B.D. v. CIT (1963 49 ITR 139) and Instalment Supply (P) Ltd. and Anr. v. Union of India and Ors. (1962 2 SCR 644) in which it was held that in matters of taxation, there is no question of res judicata because when fresh material came to the notice of the Taxing authority, it has the power to re-orient or re-consider the amount of tax paid.
20. We would also like to re-produce below, for our benefit the observations of Mr. Prakash Narain, CJ, and Mr. S. Ranganathan, J, in the aforementioned case of J.K. Synthetics Ltd. and Anr. :- "There are indeed a large number of decisions of several High Courts and the Supreme Court on various questions arising under the Income-tax Act, holding that neither the assessee nor the department is to be held bound by a stand or attitude adopted by it in an earlier year or on an earlier decision. Indeed, the Supreme Court has held that, in a subsequent year, it is open to the Department to take up, In relation to an earlier transaction, even a stand contrary to that taken by it in relation to the year in which the earlier transaction was put through and came up for consideration - see New Jahangir Vakil Mills Co. Ltd. v. CIT, (1963 49 ITR SC 137), and CIT v. Brij Lal Lohri and Anr. (1972 84 ITR SC 273). Such being the position in tax law and rating law there can be no reason by the same principle will not also be applicable to excise matters. So, it can be urged, the decision of the excise authorities or even the High Court in relation to a particular period does not have a conclusive effect in regard to that particular period and cannot be treated as a decision for all time to corne. If Broken Hill and Cafoor (supra) are to be applied straightaway, the preliminary objection raised by counsel for the petitioners has to fail." We also find that in the case of Southern Steel Ltd., Hyderabad v.Union of India and Ors. (1979 ELT J402), it was decided by the Andhra Pradesh High Court that even in a case where a petitioner was submitting classification lists, taking the stand that he was not liable to Excise Duty, which stand was accepted for a number of years by the Department, this did not prevent the Department from coming to the conclusion later in point of time that the classification list was not correctly approved as per the proper description of the goods and to seek to charge duty as per the correct description.
21. We find that the view taken by the Andhra Pradesh High Court in the case of Southern Steel Ltd., Hyderabad is supported by the view taken by the Delhi High Court in the case of J.K. Synthetics Ltd. & Another.
In this case, the Delhi High Court observed that, where the original decision is taken by an assessing authority, it is open to higher authority, who may consider it a wrong decision, to exercise their powers of revision or review under the Act and to set out the correct position. It is stated: "But if this had not been done or, if in a revisional proceeding for an earlier year the ultimate revisional authority has taken a view in favour of the assessee, fresh proceedings cannot be launched against the assessee merely because the department later thinks that the previous view is untenable or that the matter should be agitated and fresh decision obtained. In such cases, the department still has the remedy of enunciating its views in another case where its hands are not so tied and matters can be pursued therein." 22. We may also refer here to the decision of the Bombay High Court in the case of Karsan Dass Ranchod Dass 1972 83 ITR 256 (Bom.), in which it was held that while the principles of Res judicata and estoppel are not applicable in review matters and earlier decision cannot be considered conclusive or immutable for all times, such decision can be ignored or brushed aside only for good and cogent reasons.
23. We concur with the above views and are of the opinion that, as summed up in the decision of the Delhi High Court in J.K. Synthetics' case, what is necessary is a harmonious re-conciliation between two well established positions - firstly that every assessment is a separate and independent subject matter and then, therefore, the fact that a particular view has been taken in respect of a matter on one occasion does not prevent the authorities as well as the assessee from approaching the matter from a different standpoint on a different occasion and, secondly, that there has to be a finality to all litigation, even in tax matters, and that the department cannot be permitted to alter its decisions on matters of assessment, on the basis of its whims and fancies.
24. It is in this background that we have to consider the arguments of the respondents as regards the legality of the procedure adopted by the department in initiating the proceedings in this matter. It is on 19th February, 1982, that a show cause notice was issued to the respondents, re-opening the approval accorded to classification of impugned goods on 10th September, 1979. It was stated that the show cause notice was being issued under Rule 173B(5) of Central Excise Rules, 1944. This Rule reads as under :- "(5) When the dispute about the rate of duty has been finalised or, for any other reaons, affected rate or rates of duty, a modification of the rate or rates of duty is necessitated, the proper officer shall make such modification and inform the assessee accordingly." In view of the foregoing discussions, we have to take the view that, under this Rule, the Assistant Collector was duly empowered to initiate proceedings if he was satisfied that a modification of the rate or rates of duty was necessitated. At the same time, in taking any view in this matter, he cannot ignore the pattern of assessroent followed during the period and he cannot take any decision as regards change in this pattern of assessment without full justification, based on any fresh facts or changes in Tariffs or law that might have taken place.
25. It is also quite clear that re-opening the question of classification must necessarily relate to prospective periods. So far as past periods are concerned, there is no authority, under this Rule, to undo the affect of any decision already taken. Provision in respect of any errors as regards past periods is made elsewhere under the law.
26. The respondents have pleaded that there was no change in the facts or Tariff or law, which could warrant the re-opening of the approved classification in their case. The department, however, rests its case on the changes effected in the Tariff of 1st March, 1979. Prior to 1st March, 1979, Central Excise Tariff Item 34A covered all parts and accessories of motor vehicles "not otherwise specified". However, by virtue of notification all items, other than some 12 of them specified in the notification, were exempted from duty. As a result of the Finance Bill, 1979, Tariff Item 34A was amended so as to include only 15 specific parts and accessories of motor vehicles. In consequence of this change in the Tariff' Item, the department had taken the stand that all parts and accessories of motor vehicles, not covered under Tariff Item 34A, should be classified under other specific headings of the Central Excise Tariff. Where any parts did not get covered under any other specific Tariff Item, they would be covered under Tariff Item 68 of the Central Excise Tariff. The respondents claimed that their products in question would be classified under Tariff lem 68. The department, however, held that Tariff Item 68 was a residuary item recourse to which could be had only if the products to be classified were excluded from other specific entries.
27. The respondents have argued that as far back as in T979, the department had carefully considered the correct classification of their products. As a result of such consideration, certain products were held by Assistant' Collector to be classifiable under Central Excise Tariff Item 52. In respect of almost all these products, the Appellate authority had set aside the order of the Assistant Collector and classified the items as motor vehicle parts under Central Excise Tariff Item 34A. There were certain items which were held by the Appellate Collector not to be classifiable under Tariff Item 34A. But, as a result of decision of the Government of India in a revision petition, even those items were classified as motor vehicle parts. The respondents have pleaded that the correct classification of their products as motor vehicle parts having once been determined in this process at the highest level of the Government of India, there was no change which could warrant the re-classification of their goods under item 52 as bolts and nuts later in point of time. It is emphasised that the goods manufactured by the manufacturers are not general fasteners for common use in trade and industry, but they have specific function as auto-parts.
28. We find that there are certain issues raised here, which have already been examined in CEGAT decision in the case of Shri Ram Das Motor Transport Ltd., Kakinada v. Collector of Central Excise, Madras (1983 ELT 2067). Since we concur with the views expressed in this decision, we may refer here briefly to the findings in that case.
Firstly, in so far as the argument of the respondents, that there was no change in facts, Tariff or law, to warrant the change in classification, is concerned, a view was taken in the aforesaid CEGAT decision, we feel rightly, that, in view of the amendment of Tariff Item 34A, it can certainly be stated that there was a change in the Central Excise Tariff which would justify re-examination of the correct classification of motor vehicle parts. Since the description of new Tariff Item 34A limited the scope of the entry to certain specified products, this warranted a search for proper classification in respect of unspecified motor vehicle parts.
29. We also are of the view that it did not follow automatically from this change that unspecified motor vehicle parts, even if they were previously considered more appropriately classifiable under the former Tariff Item 34A in preference to other existing Tariff Items should, in view of the change, automatically fall for classification under Tariff Item 68. We agree that classification under Item 68 has to be undertaken as a matter of last resort, after the possibility of classification under other Tariff Items is considered and excluded.
30. In the light of the foregoing discussions, we hold that the proceedings of the department, initiated by the Assistant Collector, both in regard to jurisdiction and on merits, were valid and maintainable in law. This finding is without prejudice to the merits as regards the actual classification of goods.
31. Coming now to the Order appealed against, i.e. of the Appellate Collector of Central Excise, New Delhi, No. 51-CE/CHG/83 dated 4-3-1983, we are surprised to find that he has not gone into the merits of the case. While agreeing with the Assistant Collector that proceedings under Rule 173B(5) are "jusified and legal", he has not applied his mind at all to the question of the correct classification of the goods. All he has stated is as under :- "But a question arises whether the classification list has been wrongly approved in this case. I do not think so in view of the orders of the Appellate Collector and the Government of India's order-in-revision. Since there has been no change in legal position so far as description of item No.52 is concerned, the order-in-appeal as well as the order-in-revision are both binding on the Assessing Officers. I observe that Item 68 was introduced in the Tariff in 1975 much after the orders of the aforesaid two authorities. Tariff description of item 34A relating to motor vehicle parts Not otherwise specified has also undergone a change from 1-3-1979; but these changes do not have any effect on the scope of item 52 which deals with bolts, nuts and screws. Without going into the questions raised in the order-in-original passed by the Assistant Collector, I decide the case on the aforesaid basis. In the circumstances, I set aside the order and allow the appeal." It would be seen from the above that the Appellate Collector has not gone into the merits of the classification on two grounds. Firstly, he feels that the introduction of Item 68 in the Central Excise Tariff as well as amendment to the description of Item 34A of the Central Excise Tariff relating to motor vehicle parts with effect from 1-3-1979 did not affect the scope of Item 52, which dealt with bolts, nuts and screws. Secondly, he has come to the view that the order-in-appeal as well as the order-in-revision, which were before the Assistant Collector when he initiated the proceedings bound him to the indicated classification and that it was not open to him to go beyond those orders. We have already given the finding that the amendment of Item 34A with effect from 1-3-1979 materially altered the law and facts relating to the classification of the impugned goods. This justified reopening and re-examination of the matter. It is also well established that in giving decision in such matters at various levels the departmental officers act in quasi-judicial capacity and they have to apply their mind and come to an independent decision in the matter, depending on the merits of each case. In view of the fact that, as admitted by the Appellate Collector in his own order, he has not considered the decision contained in the order-in-original, on merits, we have no option out to set aside his order and to remand the matter back to him for de novo consideration and orders.