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Gokak Patel Volkart Ltd. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)(5)LC2544Tri(Delhi)
AppellantGokak Patel Volkart Ltd.
RespondentCollector of Central Excise
Excerpt:
.....excise, konnur vide his letter dated 26/28-7-1975 that tyre cord warp sheets are considered as cotton fabrics by the department and not as cycle cord yarn and appellants were asked to maintain accounts in sq.mts. and not in kgs. again appellants were intimated by the superintendent of central excise, hykeri vide his letter dated 4-8-1975 that cycle cord warp sheets are to be treated as fabric falling under t.i. 19 and appellants were advised to file classification list immediately. the appellants registered their protest under their letter dated 15-8-1975 and filed a classification list and paid duty under protest on such sheets as cotton fabrics for the period 19-8-1975 to 19-6-1976.2. a show cause notice was served upon the appellants on 29-1-1976 demanding duty to the extent of.....
Judgment:
1. The facts giving rise to this appeal are that the appellants are manufacturers of 'cotton tyre cord warp sheets'. They were clearing warp sheets as cotton yarn paying duty under T.I. 18A till the beginning of 1975. They were intimated by the Inspector of the Central Excise, Konnur vide his letter dated 26/28-7-1975 that tyre cord warp sheets are considered as cotton fabrics by the Department and not as cycle cord yarn and appellants were asked to maintain accounts in sq.

mts. and not in kgs. Again appellants were intimated by the Superintendent of Central Excise, Hykeri vide his letter dated 4-8-1975 that cycle cord warp sheets are to be treated as fabric falling under T.I. 19 and appellants were advised to file classification list immediately. The appellants registered their protest under their letter dated 15-8-1975 and filed a classification list and paid duty under protest on such sheets as cotton fabrics for the period 19-8-1975 to 19-6-1976.

2. A show cause notice was served upon the appellants on 29-1-1976 demanding duty to the extent of Rs. 2,83,482.82 for the period 1-4-1975 to 18-8-1975 at the rate leviable on fabrics under T.I. 19, CET. This notice was issued under Rule 10 of the Central Excise Rules, 1944.

Appellants filed a Writ Petition being No. 2155/76 in the High Court of Judicature, Karnataka (Bangalore). They also filed a Writ Petition being Writ No. 2632/76 challenging the directive of the Superintendent of Central Excise to classify tyre cord warp sheets as cotton fabrics.

3. Appellants obtained a stay order on 15th March, 1976 from the High Court of Karnataka against show cause notice issued by the Superintendent, Central Excise on 29th January, 1976, which reads as under : "It is ordered by this Court on 10-3-1976 that further proceedings pursuant to the Notice bearing No. 233/76, dated 29-1-1976 issued by the 1st Respondent, be and the same are hereby stayed." They also obtained a stay order dated 4th June, 1976 for collection of excise duty on cotton tyre cord warp sheets as fabrics, which reads as under : "Pending disposal of the aforesaid Writ Petition, it is ordered by this Court on 4-6-1976 that collection of excise duty as fabrics be and the same is hereby stayed. It is further ordered that the petitioner shall however continue to pay excise duty as yarn and shall further maintain an account in square metres for future clearances."Delhi Cloth and General Mills v. State of Rajasthan and Ors. 1980 E.L.T. 383 (S.C.), the Karnataka High Court disposed of both the Writ Petition Nos. 2155/76 and 2632/76 holding that tyre cord warp sheets manufactured by the appellants were to be treated as fabrics and the stay order was vacated on 16-2-1981. Consequent on this decision, the Assistant Collector of Central Excise issued an Order No. V/19/3/96/75, dated 26-11-1981 confirming the demand for short-levy and also demanding duty in respect of clearances made from 20-6-1976 to 23-2-1981.

5. Appellants challenged that order before the Collector (Appeals) who vide his Order-in-Appeal issued from File A. No. 52 to 55 (B), dated 12-4-1982 remanded the case to the lower authorities for de novo consideration in the light of the direction as given in the judgment of the Karnataka High Court. As part of the de novo proceedings, a show cause notice No. 913, dated 20-5-1982 was issued covering the short-levy of Rs. 2,83,482.82 mentioned in the notice of the Superintendent of Central Excise (Supra) dated 29-1-1976. Besides, the duty for the period 19-8-1975 to 23-2-1981 was also sought to be recovered under that notice. The Assistant Collector confirmed the demand to the tune of Rs. 2,02,487.73 and also demanded duty to the extent of Rs. 1,32,49,049.82 in respect of clearances during the period 19-8-1975 to 23-2-1981 after adjusting some amount towards compounded levy of yarn.

6. Aggrieved by the said order of the Assistant Collector, the appellants filed an appeal before the Collector of Central Excise (Appeals), Madras, who by his Order-in-Appeal No. 245/83(B), dated 3-10-1983 rejected the appeals and observed as under : "Summing up, I see no merit in the appeal as confirmation of demand in respect of clearances of cotton tyre cord warp sheet during the period 1-4-1975 to 18-8-1975 is correct in law and is sustainable.

Demand for duty in respect of clearances during the subsequent period covered by the interim injunction of the Hon'ble High Court of Karnalaka is merely a communication by the Department indicating the amount to be paid in pursuance of the judgment of the Hon'ble High Court. As per the judgment, appellants are bound to pay duty leviable on cotton tyre cord warp sheets at the rate applicable to fabrics which were cleared by them as yarn during the period of interim injunction." 7. Not satisfied by the said order, passed by the Collector (Appeals), Madras, the appellants filed an appeal before this Tribunal, which we are disposing of by this order.

8. We have heard Shri Taraporewala, Advocate assisted by Shri A.S.Boxwala and Shri D.P. Anand, Consultants for the appellants and Shri M.Chandrasekharan, Advocate assisted by Shri V. Shridharan, Chartered Accountant and Shri Vineet Ohri, S.D.R. and gone through the record.

9. Shri Taraporewala, the learned Counsel for the appellants, did not argue the case on merit and accepted that the product in dispute i.e.

"cotton tyre cord warp sheets" is classifiable under T.I. 19, CET as cotton fabrics as claimed by the Department. He also did not dispute the demand for the period 1-4-1975 to 18-8-1975 amounting to Rs. 2,83,482.82 and stated that this part of the impugned order be confirmed. The duty for the period 19-8-1975 to 19-6-1976, the appellants had already paid under protest. The dispute, according to Shri Taraporewala, remains with regard to the second demand for the period 20th June, 1976 to 23rd February, 1981 amounting to Rs. 1,32,49,049.82 which according to him is barred by limitation.

10. Shri Taraporewala argued that the appellants paid duty on these goods as 'cotton fabric' under protest during the period 19-8-1975 to 19-6-1976 and stopped paying duty from 20-6-1976 in view of the interim order of the High Court of Karnataka dated 7-6-1976 in the W.P. No.2632/76. According to him, the interim injunction was to restrain the Department from collection of duty and the Department was not restrained to assess the goods to duty as fabrics and the Department should have issued show cause notices under Rule 10, Section 11-A from time to time. He pointed out that the show cause notice issued on 20th May, 1982 demanding duty amounting to Rs. 1,35,48,627.70 in respect of the clearances made for the period 19-8-1975 to 23-2-1981 is patently barred by time having been issued after six months. The duty for the period 19-8-1975 to 19-6-1976, the appellants had paid under protest.

He cited a decision of the Supreme Court in the case of Siraj-u-Haq-Khan and Ors, v. The Sunni Central Board of Waqf, U.P.reported as AIR 1959 S,C. 198 in support of his contention that if there was nothing in the injunction order restraining the department from assessing the goods in dispute as 'cotton fabrics' by issuing a show cause notice, the Department is not entitled to claim extension of time on the ground that it was prevented from doing so by the issue of stay order passed by the Karnataka High Court. The stay was only against collection of duty as cotton fabrics. It did not debar the department to issue the show cause notice. He pointed out that the Hon'ble Supreme Court approved the decision of the Privy Council reported as AIR (32) 1945 P.C. 5 which is also on the same point. A decision of this Tribunal in the case of Hydraulics Ltd., Madras v.Collector of Central Excise, Madras (1983 E.L.T. 533) was also cited by the learned Counsel in support of his contention that if a proper show cause notice is not given to the assessee, subsequent proceedings culminating in the Order-in-Original and Order-in-Appeal is bad in law and is liable to be quashed. According to Shri Tara-porewala, the demand made in the show cause notice dated 20-5-1982 for the period 20-6-1976 to 23-2-1981 is barred by time and cannot be recovered from the appellants. The appellants had already paid duty for the period 19-8-1975 to 19-6-1976 under protest.

11. Shri Chandrasekharan, who argued the case on behalf of the Department, submitted that when the issue of classification in respect of cotton tyre cord warp sheets was pending in the High Court of Karnataka, the proper officer could not issue further show cause notic6 as per the stay order of the High Court, He cited a decision of the Madras High Court in the case of H.N. Mariam and Ors. v. Superintendent of Central Excise, Sankarankoil and Ors., reported as 1984 (16) E.L.T.219 in support of his contention that the provisions of Section 11A or Rule 10 of the Central Excise Rules will not apply in cases of demand raised after vacation of Court injunction order. According to him, the party's contention that the demand of duty for the period from 20-6-1976 to 23-2-1981 was raised for the first time under show cause notice issued by the Superintendent, Central Excise, Gokak on 20th May, 1982 is incorrect since the Assistant Collector of Central Excise, Belgaum has already demanded duty amount for the above period, while passing order confirming the demand for the period from 1-4-1975 to 18-8-1975 under adjudication Order C. No. V/19/3/96/75, dated 26-11-1981 and it is not time-barred as stated by the learned Counsel of the appellants. According to him, there was no necessity to issue a show cause notice as discussed by the Collector of Central Excise (Appeals), Madras under his Order-in-Appeal.

12. There are certain facts which are admitted ones. Show cause notice No. 233/76, dated 29-1-1976 issued under Rule 10 read with 173-J of the Central Excise Rules, 1944 was issued against the appellants for classifying the product in dispute i.e. "tyre cord warp sheets" as cotton fabrics under T.I. 19, CET and raising a demand of Rs. 2,83,482.82 for the period 1-4-1975 to 18-8-1975. Challenging that show cause notice, the appellants filed Writ Petition being W.P. No. 2155/76 in the High Court of Judicature, Karnataka. They also filed Writ Petition being W.P. No. 2632/76 challenging the directive of the Superintendent, Central Excise to classify tyre cord warp sheets as cotton fabrics. They obtained stay order on 15th March, 1976 from the High Court against show cause notice issued by the Superintendent Central Excise on 29-1-1976. They also obtained stay order dated 4th June, 1976 regarding collection of excise duty on cotton tyre cord warp sheets as fabrics. The Department did not take any action during the pendency of the writ petitions. Both these writ petitions were dismissed on 16-2-1981 by holding that tyre cord warp sheets manufactured by the appellants were to be treated as fabrics. The stay order granted by the High Court was also vacated on that day. After vacation of the stay order, the Assistant Collector by his Order No.V/19/3/96/75, dated 26-11-1981 not only confirmed the demand for the period 1-4-1975 to 18-8-1975 but also raised a demand of duty treating the goods in dispute as fabrics for the period 19-8-1975 to 23-2-1981.

The plea of the learned Counsel for the appellants that the demand raised for the period from 20-6-1976 to 23-2-1981 was barred by time is not sustainable. A perusal of the show cause notice dated 20-5-1982 shows that this was a notice in continuation of an earlier one dated 21-1-1976. In fact, it was originally on 28-7-1975 and 4-8-1975 that the appellants were put on notice that the department wanted to classify the warp sheets as fabrics. After the Supreme Court judgment, followed by the High Court Judgment in the specific case, there was no need to issue a show cause notice and it was only a demand which was re-agitated vide notice dated 20-5-1982, after the vacation of the stay order by the High Court. The interim order passed by the High Court clearly indicates that the excise officer was not to levy excise duty on the goods as fabrics under T.I. 19, C.E.T. but to levy excise duty at the rates fixed under T.I. 18A. By the injunction order, the High Court restrained the Department from implementing the order of the Superintendent, Central Excise which was to classify the impugned goods as fabrics and, therefore, the department was barred by issuing any show cause notice during that period. Even otherwise, there was no need of issuing any show cause notice for treating the goods in dispute as fabrics because that point stood finally decided by the order of the Hon'ble Karnataka High Court. After dismissal of the writ petitions, the appellants were bound to pay the duty on the goods as fabrics under T.I. 19, C E.T. but when they did not pay the duty amount, demand was made through notice dated 20-5-1982. This notice cannot be treated as a notice under Section 11A or Rule 10 of the Central Excise Rules and cannot be said to be barred by time. The Hon'ble Madras High Court in the case of H.N. Mariam and Ors. v. Superintendent, Central Excise, Sankarankoil and Ors. (supra) have clearly laid down that in cases of demand raised after the Court injunction, provisions of Section 11A or Rule 10 of the Central Excise Rules will not apply. Therefore, neither the provisions of Section 11A of the Central Excises Act nor the provisions of Rule 10 will apply.

13. The Collector (Appeals), Madras has correctly decided this matter before him and we find no reason to interfere with his judicious findings. We, therefore, confirm the findings of the Collector (Appeals), Madras and dismiss this appeal.


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