1. The petitioner is a Company manufacturing various chemical products such as Super Beckamine, Beckamine etc. This is done after taking out a licence from the Central Excise department. During the earlier part of 1967, the petitioner was removing these products declaring them as 'Alkyed resins' and claiming exemption from duty in terms of Notification No. 156 of 1965, dated 23-9-1965. After consideration of the facts and circumstances of the case, including the chemical composition of the products, the third respondent (Assistant Collector of Central Excise) passed an order dated 16-8-1968, holding that the products manufactured by the petitioner are only 'modified alkyed resins' and as such the exemption under the said notification was not available. Accordingly, a demand for a sum of Rs. 62,627.97 being the excise duty payable for the goods cleared during the period from 14-11-1967 to 5-4-1978 was raised.
2. The petitioner filed an appeal before the Appellate Collector of Central Excise, Madras, the second respondent herein. The Appellate Collector by his order dated 10-9-1975 allowed the appeal on the ground that 'alkyed resins' included modified alkyed resins. In exercise of the powers conferred in them under Section 36(2) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Act') the Government of India issued a show cause notice dt. 31-8-1976, to the petitioner proposing to review the decision of the Appellate Collector. The petitioner sent a reply dated 29-9-1976. As desired by them, personal hearing was granted on 29-1-1977 at Madras. Having regard to all the submissions made by the petitioner the Government of India passed an order on 31-8-1978 setting aside the order in appeal passed by the Appellate Collector of Central Excise, Madras, on appeal and holding that the products of the petitioner were not eligible for the benefit of exemption envisaged by the Notification No. 156 of 1965, and that they are correctly assessable under Item No. 15-A(i) of the Central Excise Tariff.
3. In seeking to quash this order, the following points are urged before me. - The jurisdiction under review does not mean that there can be a reconsideration of the entire matter afresh. The whole question before the assessing authority and the Appellate Authority was whether the Notification granting exemption was available to the petitioner or not. Instead of considering that, the order of the Government of India does to the extent of saying that the goods manufactured by the petitioner would fall within the scope of 'synthetic resins'. That was not the subject-matter of issue at all. Where, therefore, it proposed to do so, the petitioner should have been put on notice. That Section 36(2) confers only a revisional jurisdiction and not an appellate power is the purport of the ruling in Government of India and others v. A.S. Bava, 1980 E.L.T. 625. When Section 36(2) says that the Government of India on review could pass any orders thereon, it should be limited only to the scope of the orders and a new ground cannot be raised at the time of exemption. Therefore, the re-classification without notice is bad in law.
4. The second argument, is that originally be order dated 16-12-1967, the petitioner was unable to clear the goods free of duty when it was held that the notification No. 156 of 1965 would apply. However, on 5-4-1968, the very authority, namely, the Assistant Collector proposes to revise the same and raises a demand disregarding the exemption. The Government of India when it says that the order of the Assistant Collector is restored, should have specifically stated as to from what date the liability of the petitioner to excise duty would arise. Therefore, in any event, between 16-12-1967 and 5-4-1968, there cannot be a demand of excise duty at all.
5. One other ground that is urged by the learned counsel for the petitioner is that if it is a case of fresh assessment, S. 11A would come into play and the period of limitation prescribed under the said section must be put against the department.
6. The learned counsel appearing for the department would contend that the scope of the review power has not been enlarged at all. It is a matter of classification. Even as per the order of the Government of India which is under challenge, the assessability of the petitioner arises in view of item 15-A(1) of the Central Excise Tariff. Therefore, it is a mere matter of proper classification. The liability in relation to excise duty of the petitioner is not increased in any manner. As and when a demand is raised pursuant to the order under challenge, if the petitioner is well founded in their contention that it is not liable to pay any excise duty prior to 5-4-1968, it is open to them to urge it after the assessment and not now.
7. Regarding the contention of the petitioner that the scope of the review jurisdiction cannot mane that it is as wide as appellate jurisdiction, there cannot be any demur since that is the ratio of the decision in 1980 E.L.T. 625. As a matter of fact, there is no widening of jurisdiction under review because paragraph 4 of the show cause notice dated 31-8-1976 states as follows -
'...... On examination of the case records the Central Government tentatively hold the view that the order of the Appellate Collector of Central Excise, Madras, mentioned above is not proper, legal and correct inasmuch as the two products viz., Beckamines and Super Beckamines mentioned above were other than alkyed resins maleic resins and phenolic resins and exemption notification is not attracted in respect of those products. It is seen from the printed pamphlet of the party of October 1963, that 'Beckamine' and 'Super Beckamine' are synthetic resins of the type of urea formaldehyde resins and melamine formaldehyde resins respectively. The above facts are supported in the Point, Oil and Colour year Book 1970 published by Fuel and Metalurgical Journal Ltd., London, which states that (page 159) Beckamine Urea Resins - Synthetic resins and (page 178) Super Beckamine Melamine Resins - Synthetic resins. In view of the above Beckamine and Super Beckamine synthetic resins are different from alkyed resin, meleic resin and phenolic resin mentioned in Central Excise notification No. 156/65, dated 23-9-1965 as subsequently amended.'
8. By the ultimate impugned order the Government of India states as follows -
'Regarding the technical arguments advanced by the party based on the process of manufacture of the products Government of India note that in the first stage, the increase in weight is by a chemical process. In the second stage, butylation which is an etherfication process occurs and it is also a condensation reaction. The resultant product is a polycondensation material in view of the acid catalyst already present in it in small quantity. At the second stage, the increase in weight is due to polycondensation process which takes place in the presence of an acid catalyst. The products as produced and marketed are 'resin' inasmuch as item 15-A1(i) of Central Excise Tariff, includes in its scope condensation, polycondensation and polyaddition products whether or not modified or polymerised. As the party has not stated that they are using a separate catalyst at the time of application nor is a catalyst market along with its products, by implication it is understood that this product contains an acid catalyst already. Butylated urea or melamine formaladyhyde as manufactured by the party is understood in trade and technology as resin and is therefore covered by the Tariff Item 15-A'(i) Central Excise Tariff. Further, the Paint and Colour Book year 1970 records both Beckamine and Super Beckamine, categorised as Urea resin and meleik resin respectively as 'Synthetic resin'. In the booklet brought out by the party themselves in October 1963, titled 'an index of synthetic resins for the surface coating industries. Beckamine and Super Beckamine have been categorised as 'synthetic resins'. The party therefore cannot now take a stand that the impugned products are not 'resins'.'
In view of the above, it was concluded that the impugned products were assessable under item 15-A(1) of the Central Excise Tariff. Therefore, the petitioner was fully put on notice. Regarding the manufacture of products by the petitioner, what formed the subject-matter of issue before the assessing authority and the appellate authority was the eligibility of the petitioner to have the benefit of Notification No. 156/65. This is a narrow view which cannot be accepted. Should the petitioner be not entitled to the benefit of exemption under the said Notification, the question would arise as to how the products of the petitioner are to be categorised. It is that precisely what has been done by the Government of India. I am happy to note that in this case, the Government of India did interfere because the order passed by the Appellate Authority leaves very much to be desired. As to what I mean can be made evident after extracting the order of the appellate authority dated 10-9-1975. That order reads as follows :
'Sub : Central Excise - Assessment of the Super Beckamine and Beckamine - Messrs. Reichhold Chemicals India Ltd., Madhavaram, Madras.
Ref : Appeal dated 5-11-1968 by Messrs. Reichhold Chemicals India Ltd., Madhavaram, Madras, against the order D.B. Dis V/15A/3/7/67 - 67(T), dt. 16-8-68 passed by the Assistant Collector of Central Excise, Madras I Division, Madras.
* * * * I have gone through the appeal. The issue relates to the classification of two products as exempted under Notification No. 156/65, dated 23-9-1965. After going through all the records and connected notification, I am convincted that the exemption notification applies to modified Alkyd Resins also. As such the appeal is admitted with consequential relief.
Sd/- H.N. Raina
Appellate Collector 19-9-75......'
9. It is regrettable that an order in this cavalier fashion should have been passed by the Appellate Collector. It is a matter concerning the revenue of the State. There must be an application of mind as to how the appellate authority came to the conclusion that the benefit of the notification granting exemption could be accorded to the petitioner. It is no use saying 'is convinced' as is stated in the order. He should give clear and cogent reasons. All that is missing in the order. No one is worried about the convictions or faiths. It is a matter of reasoning because he is exercising quasi-judicial powers. There must be an analytical approach. That is wholly lacking in the order. Rightly, therefore, the Government of India did exercise the power of review.
10. Turning to the other argument that in the restoration of the order of the Assistant Collector, there is a lacuna, a few facts may be mentioned. By order dated 16-12-1967 the Assistant Collector of Central Excise, Madras stated as follows :
'........C. No. V/15A/3/7/67-T. 2 dated 16-12-1967The General Manager,Messrs Reichhold Chemicals India Ltd.,Kannabiran Koil St., Post Bag No. 3,Madhavaram, Madras-60.GentlemenCentral Excise - Artificial or Synthetic Resins -Messrs Reichhold Chemicals Ltd., Sembium MOR -Assessment of Beckamine 3530 - 50 and SuperBeckamine 27 - 566 - regarding. Please refer to your letter GM VR. 605 : 67 dt., 15-12-67 on the above subject.
2. It has now been decided by the Assistant Collector that -
a. Beckamine 3530 - 50 and
b. Super Beckamine 27 - 566 - are to be classified as Alkyed resin. Hence these two items may be cleared free of duty as per notification No. 156/65, dt. 23-9-1965.
Sd/- P.N. Menon
Sr. Superintendent (Tech)....'
11. However, on 5-4-1968 he proposed to raise a demand under Rule 9(2) of the Central Excise Rules in the following terms :
'......C. No. V/15A/3/7/67-TS dated 5th April, 1968 Sub : Central Excise - Resins - assessment of Beckamine 3530 - 50 and Super Beckamine 27 - 566 Messrs Reichhold Chemicals Ltd., Semptian MOR - Orders passed.
On a clear appreciation of the facts regarding the assessment of (i) Beckamine 3530 - 50 and Super Beckamine 27 - 566 it has been decided that these two items manufactured by Messrs Reichhold Chemicals Ltd., are assessable to excise duty as Resins other than Alkyed Maleic and Phenolic Resins. You are therefore requested to subject these items to Central Excise duty at 30% ad valorem and the Special excise duty under Item 15-A of the Tariff.
2. As regards past clearance, please raise necessary demands for the immediate recovery of duty and appropriate rates on the goods cleared free of duty. The demand may be raised under Rule 9(2) of the Central Excise Rules, while raising the demand the amount of duty refunded it any on these products, should also be taken into account.
3. A compliance report should be sent within seven days.
Sd/- P.N. Menon
Superintendent (Tech. II)
The Section Officer, Madhavaram Sector, Sembiam.
Copy to the Range Officer, Sembium MOR. He will please ensure that immediate necessary action is taken. The worksheet may be verified by him with reference to the Factory's production one clearance records.
Copy of Messrs Reichhold Chemicals India Ltd.,
Madhavaram, Post Bag No. 3 Madras-60.
2. If you feel aggrieved against this order, you may represent the case to the Assistant Collector of Central Excise, IDO, Madras.'
12. One thing that is claimed is that no authority has the power to review his own order. Therefore from 16-12-1967 to 5-4-1968, unless and until the power is exercised under Rule 10-A, the demand cannot be raised at all. There is not even a suggestion in the order dated 5-4-1968, that he proposed to do the same. On the contrary, he proceeds to assess, oblivious of his earlier order dated 16-12-1967. It is this which has given rise to the petitioner's contention that it is not in any event liable for excise duty between 16-12-1967 and 5-4-1968. Here again I should attach the blame only to the Assistant Collector. Had he familiarised himself with the provisions of law, he would not have committed this serious blunder. Today the power is sought to be exercised under S. 11A. Under the present S. 11A it is obviously time-barred. Who is to compensate for the loss of revenue In matters of revenue jurisdiction, it is the bounden duty of the authorities to exercise every care to avoid escape. What has given room for the petitioner to put forth the argument which I consider should merit acceptance is, only the negligence or the ignorance of the Assistant Collector.
13. I am unable to accept the argument of the petitioner that since the Government of India proposes to deal with a new ground, the petitioner would be entitled to canvass under S. 11A. As stated above, the Government of India was merely classifying the product of the petitioner under proper category. I hereby make it clear that the petitioner will not be liable for any excise duty for the goods cleared between the period 16-12-1967 and 5-4-1968. The writ petition will stand allowed only to that extent. In other respects, it will stand dismissed. No costs.