MADHUMILAN SYNTEX PRIVATE LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) Madhumilan Syntex (P) Ltd. , appellant No. 1 (hereinafter referred to as 'the appellant company') owns a factory wherein they manufacture spun yarn. At the relevant time in Tariff Item No. 18-III of the First Schedule to the Central Excises and salt Act, 1944 (hereinafter referred to as 'the act') it was prescribed that cellulosic spun yarn, in which man-made fibre of cellulosic origin predominates in weight, made by a manufacturer with the aid of power would fall within Tariff Item No. 18-III (ii) , if it contained man- made fibres of non-cellulosic origin and it would fall within Tariff Item No. 18-III (i) , whereunder duty was leviable at a lower rate, if it did not contain any man-made fibres of non-cellulosic origin. Claiming that it was manufacturing spun yarn by blending and processing cellulosic fibre and non-cellulosic waste the appellant company, on July 7, 1983, filed a classification list under the provisions of Rule 173 (2) (b) of the Central excise Rules in respect of the spun yarn manufactured by them showing the same as covered by Tariff Item No. 18-III (i). The said classification list submitted by the appellant company was approved by the Assistant collector (Central Excise) , Ujjain on July 13, 1983. A supplementary classification list was submitted by the appellant company on september 25, 1983 which was approved by the assistant Collector on October 15, 1983. It appears that the samples of the products manufactured by the appellant company were taken and were sent for chemical analysis and after receiving the test reports of the samples the Superintendent of Central excise issued a demand notice dated February 7, 1984 for a sum of Rs. 26,47,749.39p as differential amount of duty on the ground that on the man-made yarn that was being manufactured by the appellant company excise duty was payable under Tariff Item No. 18-III (ii) and not under Tariff Item No. 18-III (i). Feeling aggrieved by the said notice of demand the appellant company filed a writ Petition (M. P. No. 104/84) in the Madhya pradesh High Court, on February 9, 1984, and in the said Writ Petition the High Court on February 9, 1984 passed an interim order directing that no recovery would be made from the appellant company in pursuance of the impugned notice of demand and that excise duty would be continued to be charged as was being charged till that date. On february 9, 1984 the Assistant Collector (Central Excise) , passed an order wherein it was stated that the yarns claimed to be cellulosic spun yarn of which the samples were sent contain man-made fibres of non-cellulosic origin and as per the Central Excise Tariff schedule the same would be classifiable under tariff Item No. 18-III (ii) and not under Tariff item No. 18-III (i) and that in the light of the fresh material placed before him all the products mentioned in the Annexure-I to the said order have been reclassified as falling under tariff Item No. 18-III (ii) and that the said modified approval would be effective right from the date of production of these goods, i. e. , from July, 1983 onwards. In the said order it was further stated that in the interest of natural justice the modified approval in respect of tariff classification and rates of duties payable was provisional and the appellant company were being accorded an opportunity to submit to him their representation, if any, against the modified approval within a week's time and that if nothing was heard from them the provisional approval would be finalised. By another order dated february 9/10, 1984, the Superintendent, central Excise, Range III, Ujjain, issued a show cause notice wherein reference was made to the order dated February 9, 1984 passed by the Assistant Collector whereby the approval of the classification lists had been modified and the appellant company were required to show cause to the Assistant collector as to why short levies of Rs. 26,47,749.39p should not be recovered from them under Section 11-A of the Act. After receipt of the said notice, the appellant company sought time before the Assistant collector on the ground that the Writ Petition filed by them was pending before the High Court but the said request was not acceded to and on March 5, 1984, the Assistant Collector passed two orders. In one order the Assistant collector, in view of the revised classification of the products, confirmed the short levy of rs. 26,47,749.39p for the period from august 15, 1983 to February 6, 1984 under section 11-A of the Act but observed that in view of the stay order dated February 9, 1984 passed by the Madhya Pradesh High court the said recoveries would not be enforced till the stay order remains in force. In the order the Assistant Collector held that there was no basis for accepting the classification of the yarn manufactured by the appellant company under Tariff Item No. 18-III (i) and that the modified approval as mentioned in the show cause dated February 9, 1984 which was kept provisional pending consideration of defence by the party was now made final and the classification list effective from September, 1983 was being finally classified as falling under Tariff Item no. l8-III (ii) and that the said classification and rate of duty would apply right from the date the party manufactured such yarns. The appellant company amended the Writ petition which was pending in the High Court to challenge the validity to both these orders dated March 5, 1984 passed by the Assistant collector. The appellant company also filed an appeal against those orders before the collector (Appeals) , Customs and Excise, New delhi.

(2.) The Writ Petition (M. P No. 104/84) of the appellant company was disposed of by a Division Bench of the High Court (P. P. Mulye and V. D. Gyani JJ. ) by judgment dated november 24, 1984. The main judgment was delivered by Mulye J. with which Gyani j. agreed but Gyani J. also appended a separate explanatory note. Mulye J. in the judgment rendered on behalf of himself and gyani J. , quashed the demand for recovery of Rs. 26,47,749.39p for the period from august 15, 1983 to February 6, 1984. The learned Judges did not accept the contention urged on behalf of the appellant company that once the classification was made and approved it was only the Collector of Central excise who had the jurisdiction suo motu to revise the same. The learned Judges also took note of the fact that the appellant company had already filed an appeal before the collector (Appeals) and observed that it would be open to the Collector (Appeals) , after considering the facts and circumstances of the case, to give adequate opportunity of hearing to the appellant company including an opportunity of adducing evidence and decide the appeal on merits.

(3.) The Union of India filed an appeal (C. A. No. 1110 (NT) of 1986) in this Court against the said decision of the Division Bench of the High Court. The said appeal of the union of India was dismissed by this Court by its judgment in Union of India and Ors. v. Madhumilan Syntex Put. Ltd. and Anr,.