UNION OF INDIA Vs. MADHUMILAN SYNTEX PRIVATE LIMITED

JUDGEMENT

(1.) This is an appeal against the judgment of a Division Bench of the Madhya Pradesh High Court, Jabalpur (Indore Bench) in M. Petition No. 104 of 1984. The appeal is filed at the instance of the Union of India, Collector of Central Excise, Indore and two other excise officers. The respondents are the original petitioners in the aforesaid petition. We propose to refer to the parties by the description in the petition.

(2.) The facts necessary for the disposal of this appeal can be shortly stated.

(3.) The petitioner No. 1 is a Company manufacturing spun yarn. According to the:petitioners, in the manufacture of the said product they use as raw material cellulosic fibres and non-cellulosic fibres. Sometime prior to 7th July, 1983, the petitioners filed a classification list in respect of the spun yarn manufactured by them showing the same as covered by Item No. 18(III)(i) in the First Schedule to the Central Excises and Salt Act, 1944 (referred to hereinafter as the "Central Excises Adt"). The said schedule is generally referred to as the "Central Excises Tariff". This classification was on the basis that the spun yam was manufactured by them out of non-cellulosic synthetic waste. The said classification list was approved by the excise authorities on 7th July, 1983. A supplementary classification list was approved on 15th October, 1983. The petitioners were clearing the goods on the basis of aforesaid classification lists. It appears that samples were drawn out of the spun yarn manufactured by the petitioners and sent for chemical examination. There are some reports submitted by the Chemical Analyser, with the details of which we are not concerned. Without giving any show cause notice or affording any opportunity to the petitioners to be heard, on 7th February, 1984, the Superintendent of Central Excise issued a notice of demand for a total sum of Rs. 26,47,749.39 against the petitioner No. 1 on the footing that there was short payment of excise duty. This was done on the ground that the yam manufactured by the petitioners had been manufactured out of waste of synthetic fibres in blend of viscose fibres (of non-cellulosic origin) and hence the said goods manufactured by them were liable to be classified under Central Excises Tariff Item No. 18(III)(ii). It is an admitted position that the yarn manufacturing process used by the petitioners was with the aid of power. The petitioners filed the aforesaid writ petition in I the High Court of Madhya Pradesh challenging the validity of the said notice of demand dated 7th February, 1984. The High Court granted an interim stay of the operation of the demand notice on 9th February, 1984. On the same day, namely, 9th February, 1984, an order was passed by the Assistant Collector Of Central Excise modifying the approval granted to the aforesaid classification lists submitted by the petitioners which had been approved as aforesaid and classifying the aforesaid product under Item No. 18(III)(ii) of Schedule 1 of the Central Excises Act. On 10t February, 1984 a notice was issued by the Superintendent, Central Excise on the petitioner No. 1 reciting inter alia that the Assistant Collector had modified the approval of the classification lists on 9th February, 1984 and calling upon the petitioner o. 1 to show cause why the duty short levied should not be recovered from them under the provisions of Section 11-A of the Central Excises Act. A second similar show. cause notice was also issued. The petitioner No. 1, wrote to the excise authorities pointing out that in view of the aforesaid writ petition filed by the appellant, the adjudication proceedings should be stayed till writ petition was disposed of. This request was turned ,down on 5th March, 1984 and orders of adjudication were passed by the Assistant Collector modifying the classification lists and confirming the demand made under the aforesaid notice of demand. The petitioners thereupon amended the aforesaid writ petition filed by them and challenged the two show cause notices as well as he said orders of adjudication dated 5th March, 1984. The petitioners also filed an appeal before the Collector of Central Excises (Appeal) against the orders of adjudication dated 5th March, 1984. On 24th November, 19844 by the impugned judgment, the Madhya Pradesh High Court allowed the aforesaid writ petition in part. Mulye, J. held by his judgment that the writ petition was allowed to the extent that the demand for recovery of Rs. 26,47,749.39 for the period 15th August, 1983 to 6th February, 1984, which was the period referred to in the demand notice was quashed. However, the learned Judge directed the Collector, Central Excise before whom the appeal filed by the petitioners was pending to decide the appeal in respect of the demand made by the excise authorities for the subsequent period. Giani, J., the other learned Judge, in his concurring judgment set aside the two orders issued by the Assistant Collector, Central Excise, Ujjain Division both dated 5th March, 1984 as set out earlier. Copies of these adjudication orders are at Annexures R/10 and R/11 respectively to the writ petition. Very shortly put, both the Judges held that the notice of demand and the orders modifying the classification list served on the petitioners were bad in law and ordered that the same be quashed. A perusal of the judgment also clearly indicates that the Division Bench directed that the Collector, Central Excises (Appeal) should hear the appeal of the petitioners on merits after giving the petitioners an adequate opportunity to put their case and their evidence before him in respect of the period from 7th February, 1984 onwards. Thus, the Division Bench took the view that the show cause notice served on the petitioners could be treated as valid and effective only in respect of the period from 7th February, 1984 onwards and not retrospectively from 15th August, 1983 to 6th February, 1984 being the period for which the demand has already been made in the demand notice dated 9th February, 1984.