UNION OF INDIA Vs. GRASIM INDUSTRIES LTD

JUDGEMENT

(1.) THIS is an application under Section 35H(1) of the Central Excise Act, 1944 at the instance of Union of India seeking reference as follows :

(2.) IT appears that the respondent company M/s Grasim Industries Ltd. (White Cement Division) is engaged in manufacture of white cement. The plant was commissioned in 1988. The cement manufactured by the respondent -assessee (hereinafter referred to as 'assessees') was classified under sub -heading 2502.90 as such the assessee paid the Central Excise Duty as per the said classification. The assessee with effect from 22 -4 -1991 filed a classification list classifying white cement under sub -heading 2502.20. However, the Assistant Commissioner, Central Excise Division, Jodhpur passed an order classifying the white cement under sub -heading 2502.90. This was challenged by the assessee by way of writ petition before this Court. By an interim order dated 9 -10 -1991 this Court permitted the assessee to clear the goods by paying duty under sub -heading 2502.20 and furnish bank guarantee for the differential duty between sub -heading 2502.20 and sub -heading 2502.90. The writ petition was dismissed on the ground of alternate remedy. While dismissing the writ petition, this Court directed the assessee to keep the bank guarantee alive till the matter is decided by the Commissioner (Appeals). The appeal was dismissed by the Commissioner of Central Excise (Appeals). The department encashed the bank guarantee of Rs. 88,00,000/ - just after the dismissal of the appeal. The assessee successfully took up the matter in the second appeal before the CEGAT [2001 (127) E.L.T. 57 (Tri. - Del.)]. It was held that bank guarantee in the instant case cannot be held as payment of duty and, therefore, the refund does not attract the provisions of Section 11B of the Central Excise Act, 1944. The CEGAT. relied upon the decision of the Apex Court in Oswal Agro Mills Ltd. v. Asstt. Collector of Central Excise, Division Ludhiana and Ors. reported in 1994 (70) E.L.T. 48 (S.C.) - 1994 (2) SCC 546.

(3.) IN these circumstances, the petitioner department is under obligation to make repayment of the encashed amount of the bank guarantee to the respondent assessee. The view of the Apex Court in Oswal Agro Mills case has been approved by this receipt decision of the Apex Court in Somaiya Organics (India) Ltd. and Anr. v. State of U.P. and Anr. reported in 2001 (130) E.L.T. 3 (S.C.) = 2001 (5) SCC 519.