1990 (7) TMI 313 - AT - Central Excise

Summary

Issues:
1. Whether demand can be raised for the period prior to the issue of Show Cause Notice for reclassification.

Detailed Analysis:

Issue 1: Whether demand can be raised for the period prior to the issue of Show Cause Notice for reclassification.

The case involved a dispute regarding the classification of Acetylene Gas manufactured by M/s. B.H.E.L. for captive consumption within their factory. The Department proposed to reclassify the gas and issued a show cause notice for demanding appropriate duty under Section 11A for the period from March 1984 to December 1984. The respondents contended that the gas should be classified under T.I. 68, not T.I. 14H, and argued that the demand was time-barred as there was no intention to evade payment of duty. The Assistant Collector confirmed the demand under T.I. 14H, but the Collector (Appeals) held that the demand was barred by time, applying the revised classification only from the date of the Assistant Collector's order.

The central issue was whether the demand could be retrospective or prospective from the date of the notice for reclassification. The Department did not claim suppression of facts to invoke the longer period of 5 years under Section 11A. The Department sought to confirm the demand for six months prior to the show cause notice for reclassification. The respondents did not challenge the classification issue, leaving the determination of whether the demand could be retrospective or prospective as the key point in the case.

During arguments, the revenue representative cited various decisions to support the applicability of Section 11A and the retrospective nature of operation when a show cause notice was issued for modifying an approved list. The Tribunal noted that there was no direct Supreme Court decision on this issue. Referring to the case of Union of India v. Madhumilan Syntex Pvt. Ltd., the Tribunal concluded that the demand for duty in terms of revised classification could only be enforced from the date of the show cause notice and not for any earlier period. The Tribunal also referenced the case of M/s Brakes India Ltd. v. Collector of Central Excise, where it was held that revised classification cannot be made retrospectively applicable when there had been no change in the manufacturing process or tariff entry during the relevant period.

Ultimately, the Tribunal held that the demand could not be enforced for the period prior to the date of the show cause notice for reclassification. The decision emphasized the importance of natural justice, stating that changes in interpretation of tariff entries should only apply from the date when made known to the party, not retrospectively. Therefore, the appeal was disposed of in favor of the respondents, confirming that the demand could not be enforced for the period before the show cause notice was issued.