1986 (10) TMI 308 - AT - Central Excise

Issues Involved:
1. Classification of iron and steel products.
2. Demand of duty without a show cause notice.
3. Discrimination in tax assessment among manufacturers.
4. Eligibility for proforma credit under Rule 56A.

Issue-wise Detailed Analysis:

1. Classification of Iron and Steel Products:
The appellants, M/s. Unitech Metals (Private) Ltd., declared their products as cold-rolled formed shapes and sections, arguing they should be classified under item 26AA(ia) and later under item 25(11) of the Central Excise Tariff. The Collector classified these products under item 68, as goods not elsewhere specified. The appellants contended that their products were made from duty-paid steel strips and had undergone cold forming, not rolling, which does not reduce thickness but forms new profiles. The judgment noted that the products were not articles of steel but sections and shapes formed from strips, remaining under the same item from which they came, thus not subject to duty a second time after forming and shaping.

2. Demand of Duty Without a Show Cause Notice:
The appellants argued that the Collector's order demanding duty was invalid as it was not preceded by a show cause notice. The court emphasized that under central excise law, a proper demand must be issued detailing the reasons for short-levy, allowing the affected party to defend itself. The absence of such a notice was deemed a serious lapse, vitiating the order of recovery of duty. The court concluded that the demand of duty had to be set aside due to the lack of a proper demand notice.

3. Discrimination in Tax Assessment Among Manufacturers:
The appellants highlighted that other manufacturers producing similar goods were not being asked to pay duty, presenting this fact to various authorities without receiving any attention. The court acknowledged this discrimination, noting that the central excise authorities failed to address the appellants' submissions regarding other manufacturers not paying duty. The court found that the authorities' actions resulted in serious discrimination against the appellants.

4. Eligibility for Proforma Credit Under Rule 56A:
The Assistant Collector had previously ruled that the goods manufactured by the appellants were classifiable under item 25(11) and granted proforma credit for the duty paid on raw materials, though not for the past period due to lack of application and licence. The court noted that the central excise authorities accepted the goods as falling under the same item, making them eligible for proforma credit, which would not be the case if the goods fell under item 68. The court also referred to a tariff advice stating that cold-rolled formed sections fall under item 26AA(ia) as no process other than rolling is carried out, supporting the appellants' classification.

Conclusion:
The court set aside the Collector's order demanding duty due to the absence of a proper demand notice and ruled that the appellants' products were correctly classifiable under item 26AA(ia) and item 25(11), not item 68. The court also recognized the discrimination in tax assessment and upheld the appellants' eligibility for proforma credit under Rule 56A.

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