1984 (9) TMI 286 - AT - Central Excise

Summary

Issues Involved:
1. Classification of Partially Oriented Polyester Filament Yarn (P.O.Y.) as semi-finished goods.
2. Withdrawal of permission to operate under Rule 56B.
3. Compliance with principles of natural justice.
4. Discretionary power of the Collector of Central Excise under Rule 56B.

Issue-wise Detailed Analysis:

1. Classification of Partially Oriented Polyester Filament Yarn (P.O.Y.) as Semi-Finished Goods:

The respondents, a division of Reliance Textile Industries Ltd., manufacture P.O.Y. at Patalganga and further process it into textured yarn at their Naroda unit. The Assistant Collector initially granted permission under Rule 56B to transfer P.O.Y. for further processing, considering it semi-finished. However, this permission was later withdrawn on the grounds that P.O.Y. is a fully finished commodity sold in the market. The respondents argued that P.O.Y. is a semi-finished product requiring further orientation and texturisation to be usable by the textile industry. The Collector (Appeals) supported this view, stating that P.O.Y. is a raw material in a semi-finished state, and the conditions of Rule 56B are applicable.

2. Withdrawal of Permission to Operate Under Rule 56B:

The Assistant Collector withdrew the permission on 11-3-1983, citing budgetary changes and reclassification of P.O.Y. and textured yarn under different tariff items. The respondents contended that this withdrawal was abrupt and factually incorrect, as there were no such budgetary changes. They also argued that the withdrawal ignored the principles of natural justice. The Collector (Appeals) set aside the withdrawal, noting that the reasons given were incorrect and the decision was ex parte.

3. Compliance with Principles of Natural Justice:

The respondents argued that the withdrawal of permission was done without affording them an opportunity to present their case, thus violating the principles of natural justice. The Tribunal observed that the Assistant Collector's decision was one-sided and did not consider the integrated nature of the respondents' units. The Tribunal emphasized that any decision by the Collector of Central Excise must be made in good faith, with proper application of mind, and after giving the affected party an opportunity to be heard.

4. Discretionary Power of the Collector of Central Excise Under Rule 56B:

Rule 56B allows the Collector of Central Excise to grant permission for the removal of semi-finished goods for further processing. This rule is discretionary and not a matter of right. However, the Tribunal noted that the discretion must be exercised judicially and not arbitrarily. The Tribunal concluded that the matter should be reconsidered de novo by the Assistant Collector, ensuring compliance with natural justice and allowing the respondents to present their case fully.

Conclusion:

The Tribunal set aside the orders of the Collector (Appeals) and the Assistant Collector, remanding the case for de novo consideration. The Assistant Collector is to re-evaluate the matter, taking into account the observations made by the Tribunal and ensuring that the respondents are given a fair opportunity to present their case.