2013 (1) TMI 102 - AT - Central Excise

Manufacture of core spun threads out of nylon / cotton and polyester / cotton yarns - classification under heading 54.02 OR 56.06 - assessee claimed refund of pre-depositpaid by them towards excise duty for core spun yarn manufactured and cleared during the period 01-03-94 to 28-02-95 - demand challenged invoking period of limitation - Held that - While the assessee wanted the duty to be quantified only for six months prior to 14.6.95 (date of the show-cause notice), the Revenue asked for duty for the entire period from 1.3.1994 covered by Order-in-Original No. 55/93 dated 30.11.93. No classification issue was anywhere in the picture. Obviously, this Tribunal was required to decide only the limitation issue and, following the Supreme Court s judgment in Cotspun case 1999 (9) TMI 87 - SUPREME COURT OF INDIA , it held that no amount of duty for any period prior to the date of the show-cause notice (14.6.95) was payable by the assessee vide Final Order Nos. 281 and 282/2000 dated 23.2.2000. The sequence of events would thus show that the assessee acquiesced in the classification of the goods under Heading 54.02 and chose to stick to the plea of limitation all throughout in order to get the quantum of demand reduced to the extent possible. In such circumstances, the submission of the assessee that the classification of the goods under Heading 56.06 as held in Order-in-Original No. 55/93 dated 30.11.93 attained finality with the passage of Order-in-Appeal No. 73/2003 dated 30.7.2001 cannot be accepted, and their plea that they were not liable to pay any amount of duty in terms of Heading 54.02 and hence entitled to refund of the duty already paid is also unacceptable. Four questions of law arising out of Final Order Nos. 281 & 282/2000 dated 23.2.2000 have been referred by this Tribunal to the Hon ble High Court for its opinion and this reference under Section 35H(4) of the Central Excise Act is pending before the Hon ble High Court vide RCP Nos. 27 & 28/2001. In this scenario, it has to be held that the Tribunal s Final Order Nos. 281 & 282/2000 dated 23.2.2000 has not attained finality and that the reference proceedings are to be considered as proceedings in continuation of the Tribunal s proceedings. Therefore, the refund claim filed by the respondent is premature also

Issues Involved:

1. Classification of core spun threads under Central Excise Tariff Act.
2. Validity of demand for differential duty.
3. Applicability of Section 11A of the Central Excise Act.
4. Impact of retrospective amendments by the Finance Act, 2000.
5. Entitlement to refund of pre-deposited duty.
6. Finality of Tribunal's order and pending reference before the High Court.

Detailed Analysis:

1. Classification of Core Spun Threads:

The respondent classified core spun threads under Heading 54.02, while the department insisted on Heading 56.06. The Assistant Collector finalized the classification under Heading 56.06. The Collector (Appeals) reclassified it under Heading 54.02, but the Tribunal remanded the case for fresh consideration. Eventually, the Commissioner (Appeals) dismissed the respondent's appeal, maintaining Heading 56.06 as the classification.

2. Validity of Demand for Differential Duty:

The Superintendent of Central Excise issued a show-cause notice on 14.06.1995 demanding differential duty for the period 01.03.1994 to 14.02.1995. The respondent contested the demand based on the six-month limitation under Section 11A. The Assistant Commissioner confirmed the demand, but the Commissioner (Appeals) restricted it to six months plus the period of stay by the High Court, reducing the duty to Rs.1,76,35,187/-. The Tribunal later held that no duty was payable for any period prior to the show-cause notice date, based on the Supreme Court's decision in CCE Vs. Cotspun Ltd.

3. Applicability of Section 11A of the Central Excise Act:

The respondent argued that the department could only claim differential duty for six months preceding the show-cause notice date. The Assistant Commissioner disagreed, confirming the full demand. The Commissioner (Appeals) partially accepted the respondent's argument, limiting the demand period. The Tribunal's final order, based on the Supreme Court's Cotspun decision, negated duty liability prior to the show-cause notice date.

4. Impact of Retrospective Amendments by the Finance Act, 2000:

Section 110 of the Finance Act, 2000, retrospectively validated actions under Section 11A, affecting the show-cause notice's validity. The department argued that this validation legitimized the demand, notwithstanding any prior judgments. The Tribunal acknowledged this retrospective effect, indicating that the show-cause notice and related proceedings were protected by the Finance Act, 2000.

5. Entitlement to Refund of Pre-Deposited Duty:

The respondent sought a refund of Rs.1,30,28,051/- deposited during the writ petition pendency. The Deputy Commissioner rejected the refund claim, citing the Finance Act, 2000 amendments. The Commissioner (Appeals) overturned this, stating the refund was due as pre-deposit under Section 35F. The Tribunal disagreed, noting the premature nature of the refund claim due to the pending High Court reference and the retrospective validation of the demand.

6. Finality of Tribunal's Order and Pending Reference Before the High Court:

The Tribunal's final order was not considered conclusive due to the pending High Court reference. The Tribunal highlighted that the reference proceedings were a continuation of the Tribunal's proceedings, and the finality of the order depended on the High Court's decision. Consequently, the refund claim was deemed premature.

Conclusion:

The Tribunal set aside the Commissioner (Appeals) order, disallowing the refund claim based on the retrospective validation of the demand by the Finance Act, 2000, and the pending High Court reference. The appeal was allowed, emphasizing the non-finality of the Tribunal's order and the premature nature of the refund claim.

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