2013 (9) TMI 908 - HC - Central Excise

Classification of Goods - manufacturing of stainless steel paddy parboiling and drier plant Revenue was of the view that the goods attract the excise duty and are not exempted from the duty, as these goods fall in CET Heading 8419 and not 8437 - What should be the arrangement made in the interregnum, inasmuch as, the petitioner is not permitted to clear the goods without payment of excise duty - Held that - The respondents are not permitting the petitioner to clear the goods without payment of excise duty, the respondents should issue show cause notice and conclude the proceedings at the earliest - Further, there should be some condition imposed upon the petitioner for clearing the goods in the interregnum The respondents shall issue show cause notice to the petitioner - the respondents shall take decision on the show cause notice and pass final speaking orders within one month thereafter in the interregnum, the petitioner shall be entitled to clear the goods without payment of duty in cash, instead the petitioner shall furnish bank guarantee equivalent to the amount of duty so that in case the matter is decided against the petitioner, the respondents are in a position to encash the said amount.

Summary

Issues:
Classification of goods under Central Excise Tariff Headings, issuance of show cause notice, challenge to order preventing clearance of goods without payment of excise duty.

Classification of Goods:
The petitioner firm, engaged in manufacturing stainless steel, paddy parboiling, and drier plant, claimed to fall under Central Excise Tariff Heading 8437 with nil duty rate. However, the department detained goods worth Rs.88,01,000, alleging they fall under CET Heading 8419, attracting excise duty. A case was booked against the petitioner without issuing a show cause notice, leading to a challenge of the order preventing goods clearance. The petitioner argued that the goods were wrongly classified, citing a Board Circular exempting duty on plant and machinery for paddy processing.

Show Cause Notice and Order Challenge:
The High Court emphasized that before final action, a show cause notice must be issued to allow the petitioner a full opportunity to respond. The court directed the respondents to issue a show cause notice within 15 days, with a 15-day response window for the petitioner. The respondents were instructed to make a decision and pass final orders within one month, providing an oral hearing if requested. During this period, the petitioner could clear goods without cash payment by furnishing a bank guarantee equal to the duty amount, ensuring encashment if the decision favored the respondents. The court allowed a 10-day grace period for legal remedies before encashing the bank guarantee if the order went against the petitioner.

This judgment addressed the dispute over goods classification, the necessity of a show cause notice before taking final action, and the interim arrangement allowing goods clearance with a bank guarantee. The court's directions sought to balance the interests of both parties while ensuring procedural fairness and legal remedies for the petitioner in case of an adverse decision.