2017 (8) TMI 1413 - SC - Central Excise

Whether an assessee who has accepted the classification under the Central Excise Tariff Act is liable to pay duty as per the said classification without insisting on a notice under Section 11A of the Act? - Held that - Section 11A of the Act enjoins a duty on the concerned Central Excise Officer to show cause an assessee as to why the assessee should not pay the duty not levied or not paid or short levied or short paid or erroneously refunded, as the case may be, details of which are required to be mentioned in the show cause notice. On cause being shown by the assessee, the notice(s) is required to be adjudicated upon by the Central Excise Officer issuing such notice under Section 11A which order can be the subject matter of further proceedings under the Act. The situations in which an assessee can legitimately deny its liability to pay duty even after accepting a classification may be so myraid that it is not for the Court to speculate the same. The very fact that the requirement of giving notice has been statutorily engrafted casting a mandatory character to the said requirement is sufficient for the Court to take the view that in the present appeals the demands raised for payment of duty following the classification under Chapter Sub-Heading 3920.32 without giving the assessee an opportunity as contemplated by Section 11A of the Act is legally impermissible and therefore would not be tenable in law. Appeal dismissed - decided against Revenue.

Summary

Issues:
Classification under Central Excise Tariff Act - Liability to pay duty without Section 11A notice.

Analysis:
The Supreme Court considered the appeal against the judgment of the Customs, Excise and Gold (Control) Appellate Tribunal regarding the classification of High-Density Polyethylene (HDPE) tapes, fabrics, and sacks under the Central Excise Tariff Act. The main issue was whether an assessee accepting a classification under the Act is liable to pay duty without receiving a notice under Section 11A. The Court noted that the respondent-assessee claimed classification under Chapter Sub-Heading 3926.90, while the Revenue insisted on Chapter Sub-Heading 5406.90. Despite pending show-cause notices, the Appellate Tribunal classified the goods under Chapter Sub-Heading 3920.32. The duty liability was determined based on this classification, even though earlier notices demanded duty under a different sub-heading. The respondent challenged this, leading to the present appeal.

The appellant-Revenue argued that acceptance of the Tribunal's classification eliminates the need for a Section 11A notice, as it implies acknowledgment of duty liability. In contrast, the respondent contended that the statutory requirement of a reasonable opportunity under Section 11A is crucial, and accepting a classification does not automatically imply duty liability. Section 11A mandates the Central Excise Officer to issue a show-cause notice detailing the duty discrepancies, allowing the assessee to respond before adjudication. The Court emphasized that while duty must align with the determined classification, accepting a classification does not equate to admitting duty liability. Various circumstances, such as exemptions or limitations, could impact duty liability, justifying the need for a formal notice and response.

The Court highlighted the statutory importance of providing a reasonable opportunity to the assessee, as enshrined in Section 11A. Denying an assessee this opportunity, despite accepting a classification, renders the demand for duty legally impermissible. The Court upheld the Tribunal's decision, emphasizing that the mandatory nature of the notice requirement under Section 11A makes it unlawful to demand duty without affording the assessee a chance to respond. Consequently, the Court dismissed the Revenue's appeals, affirming the Tribunal's order based on the legal impermissibility of demanding duty without complying with the statutory obligation of providing a reasonable opportunity for the assessee to contest the duty liability.