1986 (4) TMI 70 - HC - Central Excise

Summary

Issues Involved:

1. Validity of the demand notice for differential duty.
2. Requirement of a show cause notice under Section 11A of the Central Excises and Salt Act, 1944.
3. Validity of the modification of the classification list.
4. Compliance with principles of natural justice.
5. Interpretation and compliance with the High Court's directions in Miscellaneous Petition No. 104 of 1984.

Issue-Wise Detailed Analysis:

1. Validity of the Demand Notice for Differential Duty:

The petitioners challenged the demand notice dated 6-6-1985, which called for payment of differential duty from March 1984 to April 1985. The court found that this demand was not preceded by a show cause notice as required by Section 11A of the Act. Therefore, the demand could not be sustained in law. However, the court allowed the respondents to issue a fresh demand in compliance with Section 11A.

2. Requirement of a Show Cause Notice under Section 11A:

The petitioners argued that the impugned order by the Collector was void due to the absence of a show cause notice under Section 11A. The court clarified that a show cause notice under Section 11A is mandatory when recovering excise duty that has not been levied or paid, short-levied, short-paid, or erroneously refunded. However, the court noted that the Collector's order did not demand any duty but merely affirmed the modification of the classification list. Therefore, the provisions of Section 11A were not applicable in this context.

3. Validity of the Modification of the Classification List:

The petitioners contended that the modification of the classification list by the Assistant Collector was invalid without a show cause notice under Section 11A. The court held that Section 11A does not apply to the modification of the classification list. The Assistant Collector had the authority to revise the classification list, and the Collector's affirmation of this modification was valid. The court found no provision in the Act or Rules that prescribed a specific procedure for modifying the classification list.

4. Compliance with Principles of Natural Justice:

The court examined whether the principles of natural justice were followed before modifying the classification list. It was found that the Assistant Collector had issued a show cause notice (Ex. R-9) to the petitioners before modifying the classification list (Ex. R-11). The petitioners were given an opportunity to respond but did not avail themselves of it. The Collector also provided an opportunity for hearing and adducing evidence, which the petitioners did not utilize. Therefore, the court concluded that the principles of natural justice were not violated.

5. Interpretation and Compliance with the High Court's Directions in Miscellaneous Petition No. 104 of 1984:

The petitioners argued that the Collector's order violated the High Court's directions in Miscellaneous Petition No. 104 of 1984. The court reviewed the High Court's judgment, which had quashed the demand for Rs. 26,47,749.39 but directed the Collector to decide the appeal regarding the classification list on merits. The court found no direction in the High Court's judgment requiring a show cause notice under Section 11A for the appeal. The court also addressed the conflict between the main judgment and the explanatory note by Gyani J., concluding that the judgment signed by both judges prevailed. Therefore, the Collector's order did not violate the High Court's directions.

Conclusion:

The court partly allowed the petition by quashing the demand notice dated 6-6-1985 for differential duty from March 1984 to April 1985, due to non-compliance with Section 11A. It permitted the respondents to issue a fresh demand in accordance with the law. The petitioners' request to quash the Collector's order modifying the classification list was dismissed, and the interim order was vacated. The court upheld the principles of natural justice and found no violation of the High Court's directions in Miscellaneous Petition No. 104 of 1984.