1986 (7) TMI 121 - HC - Central Excise

Summary

Issues Involved:

1. Whether the show cause notice at Exhibit-M is ultra vires and unwarranted?
2. What order should be passed?

Issue-wise Detailed Analysis:

1. Whether the show cause notice at Exhibit-M is ultra vires and unwarranted?

The petitioners are engaged in the manufacture of iron and steel products, specifically a flat product of iron and steel of less than 3 mm in thickness and less than 125 mm in width, through a process known as "Hot Rolling." Initially, this product was classified under Tariff Item No. 26AA, sub-item (ii) and/or (iii) as "Balling Hoop and Strip," which the petitioners later contended was a mis-description based on a mistake of law. The Appellate Collector, Mr. V.K. Ashtana, upheld this contention and reclassified the product as bars, providing consequential relief to the petitioners. This order was not revised, and no statutory changes occurred subsequently.

Despite this, the Excise authorities issued a show cause notice on 26-10-1981, intending to classify the product under Tariff Item 26AA(ii) as "Bailing Hoops." The petitioners moved the High Court under Article 226 of the Constitution of India, arguing that the notice was issued beyond the six-month limit prescribed under Section 35A(3)(b) of the Central Excises and Salt Act, 1944, making it bad in law. They also contended that the product had been rightly classified under Item No. (ia) and that repeated enquiries were unwarranted.

The respondents argued that the petitioners had initially described the product as "Bailing Hoops" and that the classification lists amounted to an admission. They also contended that the show cause notice was justified under Rule 173B(5) of the Central Excise Rules, 1944.

The court found that the show cause notice was the second attempt to circumvent Mr. Ashtana's verdict and that forcing the petitioners to face an unnecessary ordeal would be unfair. The court emphasized that the product in question was the same throughout the dispute and that the statutory position remained unchanged. The court also noted that the product was uneven in shape, size, and thickness, as confirmed by various test reports, and thus fell under Tariff Item No. (ia).

The court held that the show cause notice was ultra vires because it was issued beyond the six-month limit specified in Section 11A of the Act. The court also found that Rule 173B(5) did not apply to this case, as it was an attempt to get over adverse adjudications by Mr. Ashtana and Mr. Patil.

2. What order should be passed?

The court concluded that the show cause notice at Exhibit-M was ultra vires and unwarranted. The petition was allowed, and the rule quashing the notice and the inquiry proposed thereunder was made absolute. The petitioners were awarded costs from the respondents, who were also ordered to bear their own costs.

ORDER:

Petition allowed. Rule, quashing the notice and the inquiry proposed to be taken thereunder, is hereby made absolute. Petitioners shall get their costs from the respondents, who shall, in addition, bear their own.