1991 (7) TMI 100 - HC - Central Excise

Summary

Issues Involved:
1. Interpretation of "millboard" under Exemption Notification Nos. 44/83 and 45/83.
2. Jurisdiction and validity of the show cause notice issued by the Collector of Central Excise.
3. Limitation period for issuing the show cause notice under Section 11A of the Central Excises & Salt Act, 1944.

Summary:

Issue 1: Interpretation of "millboard" under Exemption Notification Nos. 44/83 and 45/83
The petitioner manufactures millboard from waste paper and board cuttings, which is excisable under Item 17 of the First Schedule to the Central Excises & Salt Act, 1944. The dispute revolves around the interpretation of "millboard" under Exemption Notification Nos. 44/83 and 45/83. Notification No. 44/83-C.E. issued u/r 8(1) of the Central Excise Rules, 1944, provided for exemption of diverse items of paper and paperboard. The explanation in the notification defined "millboard" as "any unbleached homogeneous board having a thickness exceeding 0.50 millimeter and made out of waste papers with or without screening and mechanical pulp but without any colouring material being added thereto." Notification No. 45/83 also granted further concession with an identical definition of millboard. The petitioner claimed concession under these notifications, and the classification lists were approved by the respondents.

Issue 2: Jurisdiction and validity of the show cause notice issued by the Collector of Central Excise
On 22nd December 1986, the Collector of Central Excise issued a show cause notice to the petitioner for the recovery of differential Central Excise Duty of Rs. 38,34,536.94, alleging that the goods were not eligible for the concession as mechanical pulp was not used. The petitioner challenged the notice on the grounds that it was not necessary for millboard to contain mechanical pulp for obtaining the concession. The petitioner relied on previous decisions and interpretations by the Government of India, the Central Board of Excise & Customs, and this Court, which indicated that the presence of mechanical pulp was optional. The respondents argued that the show cause notice was valid and that the petitioner had an alternative remedy under the Act. The Court held that a show cause notice could be challenged under Article 226 in appropriate circumstances, such as when it is without jurisdiction, suffers from an incurable infirmity, or is contrary to judicial decisions.

Issue 3: Limitation period for issuing the show cause notice under Section 11A of the Central Excises & Salt Act, 1944
The Court found that the impugned show cause notice was issued beyond the period of limitation prescribed u/s 11A of the Act. The monthly returns for the period in question were filed between 1-4-1983 and 31-10-1985, but the notice was issued on 22-12-1986. The petitioner had explicitly described the raw material used, which did not include mechanical pulp, and the respondents had approved the classification lists and tested the millboard. There was no question of fraud, collusion, or wilful misstatement or suppression of facts. The Court concluded that the petitioner was acting on a possible interpretation of the notifications, supported by opinions from the Government and the Central Board of Excise & Customs. Therefore, the provisions of Section 11A would not be attracted, and the show cause notice was liable to be quashed on this ground as well.

Conclusion:
The application was allowed, and the Rule Nisi was made absolute. The impugned show cause notice and all proceedings thereunder were quashed. There was no order as to costs.