1991 (12) TMI 63 - HC - Central Excise

Summary

Issues Involved:

1. Jurisdiction of Respondent No. 2 to initiate proceedings under Section 11A of the Central Excises and Salt Act, 1944.
2. Bar of limitation under Section 11A of the Act due to lack of particulars of fraud.
3. Binding nature of circulars issued by higher authorities on the Central Excise Department.

Detailed Analysis:

Issue A: Jurisdiction of Respondent No. 2 to Initiate Proceedings under Section 11A

The petitioner argued that the order dated 2nd March 1990 by the Collector of Central Excise (Appeals), which approved the classification list under Heading 7325.10, had attained finality as no appeal or revision was preferred by the Department. Consequently, Respondent No. 2 lacked jurisdiction to initiate a proceeding under Section 11A of the Act. The court noted that once a classification list is approved, it becomes binding unless the excise authorities take recourse to the appeal or revision procedures specified in Sections 35B or 35E of the Act. Citing precedents such as *Ajanta Iron & Steel Co. Pvt. Ltd. v. Union of India* and *Union of India v. Kamlakshi Finance Corporation Ltd.*, the court emphasized the principle of judicial discipline, which mandates that orders of higher appellate authorities should be followed unreservedly by subordinate authorities. The court concluded that Respondent No. 2 had no jurisdiction to initiate proceedings under Section 11A, thus quashing the impugned order.

Issue B: Bar of Limitation under Section 11A Due to Lack of Particulars of Fraud

Section 11A of the Act stipulates that a show cause notice must be issued within six months from the relevant date unless the case involves fraud, collusion, or wilful mis-statement, in which case the period extends to five years. The petitioner contended that no particulars of fraud were furnished in the notice or the impugned order. The court examined the notice and found that it did not specify any fraudulent actions but merely alleged non-compliance with certain notifications. Citing cases like *Collector of Central Excise v. Chemphar Drugs and Liniments* and *Padmini Products v. Collector of Central Excise*, the court held that mere inaction or failure on the part of the manufacturer does not suffice to invoke the extended limitation period. The court found no evidence of intentional evasion or suppression of facts by the petitioner, thus ruling that the proceedings were barred by limitation.

Issue C: Binding Nature of Circulars Issued by Higher Authorities

The petitioner argued that the Central Excise Department was bound by circulars issued by higher authorities, which clarified that unmachined iron castings should be classified under Heading 73.07. The court noted that the circulars and trade notices issued by the Central Excise Board are binding on the authorities. It cited cases like *Star Chemicals (Bombay) Ltd. v. Union of India* and *State of U.P. v. Mrs. Rakesh Dubey* to affirm that such circulars and notices are binding on the Department. The court concluded that the circulars clearly indicated that processes like annealing and surface cleaning do not alter the essential character of castings, thus supporting the petitioner's classification under Heading 73.07.

Conclusion:

The court allowed the petition, quashing the impugned order dated 31st July 1991. It held that Respondent No. 2 lacked jurisdiction to initiate proceedings under Section 11A, the proceedings were barred by limitation, and the authorities were bound by the circulars issued by higher authorities. The court directed that the amount deposited by the petitioner be adjusted against its current and future dues, with each party bearing its own costs.