1991 (4) TMI 146 - HC - Central Excise

Summary

Issues: Classification of tobacco as manufactured or unmanufactured for Central Excise duty.

Analysis:
The petitioner, a partnership firm engaged in the sale of tobacco under specific brand names, sought to challenge the communication from the Asstt. Collector, Central Excise, classifying their tobacco as manufactured under Chapter sub-heading 2404.41 of the Central Excise Tariff Act, 1985. The petitioner contended that their tobacco should be classified as unmanufactured based on a trade notice and previous communication from the Asstt. Collector. The dispute revolved around whether the tobacco sold by the petitioner under the brand names "Hari Chhap Tobacco" and "Bandar Dholak Chhap Tobacco" should be considered manufactured or unmanufactured for the purpose of Central Excise duty.

The petitioner argued that the impugned order classifying their tobacco as manufactured was issued in violation of the principles of natural justice. They claimed that the issue of classification should have been decided after providing them with a proper opportunity to be heard and that the report of the Chemical Examiner, if relied upon, was not communicated to them. The petitioner emphasized that they were not given a chance to present their case against the classification decision.

On the other hand, the Central Government's counsel contended that the order was appealable, and the petitioner should have pursued the appellate remedy. They argued that the classification was based on the report of the Chemical Examiner, which was a valid basis for the decision.

The High Court, after considering the arguments, found that the impugned order was indeed passed in violation of the principles of natural justice. The court highlighted the importance of the classification issue, as it determined the levy or non-levy of duty on the tobacco products. Despite the provisional treatment of the goods as manufactured due to seizure, the final decision on classification should have been made after providing the petitioner with an opportunity to be heard. Therefore, the court quashed the order dated 6-12-1990 classifying the tobacco as manufactured, along with the consequential proceedings issued by the Superintendent, Central Excise on 10-12-1990.

The court allowed the writ petition, directing the Asstt. Collector to decide the classification issue promptly after giving the petitioner an opportunity to be heard. Until a final determination was made, the petitioner was permitted to clear the goods by executing the bond as specified in the Asstt. Collector's earlier letter. The court made no order as to costs, emphasizing the need for a fair hearing in matters of classification for Central Excise duty.