1992 (6) TMI 31 - HC - Central Excise

Issues Involved:

1. Classification of the manufactured item under the correct Tariff Item.
2. Entitlement to exemption under Notification No. 182/82.
3. Award of interest on the refund amount.
4. Applicability of the Central Excises and Customs Laws (Amendment) Act, 1991.

Issue-wise Detailed Analysis:

1. Classification of the Manufactured Item:
The primary issue was whether the item manufactured by the respondent Company, P.V.C. Leather cloth, should be classified under Tariff Item No. 19(iii) or the residuary Tariff Item No. 68 of the Central Excise Act. The Assistant Collector initially classified the product under Tariff Item 19(iii), which pertains to cotton fabrics impregnated or coated with artificial plastic materials. The respondent Company argued that the product should be classified under Tariff Item No. 68, a residuary item, and claimed that the duty paid under Tariff Item 19(iii) was a mistake of law. The Court held that the final product, P.V.C. Leather cloth, did not meet the criteria under Tariff Item 19(iii) because the cotton fabric used in the process lost its identity and did not predominate in weight. Consequently, the Court concluded that the product should be classified under Tariff Item No. 68, supporting the Company's claim.

2. Entitlement to Exemption under Notification No. 182/82:
The second issue was whether the Company was entitled to an exemption from excise duty under Notification No. 182/82, which exempts articles made of plastic falling under Item No. 68. The learned single Judge accepted the Company's claim that since the product falls under Tariff Item No. 68, it is exempt from duty from May 11, 1982, onwards. The Department contended that the exemption could not be granted unless specific conditions were met, such as the articles being produced from artificial resins or plastic materials on which duty had already been paid. However, the Court found that the Assistant Collector had not rejected the refund claim on these grounds and that the Department had not raised this issue before the learned single Judge. Therefore, the Court upheld the Company's entitlement to the exemption.

3. Award of Interest on the Refund Amount:
The third issue concerned the award of interest on the refund amount. The learned single Judge directed the Department to refund the amount along with interest at the rate of 12% per annum. The Department challenged this decision, but the Court found no infirmity in awarding interest, stating that the Company had paid the amount under a mistaken notion of law and was entitled to the refund with interest. The direction to refund with interest was deemed correct and discretionary.

4. Applicability of the Central Excises and Customs Laws (Amendment) Act, 1991:
The final issue was whether the Company was entitled to the refund in light of the Central Excises and Customs Laws (Amendment) Act, 1991. The Department argued that under the amended Section 11B, the Company needed to prove that the duty paid had not been passed on to the customer. The Court held that this issue would arise when the Assistant Collector computes the refund amount. The validity of the amended provisions was not determined in this judgment, and the Court directed the Assistant Collector to examine the amount refundable and whether it should be refunded under the amended provisions.

Conclusion:
The appeal was dismissed with costs. The Department was directed to compute the refund amount within eight weeks and pass a speaking order. If the Assistant Collector finds the amount refundable, it should be refunded within four weeks from the date of the order. The Court also directed that if the Government had deposited Rs. 75 lacs in compliance with a previous order, the amount should be allowed to be withdrawn by the appellants along with any accrued interest.

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