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2023 (5) TMI 1148 - AT - Central ExciseShort payment of Central Excise duty - allegation of undervaluation of liquid hair dye - SCN alleged that the appellants incorrectly claimed higher abatement of excise duty of 105% (duty payable for goods classifiable under Tariff Item 14F) instead abatement of excise duty 8% or 10% (duty payable for goods classifiable under Tariff Item 68) which has been actually paid by them - recovery of differential duty alleged to be short levied along with Interest and penalty - HELD THAT - The order determining the classification was challenged by the Appellant before the Hon ble Bombay High Court 2002 (9) TMI 128 - HIGH COURT OF JUDICATURE AT BOMBAY , where the issued was determined in favour of revenue. This order was challenged by the appellant before the Hon ble Supreme Court 2008 (7) TMI 12 - SUPREME COURT , and Hon ble Supreme Court decided the issue in favour of appellant, i.e classification of liquid hair dye was held under TI 68. In the present case there is an specific letter dated 14th September 1982 of the Superintendent, informing the appellant that the assessment are to be made provisional and directing them to execute bond etc as required under law. In view of the observations made by the larger bench of tribunal the demands for duty or refunds can be effected only after finalization of the assessment. Thus the show cause notice dated 07.10.1988 was pre-mature and demand made under Section 11A in terms of the said show cause notice is pre-mature. Appellants as observed by the impugned order do not dispute that differential duty is payable by them hence we do not go into the issues relating to the demand/ quantification of duty paid by the appellant even under protest. The show cause notice issued without finalization of the assessment is pre-mature, so the demand made in terms of Section 11A of the Central Excise Act,1944 cannot be sustained and the amounts should have been recovered from the appellants by finalization of the provisional assessment. Thus the authorities are directed to finalize the provisional assessments at the earliest and appropriate the amounts as required from the amounts deposited by the appellant under protest in these proceedings. Interest and penalties - HELD THAT - As the demands made under the Section 11A are set aside, the demand for interest and penalties imposed also cannot be upheld - It is also observed that the during the period under dispute there was no provision for demanding the interest under the Central Excise Law. In case of provisional assessment the provisions to demand interest were first introduced in the w.e.f. 1.7.2001 in Rule 7(4) of the Central Excise (No. 2) Rules, 2001 which provides for imposition of interest consequent to order for final assessment under subrule. This Rule 7(4) being in the nature of delegated legislation cannot be retrospective as have been held in the decisions referred to by the learned counsel for appellant. The Board vide its Circular F. No. 354/66/2001-TRU dated 21.6.2001 clarified that Rule 7 relating to provisional assessment and for charging of interest, will apply to cases in which provisional assessment is resorted to on or after 1.7.2001 and not to past cases of provisional assessment even if the assessments are finalized on or after 1.7.2001. In view of the above the demand for interest as upheld by the impugned order cannot be sustained and is set aside - As the demand made under Section 11A is set aside so is the penalty imposed under Rule 173 Q of the erstwhile Central Excise Rules, 1944. Impugned order refers and relies upon the decision of Hon ble Bombay High Court in the appellants case which admittedly has been set aside by the Hon ble Supreme Court. The approach of the Commissioner (Appeal) by relying on the decision which has been set aside is not a fair judicial practice and cannot be approved. There are no merits in the impugned order and set aside the same - appeal allowed.
Issues Involved:
1. Validity of Show Cause Notice issued before finalization of provisional assessment. 2. Demand for differential duty under Section 11A of the Central Excise Act, 1944. 3. Imposition of interest under Section 11AB of the Central Excise Act, 1944. 4. Imposition of penalty under Rule 173Q(1)(a) of the Central Excise Rules, 1944. 5. Applicability of principles analogous to Section 11D and Section 11DD of the Central Excise Act, 1944. Summary: 1. Validity of Show Cause Notice: The appellant argued that the assessment for the period September 1982 to March 1985 was provisional under Rule 9B of the Central Excise Rules, 1944, and the show cause notice issued on 17.10.1988 before the finalization of provisional assessment was premature and thus bad in law. The Tribunal agreed, citing the Larger Bench decision in Rajiv Mardia, which held that demands or refunds can only be effected after the finalization of provisional assessments. 2. Demand for Differential Duty: The show cause notice alleged that the appellants had undervalued the 'liquid hair dye' by incorrectly claiming higher abatement of excise duty of 105% instead of 8% or 10%, leading to a short levy of Rs. 20,84,955.72. The Tribunal noted that the appellant admitted the duty short paid by availing excess excise duty abatement was liable to be paid by them. However, since the show cause notice was issued before the finalization of the provisional assessment, the demand under Section 11A was premature and could not be sustained. 3. Imposition of Interest: The Tribunal observed that during the disputed period, there was no provision for demanding interest under the Central Excise Law. The provisions for demanding interest on provisional assessments were introduced only w.e.f. 1.7.2001. Thus, the demand for interest upheld by the impugned order could not be sustained and was set aside. 4. Imposition of Penalty: The penalty of Rs. 20,84,960/- imposed under Rule 173Q(1)(a) of the Central Excise Rules, 1944, was also set aside. The Tribunal held that since the demand under Section 11A was set aside, the penalty imposed could not be upheld. 5. Applicability of Principles Analogous to Section 11D and Section 11DD: The Tribunal noted that the impugned order relied on the decision of the Hon'ble Bombay High Court, which had been set aside by the Hon'ble Supreme Court. The Tribunal disapproved of the Commissioner (Appeals) relying on a decision that had been overturned. Conclusion: The appeal was allowed, and the impugned order was set aside. The Tribunal directed the authorities to finalize the provisional assessments and appropriate the amounts deposited by the appellant under protest. The demands for interest and penalties were also set aside.
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