1996 (12) TMI 84 - SC - Central Excise

Whether both natural colour polystyrene and the corresponding coloured grain had been classified under Tariff Item 15A(1)(ii)? Whether the Tribunal was right in holding that the appellants should pay excise duty as at the coloured stage, but limiting the quantum thereof to that which would have been paid had the demand under Tariff Item 68 been sustained? Held that - The Tribunal should not, in this case, have passed an order which proceeded upon a basis that is altogether different from that of the demand made upon the appellants. That is not moulding relief. The demand that was made upon the appellants was under Tariff Item 68 and it proceeded upon the basis that there was a process of manufacture of coloured polystyrene from uncoloured polystyrene. Having come to a conclusion against the Revenue on these counts, the appropriate order for the Tribunal to have passed was to have set aside the demand and left it open to the Revenue to proceed against the appellants, as permissible under the law. The appellants would then have had the opportunity of meeting the precise case made out by the Revenue. Assessee appeal allowed.

Summary

Issues:
Classification of polystyrene under Tariff Item 15A(1)(ii) or Tariff Item 68 for excise duty purposes.

Analysis:
The case involved the classification of polystyrene for excise duty purposes under Tariff Item 15A(1)(ii) or Tariff Item 68. The appellants, who manufactured polystyrene, were issued show cause notices by the Assistant Collector of Central Excise, proposing to classify coloured polystyrene under Tariff Item 68 instead of 15A(1)(ii). The Tribunal noted that the appellants argued coloured and uncoloured polystyrene were the same product, falling under Tariff Item 15A(1)(ii). The Revenue acknowledged that uncoloured polystyrene was dutiable but disputed the duty on coloured polystyrene cleared after colouring within the factory.

The Tribunal held that the demand to classify coloured polystyrene under Tariff Item 68 was unsustainable. It directed that duty demands should be quantified under Tariff Item 68 for the limited period and under Tariff Item 15A(1)(ii) for the rest, ensuring the total demand did not exceed what would have been payable under Tariff Item 68. The appellants challenged the order, arguing that since the Tribunal found coloured polystyrene could not be classified under Tariff Item 68, the demand should have been quashed.

The Supreme Court found that the Tribunal erred in passing an order based on a different premise than the Revenue's demand under Tariff Item 68. The Court held that the appropriate action for the Tribunal, after rejecting the Revenue's case, was to set aside the demand and allow the Revenue to proceed as per the law, giving the appellants a chance to address the specific case made by the Revenue. Consequently, the Court allowed the appeals, setting aside the Tribunal's judgments and orders, and permitted the Revenue to proceed as per the Tribunal's original order.

In another set of appeals related to the same issue, the Court allowed the appeals based on the judgment in the primary case. Additionally, in cross-appeals by the Revenue on the aspect of limitation, the Court dismissed them as nothing remained to be decided after the primary appeals were allowed.