2002 (7) TMI 108 - HC - Central Excise

Summary

Issues Involved:
1. Proper classification of Rayon Woven Fabrics for excise duty purposes.
2. Conflicting appellate orders by the same Collector of Excise (Appeals).
3. Procedural lapses and inaction by superior officers in the Excise Department.
4. Legality of the second appellate order.
5. Procedural fairness and natural justice in the CEGAT hearing.

Detailed Analysis:

1. Proper Classification of Rayon Woven Fabrics for Excise Duty Purposes:
The primary issue in this case revolves around the classification of Rayon Woven Fabrics manufactured by the petitioner company for excise duty under the Central Excise Tariff Act, 1985. The petitioner argued that these fabrics fall under Heading 5408 and are not subject to additional excise duty. Conversely, the Excise Department classified them under Heading 5902.30 as 'Tyre Cord Fabric' of Viscose Rayon, attracting additional duty.

2. Conflicting Appellate Orders by the Same Collector of Excise (Appeals):
The case highlights a disturbing scenario where the same Collector of Excise (Appeals) issued two contradictory orders in appeal. The first order dated 27th October 1987 confirmed the classification under Heading 5902.30, while the second order dated 24th November 1988 set aside the original order and remanded the matter for a fresh hearing. This discrepancy raised serious questions about procedural integrity and administrative oversight.

3. Procedural Lapses and Inaction by Superior Officers in the Excise Department:
The judgment points out the failure of superior officers to take appropriate action upon discovering the conflicting orders. Despite being aware of the issue, no significant steps were taken to address it. The affidavits filed by various officers, including Mr. A.C. Buck, Commissioner of Central Excise, revealed an attempt to downplay the matter, citing reasons such as the retirement of the involved officers and no pecuniary loss to the revenue. This inaction and reluctance to investigate further were criticized by the court.

4. Legality of the Second Appellate Order:
The court scrutinized the second appellate order dated 24th November 1988, which was produced by the petitioners. Upon investigation, it was revealed that this order was indeed passed by Mr. Mittal, the same officer who issued the first order. However, the second order did not reference the first order or explain the circumstances under which it was issued. The court declared the second order a nullity and inoperative, emphasizing that it could not coexist with the first order, which had already been confirmed by the CEGAT.

5. Procedural Fairness and Natural Justice in the CEGAT Hearing:
The petitioners contended that they were not given a proper hearing before the CEGAT, which dismissed their appeal without considering the second appellate order. The court agreed that the petitioners should have been heard regarding the legality of the first order-in-appeal, in line with the principles of natural justice. Consequently, the court set aside the CEGAT's order dated 23rd September 1996 and restored the appeal for a fresh hearing on merits.

Conclusion:
The court directed the Central Board of Excise and Customs to examine the conduct of the involved officers, including Mr. Mittal and his superiors, for potential dereliction of duty. The Board was also tasked with considering any necessary amendments to the relevant service rules to prevent similar issues in the future. The CEGAT was instructed to hear and decide the revived appeal expeditiously, ensuring procedural fairness.

Follow-Up Actions:
The Prothonotary and Senior Master of the court were instructed to send a copy of the order to the Member Secretary (Personnel) of the Central Board of Excise and Customs. The Board was required to file a report by 30th September 2002, detailing the decisions and steps proposed. The case was to be placed before the concerned Bench for further directions on 1st October 2002.