2006 (3) TMI 149 - SC - Central Excise

Duty demand - Revision of approved classification list - Held that - Revenue contends that the decision in Cotspun (1999 (9) TMI 87 - SUPREME COURT OF INDIA) was no longer good law after the change effected by virtue of the amendment to the Finance Act 2000 - In that case the amendment to Section 11A effected by the Finance Act 2000 was challenged. The amendment sought to create jurisdiction in the authorities to recover duties short levied despite the fact that classification had been approved by the Department during this period with retrospective effect from 17-11-1980. In other words the basis of the principle enunciated in Cotspun was removed so that the ratio of the judgment would cease to apply for the period covered by the amended Sec. 11A. - In that view of the matter the order of the Tribunal insofar as it quashed the demands of duty prior to the date of the issuance of the show cause notice on the basis of the decision in Cotspun must be set aside. However if the respondent becomes liable to duty it will be open to the respondent to claim the benefit of any exemption which it might be entitled under the law - Decided partly in favour of Revenue.

Summary

Issues: Classification of Sodium Carboxy Methyl Cellulose (SCMC) under tariff item, Benefit of exemptions, Validity of the decision in Commissioner of Central Excise v. Cotspun Limited, Amendment to Section 11A of the Finance Act, 2000

In this case, the respondent manufactured Sodium Carboxy Methyl Cellulose (SCMC) which was initially classified under tariff item 68 of the Central Excise and Salt Act, 1945. However, a new tariff item 15A(I) was introduced on 1st March 1982 specifically for SCMC. Despite this amendment, the excise authorities accepted the classification under tariff item 68 by the respondent. A show cause notice was later issued seeking to recover duty short paid post the amendment date. The respondent relied on a previous decision and claimed that duty could not be claimed based on revised classification before issuing the show cause notice, and also sought exemptions.

The Tribunal upheld the respondent's submission on the issue of duty recovery before the show cause notice, but remanded the matter for redetermination of accounts considering the exemption notification. The appellant challenged the decision, arguing that the previous decision was no longer valid post an amendment to the Finance Act, 2000. The appellant cited a different case where an amendment to Section 11A allowed recovery of short levied duties despite approved classification by the Department.

The Supreme Court held that the amendment to Section 11A removed the basis of the previous decision, making it inapplicable for the period covered by the amended section. Therefore, the Tribunal's decision to quash the duty demands before the show cause notice based on the previous decision was set aside. However, if the respondent becomes liable for duty, they can claim any applicable exemptions. The Court confirmed the Tribunal's decision except for the duty recovery issue based on the previous decision.