1985 (10) TMI 176 - HC - Central Excise

Issues Involved:

1. Legality of the show cause notice demanding the difference of excise duty for the period 16-10-1978 to 15-4-1979.
2. Classification of carbon paper under the Central Excise Tariff Item 17(2) versus Item 68.
3. Validity of the demand for the subsequent period 16-4-1979 to 22-2-1980.
4. Jurisdiction and consistency in the issuance of trade notices and tariff advice.
5. Entitlement to a refund of the excise duty paid under protest.

Issue-wise Detailed Analysis:

1. Legality of the Show Cause Notice:

The petitioner, a company engaged in the manufacture of carbon paper, challenged the show cause notice issued on 16-4-1979, which proposed to demand the difference of duty for the period from 16-10-1978 to 15-4-1979. The petitioner argued that the carbon paper was correctly subjected to duty under Item 68 as per Trade Notice 56/76 issued by the Collector, which classified carbon paper as an article of stationery outside the purview of Item 17 of the Central Excise Tariff. The court found merit in the petitioner's contention, stating that there was no reason for the Assistant Collector to take a different view from the established trade notice and thus quashed the show cause notice.

2. Classification of Carbon Paper:

The Assistant Collector had classified carbon paper under Item 17(2) of the Central Excise Tariff, treating it as coated paper. This classification was upheld by the Appellate Collector. However, the petitioner argued that carbon paper should be classified under Item 68, as per the Trade Notice 56/76 and Tariff Advice 5/76, which treated carbon paper as an article of stationery. The court agreed with the petitioner, noting that the carbon paper was rightly subjected to levy under Item 68 as per the trade advice issued by the Board and there was no justification to review the earlier levy.

3. Validity of the Demand for the Subsequent Period:

The demand for the period from 16-4-1979 to 22-2-1980 was also challenged on similar grounds. The petitioner contended that the Trade Notice 56/76 applied to this period as well, and the department was incorrect in treating carbon paper as coated paper under Item 17(2) after its amendment on 27-5-1976. The court found that the department's action was unjustified, as there was no further clarification or trade notice issued post-amendment to reclassify carbon paper under Item 17(2).

4. Jurisdiction and Consistency in Issuance of Trade Notices:

The petitioner challenged the jurisdiction of the Collector of Karnataka in issuing the trade notice that reclassified carbon paper under Item 17(2). The court emphasized that the interpretation of tariff items should be uniform across the country and should not be subject to varying interpretations by different Collectors. The court noted that many other Collectors continued to treat carbon paper as stationery under Item 68 until it was specifically added to Item 17 in 1982, underscoring the need for consistency.

5. Entitlement to Refund:

The petitioner sought a direction for the refund of Rs. 4,61,218.18 paid under protest for the period from 4-3-1980 to 26-3-1981 and for the subsequent period. The court allowed the petitioner to make such a claim before the department, indicating that the petitioner is entitled to seek a refund of the excise duty paid under protest.

Conclusion:

The writ petitions were allowed, and the orders of the Assistant Collector and the Appellate Collector, along with the demand notice, were set aside. The court ruled in favor of the petitioner, recognizing the validity of the trade notices and tariff advice that classified carbon paper as an article of stationery under Item 68. The petitioner was granted the liberty to claim a refund of the excise duty paid under protest. The rule issued was made absolute.

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