1996 (8) TMI 1 - HC - Central Excise

Central Excise Provisional assessment At the time of making final assessment under Rule 173-I ibid, Department would have to comply with Natural justice and quantify the amount of Excise duty due from the assessee, independent of provisions of Section 11A ibid.

Summary

Issues Involved:
1. Classification of block boards under the Central Excise Tariff.
2. Provisional assessment and final assessment of excise duty.
3. Applicability of Section 11-A of the Central Excise and Salt Act, 1944.
4. Encashment of bank guarantee.

Issue-wise Detailed Analysis:

1. Classification of Block Boards under the Central Excise Tariff
The appellant, M/s. Sarda Plywood Industries Limited, initially classified block boards under Heading 44.10 of the Central Excise Tariff, attracting a 15% duty rate. However, the department issued a show cause notice reclassifying block boards under Heading 44.08, subjecting them to a 30% duty rate. The Supreme Court upheld the department's classification, confirming block boards as "similar laminated wood" under Heading 44.08, liable to a 30% duty rate.

2. Provisional Assessment and Final Assessment of Excise Duty
The Assistant Collector directed provisional assessment of block boards at 30% ad valorem under Rule 9B of the Central Excise Rules, 1944, pending final classification. The appellant cleared block boards at a 15% duty rate per an interim court order. The department's final assessment, post-Supreme Court judgment, demanded Rs. 2,29,90,563.88 as basic duty and Rs. 52,65,758.58 as special duty for the period from March 1992 to January 1993. The court found that provisional assessments were made per Rules 9B and 173B, and the appellant's claim of no provisional assessments was without merit.

3. Applicability of Section 11-A of the Central Excise and Salt Act, 1944
The appellant argued that the department should have followed Section 11-A for recovering duty, which mandates a show cause notice within six months from the relevant date. The court noted that Section 11-A(3)(ii)(b) specifies the "relevant date" as the date of adjustment after final assessment in cases of provisional assessment. Thus, the department was not required to issue a show cause notice under Section 11-A for recovering differential duty post-final assessment. The court concluded that Section 11-A's provisions did not apply until the final assessment and adjustment of differential duty.

4. Encashment of Bank Guarantee
The appellant contended that the bank guarantee could not be encashed without following Section 11-A's mandatory provisions. The court observed that the bank guarantee was furnished at the appellant's request as security for arrears of duty up to 17-3-93. The department determined the duty payable after following principles of natural justice. The court found no merit in the appellant's claim of mala fide action by the department in demanding and encashing the bank guarantee. The court held that the department was entitled to encash the bank guarantee to recover the due amount.

Conclusion:
The appeal was dismissed, and the interim orders restraining the department from encashing the bank draft were vacated. The court affirmed the cost of Rs. 3000/- awarded by the learned single Judge in favor of the department.