1987 (11) TMI 188 - AT - Customs

Summary

Issues: Classification of products under disputed tariff items, demand of duty for past six months, application of Section 11A, financial condition of the applicants, pre-deposit of duty, early hearing of the case.

The case involves a dispute over the classification of products manufactured by small-scale manufacturers under different tariff items. The Department claimed the products should be classified under an old Tariff-Item 42, while the applicants argued for classification under Tariff Item 68. The Department issued a show cause notice demanding duty for the past six months based on the new classification. The original authority dropped the proceedings, but the Collector (Appeals) upheld the classification under Tariff Item 42, leading to a demand of Rs. 28,09,744.

The applicant's consultant argued that duty was paid based on the Department's own approval of the classification list, and there was no basis for demanding duty for the past six months under Section 11A. The consultant cited various decisions to support this argument. The financial condition of the applicants was also highlighted, showing losses and lack of liquid resources, making it challenging to pay the demanded duty.

The Department, represented by the SDR, contended that Section 11A allows for the demand of short levy for at least six months without specifying grounds or reasons for the demand. The SDR emphasized that the rulings cited by the applicant's consultant were specific to those cases and not applicable in general circumstances.

The Tribunal considered the arguments from both sides and acknowledged the unsettled legal position regarding the invocation of Section 11A in various situations. While noting conflicting rulings, the Tribunal referred to a Karnataka High Court case supporting the Department's position on the application of Section 11A. However, considering the financial hardship faced by the applicants and the lack of rebuttal from the Department on their financial condition, the Tribunal decided to dispense with the pre-deposit of duty as per the proviso to the Central Excises and Salt Act. Despite the high stakes and potential revenue impact, the Tribunal directed for an early hearing of the case due to the significant financial burden on the applicants.