1988 (3) TMI 191 - AT - Central Excise

Issues Involved:
1. Whether the appellants used power or steam in the manufacture of soap.
2. Entitlement to the benefit of Notification No. 28/64-C.E., dated 1.3.64.
3. Validity of the show cause notice issued contrary to the order dated 28.4.70.
4. Whether the demand for duty was barred by limitation.
5. Whether the long-standing practice of not charging duty could be changed retrospectively.

Issue-wise Detailed Analysis:

1. Use of Power or Steam in the Manufacture of Soap:
The Department alleged that the appellants used power and steam in the manufacturing process of soap. The manufacturing process involved heating soap stock with steam and transferring it with the aid of power. The Collector of Central Excise, Indore, confirmed that steam was used in boiling soap-stock and power was used in transferring the soap-stock to the soap-stock pans. This integrated process indicated that power and steam were used in the manufacture of soap, thus disqualifying the appellants from the exemption under Notification No. 28/64-C.E.

2. Entitlement to the Benefit of Notification No. 28/64-C.E.:
Notification No. 28/64-C.E. exempted soap from central excise duty if no process was ordinarily carried on with the aid of power or steam for heating. The Collector of Central Excise, Indore, held that since power and steam were used in the integrated manufacturing process, the appellants were not entitled to the exemption. This decision was supported by the Tribunal's previous rulings, such as the Gujarat Dye Tex Case, which established that pumping raw material with power constitutes manufacture with the aid of power.

3. Validity of the Show Cause Notice Issued Contrary to the Order Dated 28.4.70:
The appellants contended that the show cause notice issued on 22.11.82 was invalid as it contradicted the Collector of Central Excise, Nagpur's order dated 28.4.70. However, the Collector of Central Excise, Indore, noted that the 1970 order was not a speaking order and was not binding. Additionally, the manufacturing process had changed since 1981, justifying the reopening of the issue. The Tribunal agreed with this view, stating that the change in the manufacturing process allowed the Department to re-examine the matter.

4. Whether the Demand for Duty Was Barred by Limitation:
The appellants argued that the demand for duty was barred by limitation. The Collector of Central Excise, Indore, held that there was no suppression or willful mis-declaration by the appellants, thus confirming the demand for duty for six months prior to the issuance of the show cause notice. The Tribunal upheld this decision, noting that the classification list filed by the appellants was not properly approved, allowing the Department to demand duty for the specified period under Section 11-A of the Central Excises and Salt Act, 1944.

5. Whether the Long-standing Practice of Not Charging Duty Could Be Changed Retrospectively:
The appellants argued that the long-standing practice of not charging duty on soap should only be changed prospectively. The Tribunal dismissed this argument, stating that the change in the manufacturing process since 1981 justified the retrospective demand for duty. The Tribunal referenced the Karnataka High Court's decision in Shyam Sunder U. Nichani, which allowed the reopening and reassessment of classification lists under Section 11-A of the Central Excises and Salt Act.

Conclusion:
The Tribunal concluded that both steam and power were used in the integrated process of manufacturing soap, disqualifying the appellants from the exemption under Notification No. 28/64-C.E. The show cause notice and the demand for duty were valid, and the long-standing practice argument was not applicable due to the change in the manufacturing process. The appeal was dismissed, and the impugned order was upheld.

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