1987 (11) TMI 236 - AT - Central Excise

Summary

Issues Involved:
1. Classification of goods under Tariff Item 17(4) CET or 68 CET.
2. Competence of the Assistant Collector to re-open the issue of classification after approval.
3. Applicability of duty demand retrospectively or prospectively.

Detailed Analysis:

1. Classification of Goods:
The primary issue was whether the goods manufactured by the appellants, described as 'composite containers' or fibre drums, should be classified under Item 17(4) CET or Item 68 CET.

- Appellants' Argument: The appellants argued that their containers, primarily made of paper/board with plastic or hardboard ends, should be classified under Item 17(4) CET as articles made of paper. They cited various case laws and a Trade Notice (No. 49(MP)/Paper(2)/82) to support their claim that tubular containers are covered under Item 17(4) CET.

- Respondents' Argument: The respondents contended that the composite nature of the containers, which included essential parts made of materials other than paper, excluded them from Item 17(4) CET. They referenced the Tribunal's decision in the case of Indian Textile Paper Tube Company, Madras v. Collector of Central Excise, Madurai, which held similar containers to be assessable under Item 68 CET.

- Tribunal's Decision: The Tribunal observed that the containers were not wholly made of paper and included essential parts made of other materials. It concluded that the containers did not fall under Item 17(4) CET but were correctly classifiable under Item 68 CET. The Tribunal emphasized the trade understanding of the goods and cited the decision in Indian Textile Paper Tube Company, which supported the classification under Item 68 CET.

2. Competence to Re-open Classification:
The second issue was whether the Assistant Collector had the authority to re-open the classification issue after it had been approved.

- Appellants' Argument: The appellants argued that once the classification list was approved, it could not be reviewed by the same authority. They cited the case of Ajanta Iron and Steel Company Private Limited v. Union of India and Others, which held that an approved classification list could not be disapproved by another Assistant Collector.

- Respondents' Argument: The respondents argued that under Section 11A of the Central Excises and Salt Act, 1944, the Assistant Collector had the authority to review and correct any error in the classification. They cited the Karnataka High Court decision in Shyam Sunder U. Nichani v. Assistant Collector of Central Excise, which supported the power of the Assistant Collector to re-open the classification issue.

- Tribunal's Decision: The Tribunal held that there was no legal bar to the Assistant Collector raising a demand under Section 11A, even if the same authority had earlier approved the classification list. The Tribunal favored the decision of the Karnataka High Court, which was based on the Supreme Court's observations in D.R. Kohli v. Atul Products Ltd., over the Delhi High Court decision cited by the appellants.

3. Retrospective or Prospective Duty Demand:
The third issue was whether the duty demand could be raised for the period prior to the issue of the show cause notice or should be applicable only prospectively.

- Appellants' Argument: The appellants argued that any duty demand should be prospective and not retrospective. They cited cases where the Tribunal held that demands should be enforceable only from the date of the show cause notice, particularly when there was a long-standing practice of assessment under a particular heading.

- Respondents' Argument: The respondents argued that the Assistant Collector had the authority to raise a retrospective demand under Section 11A.

- Tribunal's Decision: The Tribunal noted that in the present case, there was no long-standing practice of assessment under a particular heading. The Tribunal held that the demand could be raised retrospectively as there was no established long-standing practice, and the appellants were aware of the potential reclassification. The Tribunal rejected the appellants' plea for prospective application of the duty demand.

Conclusion:
The appeal was dismissed, and the Tribunal upheld the classification of the goods under Item 68 CET. The Tribunal also confirmed the competence of the Assistant Collector to re-open the classification issue and allowed the retrospective application of the duty demand. The decision was supported by the observations of all the members, with additional emphasis on the Karnataka High Court's ruling and the absence of a long-standing practice in the present case.