1984 (4) TMI 190 - AT - Central Excise

Summary

Issues: Duty credit eligibility under different tariff headings, retrospective effect of notifications, correct assessment for duty recovery

In this case, the Collector of Central Excise, Madras filed an appeal against an Order-in-Appeal passed by the Collector of Central Excise (Appeals) Madras. The issue revolved around M/s. Addisons Paints & Chemicals Ltd. receiving nitrocellulose and chlorinated rubber under Item 68, entitled to duty credit under Notification 201/79-C.E., but later, these items became assessable under Item 15A. The Central Excise demanded duty as they believed the duty credit was wrongly taken post the change in assessment. The Assistant Collector held that Notifications 136/82-C.E. and 137/82-C.E. were not retrospective, leading to the duty demand. However, the Collector (Appeals) ruled in favor of the appellants, ordering a refund of the credited amount and recrediting the debited amount in the account. The main contention was whether duty recovery was justified post the change in assessment and if the duty credit was valid under the new tariff heading.

The key argument put forth by the learned Counsel for M/s. Addisons Paints was that the duty demand was unjust as the raw materials had been cleared before the assessment change. They contended that the action of the Appellate Collector was correct in ordering the refund. On the other hand, the department's counsel argued that post the change in assessment, the raw materials were covered under a different tariff heading, making them ineligible for the earlier duty credit. They justified the denial of credit and the recovery of the amount taken as credit in R.G. 23 for goods yet to undergo the manufacturing process.

The Tribunal analyzed the situation and found that the Central Excise's demand for duty from M/s. Addisons Paints based on the change in classification was erroneous. They emphasized that once goods are assessed and cleared under a specific item, the assessment cannot be altered except through a proper process like issuing a demand under Section 11A against the manufacturer, not the purchaser. Since the assessment under Item 68 was correct until the change in the budget, the duty credit under Notification 201/79-C.E. was valid. The Tribunal rejected the appeal, deeming the recovery of duty credit as incorrect.

In conclusion, the Tribunal directed the Central Excise to make necessary arrangements within three months to restore any amounts taken or recovered from M/s. Addisons Paints & Chemicals during the previous proceedings, affirming the validity of the duty credit under the original assessment.