1990 (3) TMI 163 - AT - Central Excise

Summary

Issues Involved:
1. Classification of rigid polyurethane foam under the Central Excise Tariff Act, 1985.
2. Demand raised on RT 12 assessments without issuing a show cause notice.

Issue-Wise Detailed Analysis:

1. Classification of Rigid Polyurethane Foam:

The primary issue in these appeals was whether rigid polyurethane foam should be classified under sub-heading No. 3921.11/3921.90 as claimed by the appellants or under sub-heading No. 3909.60 as held by the authorities below under the Central Excise Tariff Act, 1985.

The appellants argued that the rigid polyurethane foam, manufactured in the shape of buns or blocks with regular geometric shapes, should fall under sub-heading 3921.11 and be eligible for exemption under Notification No. 243/83-C.E., dated 9-9-1983. They contended that the Department erred in classifying the item under 3909.60 on the grounds that blocks are omitted under sub-heading 39.21 and the goods in question, obtained by the reaction of two non-plastic chemicals, are of 'primary form'. The learned Advocate referred to the Board's Circular No. 10/89 dated 10-2-1989, which clarified that polyurethane foam products in the form of blocks of regular geometric shape should be classified under Heading No. 39.21.

The Departmental Representative countered that circulars and Trade Notices inconsistent with the statute are not binding on quasi-judicial authorities. The rigid polyurethane foam, being in the form of bun-like blocks, constituted a primary form as per the Deputy Chief Chemist's opinion. The Department argued that there was no change in the old Tariff Item 15A(3) and the classification should be under 3909.60.

The Tribunal considered the arguments and found that the rigid polyurethane foam, admitted by the appellants to be in bun-like blocks, had irregular shapes. The Deputy Chief Chemist's report confirmed that the foam blocks had a curved irregular top, making them primary forms. The Tribunal upheld the classification under sub-heading 3909.60, stating that the term 'block' is omitted under sub-heading 3921.11, and the blocks were of irregular shape. The contention that classification was modified without issuing a show cause notice was dismissed, as the appellants were given sufficient opportunity to present their case.

2. Demand Raised on RT 12 Assessments Without Issuing a Show Cause Notice:

The second issue was whether the demand raised on RT 12 assessments without issuing a show cause notice for the period October 1987 to January 1988 was valid.

The appellants argued that the issue of a show cause notice is mandatory, and in its absence, the demand is null and void. They cited several decisions supporting their contention that a show cause notice must be issued for demands on RT 12 assessments.

The Departmental Representative submitted that the demand on RT 12 assessments is a requirement of Rule 173(1) of the Act, and non-issuance of a show cause notice would not vitiate the proceedings but could be treated as a violation of natural justice. He had no objection to sending the matter back to the Assistant Collector with the direction to issue a show cause notice.

The Tribunal referred to the Kerala High Court's decision in the case of M.A. Good Shepherd Rubber Co. v. Inspector of Central Excise, which quashed the assessment on the ground of non-issuance of a show cause notice. This ratio was confirmed by the Supreme Court in the case of C.C.E., Baroda v. M/s. Kosan Metal Products Ltd. and Others, and followed by the Tribunal in the case of Indian Iron and Steel Co.

The Tribunal concluded that even if there is a demand on RT 12, a show cause notice must be issued. The demand raised on RT 12 assessments without issuing a show cause notice was not sustainable.

Conclusion:

The appeal concerning the classification issue (Appeal No. 1544/89) was dismissed, upholding the classification under sub-heading 3909.60. The appeals concerning the demand raised on RT 12 assessments without issuing a show cause notice were allowed, and the demands were set aside. The Tribunal emphasized the necessity of issuing a show cause notice for demands on RT 12 assessments, in line with principles of natural justice.