2000 (2) TMI 342 - AT - Central Excise

Summary

Issues:
Manufacture and clearance of refrigeration and air-conditioning appliances under Central Excises and Salt Act, 1944 - Allegations of undervaluation and duty evasion - Show cause notice issued - Demand of differential duty confirmed - Challenge to the order.

Analysis:
The appellants were involved in the manufacture and clearance of refrigeration and air-conditioning appliances falling under Item 29A of the First Schedule to the Central Excises and Salt Act, 1944, classifiable under Chapter 84 of the Schedule to the Central Excise Tariff Act, 1985. The Department alleged that the manufacturers were undervaluing the products to evade duty, resulting in duty evasion amounting to Rs. 4,45,19,321.17 from 1-3-1981 to 24-8-1985. A show cause notice was issued on 31-3-1986, and after considering the manufacturer's response, the adjudicating authority confirmed a demand of Rs. 3,91,15,883.53, which was challenged by the manufacturer.

The counsel representing the appellant argued that all clearances were made in compliance with approved classification and price lists, both during the period covered by the show cause notice and subsequently. Citing legal precedents, the counsel contended that duty cannot be demanded based on an approved classification list until its correctness is challenged through a show cause notice. The impugned order was deemed illegal as all clearances were in accordance with approved lists under the Rules.

The Tribunal found that the clearances were indeed made as per approved classification and price lists, rendering the Department's actions pursuant to the show cause notice illegal. Consequently, the order of the adjudicating authority was set aside. Additionally, the Tribunal directed the appellant to deposit a sum of Rs. 1 Crore as per Section 35F of the Central Excise Act, which was to be refunded by the Department within one month from the date of receipt of the order.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the importance of adherence to approved classification and price lists in determining excise duty liabilities and highlighting the necessity for legal challenges to approved lists before demanding differential duty. The judgment underscored the principle that duty cannot be retrospectively imposed based on subsequent challenges to approved lists, ensuring clarity and consistency in excise duty assessments.