9911796707
TMI Blog1983 (9) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 7/80, dated 27.2.1980. This notification provided for a concessional rate of duty, namely 33%, in respect of UFMP manufactured from raw naphtha or any chemical derived therefrom, on which the appropriate amount of duty of excise has already been paid . The classification (is it were duly approved by the concerned Assistant Collector. Subsequently, a show cause notice dated 15.1.81 was issued to the appellants, requiring them to show cause to the Assistant Collector why the approval to the three classification lists should not be revoked, the appropriate amount of duty on the UFMP should not be approved at 40% instead of at 33% as leviable under Notification No.7/80, and the differential duty should not be demanded from them under Rule 10 of the Central Excise Rules. After following the adjudication procedure, the Assistant Collector passed his order dated 1.7.81 containing decision as proposed in the show cause notice. An appeal to the Collector of Central Excise (Appeals) having been rejected, the appellants have come before us. 3. On behalf of the appellants, their Advocate, Shri K. Narasimhan, raised a number of points, on which he argued at length. It is, however, necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply to the show cause memo was also not avail able to them on that quantity of formaldehyde which had not borne the incidence of duty for whatever reasons. It could of course be claimed in respect of such quantity of formaldehyde which could be shown to be duty paid but once the proforma credit was taken (and A.C. is right in this respect) the material in effect becomes non-duty paid in character and, therefore, UFMP produced by its interaction with urea would not be entitled to the benefit of Notification No. 7/80." 7. The entire case of the Department is, therefore, on the basis that the appellants bought formaldehyde and brought it into their factory; that they took proforma credit of duty under Rule 56A on the formaldehyde so brought in; that the formaldehyde became in effect non-duty paid in character; and consequently UFMP produced by the interaction of the formaldehyde with urea (or rather the UFMP so produced) would not be entitled to the benefit of Notification No. 7/80. 8. Shri Narasimhan pointed out that all these observations contained a basic error of fact. This was that the appellants did not buy any formaldehyde or bring it into their factory. What they boug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear, therefore, that the lower authorities acted throughout on the wrong assumption that the appellants had brought formaldehyde into their factory and availed themselves of proforma credit of the duty paid on it, and it was on this ground that their eligibility for the concessional rate of duty under Notification No. 7/80 was assailed. 11. As we said, the above facts were not controverted by Smt. Zutshi, appearing for the Department. There was a faint suggestion that if the formaldehyde was not duty paid, even though manufactured within the factory and therefore exempt from duty, the appellants would be Ineligible for the benefit of the duty concession on the UFMP manufactured using the said formaldehyde. In other words, the argument is that the words manufactured from raw naphtha or any chemical derived therefrom on which the appropriate amount of duty of excise has already been paid , should be interpreted to mean that even where the raw naphtha was duty-paid, any intermediate chemical manufactured from it and used for the further manufacture of UPMP should also have been duty-paid. We consider that this would be a strained construction of the notification. The reference is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h will be referred to later in this order. 15. We now come to the other main argument of Shri Narasimhan, relating to the alleged lack of jurisdiction of the Assistant Collector to pass his order dated 1.7.1981. Shri Narasimhan argued that the classification lists had been approved on 8.4.1980, 2.7.1980 and 22.7.1980 respectively by the concerned Assistant Collector, and that these approvals constituted decisions under the Central Excises and Salt Act and Rules. The revocation of the approval of the classification lists by the successor Assistant Collector, according to him, amounted to a revision of his predecessor s order, which was not within his jurisdictional competence. It was only the Collector of Central Excise, acting under Section 35A of the Act, as in force at that time, who had the jurisdictional competence to review the orders of the Assistant Collector. 16. In support of his argument, Shri Narasimhan cited the decision of the Allahabad High Court in the case of Khazanchi Paper and Board Mills v. Superintendent of Central Excise, Kanpur. reported in 1977 E.LT. (J144), and the decision of the Delhi High Court in the case of Caltex 0)7 Refining (India) Ltd. v. Unio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference in an Audit Report regarding classification of a product was not in any way binding on a quasi-judicial authority deciding a revision application. (This does not appear to be very relevant to the point raised). Smt. Zutshi also relied on an order of the Government of India in the case of C.B. Glass Works, reported in 1979 E.L.T. (J40), wherein it was held that the plea that final assessment cannot be re-opened at a subsequent stage was not maintainable in law . Since no reasoning or authority is given for this conclusion, this decision is of very limited authority. 18. There are, however, two other judgments which have an important bearing on the question regarding the circumstances in which an authority under the Central Excises and Salt Act can review, or depart from, an earlier decision taken by its predecessor. Though these were not among the authorities cited by either of the parties before us, we do not feel ourselves justified in ignoring them. This is not only because of their general relevance, but also because they happen to have been pronounced by the Delhi High Court within whose jurisdiction we are situated. 19. The earlier of these judgments is that of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch disposed of the petition by its order dated 9.9.1980, passed by a Division Bench consisting of Chief Justice Mr.Prakash Narain and Mr. Justice S. Ranganathan. One of the grounds taken by the petitioners was that, the refund having been granted by the order of an Assistant Collector after a careful consideration of the various points involved, it was not open to another Assistant Collector to review that order merely because he thought that it was wrong, and to hold to the contrary. The High Court, however, rejected this contention. In doing so, it made the following observations :- Nevertheless, the legislature has considered it expedient to confer on the assessing authority itself a limited power of review where, according to him or his successor, the earlier order is erroneous. The language of the rule clearly postulates the existence of a prior quasi-judicial determination by way of levy of duty or grant of refund or a decision not to levy duty and confers on the same authority a power of review of the earlier decision, subject to the fulfilment of the conditions mentioned in the rule and subject to action for review being taken within the prescribed period of limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the principles which the High Court held should be followed in such a case:- Will it be open to the department, without reasons and merely at its own caprice, to refuse to follow the conclusion reached on the earlier occasion and to take up a totally different stand in a subsequent year? In answering this question, it has to be appreciated that, while what is sought to be done in this case is to ignore or brush aside the decision taken by one of the departmental authorities on the same issue for an earlier period, it should make no difference in principle even in a case where the decision for the earlier year had been confirmed by the High Court or Supreme Court in appropriate proceedings for, as pointed out by Lord Radcliffe, the rule operates not because of the nature of the proceedings in which the decision was taken earlier but because of the truly limited scope of the issue decided earlier. If that be so, the question for consideration would be whether, for a subsequent period, the department can contend that the decision on an issue on an earlier occasion would have no importance or relevance whatever when the issue arises subsequently, even if it had been contested upto, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him from revising his views arbitrarily and that too, only in the case of the particular assesses where the earlier decision has been taken. Thus, where the original decision is taken by an assessing authority, it Is open to the higher authorities, who may consider it a wrong decision, to exercise their powers of revision or review under the Act and to set out the correct position. But if this has not been done or, if in a revisional proceeding for an earlier year, the ultimate revisional authority has taken a view in favour of the assessees, fresh proceedings cannot be launched against the assessee merely because the department later thinks that the previous view is untenable or that the matter should be agitated and a fresh decision obtained in such cases, the department would still have the remedy of enunciating its views in another case where its hands*are not so tied and matters can be pursued therein. [paragraph 22 - emphasis added] In the light of the above observations, the High Court held in the case before it that it was not open to the excise authorities to take a different view without any valid reasons and to start levying excise duty on the goods which had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue, there is obvious justification for such action to be taken. None of these factors operated in the present case. However, the judgment gives the authorities some further latitude by indicating that such a decision could be reopened if fresh facts are brought on record, or there is at least a suggestion that while arriving at the earlier conclusion certain material facts or provisions had not been considered, and that if they had been considered a different view might have been taken. (The case of Bawa Potteries could be considered as falling within this category, since the predecessor Assistant Collector had made an assumption that the assessees were paying for insurance for breakages, which assumption the successor Assistant Collector found to be factually incorrect). These guidelines might have been invoked in the present case on the basis that the Department had come across certain facts (fresh or otherwise) which would have led to a different view had they been considered. This, indeed, is what the successor Assistant Collector proposed to do, on the ground that the appellants had purchased formaldehyde and brought it into their factory, and taken credit of the duty pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was not open to the successor Assistant Collector to reopen or revoke his predecessor s order on the basis of the material contained in the show cause notice Issued by him, and that the order passed by him is vitiated by this basic infirmity. 26. The fact that the Urea used in the manufacture of UFMP was manufactured from raw naphtha, and was purchased from outside, has come out only in the course of the proceedings before us. We cannot totally ignore this fact, which might well have a material bearing on the eligibility of the UFMP to the concessional rate of duty. At the same time, we do not think it would be open to us to decide the matter on the basis of this fact, as it would amount to our setting up an entirely new case which the appellants were not called upon to meet by any of the lower authorities. 27. We are considered to express our surprise at the way in which this case, involving very substantial amounts of duty, has been handled by the Department. Firstly, the decisions of the lower authorities appear to have been taken without ascertaining the full facts regarding the materials used in the manufacture of UFMP and their duty status. Secondly, and what is more su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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