9911796707
TMI Blog2025 (4) TMI 1597X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appellate Tribunal, West Zonal Bench at Mumbai ('CESTAT' hereinafter) disposed of appeal Nos. E/2380/06-MUM, E/3816/03-MUM and E/40/02-NB-C. It may be mentioned that appeal No. E/2380/06-MUM was filed by the respondent whereas the other two appeals were filed by the appellant. 4. By the impugned order dated 21.05.2010, CESTAT dismissed the appeals filed by the appellant and partly allowed the appeal filed by the respondent. The differential duty demand in respect of the two products Benzene and Toluene for the period September, 1990 to December, 1992 amounting to Rs. 1,97,17,015.00 and for the period January and February, 1993 of Rs. 18,16,304.00 have been upheld. In respect of the aforesaid two products, CESTAT has also held that contents of the test reports on the basis of which tariff classification of the above two products were changed leading to higher duty and hence differential duty were duly communicated to the appellant. CESTAT has also held that the assessments covering the said period were not provisional except for the months of January and February, 1993. 5. This Court vide the order dated 03.01.2011 had condoned the delay in filing of the appeals and had issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant had cleared the two products Benzene and Toluene under the tariff heading which was approved by the Assistant Collector, a show-cause notice dated 26.03.1991 was issued to the appellant by the Superintendent of Central Excise in respect of Benzene and Toluene cleared during the period September, 1990 to January, 1991 seeking to re-classify the two products under chapter sub-heading 2707.10 and 2707.20 respectively and proposing to recover differential excise duty alongwith penalty and interest. It was acknowledged in the show-cause notice that if the purity of Benzene and Toluene was 96 percent or more, those two products would be classifiable under chapter 29 as declared by the appellant but if the two products had purity of less than 96 percent, those would be classifiable under the heading 2707 resulting in higher excise duty leading to demand of differential excise duty i.e. actual duty leviable less the duty paid. Thereafter, similarly worded show-cause notices were issued covering the period from February, 1991 to December, 1992 proposing a total excise duty of Rs. 1,75,30,861.00 alongwith penalty and interest for wrong classification of the two products Benzene and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principles of natural justice. It was also contended that no samples were drawn by the department for any of the periods covered by the show-cause notices and that appellant had upgraded its manufacturing process in the meanwhile. Appellant also placed on record copies of test reports of the two products for the period from September, 1990 to November, 1990 which indicated that purity of the two products was above 96 percent. 18. All the show-cause notices were adjudicated by the Assistant Commissioner. Vide the order dated 27.02.2001, Assistant Commissioner held that the two products Benzene and Toluene manufactured by the appellant were indeed classifiable under chapter sub-heading 2707.10 and 2707.20 respectively and consequently levied duty demand of Rs. 1,97,17,015.00 alongwith equivalent amount of penalty. While so adjudicating, Assistant Commissioner relied upon the test reports in respect of the samples drawn on 04.10.1990 and report of the Deputy Chief Chemist dated 17.01.1991 but declined to rely upon the test reports of the sample test done in the laboratory of the appellant. 19. Aggrieved by the aforesaid order, appellant filed an appeal before the Commissioner (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner (Appeals) for considering afresh the issue of provisionality of assessments after furnishing to the appellant, copies of re-classification and RT-12 returns for the disputed period. 25. On remand, Commissioner (Appeals) allowed the appeal filed by the appellant vide the order-in-appeal dated 31.03.2006 holding that the disputed products were not under provisional assessment during the period of dispute i.e. 1989-90 to1998-99. 26. This order in appeal dated 31.03.2006 came to be challenged by the department before the CESTAT by filing an appeal which was registered as appeal No. E/2380/06-MUM. 27. As noted above, all the three appeals were heard together by the CESTAT and were disposed of vide the common order dated 21.05.2010. While the CESTAT dismissed the two appeals filed by the appellant, it partially allowed the appeal filed by the department. The demand of duty for the period September, 1990 to December, 1992 (Rs. 1,97,17,015.00) and January and February, 1993 (Rs. 18,16,304.00) were upheld. CESTAT further held that the contents of the test reports relating to the two products Benzene and Toluene were intimated to the appellant. That apart, the assessments carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chemical tests, department had fulfilled the obligation cast on it to communicate the results of the tests. This approach of the CESTAT is wholly incorrect. Learned counsel further submits that CESTAT was not at all justified to brush aside the contention of the appellant that because of non-communication of the test reports, appellant was denied the right to demand re-test. On the contrary, CESTAT put the burden on the appellant by posing the question as to why appellant did not ask for a re-test. Thereafter, CESTAT erroneously held that appellant was not deprived of its right to re-test as per Rule 56 of the Central Excise Rules as no such request was made. Further, CESTAT wondered as to why appellant did not seek re-test when it claimed that it had upgraded the facilities and its own test reports indicated that the two products had purity of more than 96 percent. 28.4. Learned counsel vehemently submits that non-communication of the test reports dated 29.01.1991 to the appellant is clearly in violation of the principles of natural justice. The same has vitiated the impugned order. 28.5. Learned counsel submits that the aforesaid test reports are part of the proceedings as tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal dated 31.03.2006 held that the assessments were not provisional. 28.9. Learned counsel asserts that for an assessment to be a provisional assessment, a provisional assessment order under Rule 9B of the Central Excise Rules was required to be passed; the assessee was required to execute a bond and to follow the procedure for provisional assessment. The aforesaid requirements were not at all complied with. Therefore, the assessments could not be termed as provisional. In support of the above contention, learned counsel for the appellant has placed reliance on the following decisions: 1. Coastal Gases and Chemicals Pvt. Ltd Vs. Assistant Collector of Central Excise, Visakhapatnam (1997) 7 SCC 223. 2. Metal Forgings Vs. Union of India (2003) 2 SCC 36. 3. Commissioner of Central Excise, Calcutta Vs. Hindustan National Glass & Industries Ltd (2005) 3 SCC 489. 28.10. Adverting to the above decisions, learned counsel submits that this Court has made it clear that in order to establish that the clearances were on a provisional basis an order under Rule 9B of Central Excise Rules and payment of duty on provisional basis are mandatory requirements. 29. Learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals. Therefore, all the appeals should be dismissed. 30. Submissions made by learned counsel for the parties have received the due consideration of the Court. 31. Upon considering the materials on record and after hearing learned counsel for the parties, the following two issues emerge for our reconsideration: 1. Whether a duty demand based on re-classification of the products Benzene and Toluene from chapter 29 to chapter 27 is sustainable when such re-classification is based on test reports dated 29.01.1991 on samples drawn in October, 1990 of which only a gist was provided to the appellant by the respondent vide letter dated 29.01.1991? 1A. Corollary to the above question is the consequential question as to whether such test reports can legally form the basis for re-classification of the above products manufactured and cleared during 1991 and 1992? 2. Whether CESTAT was justified in treating the assessments provisional for the two products Benzene and Toluene for the months of January and February, 1993 in the absence of any order passed under Rule 9B of the Central Excise Rules, 1944 and without executing any B-13 bond? 32. Let us take up the issue relating to re-clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the principles of natural justice. That apart, according to CESTAT, appellant did not seek re-test. Therefore, CESTAT was of the opinion that there was compliance to Rule 56 of the Central Excise Rules and consequently the re-classification was justified. 37. We are afraid we cannot subscribe to such sweeping generalizations made by CESTAT. There is no dispute that the test reports formed the basis for re-classification of the two products Benzene and Toluene. Department had entirely relied upon the test reports to alter the classification from 2902.00 to 2707.10 and 2707.20, thereby necessitating a higher duty demand resulting in levy of differential duty demand. Therefore, principles of natural justice required that copies of such test reports ought to have been furnished to the appellant. Informing the appellant only the gist of the test reports cannot be said to be in compliance with the principles of natural justice as the test reports formed the sub-stratum of higher duty demand raised by the department thus entailing adverse civil consequences on the appellant. It is axiomatic that documents relied upon by the authority to take a view different from the one existing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturer the result of such test. On the other hand, what sub-rule (4) contemplates is that upon receipt of the test result if a manufacturer is aggrieved by the same, he may within 90 days of the date on which the result of the test is received by him, request the Assistant Commissioner that the samples be re-tested. Unless a copy of the test report is furnished to the manufacturer, he would not be in a position to seek re-test within the specified period, if he is aggrieved by the result of the test. Therefore, a copy of the test report has to be furnished to the manufacturer. In such circumstances, extracting the gist of the test reports, that too in the show-cause notices, would clearly be in breach of Rule 56 (2) and Rule 56 (4) of the Central Excise Rules. Such a procedure is not contemplated under Rule 56. That apart, it will defeat the right of a manufacturer to seek re-test if he is aggrieved by the result of the test. CESTAT has missed the point when it says that appellant was aware of the test report as gist of the same was communicated to it through the medium of the show-cause notices but it never sought for any re-test. Even at the cost of repetition, we say that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. For easy reference Rule 9B is extracted hereunder: 9B. Provisional assessment to duty (1) Notwithstanding anything contained in these rules,- (a) where the assessee is unable to determine the value of excisable goods in terms of section 4 of the Act on account of non-availability of any document or any information; or (b) where the assessee is unable to determine the correct classification of the goods while filing the declaration under rule 173B; the said assessee may request the proper officer in writing giving the reasons for provisional assessment to duty, and the proper officer may direct after such inquiry as he deems fit, that the duty leviable on such goods shall be assessed provisionally at such rate or such value (which may not necessarily be the rate or price declared by the assessee) as may be indicated by him, if such assessee executes a bond in the proper form with such surety or sufficient security in such amount, or under such conditions as the proper officer deems fit, binding himself for payment of difference between the amount of duty as provisionally assessed and as finally assessed; Provided that all clearances in respect of excisable goods cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment is subject to the assessee executing a bond in proper form binding the assessee for payment of the differential amount of duty as provisionally assessed and as may be finally assessed. The goods provisionally assessed under sub-rule (1) may be cleared for home consumption or for export in the same manner as the goods which are not provisionally assessed. When the duty is finally levied, the duty provisionally assessed shall be adjusted against the duty finally assessed. 45. Thus, the first and foremost requirement of Rule 9B is that it is the assessee who has to request in writing the proper officer for provisional assessment in the event the assessee is unable to determine the value of excisable goods or the correct classification of goods. This is the first requirement. The second requirement is that the proper officer competent to make provisional assessment may direct after making necessary inquiry that duty leviable on such goods shall be assessed provisionally. Such directions the proper officer can issue only by passing a written order and not otherwise. Thirdly, the assessee must execute a bond in the proper form binding the assessee to pay the differential amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistant Collector for re-determination of the classification of the subject goods. Pursuant to such remand order, Assistant Collector had passed an order dated 18.10.1993 directing provisional assessment of certain products mentioned in Annexure-A to the said order including products of the appellant for the years 1990-91, 1991-92, 1992-93 and 1993-94. By the aforesaid order, Assistant Collector had directed the appellant to execute a bond and to furnish a bank guarantee equivalent to 25 percent of the differential duty. No evidence could be adduced by the department that such a bond was executed or bank guarantee furnished by the appellant. That apart, the said order dated 18.10.1993 could not render assessments prior thereto i.e. from 1989-90 to 17.10.1993 provisional. In any case, there is no basis for the CESTAT to hold that assessments in respect of the products Benzene and Toluene for the months of January and February, 1993 were provisional. Only the order dated 18.10.1993 was available but it could not have had retrospective effect. Moreover, the essential requirements of Rule 9B were not complied with. There is no order of the proper officer under Rule 9B directing that a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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