1993(05)LCX0022

BEFORE THE CEGAT, SPECIAL BENCH ‘C’, NEW DELHI

S/Shri G.P. Agarwal, Member (J) and P.K. Kapoor, Member (T)

M.R.F. LTD.

Versus

COLLECTOR OF CENTRAL EXCISE

Final Order No. 177/93-C, dated 31-5-1993 in E/A No. 3153/91 -C

Cases Quoted

Shri Hap Chemical Enterprises Pvt. Ltd. v. Collector - 1990 (049) ELT 377................ [Paras 3, 6]

Metal Box India Ltd. v. UOI - 1987(07)LCX0118 Eq 1987 (031) ELT 0696 (Bom.) ................................................. [Para 5]

Advocated By : Shri S. Ignatius, Corporate Manager (Indirect Taxes), for the Appellants.

Shri L.N. Murthy, JDR, for the Respondents.

[Order per : P.K. Kapoor, Member (T)]. - This is an appeal against the order passed by the Collector of Central Excise (Appeals), Madras. Briefly stated, the facts of the case are that in respect of their product ‘pre-cured tread rubber’, the appellants filed the classification list No. 34/89-90 dated 4-1-1990 seeking the classification of the goods under sub-heading 4016.99 in terms of the Trade Notice No. 214/89 dated 27-12-1989. The Assistant Collector accorded provisional approval to this classification list. Having regard to proposed amendment to Note 9 under Chapter 40 of the Central Excise Tariff Schedule by the Finance Bill of 1990, Trade Notice No. 59/90 dated 19-4-1990 was issued by the Collector stating that ‘pre-cured tread rubber’ would be classifiable under Heading 4008.21 with effect from 20-3-1990. Another classification list No. 54/89-90 dated 26-3-1990 was filed by the appellants in which the classification of the goods in question was once again claimed under Heading 4016.99. The Assistant Collector passed an order holding that ‘pre-cured tread rubber’ was classifiable under Heading 4008.21 with effect from 20-3-1990. He also finalised the provisional assessments and confirmed the demands for differential duty for the periods 20-3-1990 to 31-5-1990 and 1-6-1990 to 22-8-1990. He, further, held that the assessment of goods, in question, prior to 20-3-1990 would continue to be provisional until further order. Being aggrieved by the order passed by the Assistant Collector, the appellants filed an appeal before the Collector (Appeals), who by the impugned order held that the amendment of the Note 9 to Chapter 40 had resulted in increase in duty by bringing about a change in the classification of the goods from Heading 4016.99 to Heading 4008.21 and in terms of Section 3 of the Provisional Collection of Taxes Act, 1931, the change had to be deemed as having taken effect from 20-3-1990. The Collector (Appeals) confirmed the classification of the disputed goods under Heading 4008.21 with effect from 20-3-1990 and also upheld the confirmation of demand of duty of Rs. 51,74,132.00 for the period from 20-3-1990 to 31-5-1990.

2. Appearing on behalf of the appellants, the Corporate Manager, Shri S. Ignatius stated that prior to 19-3-1990, ‘pre-cured tread rubber’ manufactured by the appellants was being classified under Heading 4016.99. He added that in the classification lists effective from 4-1-1990 and 20-3-1990, the appellants had sought the classification of the goods, in question, under sub-heading 4016.99. He stated that the Department did not approve these price lists and decided to assess the goods provisionally. Shri Ignatius pointed out that the assessments from 20-3-1990 were finalised by the Assistant Collector by his order dated 10-1-1991 holding that from 20-3-1990 the goods were classifiable under sub-heading 4008.21 in view of the provision in the Finance Bill 1990 relating to amendment to Note 9 to Chapter 40. Shri Ignatius argued that the changes made in the chapter notes were effective with effect from 1-6-1990 only after enactment of the Finance Bill since the declaration under Section 3 of the Provisional Collection of Taxes Act, 1931 covered only those provisions in the Finance Bill which related to imposition of new duties or changes in the rate of duty. He stated that in terms of Board’s letter dated 26-6-1989 and Madras Collectorate’s Trade Notice dated 27-12-1989 ‘pre-cured tread rubber’ was classifiable under sub-heading 4016.99 and it became classifiable under Heading 4008.21 only with effect from 31-5-1990 when the amendment to Note 9 of Chapter 40 by Finance Bill, 1990 legally took effect after on the enactment of the Finance Bill. He contended that under these circumstances the order passed by the Collector (Appeals) holding the goods, in question, as classifiable under Heading 4008.21 from 20-3-1990 onwards and confirming the demand of Rs. 51,74,132.00 for the period 20-3-1990 to 31-5-1990 was not sustainable.

On behalf of the Revenue, the Ld. JDR, Shri L.N. Murthy, appeared before us. He reiterated the finding of the Collector (Appeals) that in view of the declaration under Section 3 of the Provisional Collection of Taxes Act, the amendment to Note 9 to Chapter 40 had the effect of increasing the duty on the goods in question and accordingly, it had to be deemed as having taken effect from 20-3-1990. In support of his contention, he cited the decision in the case of Shri Hap Chemical Enterprises Pvt. Ltd. v. Collector of Central Excise, Indore reported in 1990(03)LCX0062 Eq 1990 (049) ELT 0377 (Tri.) = 1990 (031) ECR 409. He pleaded for the rejection of the appeal.

4. We have examined the records of the case and considered the sub-missions made on behalf of both sides. It is seen that the main point that arises for consideration in this case is whether the proposed amendment to Note 9 to Chapter 40 of the Central Excise Tariff by the Finance Bill of 1990 on the basis of which the classification of ‘pre-cured tread rubber’ was held to have changed from sub-heading 4016.99 to 4008.21, could be deemed to have taken effect from 20-3-1990 i.e. the date of introduction of the Finance Bill.

5. It is seen that the question whether the purported changes in Section 2(f) of the Central Excises and Salt Act, 1944 and sub-item (f) of Item 27 of Central Excise Tariff by the Finance (No. 2) Bill, 1980, introduced in Lok Sabha on 18-06-1980 and consequent change in the classification of collapsible aluminium tubes from Item 27(e) to 27(f) of the Tariff would have immediate effect by virtue of the declaration under Section 3 of the Provisional Collection of Taxes Act was examined by the Hon’ble Bombay High Court in the case of Metal Box India Ltd. v. Union of India reported in 1987 (031) ELT 696. The High Court held that the said alterations neither provided for imposition of duty or increase in the duty and accordingly the said declaration under the Provisional Collection of Taxes Act was ineffective in law and collection of taxes on the basis of said changes were without the authority of law until the Act received the assent of the President. Para 8 of the judgment being relevant is reproduced below :-

“The relevant provisions of the Provisional Collection of Taxes Act, 1931 are as follows :-

“3. Power to make declarations under this Act. - Where a Bill to be introduced in (Parliament) on behalf of Government provides for the imposition or increase of a duty of customs or excise, the (Central Government) may cause to be inserted in the Bill a declaration that it is expedient in the public interest that any provision of the Bill relating to such imposition or increase shall have immediate effect under this Act.”

It is clear in the present case, that all that the said purported changes have done, is to shift by means of an artificial definition, the said tubes from sub-item (e) to sub-item (f), and by applying an artificial definition in the Explanation thereto read with Section 2(f) of the said Act, increase the assessable value of the said goods. The said alterations, therefore, are alterations to the assessable value of the said goods and are neither a law providing for the imposition of duty or an increase in the duty. Therefore, it must be held that the said declaration was clearly ineffective in law, as far as the said changes were concerned. If, therefore, the declaration was clearly ineffective in law, certainly the collection of taxes during the said period till the Act received the assent of the President would be without the authority of law and, therefore, the department is bound to refund the said amount to the petitioner. In fact, I find no answer to this contention of the petitioner at all.”

6. We find that relying upon a number of earlier decisions, the Tribunal has also held in the case of Shri Hap Chemical Enterprises Pvt. Ltd. v. Collector of Central Excise, Indore (supra) that the proposed amendments to Tariff Item 15A by the Finance Bill 1982 not being related to imposition or increase of duty did not have immediate effect in terms of the declaration under Section 3 of the Provisional Collection of Taxes Act, 1931 and it had to be deemed to have taken effect only after the enactment of said provision. Para 13 of the said decision being relevant is reproduced below :-

“In Wavin India Ltd. v. Collector of Central Excise, Nagpur as reported in 1987(03)LCX0049 Eq 1987 (029) ELT 0520 (Tribunal) = 1987 (011) ECR 652 the Tribunal followed the view taken in M/s. Peico Electronics & Electricals Ltd. reported in 1986 (006) ECR 416. In both these rulings and also in the case of Sankey Wheels Ltd., Durgapur v. Collector of Central Excise, Bolpur reported in 1986 (024) ELT 350 = 1986 (008) ECR 1180, the finding of the Tribunal had been that only such of the tariff changes proposed in the Budget were effective immediately as related to imposition or increase of duty. This is because the declaration under Provisional Collection of Taxes Act, 1931, inserted in the Finance Bill read with Section 3 of that applied only to imposition or increase of duty. Any other provisions of the Finance Bill were to take effect only after they are enacted. The change proposed in the present case was being neither imposition or increase of duty, was therefore to take effect only after the enactment. In other words, during the intervening period before the Finance Bill 1979 became an Act, the exemption Notification 149/82 dated 22-4-1982 has come into effect exempting the appellants’ goods from duty and hence the effective date is the date of the Notification i.e. 22-4-1982 and not the date of the passing of the Act i.e. 11-5-1982. Hence the benefit of the Notification No. 149/82 has to be given to the appellants from its date i.e. 22-4-1982. They are entitled to claim refund for duty paid beyond this day.”

7. It is seen that the disputed goods, viz., ‘pre-cured tread rubber’ was classifiable under Heading 4016.99 in terms of Board’s letter F. No. 11/2/7/80 Ex. 3 dated 26-6-1989 and the Madras Central Excise Collectorate Circular No. 6/89 dated 26-12-1989. However, by virtue of the proposed amendment to Note 9 of Chapter 40 of the Central Excise Tariff by the Finance Bill of 1990 introduced in the Lok Sabha on 20-3-1990 the said goods became classifiable under Heading 4008.21. Evidently, the amendment to Note 9 of Chapter 40 of the Tariff did not relate to imposition or increase of duty. Under these circumstances, on the ratio of the case law discussed above, we are of the view that the amended Note 9 to Chapter 40 and consequent change in classification of ‘pre-cured tread rubber’ took effect only on enactment of the Finance Bill of 1990 on 31-5-1990.

8. In view of the above discussion, we set aside the impugned order holding that ‘pre-cured tread rubber’ was classifiable under Heading 4008.21 with effect from 20-3-1990 and confirming the demand of duty for the period 20-3-1990 to 31-5-1990.

9. The appeal is disposed of in the above terms.

Equivalent 1993 (67) ELT 968 (Tribunal)