1998(10)LCX0034

IN THE CEGAT, COURT NO. III, NEW DELHI

Shri S.K. Bhatnagar, Vice President and Ms. Jyoti Balasundaram, Member (J)

Third Member on reference : Shri S.S. Kang, Member (J)

Majority Order : Ms. Jyoti Balasundaram, Member (J) and Shri G.R. Sharma, Member (T)

PUNJAB BONE MILLS

Versus

COLLECTOR OF CENTRAL EXCISE, CHANDIGARH

Misc. Order No. 226/98-C & 2/2000-C, dated 30-10-1998 in Appeal Nos. E/309 & 310/97-C

Cases Quoted

Elson Machines v. Collector — 1988(11)LCX0035 Eq 1988 (038) ELT 0571 (S.C.) — Relied on .............................. [Para 4]

Final Order No. 105-106/92, dated 23-3-1992 — Referred ......................................... [Paras 10, 13]

Indichem v. U.O.I. — 1996(04)LCX0051 Eq 1996 (088) ELT 0035 (Guj.) — Distinguished ......................... [Paras 4.1, 10]

Kissan Chemicals v. U.O.I. — 1996(05)LCX0042 Eq 1996 (088) ELT 0648 (Delhi) — Distinguished ....... [Paras 4.2, 10]

Pharm Aromatic Chemicals v. Municipal Corpn. of Greater Bombay — 1994(02)LCX0007 Eq 1997 (095) ELT 0203 (Bom.) — Distinguished              [Para 4.3]

Raymon Glues & Chemical Works v. U.O.I. — 1999(03)LCX0109 Eq 2000 (117) ELT 0029 (Guj.) — Referred ... [Para 13]

U.O.I. v. Bajaj Tempo Ltd. — 1997(07)LCX0136 Eq 1997 (094) ELT 0285 (S.C.) — Relied on ............................... [Para 4]

DEPARTMENTAL CLARIFICATION CITED

C.B.E. & C. Order No. 47-1-97-CX., dated 3-3-1997 ................................ [Paras 2, 4.1, 4.2, 13, 17]

Advocated By :   Shri Vinod Agarwal, Advocate, for the Appellant.

Shri A.K. Madan, SDR, for the Respondent.

[Order per : Jyoti Balasundaram, Member (J)]. - The above applications have been filed under Rule 41 of the CEGAT (Procedure) Rules, 1982 for quashing the show cause notices No. CE-20/PBM/7/97/393 and No. CE-20/PK/9/97/389, both dated 28-5-1989 issued by the Superintendent of Central Excise, Phagwara and for issue of orders or directions to give effect to the Final Order Nos. 105-106/92 dated 23-3-1992 passed by the Tribunal by which it was held that Di-Calcium Phosphate (Animal Feed Grade) manufactured by the applicants herein falls for classification under sub-heading 2302.00 of the Schedule to the Central Excise Tariff, Act, 1985. From March, 1992 onwards, the Department had been following the order of the Tribunal and assessing the above mentioned product in accordance with the Tribunal’s order on classification. However, the Superintendent of Central Excise, Phagwara has now issued a show cause notice to each of the applicants proposing recovery of duty on the ground that Di-Calcium Phosphate (Animal Feed Grade) is more appropriately classifiable under CET sub-heading 2835.00 (prior to the issue of the show cause notices, the Department had been issuing letters requiring the applicants to pay excise duty @ 18% adv. or in the alternative to supply figures of clearance of the product during the period ranging between 31st December, 1996 and 31st March, 1997).

2. Learned Counsel for the applicants submits that the letters of the Superintendent of Central Excise as well as the show cause notices have been issued in gross violation of the Tribunal’s Final Order by which the classification of the product stands finally decided and, therefore, it is not open to the Department to issue a show cause notice in contravention of the Tribunal’s order which is binding on the authorities below. He further submits that CBEC Order No. 47-1/97-CX, dated 3-3-1997 directing classification of Di-Calcium Phosphate under CET sub-heading No. 2835 cannot confer jurisdiction on the Superintendent to reopen the classification issue. He contends that since the proviso to Section 37B of the Central Excise Act, 1944 provides that the Board cannot issue any order or instructions or directions to any Central Excise Officer to make a particular assessment in a particular manner, the show cause notices dated 28-5-1997 are illegal and without jurisdiction. He, therefore, prays that the proceedings initiated vide the letters of the Superintendent and the show cause notices may be quashed or the Tribunal may direct implementation of its order dated 23-3-1992 by directing the Central Excise authorities to assess the product only under CET sub-heading 2302.00.

3. Opposing the stand of the applicants, learned SDR, Shri A.K. Madan submits that since there is no res judicata in fiscal matters and since the rival entries considered by the Tribunal in its Final Order referred to herein above were Chapters 23 and 31 while the Board was subsequently of the view that Chapter 28 would be attracted because Di-Calcium Phosphate is a separate chemically defined compound, there is no legality or infirmity in the show cause notices dated 28-5-1997 and it was open to the Department to issue such notices which would then be adjudicated. He, therefore, submits that the question of quashing the show cause notices does not arise and prays that the miscellaneous applications may be rejected and the Department be permitted to proceed to adjudicate the notices in question.

4. We have carefully considered the rival submissions. We note that there is no res judicata in fiscal matters [see Supreme Court decision in the case of Elson Machines - 1988 (038) ELT 571]. We also note that from March 92 onwards, the Department had been implementing the order of the Tribunal by assessing Di-calcium Phosphate (Animal Feed Grade) under sub-heading 2302.00 of the Schedule to the CETA 1985, in accordance with the Tribunal’s final order referred to supra. The rival entries considered by the Tribunal were Chapters 23 and 31 and the Board was specifically of the view that Di-calcium Phosphate would fall for classification under Chapter 28 because it is a separately chemically defined compound. Since this subsequent view has arisen, the Department has rightly issued the show cause notices dated 28-5-1997 proposing reclassification of the product under Chapter 28 and the Department is entitled to proceed to adjudicate the notices. Further, we are of the view that the Tribunal has no power to quash proceedings at the show cause notice stage. In fact, it has been held by the Hon’ble Supreme Court in the case of Union of India v. Bajaj Tempo Ltd. reported in 1997 (094) ELT 285 that even writ jurisdiction at show cause notice stage cannot be invoked by the High Court merely because a trade notice was issued by the authorities on the subject and that the appropriate course for the assessee is to reply to the show cause notice enabling the authorities to record their findings and then to avail the process of appeal to the Tribunal and the Apex Court.

4.1 The case law relied upon by the learned Counsel for the applicants is distinguishable on facts - in the case of Indichem v. Union of India reported in 1996(04)LCX0051 Eq 1996 (088) ELT 0035 (Guj.), the Hon’ble High Court held that a circular issued by the CBEC under Section 37B was contrary to the decision rendered by the Tribunal that certain processes did not amount to manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944 and, therefore, was not valid and was liable to be quashed. The Court held that the CBEC cannot issue a circular so as to make the Tribunal’s order nugatory.

4.2 In the case of Kissan Chemicals v. Union of India reported in 1996(05)LCX0042 Eq 1996 (088) ELT 0648 (Delhi), the Hon’ble Delhi High Court held that a circular under Section 37B of the Central Excise Act, 1944 cannot be issued contrary to a decision of the Tribunal which had become final and the only option to the Department was to file an appeal. In these circumstances Section 37B circular and consequential proceedings were set aside.

4.3 In the case of Pharm Aromatic Chemicals v. Municipal Corporation of Greater Bombay reported in 1994(02)LCX0007 Eq 1997 (095) ELT 0203 (Bom.), the Hon’ble Bombay High Court has held that classification of the goods followed by the Department for a number of years cannot be departed from unless new material or cogent reasons are available for changing the classification.

5. In the present case, the Department has issued two show cause notices setting out the grounds for change of classification which have yet to be adjudicated. There is no legal bar against issue of such notices. We, therefore, see no reason to interfere at this stage and accordingly reject the applications.

6. [Order per : S.K. Bhatnagar, Vice President]. - With due respect to the Hon’ble Member (Judicial), my views and orders are as follows :

7. I consider that ld. Counsel’s arguments have a lot of force. Once the admitted position is that the classification of the product had been determined by the Tribunal and Final Order was passed and action was being taken accordingly, the department was required to continue to follow the same unless and until there was some change in the facts or the law.

8. Actually in terms of Section 35C(4) of the CESA, 1944, “Save as provided in Section 35G or Section 35L, orders passed by the Appellate Tribunal on appeal shall be final” i.e. Tribunal’s orders are final subject only to reference/appeal. If therefore, the Department was aggrieved with the Tribunal's orders or had any reasons to propose and adopt a different view, the only course open to it was, to move a reference application before the High Court in cases where reference lies and an appeal before the Hon’ble Supreme Court where such appeal lies.

9. In the present case, the learned Counsel has stated that the classification of Di-Calcium Phosphate (Animal Feed Grade) as determined by the Tribunal was being followed by the Department and rightly so for quite some time (till the issue of show-cause notice in question) and thereafter in view of change of opinion by the Board, these show-cause notices have been issued. The ld. Departmental Representative has however, not been able to show whether there was any change in the facts (e.g., the manufacturing process or composition of the product in question etc.) or the law, therefore, in the normal course, the Department was required to continue to follow the Tribunal’s orders and even the Board was not competent to issue any direction/instruction contrary to the Tribunal’s orders while it was holding the field; and the plea with respect to res judicata is of no avail.

10. Ld. DR has not been able to show any order of any High Court or the Supreme Court, whether in the nature of the Stay Order or Final Order staying, modifying or setting aside the Tribunal’s order. Therefore, the ratio of Gujarat High Court’s judgment in the case of Indichem reported in 1996(04)LCX0051 Eq 1996 (088) ELT 0035 (Guj.) and that of Delhi High Court in the case of Kissan Chemicals reported in 1996(05)LCX0042 Eq 1996 (088) ELT 0648 (Delhi) clearly covers the issue and in my opinion, the applicant was justified in praying for a direction in terms of Rule 41 of the CEGAT (Procedure) Rules. I, therefore, direct the concerned officers to keep in view the Tribunal’s Final Order Nos. 105-106/92, dated 23-3-1992 and take action accordingly.

DIFFERENCE OF OPINION

In view of the difference of opinion between the Member (Judicial) and the Vice President, the matter is submitted to the Hon'ble President for referring to the Third Member on the following points :

“Whether in the facts and circumstances of the case and the legal position highlighted before the Tribunal the applications were required to be accepted and an appropriate direction was required to be issued under Rule 41 of CEGAT (Procedure) Rules or the applications were required to be rejected.”

11. [Order per : S.S. Kang, Member (J)]. - The following difference of opinion between the Hon’ble Vice-President and the Hon’ble Member (judicial) has been referred to the undersigned :

“Whether in the facts and circumstances of the case and the legal position highlighted before the Tribunal the applications were required to be accepted and an appropriate direction was required to be issued under Rule 41 of CEGAT (Procedure) Rules or the applications were required to be rejected.”

12. The applicants filed two misc. applications under Rule 41 of CEGAT (Procedure) Rules with the prayer, that the two show cause notices issued by the Revenue be quashed.

13. Ld. Counsel, appearing on behalf of the applicants, submits that the Tribunal in applicants’ own case, vide Final Order Nos. 105-106/92 dated 23-3-1992 held that Di-Calcium Phosphate (Animal Feed Grade), manufactured by the applicants is classifiable under sub-heading 2302.00 of the Central Excise Tariff. He submits that this view was upheld by the Hon’ble Supreme Court and the Tribunal is consistently following this view. He submits that in spite of this, the Revenue again issued two show cause notices to the applicants for classifying the product under sub-heading 2835.00 of the Central Excise Tariff. He submits that the show cause notices were issued in view of the CBEC Order No. 47-1/97-CX, dated 3-3-1997 and this order passed by the CBEC, is quashed by the Hon’ble Gujarat High Court in the case of Rayon Glues and Chemical Works v. U.O.I, vide order dated 17-3-1999 [1999(03)LCX0109 Eq 2000 (117) ELT 0029 (Guj.)]. Therefore, the show cause notice be quashed.

14. Heard Shri Sumit K. Das, ld. JDR appearing on behalf of the Revenue, submitted that in the fiscal matters, there is no res judicata. He submits that before the Tribunal, the dispute was between Chapter 23 and 31 of the Central Excise Tariff and the Tribunal held that the goods, in question, were classifiable under Chapter 23 and the Tribunal had not considered the scope of Chapter 28 of the Central Excise Tariff in respect of the goods, in question. He, therefore, submits that the misc. applications be dismissed.

15. Heard both sides.

16. The applicants are admitting this legal position that the principles of res judicata are not applicable in the fiscal matters. The applicants filed these applications under Rule 41 of the CEGAT (Procedure) Rules, which provides as under :

“The Tribunal may make such orders or give such directions, as may be necessary or expedient to give effect or in relation to its orders or to prevent abuse of its process or to secure the ends of justice.”

17. The grievance of the applicants is that in respect of various orders passed by the Tribunal, the Revenue is not accepting the classification of the goods, in question. The show cause notices issued to the applicants, were based on the CBEC order dated 3-3-1997 and as per the contention of the applicants, this order was set aside by the Hon’ble Gujarat High Court. I find that there is no bar on the applicants to cite these decisions before the adjudicating authority in reply to the show cause notices nor, for this, any direction is required under Rule 41 of the CEGAT (Procedure) Rules.

18  The show cause notices were only issued for change in classification, which is ultimately to be adjudicated by the competent authority and applicants had opportunity to defend their case before the adjudicating authority, therefore, I find no reasons to interfere at this stage by issuing any direction under Rule 41 of the CEGAT (Procedure) Rules. I, therefore, agree with the findings arrived at by the Hon’ble Member (Judicial) and these applications are deserved to be dismissed.

Dt. 29-9-1999

In the light of the majority view, the Misc. applications are rejected.

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Equivalent 2001 (135) ELT 1377 (Tri. - Del.)