1999(08)LCX0175
IN THE CEGAT, COURT NO. III, NEW DELHI
S/Shri G.R. Sharma, Member (T) and A.C.C. Unni, Member (J)
CAMPHOR & ALLIED PRODUCTS LTD.
Final Order No. 655/99-C, dated 3-8-1999 in Appeal No. E/104/97-C
Cases Quoted
Associated Cement Co. v. Collector — 1991(06)LCX0016 Eq 1992 (057) ELT 0178 (Tribunal) — Referred ........... [Para 4]
Camphor & Allied Products Ltd. v. Commissioner — 1999(01)LCX0142 Eq 1999 (113) ELT 0516 (Tribunal)
— Referred...................................................................................................................... [Para 4]
Indian Organic Chemicals Ltd. v. U.O.I — 1982(07)LCX0002 Eq 1983 (012) ELT 0034 (Mad.) — Referred............ [Para 6]
J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. Collector — 1998(03)LCX0069 Eq 1998 (099) ELT 0008 (S.C.) — Relied on [Paras 4, 6]
Nipha Machinery Manufacturers v. Collector — 1987(02)LCX0114 Eq 1990 (048) ELT 0549 (Tribunal) — Referred [Para 6]
Orient Paper Mills v. Collector — 1983(05)LCX0005 Eq 1983 (014) ELT 1813 (Tribunal) — Referred ................. [Para 4]
Ranadey Micronutrient v. Collector — 1996(09)LCX0009 Eq 1996 (087) ELT 0019 (S.C.) — Relied on..................... [Para 6]
DEPARTMENTAL CLARIFICATIONS CITED
C.B.E. & C. Circular No. 26/89, dated 24-4-1989........................................................... [Paras 4, 6]
C.B.E. & C. Circular, dated 25-5-1990................................................................................... [Para 4]
Advocated By : Shri G. Shiv Das, Advocate, for the Appellants.
Shri H.K. Jain, SDR, for the Respondent.
[Order per : A.C.C. Unni, Member (J)]. - This is an appeal filed against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals) Allahabad dated 12-12-1996 confirming duty demand of Rs. 31,84,462.00 on the appellants for the period 1-3-1986 to 30-4-1991.
2. Appellants who are engaged in the manufacture of Camphor and other related products, filed Classification List (C.L.) effective from 1-3-1986 classifying their products viz., (a) Thymol Crystal IP, (b) Terpineol BP and (c) Terpine Hydrate under Chapter Heading 3003.30 (Medicaments) which were exigible to ‘nil rate of duty’ in the Tariff itself. The Classification List (C.L.) filed by the appellants effective from 1-3-1986 was signed by the Asst. Collector on 10-6-1986 and while doing so, he scored off Paragraphs 1 and 3 in the Memorandum of Approval but did not strike out Paragraph 2, which related to provisional approval. No reasons were, however, given by the Asst. Collector for doing so. Appellants were also not asked to execute any bond or furnish security. On that basis the appellants filed RT 12 returns every month and cleared the goods at nil rate of duty. This practice continued for a period upto February, 1988 except for the month of March, 1986. After February, 1988, however, in the RT 12 returns, the column relating to ‘Provisional Assessment’ was not scored out. No reason was given by the Assessing Officer and the appellants continued to clear the goods at nil rate of duty and without executing any bond. The C.Ls filed by the appellants effective from 1-3-1988, 1-4-1988 and 1-3-1989 classifying the goods under Heading No. 3003.30 were returned by the Asst. Collector without any endorsement. On 18-8-1989, appellants were informed that since there was no change in the contents of the C.Ls filed in 1989 and from the contents of C.Ls. filed from 1987, all the C.Ls. were approved and assessments made finally. Later, around April, 1989, appellants were asked to file C.L. for one of the products, viz., Terpineol BPC under Chapter Heading No. 29 instead of Chapter Heading No. 30. Appellants filed the said C.L. under Chapter 29 under protest. However, they claimed the benefit of Notification. No. 31/88 which was not allowed by the Department. Appellants subsequently submitted a C.L. effective from 20-3-1990 claiming inter alia the benefit of Notification No. 31/88 in respect of Terpineol BPC. This C.L. was also approved on 31-10-1990 on the ground that Terpineol BPC was a bulk drug and was eligible for benefit under Notification No. 31/88 but subject to end-use certificate. The approval of the said C/List also did not carry any remark to the effect that the assessments were being done provisionally.
3. On 27-4-1991, the Asstt. Collector by Memorandum of that date approved the C.L. effective from 1-3-1986 to 30-4-1991 holding them to be provisional in nature and classifying the goods under Chapter 29. Pursuant to the said Memorandum, the Superintendent issued a demand quantifying the duty. However, the Commissioner of Central Excise (Appeals) set aside the Asst. Collector’s Memorandum dated 27-4-1991. Thereafter, the Asst. Commissioner issued a fresh memorandum on 12-1-1996 confirming the classification under Chapter 29 which was confirmed by the Commissioner (Appeals) by Order dated 12-12-1996. Appellants have challenged the said order before us.
4. Ld. Counsel, Shri G. Shiv Das appearing for the appellants submitted that the first question requiring consideration in the appeal is whether the assessments for the period March, 1986 to March, 1991 were ‘provisional’ in nature. He referred to Rule 9B of the Central Excise Rules, 1944 which lays down the procedure for making provisional assessment. He submitted that for making provisional assessment, a direction has to be issued by the Proper Officer either on his own motion or on a written request by the assessee to the effect that the duty leviable on the goods in question is assessed provisionally at a particular rate or on a particular value. The rule also requires execution of bond in the proper form by the assessee on the terms and conditions laid down by the proper Officer. He submitted that the Asst. Collector had not followed the said procedure while approving C.L. or the RT 12 return during the period under dispute nor had he directed the appellants to execute any bond. There was also no indication of any condition imposed for such clearance. The appellants had in fact cleared the goods at nil rate of duty in terms of the Tariff itself. He submitted that in such circumstances, there cannot be any provisional assessment in law. He relied on the Tribunal decision in the case of J.K. Cotton Weaving & Spinning Mills Ltd. v. CCE [1989 (023) ECR 385], wherein the Tribunal had held that for an assessment to be considered provisional, there has to be an order of the Proper Officer. He further submitted that the said decision of the Tribunal had been confirmed by the Hon’ble Supreme Court as per report in 1988 (099) ELT 8. Further, he also drew our attention to certain circulars issued by the Central Board of Excise and Customs dated 24-4-1989 and 25-5-1990, in which the field formations were advised to strictly follow the requirements of Rule 9B, failing which the assessment will not be considered as provisional. Detailed instructions had been given in the circulars as to the steps to be taken by the Assessing Authorities while making provisional assessment. He also submitted that in the absence of any direction to execute a bond for securing the provisionally assessed duty, it cannot be claimed that Rule 9B has been complied with. He relied on the Tribunal decision in this connection on Orient Paper Mills v. CCE reported in 1983(05)LCX0005 Eq 1983 (014) ELT 1813 (T) = 1983 (2) ETR 629. Further, reliance was placed on the decision in Associated Cement Co. v. C.C.E. reported in 1992 (057) ELT 178 holding that on re-classification, duty demand can only be prospective. He emphasised the fact that in the instant case, no Show Cause Notice (SCN) had been issued to the appellants. Attention was also drawn to the fact that the Tribunal had in their own case [Reported in 1999(01)LCX0142 Eq 1999 (113) ELT 0516 (Tribunal) - 1999 (031) RLT 721] granted the benefit of Notification No. 31/88 for the period after 1-3-1988. Alternatively, it was contended that even if the demand of duty was held to be sustainable, appellants were entitled to the benefit of Modvat credit and abatement of duty payable under Section 4(4)(d)(ii).
5. Shri H.K. Jain, ld. SDR defended the order and reiterated the findings of the authorities below.
He submitted that Rule 9B(1) permitted the Asstt. Commissioner to order provisional assessment on his own accord even without any request from the assessee. It was also not necessary for him to insist on the execution of a bond or surety where he did not consider it necessary. As regards the Circulars issued by the Board, he submitted that the instructions of the Board were for the guidance of the Assessing Officers and it did not restrict the discretionary powers of the Proper Officer under Rule 9B.
6. We have considered the submissions and have perused the records. Rule 9B(1) lays down three circumstances in which the Proper Officer can make a provisional assessment. The Proper Officer has also been given the power to make a provisional assessment at the rate indicated by him if the assessee executes a bond in the proper form with sufficient security or on the basis of conditions laid down by the Proper Officer. It has been held in Nipha Machinery Manufacturers v. CCE [1987(02)LCX0114 Eq 1990 (048) ELT 0549 (Tribunal) = 1990 (031) ECR 292] that in the absence of a bond, there will be no provisional assessment. It has also been held that where the C.L. been once approved unconditionally, it would not be treated as a provisional assessment under Rule 9B and the assessee cannot also be asked to execute a bond [Indian Organic Chemicals Ltd. v. Union of India - 1982(07)LCX0002 Eq 1983 (012) ELT 0034 (Mad.)]. In the instant case, it is not in dispute that the appellants have been allowed to clear the goods at nil rate of duty and the paragraphs relating to provisional approval was not struck off. This, according to the appellants, showed that the Department had allowed the clearances in the normal course and not on a provisional basis. We observe from the copies of the Assessment Memorandum annexed at pages 37 to 56 of the Appeal Paper Book of the appellants that the approvals given to the appellants during the period April, 86 to November 87 have scored off paragraph 2 of the said memorandum relating to provisional assessment under Rule 9B. It is seen that paragraph 2 of the Assessment Memorandum stating that “this return has been assessed provisionally under Rule 9B and the provisions of the said rule shall apply for recovery of deficiency in or refund of excess duty” has been scored off in a routine manner in all the returns. Further, there is also a remark written in hand saying that the assessee is “fully exempted from Central Excise duty”. The striking off of the para relating to Rule 9B and the remark reproduced above give the impression that the assessing authority has not considered the clearance as subject to provisional assessment. There is also no indication of any condition being laid down by the authority before allowing clearance of the goods. The records thus show that clearances have been allowed on the basis of the C.Ls. and RT 12 returns without invoking the provisions of Rule 9B and without directing the assessee to execute any bond for safeguarding revenue interest. Since in the C.Ls and RT 12 returns appellants had claimed Nil rate of duty as per the Tariff itself, if there was intention to assess a provisional rate of duty, execution of a bond to secure the amount assessed would have been clearly insisted upon. Further, it also appears that the assessing authority had failed to take note of the circulars issued by the Board relating to the procedure to be followed by the assessing authorities under Rule 9B. We find from C.B.E.C Circular No. 26/89, dated 24-4-1989 that there are provisions therein to the effect that the Asst. Collector directing provisional assessment has to state “(i) the grounds on which the provisional assessment has been ordered (ii) rate of value at which duty is to be provisionally paid (iii) the amount of differential duty for which bond has to be executed and (iv) the amount of security or surety as may be fixed by the Asst. Collector keeping in view the instructions issued by the Board from time to time.” The Circular in paragraph 3 has further stated “if any of these conditions are not observed, the assessment will not be considered as provisional, not withstanding the fact that the words ‘provisional assessment’, ‘provisionally approved’ etc. are endorsed on the relevant documents”. In the facts of the case, we find that the assessing authority has failed to comply with not only the provisions of Rule 9B but also the above directions of the Board. As has been held by the Supreme Court in Ranadey Micronutrient v. CCE [1996(09)LCX0009 Eq 1996 (087) ELT 0019 (S.C.)], the Departmental Officers are barred from taking a stand which is contrary to the directions given by the Board. It is also observed that the Tribunal decision in J.K. Cotton Weaving & Spinning Mills Ltd. v. CCE (supra), in support of their contention that for considering an assessment as provisional, there has to be an order of the Officer concerned, has been upheld by the Supreme Court. The impugned order cannot, in the light of the above, be sustained. The Appeal is accordingly allowed and the impugned order set aside.
7. We have taken note of the submission made by the ld. SDR as regards the appellants’ claim for the benefit of Notification No. 31/88 which relates to bulk drugs. For deciding eligibility under this notification, according to the D.R., chemical examination report may have to be called for and therefore on this aspect, the matter has to be remanded to the original adjudicating authority. However, since we have taken the view that the claim of the Department that the items were only provisionally assessed is not legally sustainable, the classification claimed by the appellants in their C.Ls and RT 12 returns hold good. These items being eligible to Nil duty in the Tariff itself, no duty demand remains.
8. The Appeal is accordingly allowed and the impugned order set aside.
Equivalent 2000 (124) ELT 406 (Tribunal)
Equivalent 1999 (035) RLT 0240