1984 (3) TMI 67 - HC - Central Excise

Court classifies 'nyloc self-locking nut' under Tariff Item 52, denies refund in discrimination case

SIMMONDS MARSHAL LTD. Versus MR BARALIKAR, ASSISTANT COLLECTOR OF CENTRAL EXCISE, PUNE AND OTHERS

The Court classified the product 'nyloc self-locking nut' under Tariff Item 52, deeming it a nut despite its special features. The demand notice issued ... Nuts and Bolts - Revision - Statute - Writ jurisdiction - Classification of goods Issues Involved:1. Classification of 'nyloc self-locking nut' under Tariff Item 52 or Tariff Item 68.2. Validity of the demand notice issued under Rule 10 without a show cause notice.3. Alleged discrimination against the petitioners.4. Alleged violation of principles of natural justice.5. Entitlement to refund of duty already paid.Issue-wise Detailed Analysis:1. Classification of 'nyloc self-locking nut' under Tariff Item 52 or Tariff Item 68:The core issue was whether the petitioners' product, 'nyloc self-locking nut,' should be classified under Tariff Item 52 or Tariff Item 68. Initially, the authorities classified the product under Tariff Item 52, but the Appellate Collector later reclassified it under Tariff Item 68. However, after a show cause notice and subsequent hearings, the Central Government reverted to the original classification under Tariff Item 52.The Court emphasized that the words or expressions describing an article in a taxing statute must be construed in their popular sense, meaning the sense in which they are understood by those dealing in them. It was noted that the product is primarily a nut used for fastening, despite having additional features like self-locking and sealing. The Court held that the product should be classified under Tariff Item 52, as it is essentially a nut, albeit with special properties.2. Validity of the demand notice issued under Rule 10 without a show cause notice:The petitioners challenged the demand notice dated 21st April 1978, issued under Rule 10, arguing that it was invalid as it was a direct notice of demand without a preceding show cause notice. The Court agreed with the petitioners, citing previous judgments that a demand notice issued under Rule 10 without first issuing a show cause notice is invalid and liable to be set aside. Consequently, the demand made by the letter dated 21st April 1978 was held to be illegal and without jurisdiction.3. Alleged discrimination against the petitioners:The petitioners contended that there was hostile discrimination against them compared to other manufacturers like Pioneer and Gurumukh Singh, whose products were treated differently. The Court found no merit in this argument, stating that the cases of Pioneer and Gurumukh Singh were decided on their own facts and did not establish a general rule. Each case must be decided based on its specific facts and circumstances.4. Alleged violation of principles of natural justice:The petitioners argued that the second order dated 9th September 1981, was passed in violation of principles of natural justice, as it relied on certain ISI standards and opinions without giving them an opportunity to respond. The Court found that the petitioners were given a reasonable opportunity to be heard and to produce evidence. The decision was based on the evidence presented, and there was no violation of natural justice.5. Entitlement to refund of duty already paid:The petitioners sought a refund of the duty already paid. However, the Court held that since the product was correctly classified under Tariff Item 52, the petitioners were not entitled to a refund of the duty already paid.Conclusion:The Court concluded that the petitioners' product, 'nyloc self-locking nut,' falls under Tariff Item 52. The demand notice dated 21st April 1978 was held to be illegal and unenforceable. The petitioners were not entitled to a refund of the duty already paid. The rule was partly made absolute, with no order as to costs. An oral prayer for leave to appeal to the Supreme Court was refused, but status quo was directed to be maintained for two months.