1993 (6) TMI 91 - HC - Central Excise

Reclassification ruled invalid, Show Cause Notices barred by limitation, Court sets aside orders.

The Court held that the reclassification of Lead Oxide Grey under a different sub-heading was invalid due to non-compliance with natural justice ... Demand - Jurisdiction Issues Involved:1. Classification of Lead Oxide Grey.2. Validity of Show Cause Notices.3. Limitation period u/s 11A of the Central Excises and Salt Act, 1944.4. Compliance with principles of natural justice.Summary:1. Classification of Lead Oxide Grey:The petitioner company manufactures Lead Oxide Grey. The dispute centers on whether Lead Oxide Grey should be classified under sub-heading No. 2804.60 (later renumbered as 2824.00) as 'Lead Oxide, Red Lead, and Orange Lead' or under sub-heading No. 3823.00, which includes 'Prepared binders for foundry moulds or cores; chemical products and preparations of the chemical or allied industries, not elsewhere specified or included.'2. Validity of Show Cause Notices:The Excise authorities initially classified Lead Oxide Grey under sub-heading No. 2804.60. However, subsequent audit objections and a report from the Chief Chemist led to a reclassification under sub-heading No. 3823.00. This reclassification was challenged by the petitioner. The Assistant Collector issued a Show Cause Notice on 2-5-1989, which was impugned in this proceeding. The Court found that the Assistant Collector's order dated 25-2-1991, which relied on the Chief Chemist's report, was invalid due to non-compliance with the principles of natural justice, as no copy of the report was provided to the petitioners.3. Limitation Period u/s 11A of the Central Excises and Salt Act, 1944:The Court focused on the limitation period prescribed u/s 11A of the Central Excises and Salt Act, 1944. The Show Cause Notice was issued beyond the six-month period from the relevant date, making the proceedings ex facie barred by limitation. The proviso to Section 11A allows for an extension up to five years in cases of fraud, collusion, or willful mis-statement, but the impugned notice contained no such allegations.4. Compliance with Principles of Natural Justice:The Court noted that the Assistant Collector's order dated 25-2-1991 was also vitiated by non-compliance with the principles of natural justice. The Assistant Collector had no jurisdiction to re-approve the Classification List after it had already been approved. Additionally, the reliance on a report without providing a copy to the petitioners further violated natural justice principles.Conclusion:The impugned Show Cause Notice dated 2-5-1989, the order dated 25-2-1991, and the subsequent Show Cause Notice dated 2-4-1993 were set aside and quashed. The writ application was allowed, and there was no order as to costs.