Retrospective classification change requires proper notice and hearing; a quashed modification order cannot support a backdated demand.

A classification list cannot be retrospectively altered to the assessee's detriment unless a proper show cause notice and effective opportunity of hearing are given. The Supreme Court held that the earlier binding judgment had already quashed the modification of the classification list, so the later authority could not treat that order as subsisting or sustain a demand for the earlier period. The retrospective classification change and consequent demand were therefore invalid, and the decision favoured the assessee.

---

---

Issues: Whether the Assistant Collector's order modifying the classification list and the consequent demand could stand when the earlier High Court judgment, as affirmed by the Supreme Court, had quashed the modification and held that any demand could arise only prospectively after a proper opportunity of hearing.

Analysis: The earlier High Court judgment was construed as having set aside the orders modifying the classification lists. The Supreme Court had also understood that decision to mean that the show cause process could not justify a retrospective demand for the earlier period. The later Collector (Appeals) proceeded on an erroneous assumption that the modification order had survived, and thereby affirmed a retrospective classification change from the date of manufacture. That approach was inconsistent with the earlier binding decision and with the requirement that an assessee be informed of the material and given a proper opportunity before any adverse modification of classification is made effective.

Conclusion: The modification order dated 5 March 1984 could not be sustained, and the retrospective classification change and demand were invalid. The decision is in favour of the assessee.

Ratio Decidendi: A classification list cannot be retrospectively altered to the detriment of the assessee unless the assessee is first given a proper show cause notice and effective opportunity of hearing, and a later authority cannot treat as subsisting an order already quashed by an earlier binding judgment.

---