2000 (8) TMI 88 - SC - Central Excise

Unappealed classification orders under Central Excise and Salt Act bind assessee and bar reopening in refund claims (Rule 173B, 11(3))

SC held that classification determinations by an adjudicating authority under the Central Excise and Salt Act, 1944, are substantive and, if embodied in ... Consequence of non-challenge of an appealable order passed under the Central Excise and Salt Act, 1944 - classification of the product under tariff item 22-B - Whether the jurisdiction of the Assistant Collector while considering an application for refund of duty paid is independent of the jurisdiction exercised by him in determining classification of the product? Held that:- It is not an empty formality. Classification of the goods manufactured by an assessee is important for the purpose of levy and collection of excise duty. Under Rule 173B every assessee is required to file with the proper officer a list of goods manufactured by him for approval and the proper officer shall after such inquiry as he deems fit approve the list with such modifications as are considered necessary and all clearances are to be made only thereafter. Where an adjudicating authority has passed an order which is appealable under the statute and the party aggrieved did not choose to exercise the statutory right of filing an appeal, it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had committed an error in passing his order. If this position is accepted then the provisions for adjudication in the Act and the Rules, the provision for appeal in the Act and the Rules will lose their relevance and the entire exercise will be rendered redundant. This position in our view, will run counter to the scheme of the Act and will introduce an element of uncertainty in the entire process of levy and collection of excise duty. Such a position cannot, be countenanced. The view taken by us also gain support from the provision in sub-rule (3) of Rule 11 wherein it is laid down that where as a result of any order passed in appeal or revision under the Act, refund of any duty becomes due to any person, the proper officer, may refund, the amount to such person without his having to make any claim in that behalf. The provision indicates the importance attached to an order of the appellate or revisional authority under the Act therefore, an order which is appealable under the Act is not challenged then the order is not liable to be questioned and the matter is not to be reopened in a proceeding for refund which if we may term it so is in the nature of execution of a decree/order. In the case at hand it was specifically mentioned in the order of the Assistant Collector that the assessee may file appeal against the order before the Collector (Appeals) if so advised. Issues:Consequence of non-challenge of an appealable order under the Central Excise and Salt Act, 1944 regarding classification of a product and entitlement to question the order in a refund application.Analysis:The case involved a dispute where an Assistant Collector classified a product under a specific tariff item, which was appealable but not challenged by the assessee. The question was whether the assessee could question the classification in a refund application. The respondent, a manufacturer, claimed refund after the Assistant Collector classified the product differently than claimed. The Assistant Collector denied the refund, stating the classification order had finality. The Collector (Appeals) later allowed the appeal, remanding the matter for reconsideration. The Tribunal dismissed the appeal by the Collector of Central Excise, leading to the current appeal.The central issue was whether the jurisdiction of the Assistant Collector in a refund application was independent of his jurisdiction in determining product classification. The respondent argued that the refund jurisdiction was separate and not bound by the classification order. The Act provided for refund claims under Rule 11, stating the Assistant Collector could refund duty if satisfied. The Act also outlined the appeal process to the Collector (Appeals) and the appellate tribunal. The hierarchy of authorities for excise duty matters was emphasized, highlighting the importance of appeal rights.The Court emphasized that a right of appeal was substantive and binding on lower authorities. It held that if an appealable order was not challenged, the party could not later question it in a refund claim. Allowing such challenges would undermine the statutory appeal provisions and introduce uncertainty in duty collection. The Court highlighted Rule 11(3), indicating the significance of appellate orders in refund matters. As the Assistant Collector's order was appealable and not challenged, it could not be questioned in a refund proceeding. The Tribunal's order was deemed unsustainable, and the appeal was allowed with costs.