1991 (1) TMI 163 - HC - Central Excise

Assistant Collector has jurisdiction to modify classification list under Rule 173B(5) after approval with natural justice

The HC dismissed the writ petition challenging a show cause notice issued under Section 11A of the Central Excise and Salt Act, 1944. The court held that ... Demand - Show cause notice - Classification of goods Issues Involved:1. Jurisdiction to issue show cause notice.2. Power of the proper officer to modify the classification list.3. Requirement of fulfilling conditions for modification.4. Applicability of alternative remedies.Detailed Analysis:1. Jurisdiction to Issue Show Cause Notice:The petitioners challenged the notice dated 29-12-1989 issued by the Assistant Collector, Central Excise and Customs, Kota, under Section 11A of the Central Excise and Salt Act, 1944. The respondents argued that they had jurisdiction to issue the notice in terms of Section 11A of the 1944 Act and Rule 173B(5) of the Central Excise Rules, 1944. The court found that Section 11A confers wide power on a Central Excise Officer to issue notice for recovery of duty not levied, not paid, or erroneously refunded within six months. The court concluded that the notice issued under Rule 173B(5) read with Section 11A of the 1944 Act by respondent No. 2 is not vitiated on the ground of lack of jurisdiction.2. Power of the Proper Officer to Modify the Classification List:The petitioners argued that there is no provision for review or revision of the classification list once it has been finalized. The court examined Rule 173B, which provides that the assessee shall file a list of goods for approval by the proper officer. Sub-rule (5) of Rule 173B allows the proper officer to make modifications in the classification list for any reason affecting the rate of duty. The court held that Rule 173B(5) comprehends within itself the change of the classification list after it has been approved. The proper officer has the authority to rectify errors or correct mistakes in classification, provided that the affected party is given proper notice and an opportunity to make representations.3. Requirement of Fulfilling Conditions for Modification:The petitioners contended that the power under Rule 173B(5) can only be exercised on the fulfillment of certain conditions or the existence of certain conditions. The court referred to the decision in J.K. Synthetics Ltd. v. Union of India, which held that the Department should not change its stand unless there is a good or cogent reason for the change. The court, however, did not accept this broad proposition, stating that even in cases of mistake or erroneous classification, the proper officer has the power to modify the classification list suo motu. The court emphasized that the exercise of such power must comply with the principles of natural justice.4. Applicability of Alternative Remedies:The respondents argued that the writ petition was premature as the petitioners had not exhausted the remedies available under the 1944 Act. The court agreed, stating that the petitioners have an equally effective and efficacious remedy under the 1944 Act. The court held that it should not ordinarily interfere in such matters unless the aggrieved party has exhausted alternative remedies available under the statute. The court cited several precedents, including Titaghur Paper Mills Company Ltd. v. State of Orissa and Assistant Collector of Central Excise v. Dunlop India Ltd., to support this view.Conclusion:The court dismissed the writ petition, stating that the proper officer has jurisdiction to issue the impugned notice and modify the classification list. The petitioners were advised to exhaust the alternative remedies available under the 1944 Act. The court emphasized that the proper authority should decide the objections of the petitioners objectively and uninfluenced by the observations of the court.