1987 (7) TMI 219 - AT - Central Excise

Tribunal Invalidates Duty Notices, Emphasizes Fairness

The Tribunal set aside the demand notices for differential duty, ruling them invalid due to lack of specificity and failure to comply with time ... Demand - Short levy - Aluminium foil scrap Issues Involved:1. Classification of aluminium foil scrap under Central Excise Tariff.2. Validity of demand notices for differential duty.3. Time limitation for issuing demand notices under Rule 10 of the Central Excise Rules, 1944.4. Impact of frequent changes in classification on the assessee.5. Acquiescence of the assessee in the classification.Issue-wise Detailed Analysis:1. Classification of Aluminium Foil Scrap:The case revolves around the classification of aluminium foil scrap. Initially, the Assistant Collector directed the manufacturers to pay duty on aluminium foil scrap at the crude rate under Central Excise Tariff Heading 27(a)(i). Later, in November 1975, the classification was changed to Heading 27(c) as foils. This change was reversed in February 1978 when a trade notice stated that aluminium arising in the manufacture of aluminium foil was assessable under Tariff Heading 27(a)(i). The Tribunal noted that these frequent changes in classification, from crude to foil and back to crude, were capricious and caused significant confusion and financial burden on the manufacturers.2. Validity of Demand Notices for Differential Duty:The Superintendent issued a notice on 1-4-1978 demanding differential duty, followed by another notice on 18-7-1978 asking the manufacturers to show cause why they should not pay a short differential levy of Rs. 1,165,497.05. The Assistant Collector adjudicated and directed the Superintendent to issue a fresh demand covering differential duty for six months from 1-4-1978. The Tribunal found that the notice dated 1-4-1978 was not a valid demand notice as it did not specify the amount demanded or the period, nor did it ask the notice receiver to show cause. This omission invalidated the notice, rendering it ineffective.3. Time Limitation for Issuing Demand Notices under Rule 10:Rule 10 of the Central Excise Rules, 1944, allows the proper officer to serve notice within six months where any duty has not been levied or paid or has been short levied. The Tribunal held that the demand notice dated 18-7-1978 did not qualify as a discovery of short levy but was merely a change of opinion. The demand for Rs. 2,42,005.98 issued on 24-1-1981 was found to be time-barred and thus null and void. The Tribunal emphasized that a time-barred demand is a dead demand and cannot be enforced.4. Impact of Frequent Changes in Classification on the Assessee:The Tribunal criticized the frequent changes in classification, stating that such capricious changes caused significant damage to the assessee. The manufacturers were unable to recover the differential duty from their customers as the goods had already been sold at the lower rate. The Tribunal noted that these changes were arbitrary and always to the detriment of the assessee. The Tribunal held that the reassessment could only take place from the date of the trade notice and not retrospectively.5. Acquiescence of the Assessee in the Classification:The department argued that the manufacturers acquiesced in the classification of the foil scrap under Heading 27(a) as they did not pay the duty under protest. The Tribunal rejected this argument, stating that the manufacturers' compliance with the trade notice did not imply acquiescence. The Tribunal noted that the manufacturers were aggrieved by the demand for the past period as they could not recover the differential duty from their customers.Conclusion:The Tribunal set aside the demand and prohibited the recovery of money under it. The assessment at the crude rate from 7-2-1978, after the issue of the public notice, was held to be in order and was not to be altered or disturbed. The Tribunal emphasized the need for uniformity and fairness in assessments and criticized the arbitrary and frequent changes in classification that caused significant harm to the assessee.