Approved classification list and show-cause procedure control recovery of non-levied Handloom cess; RT-12 demand alone is unsustainable.

Approved classification lists governed duty liability until modified under the prescribed procedure, so where Handloom cess was omitted from an approved list, the proper course was to amend the list or invoke the recovery mechanism for non-levied duty. A demand raised merely by directing payment through RT-12 returns, without issuing a show-cause notice and completing regular adjudication, did not follow the required procedure and was therefore unsustainable. The lower authorities' demands were set aside.

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Issues: Whether demands for Handloom cess could be raised on finalisation of RT-12 returns when the approved classification list did not indicate liability to cess, and whether recovery of the non-levied amount required recourse to the prescribed show-cause procedure.

Analysis: The assessee did not dispute that the goods were liable to Handloom cess, but contended that the department had approved the classification list without indicating such liability and that duty had therefore not been collected from buyers. Rule 173B required filing and approval of the classification list, and the approved list governed duty payment unless modified in the manner provided. Where the omission resulted in non-levy, the proper course was to modify the approved list or proceed under the recovery machinery for non-levied duty. Raising the demand merely through directions on RT-12 returns, without issuing a notice and conducting regular adjudication, did not accord with the prescribed procedure.

Conclusion: The demands raised on the RT-12 returns were not sustainable, and the orders of the lower authorities were set aside.

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