Refund classification cannot be altered to assessee's prejudice without notice; exemption applies to goods assessed as nuts and bolts.

In a refund proceeding, a fresh classification prejudicial to the assessee cannot be adopted without prior notice, and the revenue was therefore barred from changing the assessed description of the goods to the assessee's detriment. As the goods had already been assessed as nuts and bolts, Notification No. 86/86-Cus. applied on its terms to that description, and the exemption could not be denied by relying on an alternative classification. The impugned order was set aside and the refund claim was held eligible for the notified exemption.

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Issues: (i) whether, in a refund proceeding, a fresh classification adverse to the assessee could be adopted without putting the assessee on notice; (ii) whether bolts and nuts, having been assessed as such, were entitled to exemption under Notification No. 86/86-Cus. dated 17-2-1986.

Issue (i): whether, in a refund proceeding, a fresh classification adverse to the assessee could be adopted without putting the assessee on notice.

Analysis: The assessment had already been made under CTH 7318 as nuts and bolts. In the refund matter, the classification could not be altered for the first time to the assessee's prejudice without prior notice. The order also noted that general purpose nuts and bolts are excluded from the special treatment invoked by the department.

Conclusion: The fresh adverse classification was not permissible in the refund proceeding without notice to the assessee.

Issue (ii): whether bolts and nuts, having been assessed as such, were entitled to exemption under Notification No. 86/86-Cus. dated 17-2-1986.

Analysis: Notification No. 86/86-Cus. granted partial exemption to bolts and nuts. Since the goods had admittedly been assessed as bolts and nuts, the notification applied on its terms. The departmental reliance on a different classification could not defeat the exemption claim once the assessment itself stood at that description.

Conclusion: The assessee was entitled to the benefit of Notification No. 86/86-Cus. dated 17-2-1986.

Final Conclusion: The impugned order was set aside and the appeal succeeded, with the refund claim held eligible for exemption as assessed goods of the description bolts and nuts.

Ratio Decidendi: In a refund proceeding, the revenue cannot adopt a new adverse classification without notice to the assessee, and an exemption notification must be applied according to the description on which the goods were assessed.

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