1997 (3) TMI 321 - AT - Central Excise

Tribunal enforces short levy demand from show cause notice date, aligning with Supreme Court precedent

The Tribunal held that the demand for short levy on account of the change in classification of rubber flaps for animal-drawn vehicles was enforceable from ... Demand - Short levy arising out of change of classification Issues: Classification of rubber flaps for animal-drawn vehicles under Central Excise Act, retrospective demand raised by the department, enforceability of demand for short levy on account of change in classification, interpretation of Section 11A of the Central Excises and Salt Act, 1944.In this case, the appellant argued that there was a dispute regarding the classification of rubber flaps used for animal-drawn vehicles, claiming it was mistakenly classified under Heading 4011.10 instead of 40.12. The appellant contended that the classification list approved by the department up to 31-3-1987 was incorrect but argued that any revision should be prospective from the date of the show cause notice. The appellant relied on the decision in the case of Collector of Central Excise v. Bhiwani Textile Mills, emphasizing that demand for short levy due to a change in classification should be enforceable from the date of the show cause notice proposing the revision. The department issued show cause notices on 23-11-1987 and 12-4-1988 for raising the demand, with the appellant arguing that the demand should be enforceable only from the date of the first notice.The Tribunal considered the submissions and reviewed relevant Supreme Court decisions. Referring to the case of Union of India v. Madhumilan Syntex Pvt. Ltd., the Tribunal noted that demand cannot be raised without a show cause notice when changing the classification. Subsequently, in the case of Rainbow Industries (P) Ltd. v. Collector of Central Excise, it was established that demand can be raised prospectively from the date of the show cause notice, not retrospectively. However, in the case of Ballarpur Industries Ltd. v. Assistant Collector of Customs and Central Excise, the Supreme Court ruled that duty short levied before the show cause notice can be recovered within the time limit under Section 11A. Yet, in the recent case of Bhiwani Textile Mills, the Supreme Court held that demand for short levy due to a change in classification is enforceable from the date of the show cause notice proposing the revision. Following the Supreme Court's decisions, the Tribunal concluded that the demand for short levy on account of the change in classification was enforceable from 23-11-1987, the date of the first show cause notice proposing the revision. Consequently, the appeal was disposed of in accordance with this interpretation.