Judgment:
1. All these 11 appeals are against a common order of the Appellate Collector. The facts and circumstances of the appeals are similar. We, therefore, heard them together and decide the same together.
2. The appellants are manufacturer of paints etc. falling under Item 14 of the First Schedule to the Central Excises and Salt Act, 1944. They filed a classification list on 1-4-79 effective on the same date. This list contained, among others, two products, namely, "Star Wood Primer White and Pink" and "Indeco N.C. Primer Redoxide". They claimed that these two products (about others there is no dispute) were assessable at concessional rate of duty of 10% under Notification No. 220/77-C.E., dated 15-7-77. The Superintendent approved the classification list on 11-4-79. However, on 28-12-79 the Superintendent issued a show cause notice asking the appellants to show cause why the classification of the said two products should not be amended, making them ineligible to the concessional rate of duty under Notification No. 220/77-C.E.3. On 11-9-80 the Assistant Collector passed orders holding that the two products would not be entitled to the concessional rate of duty. In addition to this order of the Assistant Collector there were also 10 orders whereby he confirmed the endorsements in RT 12 returns, which indicated short-levy of duty. The appellants filed, therefore, 11 appeals before the Appellate Collector. The Appellate Collector holding that the short-levy indicated by the Department was within six months from the date on which such short-levy occurred, held the demand was not time-barred. He further took the endorsement for demand of duty made on the RT 12 returns and viewed that these endorsements contained specifically the elements of show cause notices and therefore did not accept the argument of the appellants that there was no show cause notice. He further hold that two products Starwood Primer and Indeco N.C. Primer did not qualify for the concession under Notification No.220/77-C.E. Hence the appeals before us which were originally filed as Revision Applications and on transfer are being treated as appeals before the Tribunal.
4. The appellants argued that the show cause notice issued to them threatened only modification of the classification list and did not contain demand for duty. They submitted that the Appellate Collector's finding that the endorsement on the R.T. 12 returns should be considered as show cause notices was not correct. They further emphasised that the notification covers both the products and that it did not require the products to possess anti-corrosive properties to entitle them to the concessional rate. It is enough if the product is known as primer and used as such. They further relied on 1983 ELT 1249 CEGAT in the matter of Gujarat Machinery Manufacturers Ltd., Karamsad, Gujarat v. Collector of Central Excise, Baroda and pleaded that even if duty was payable by them, it will be payable for six months before the date of the order and not from the date of show cause notice.
5. The learned JDR opposing the arguments submitted that Starwood Primer is not a primer metal and is not covered by Notification No.220/77-C.E. Indeco N.C. Primer was not a primer and could not be used as first coat. Even if it is primer it was not covered by Notification No. 220/77-C.E. In support of this argument she relied on technical data sheets published by the Appellants for the information of the customers, etc. The learned JDR also argued that the Superintendent wrongly approved the classification list inasmuch as he was not authorised to do so.
6. We have considered the arguments of both sides. The questions to be decided are whether the two products are entitled to concession under Notification No. 220/77-C.E. and, whether, if they were not so eligible, duty could be demanded for six months before the date of show cause notice.
7. We have perused the technical data sheets which were seen by the authorities below at the time of adjudication. In this, while describing the product Indeco N.C. was listed as "N.C. Paints and ancillaries" and Starwood metal was shown under the heading of primers.
In what was called the general methods of uses the appellants instructed that (the Surfacers) should be primed with the recommended primer and they should be finished using correct paint suited for the purposes. They described the Indeco N.C. primer as follows :- (a) Indeco Nitrocellulose Primer Surfacer is made with high quality Nitrocot-ton suitably blanded with plasticising and hard resins and contains micronised extenders as well as Titanium Dioxide. Thus, it passesse very good flexibility, adhesion and filling properties.
However, it should never be applied on bare metal because it is not supposed to have corresion resistance like Red Oxide Primer.
(b) Direction for use : Surface should be suitable primer with redoxide or two pack primers (see pamphlet). Dents should be filled up with INDECO N.C. Putty. The surface thus prepared can be wet sanded after 2-1/2 - 3 hours and care should be taken to make the surface moisture free." 8. The Notification in question mentioned "metal primer and oxide".
From what has been stated above it appears that before Indeco NC primer could be used the surface is to be prepared with redoxide or primers and putty. It appears that in view of this Indeco NC primer could not be considered as a metal primer. Therefore, the argument that the Notification does not prescribe anti-corrosion properties as a qualification is not helpful to the appellants.
9. The appellants also claimed that the meaning of primer is as followsn :- "Paint designed to be applied as a first coat to surface. Their function is to seal off the pores, make a strong adherent film on the surface and in their turn from a suitable base for the subsequent coat of Paints".
Even then what has been seen shows that Indeco NC Primer which should be used on prepared surfaces cannot be considered as primer inasmuch as it is not metal primer in the accepted sense. The reason given for not using NC Primer on base metal surface that it would not create good adhesion is not a ground to consider it as a metal primer as the relevant notification has to be construed strictly.
10. The second product is Starwood primer, white and pink. The Assistant Collector held that Starwood primer is not a metal primer.
The learned JDR stated that this commodity is not used as metal primer.
The show cause notice alleged that starwood primer is not used as primer for application on metal but is used for application on wood.
The learned JDR reiterated this position. This has not been disproved by the appellants. As the Notification in question mention only metal primer, it is clear that this commodity, namely, starwood primer is not eligible to the same.
In the result we hold that both the commodities were not eligible for concession under the Notification No. 220/77-C.E., as held by the authorities below.
11. This would take us to the next question as to whether duty could have been charged for a period of six months prior to the show cause notice. The appellants submitted that the show cause notice issued to them threatened only the re-classification of the goods and recovery of the dues and that Rule 10 of the Central Excise Rules was not invoked.
The relevant part of the show cause notice is as follows :- "Now, therefore M/s. Comet Paints Ltd., V.V. Nagar, Anand are called upon to show cause to the Assistant Collector of Central Excise, Anand within 30 days of the receipt of this notice as to why the classification of the said products should not be amended as mentioned above as provided in Rule 173(B)(5) of Central Excise Rules, 1944." 12. Perusal of this shows that appellants' plea regarding the absence of demand and mention of Rule 10 in the Show Cause Notice was correct.
The Appellate Collector's observation that the endorsements on the RT 12 returns amounted to show cause notice cannot be accepted. A Show Cause Notice has to state the reasons for demand and the amount thereof and the rules under which demand is made. The endor-sement on the RT 12 produced before us do not contain any of these elements. We, there fore, do not accept the reasoning of the Appellate Collector in this regard.
13. In this context, we have perused the judgment cited by the appellants in sup port of their argument (1983 ELT1249 CEGAT) that the demand can be only from the date of the final order. Paragraph 18 of the said order which appears to be relevant to the present matter is as follows :- The show cause notice dated 4-11-1981, no doubt, did not, in terms, ask the appellants to show cause why recoveries of short-levies in respect of the pas period should not be effected. It is probable that the Collector did not do so since the question of recovery in respect of past period would arise only after the basic issue, viz., the classification of frit, was adjudicated upon. We do not know. Be that as it may, once the Collector came to the conclusion and ordered re-clas-sification of frit under Item 23A(4) CET, he was right in demanding payment of differential duty. However, recoveries of such amounts can be made only in respect of a period of 6 months preceding the date of the order, i.e. 30-4-1982, as determined with due regard to the provisions of Rule 11 or Section 11-A as applicable in each assessment. The Central Excise authorities shall re-calculate the amount of short-levy in the light of these observations and communicate the figures to the appellants within 3 months from the date of communication of this order." 14. In the present case there was no show cause notice under Rule 10.
Keeping in mind the extract of the CEGAT order (supra) and also the order of the Kerala High Court in Good Shephered Rubber Company, Palghat v. Inspector of Central Excise, Palghat and Ors. (1978 ELT J 66) which was cited in the CEGAT judgment, we are of the opinion that the demand of the short-levy without show cause notice is violation of Rule 10. In the circumstances where no show cause notice was issued for demand for duty we follow the earlier CEGAT decision and order that the demand for duty be limited to a period of 6 months from the date of the order.
15. As a result the rate of duty as decided by the authorities below is upheld but the demand for duty is restricted to a period of 6 months from the date of Assistant Collector's order. The appeals are disposed of accordingly.