Full Judgment
White Cliff Tea. They claimed the PTM as falling under heading 0902 vide letter dated 8-9-1998. The classification declaration was returned for settlement of certain doubts not relating to the classification.
Pending receipt of the explanation, show cause notice was issued on 9-11-1999 proposing classification of the product under heading 2101.20 as miscellaneous edible preparation.
2. On 28-4-2000, Director General of Anti Evasion, Mumbai issued show cause notice to both the units seeking re-classification on clearances made during November 1998 to February 2000, demanding duty of Rs. 1,73,97,760.49 and seeking imposition of penalties upon the manufacturers. The specified averment was made of mis-classification with intent to evade payment of duty. The show cause notices were made answerable to Commissioner (Adj) Central Excise Mumbai, where the units were located in Nagpur.
3. The Commissioner heard the notices and passed the orders. She held that the demand for extended period did not survive, being hit by limitation. She confirmed duty of Rs. 97,87,373/- calculated on the clearances made in the "permissible" period. She refrained from imposing any penalty. On the quantification of the demand, there were considerable arguments. Citing the judgment of the Tribunal in Sri Chakra Tyres Ltd. v. CCE [1999 (108) E.L.T. 361], it was claimed that the assessable value had to be determined by deducting the duty payable from the sales price. Ld. Commissioner did not accept the ratio of this judgment but citing Supreme Court judgment on Brooke Bond Lipton India Ltd. and Madras Rubber Factory Ltd., confirmed the amount as mentioned above. The two appeals have been filed against this common order and are disposed of by this single order.
4. We have heard Shri C.S. Lodha, Advocate for the appellant and Shri S.V. Parelkar, DR for the Revenue.
5. Shri Lodha first argued on merits. It was his case was that tea in admixture with other substance would continue to fall under heading 0902. It was his case that for attracting the title "preparation" that tea must first be boiled. He claimed that mere mixing did not amount to preparation, His second claim was that the package containing the product described the product as "tea". The product was accepted as tea by the experts as well as the dealers and housewives. In this respect he relied upon the affidavits filed. He claimed that the notices were invalid on the point of jurisdiction. Both the factories were in the jurisdiction of the Commissioner of Central Excise Nagpur. The Directorate of Anti Evasion could not arbitrarily confer the jurisdiction for adjudication on the Commissioner of Central Excise Adjudication, Mumbai, in the absence of any notification under section of Central Excise Act, 1944. It was his further case that in the case of first appellant viz., HLL, classification had been approved and clearances were being made. In the case of the other appellant viz.
White Cliff Tea the show cause notices asking why an alternate classification be adopted/issued by the jurisdictional Central Excise Officer. He stated that the show cause notice alleging short levy was wrong in law inasmuch as the demand for duty was on the basis other than the approved classification list. He stated that the ratio of the Supreme Court order in the case of Madhumilan Syntex Pvt Ltd., 1988 (35) E.L.T. 349 (S.C.) had been approved by the Supreme Court in the judgment in the case of Maheshwari Mills Ltd. [2002 (142) E.L.T. 520 (S.C.) = 2002 (5) RLT 872 (S.C,)]. It was his case that the show cause notice, which was issued without seeking to vary the classification list, was not legal and, therefore, the entire demand was without basis. His argument was that in case the demand is held to be valid, the amount of duty has to be recalculated applying the principles laid down by the Tribunal in the case of Sri Chakra Tyres Pvt. Ltd. He pointed out that the Commissioner in the impugned order had chosen not to follow the judgment of Sri Chakra Tyres, placing reliance on other orders of the Supreme Court. In reply, ld. DR opposes the contention of the appellant and reiterates the finding of the Commissioner.
6. We have carefully considered the submissions. The events leading to the issues of the show cause notice have been narrated above by us. In the case of one appellant the department had approved the classification under heading 0902 and in the case of other appellant the classification claimed was being examined by the department by way of issue of a show cause notices. The present notice issued by the Directorate General of Anti-Evasion alleged that the classification was consciously wrongly shown under 0902 classified product under heading 2101.20 and sought to confirm the duty for the entire duration including the extended period. The Commissioner limited the confirmation to the normal period of six months. Thus, the same proceedings combined to upset the established classification and also demanded the duty for the duration.
7. In the case of Madhumilan Syntex Pvt. Ltd., the assessees were manufacturing spun yarn. This classification claimed was under item No.18 (III) (ii). The classification was approved in July 1983 and clearances were accordingly done. However, in February 1984, show cause notice was issued seeking recovery of Rs. 26,47,749.39 on the ground that the goods merited classification under heading 18 (III) (ii) and that on wrong classification, differential duly had accrued.
8. On 9th February, the classification list was modified by the jurisdictional Assistant Commissioner re-classifying the products under heading 18(III)(ii). Differential duty was also confirmed. The High Court of Madhya Pradesh passed orders quashing the demand for the period August 1983 to 6th February 1984. The demand for the period subsequent to the order amending the classification was however uphold, The Supreme Court in the cited judgment upheld this order of the High Court and dismissed the appeal of the UOI.9. The judgment again came up for consideration in the cited case of Maheshwari Mills Ltd. (supra). In the judgment, the Supreme Court confirmed the Madhumilan Syntex Pvt. Ltd., judgment holding that their judgment in the case of Elson [1988 (38) E.L.T. 571] did not give a different ratio. It was reiterated by the Supreme Court that the department could not issue the demand of duty on the basis of an approved classification list without seeking to first vary the classification.
10. In the present case the show cause notice makes it clear that the demand was raised without completing essential process, that of modification of the approved classification. It has, therefore, to be held that the proceedings instituted by show cause notice do not survive. On this ground alone the appeal would succeed.
11. Since the appeal succeeds on this ground we are not pronouncing our judgment either on merits of the classification or on the aspect of jurisdiction of the Commissioner (Adj) Mumbai to pass this order in the face of the fact that he had no territorial jurisdiction to adjudicate the case.
12. We also make it clear that the judgment would not bar, the progress of the proceedings instituted under show cause notice No.V(09)3-12/CD/Div-II/99/3616, dated 9-11-1999.