Judgment:
1. The facts of the case, briefly stated, are that the appellants are engaged in the manufacture of welding electrodes and Mig wire (MW I).
The dispute in the present proceedings turns on the classification, under the Central Excise Tariff Schedule (CET, for short), of MWI wire.
The said wire is nothing but steel wire coated with copper. It is stated that the appellants purchase duty paid steel wire and get the same copper-coated by the process of electrolysis through job workers.
The copper-coated steel wire is brought into the appellants' premises and reeled to the desired sizes. The excisability of the product was determined by the jurisdictional Assistant Collector of Central Excise by his order in the form of a letter dated 2-7-1975 by which he held that as the wire in question was bare continuous wire in reels, and since flux was not used in the process of welding with such wires, they were not classifiable as welding electrodes falling under Item No. 50, CET but under Item No. 68, ibid with effect from 1-3-1975. In terms of the said decision, the appellants were clearing MW I wire on payment of duty under Item No. 68, CET. On 3-12-1975, however, the Assistant Collector addressed another letter to the appellants stating that, on further examination, it had been decided that the wires in question were classifiable as welding electrodes under Item No. 50, CET and not under Item No. 68, ibid. He directed the appellants not to clear any wires without payment of duty according to the revised classification and also called upon them to intimate the particulars of clearances effected till then. The Superintendent of Central Excise thereupon issued on 1-3-1976 a demand for the differential duty amounting to Rs. 22,978.79 in respect of the clearances effected from 23-7-1975 to 28-11-1975. By a letter dated 19-3-1976, the appellants protested against the demand maintaining that the subject wires were not classifiable as welding electrodes, that it had been classified by the Assistant Collector under Item No. 68 and requesting to be personally heard before the case was decided. After hearing the appellants, the Assistant Collector, by his order dated 14-4-1976, confirmed the demand for duty. In the meanwhile, it appears that a further demand was made by the Superintendent on 31-3-1976 for a sum of Rs. 53,202/- being the differential duty involved on the clearances effected from May, 1971 to March, 1975 and followed it up by two demands in Form DD 2 for the said sum. On receipt of a reminder to this demand, the appellants wrote to the Assistant Collector on 21-5-1976 stating that while they were depositing the amount under protest, they would request to be personally heard. To this, the Assistant Collector replied on 11-6-1976 to the effect that in view of the adjudication order dated 14-4-1976 passed after taking into consideration written as well as oral submissions, there was no further scope to grant personal hearing. The Assistant Collector's order-in-original dated 14-4-1976 was challenged in appeal before the Appellate Collector. In the Memo of Appeal, the demand for Rs. 53,202/- was also challenged. The Appellate Collector, by his impugned order dated 17-9-1982, confirmed the Assistant Collector's order. It is this order that is now challenged in the present appeal before us.
2. We have heard Shri N. Mookherjee, Advocate, for the appellants and Shri K.C. Sachar, D.R., for the respondent and read the record.
3. At the outset, it was pointed out to the counsel that since there was only one appeal before the Appellate Collector, there was no necessity for the appellants to have filed a supplementary appeal which had been numbered as Appeal No. 3050 of 1987. We direct the Registry to refund the fees paid in respect of this appeal. No separate order is required to be passed in respect of this appeal.
4. It is beyond dispute that the subject MW I wire was classified by the Assistant Collector by his order dated 2-7-1975 under Item No. 68, CET which further held that it was not classifiable as welding electrodes under Item No. 50 ibid. It appears that the subsequent reclassification by letter dated 3-12-1975 was not on the basis of any fresh material or facts coming to light nor on the basis of any judicial pronouncements or amendment of the law. If any such circumstance existed, it has not been pointed out to us by the respondent. Therefore, the reclassification of the goods under Item No.50, CET, if it is upheld on merits, can take effect only from the date of the show cause notice seeking to re-classify the product. However, no show cause notice seems to have been issued to the appellants. The Assistant Collector's letter dated 3-12-1975 actually contains the decision to re-classify the goods and restrains the appellants from clearing the goods except on payment of duty as welding electrodes and calls upon them to furnish particulars of past clearances. The demand issued by the Superintendent on 1-3-1976 also does not amount to a show cause notice. It is a peremptory demand in respect of the differential duty on clearances effected between 23-7-1975 and 28-11-1975. However, it is clear from the records that the appellants had represented against the demand and the Assistant Collector had, after considering the written representation dated 19-3-1976 as well as the submissions made during personal hearing, passed an order confirming the demand on 14-4-1976. The fact that the demand letter dated 1-3-1976 was not worded as a show cause notice should or would normally be worded, cannot be, therefore, fatal to the proceedings since the appellants understood the letter as show cause notice, represented against it, and were given personal hearing by the adjudicating authority before the demand was confirmed.
5. The same thing cannot be said of the Assistant Collector's letter dated 11-6-1976 in respect of the demand dated 31-3-1976 for Rs. 53,202 in respect of the clearances effected during May, 1971 to March, 1975.
This is, because firstly, the demand was peremptory. Secondly because despite the prayer for a personal hearing, the Assistant Collector did not consider it necessary to give the appellants a personal hearing on the ground that the issue of classification had already been adjudicated upon by his order dated 14-4-1976. This reasoning of the Assistant Collector flies on the fact of the well settled proposition of law that no duty can be demanded from any assessee without giving him an opportunity of making a representation against the same. The fact that the appellants were heard in respect of the demand for Rs. 22,978.79 would not be sufficient reason for denying a hearing in respect of the demand for Rs. 53,202/- because the two proceedings were separate involving different periods during which clearances took place. In this view of the matter, the demand for Rs. 53,202/- must be set aside as bad and illegal. We order accordingly.
6. We shall now turn to the submissions on the merits of the classification dispute. The counsel for the appellants relies on the Tribunal's decision in the case of Poonam Trading Co. v. Collector of Central Excise, Calcutta, 1983 (14) ELT 2455, which was based on the Bombay High Court's judgment in the case of Advani Oerlikon Ltd. v.Union of India, 1981 (8) ELT 432. The Tribunal had held with respect to the goods therein, namely, copper-coated steel wires used in submerged arc welding, that they were not welding electrodes within the meaning of Item No. 50, CET. This view was inter alia based on the consideration that the contention of the appellants that electric current did not pass through the wire during the course of welding had not been controverted by the department. In the present case, however, it is the admitted position that electric current passes through the wire though it is stated for the appellants that the passage of electricity through the wire is incidental for the purpose of heating and melting the metals. The counsel's comment on this was that the wire would not become a welding electrode only for the reason that electricity passes through it. Shri Sachar, for the department, refers to the Supreme Court judgment in the case of Atul Glass Industries Ltd. and Ors. v. Collector of Central Excise and Ors., 1986 (25) ELT 473 - in which it has been laid down that consideration of functional utility would rule out mirror from being classified as glassware. The contention appears to be that since the wire is used in welding and electricity passes through it, it should be considered as a welding electrode. The reference to the Supreme Court's judgment may not be very relevant in the present case since, as the Bombay High Court has observed in the case of Advani Oerlikon (supra), Item No. 50 unlike Items Nos. 51 and 54 of the CET do not have the end-use criterion built into the entry.
7. For the purpose of the disposal of the present appeal, it does not seem necessary to pronounce on the classification of the goods. This is for the reason that the Tribunal has held in Steel Authority of India Ltd. v. Collector of Central Excise, West Bengal, Calcutta, 1985 (22) ELT 487 that in a case where a long standing practice has been allowed to, continue by the department by means of orders issued and approvals accorded till the Issue of a show cause notice for revising the classification, the demand for additional duty under the revised classification could be held enforceable only with effect from the date of the issue of the first show cause notice. In the present case, we are left with the Assistant Collector's peremptory order dated 3-12-1975 revising the classification without, as already noted, any disclosed fresh basis for doing so and the Superintendent's demand for duty dated 1-3-1976 which, in the light of the subsequent adjudication proceedings, could perhaps be treated as a notice to the appellants.
Both these documents and the adjudication proceedings consequent thereto have resulted in a demand for duty for the period from 23-7-l975 to 28-12-1975. Following the ratio of the Tribunal's decision in the case of Steel Authority of India Ltd. (supra), we hold that the demand cannot be enforced for the period prior to the date of the notice.
8. In the result, while we allow the appeal and set aside both the demands, we are not expressing any opinion on the merits of classification of MWI wire.