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Judgment
S.H. Kapadia, J.—By this Writ Petition under Article 226 of the Constitution, the petitioner seeks to challenge the Order dated 11th February, 1983, passed by the Assistant Collector, Central Excise, Division K-III, Bombay, by which the show cause notice dated 20th November, 1978, came to be confirmed.
The facts giving rise to this Writ Petition are as follows:
(a) The petitioner-company, inter alia, manufactures bare copper wire finer than 14 SWG (standard wire gauge) and bare aluminium wire finer than 10 SWG (hereinafter referred to, for the sake of brevity, as ''the said products''). The said products are not used as an electric conductor without insulation.
(b) In April, 4962, Tariff Item No. 33-B was inserted in Central Excise Tariff and excise duly was levied on electric wires and cables.
(c) By Trade Notice No. 114/MP/62 dated 4lh July, 1962, it was clarified that bare copper wire of more than 14 gauge arc hardly ever used as electric conductors without insulation and no duty should be recovered on such wires under Tariff Item No. 33-B.
(d) By a subsequent Trade Notice No. 181 (MP) electric wires and cablcs/8/63 dated September 9,1963, issued by the Central Board it was clarified that bare aluminium wire above 10 SWG, even if manufactured from electrolytic aluminium wire, need not be subjected to duty under Item 33-B of the Central Excise tariff.
(e) In July, 1973", the petitioner filed a Classification List in respect of various products including the products in question. By the said Classification List, the petitioner expressly mentioned that the products herein were not excisable particularly in view of the above Trade Notice. The said List was approved by the concerned Excise Authorities.
(f) Similarly, identical Classification Lists were also filed in March 1974 and March 197S indicating that the above mentioned products were not excisable. The said two Classification Lists were also approved by the concerned Excise Authorities, after making appropriate enquiries. As per the above approved Classification Lists, the said products were not excisable, which case was accepted by the Excise Authorities.
(g) In March, 1975, Tariff Item No. 68 (being the residuary item) came to be inserted in Central Excise Tariff. Disputes arose between the petitioner and respondents regarding classification of the above mentioned products by which it was alleged by the Department that in view of Item 65 introduced from March, 1975, the above mentioned products were classifiable under Tariff Item 68 and not under Item 33-B.
(h) Consequently, by a show cause notice dated October 31,1977, respondent No. 3 herein called upon the petitioner to pay Rs. 62,012.69 for the period 14th February, 1976 to 19th August, 1976 in respect of the said products under Tariff Item 68. However, in February 1978, a Trade Notice dated 14th February, 1978, came to be issued and consequently, the Department took the view that the claim made by the Department vide show cause notice dated 31st October, 1977, on the basis of Item 68 was not maintainable in view of the Notification dated 14th February, 1978. The Department contended that in view of the said Trade Notice dated 14th"February, 1978, the said products were covered under Tariff Item 33-B and not under Tariff Item 68 and consequently, proceedings which commenced by show cause notice dated 31st October, 1977, came to be dropped.
(i) Surprisingly, by a show cause notice dated November 20, 1978, issued under Rule 10 of the Central Excise Rules (as it then stood), the petitioner was called upon to show cause why excise duty amounting to Rs. 16,64,972.21 for the period February 1, 1973 to 20th February, 1978 in respect of the said products should not be recovered. By the said show cause notice it was, inter alia, alleged that the petitioners had removed the said products without payment of duty as the said products were excisable under Tariff Item 33-B of the Excise Tariff.
(j) By reply dated 5th December, 1978, the petitioner-company pointed out that the petitioner was clearing the products right from the beginning pursuant to the above mentioned Trade Notices; that the petitioners had filed Classification Lists from time to time as stated hereinabove which were also approved by the concerned Central Excise Authorities and as such, clearance of the said products was within the knowledge of the Excise Authorities; that under Rule 10 of the Central Excise Rules the show cause notice was barred by limitation as Rule 10 as it then stood contemplated issuance of the notice within six months from the relevant date (i.e. 28.2.1978). In the present case, as indicated above, the show cause notice is dated November 20, 1978, in respect of the period ending 28th February, 1978 and accordingly it was submitted that the said show cause notice dated 20th November, 1978, was barred by limitation under Rule 10 of the Central Excise Rules. It was also submitted that there was no case of suppression, collusion, or fraud as contemplated by the provisions to Rule 10 of the Central Excise Rules which laid down that in such an eventuality, the period of limitation would be five years. In the circumstances, the petitioners by their reply stated that the show cause notice was erroneously issued and should be withdrawn.
(k) By impugned Order dated 11th February, 1983, respondent No. 2 herein, however, confirmed the above show cause notice and consequently called upon the petitioners to pay Rs. 13,77,319.61 which was calculated on the basis of certain payments being effected by the petitioners for the period 1st August, 1976 to 31st August, 1978 as could be seen from the letter of the petitioners dated 10th October, 1979. In other words, the demand made by respondent No. 2 was for an amount of Rs. 13,77,319.61 in respect of the period 1st March, 1973 to 28th February, 1978. By the said Order dated 11th February, 1983, the respondent No. 2 came to the conclusion that the petitioners had wilfully misstated or suppressed the material facts and in the circumstances, respondent No. 2 had taken action under the proviso to Rule 10 of the Central Excise Rules and accordingly called upon the petitioners to make the above payment By the said Order, respondent No. 2 also clarified that no duty was recoverable after 1975 under Item 68 as the said Item did not apply and the Item which was applicable was the Tariff Item No. 33-B. Accordingly, the respondent No. 2 also withdrew the show cause notice/demand dated 31st October, 1977, issued by the Superintendent of Central Excise on the basis that Tariff Item 68 applied.
(l) Against the said Order of respondent No. 2 dated 11/13th February, 1983, the petitioner has filed the present Petition. No Affidavit-in-reply has been filed by the Department to the said Petition.
Mr. Parikh, the learned Counsel appearing on behalf of the petitioner advanced three fold arguments before us in support of his challenge to the impugned Orders. Firstly, he submitted that Rule 10, which stood at the relevant time under the Central Excise Rules, contemplated a period of six months in cases of short levy or in cases where duty has not been levied. Mr. Parikh submitted that it is true that the proviso to Rule 10 would apply in cases of misstatement or wilful suppression of facts. However, in the present case, the second respondent erred in coming to the conclusion that there was suppression of material facts. Mr. Parikh submitted that the above facts clearly indicated that the petitioners had filed Classification Lists during 1973 to 197S and each of the Classification List came to be approved after detailed enquiries were made by the Concerned Authorities. Mr. Parikh also submitted that the above facts clearly indicated that the Department itself was not clear regarding applicability of the Tariff Item. He further submitted that the petitioners manufactured bare copper wires of more than 14 SWG and bare aluminium wires of more than 10 SWG which, clearly, were not excisable, particularly in view of the above referred two Trade Notices and the clarification mentioned therein. In the circumstances, there was no question of suppression or misstatement of facts and if the proviso to Rule 10 of the Central Excise Rules which laid down a period of five years did not apply, then the show cause notice dated 20th November, 1978, in respect of the period ending 28th February, 1978, was clearly barred. Mr. Parikh also relied upon various judgments to indicate that in any event and in the alternative in view of the above facts, the doctrine of promissory estoppel stood attracted. Lastly, he submitted that the Order of respondent No. 2 was clearly incomprehensible and it is not clear as to the basis on which respondent No. 2 came to the conclusion that there was misstatement of facts or suppression of facts as alleged by the Department.
Mr. Sethna, the learned Counsel appearing on behalf of the Department, at the very outset, pointed out that the basic question to be answered in the present case was whether the products in question were non-excisable and secondly whether suppression of facts had taken place so as to attract provisions of proviso to Rule 10 of the Central Excise Rules. Mr. Sethna very candidly and fairly stated that the findings of respondent No. 2 as contained in the impugned Order are not comprehensible and in the absence of any affidavit-in-reply to the Petition, the position cannot be clearly explained. However, he relied upon the Trade Notices referred to above and submitted that what respondent No. 2 intended was to say that the products were excisable as the said products were capable of being used as electrical wire.
The short point for determination in the present petition is whether the petitioners had wilfully suppressed or misstated the facts so as to attract proviso to Rule 10 of the Central Excise Rules (as it then stood). The Trade Notices dated 4th July 1962 as also 9th September 1963 laid down that no duty should be recovered on bare copper wires of more than 14 gauge as also on bare aluminium wires about 10 gauge. In the light of the said Trade Notices, the Petitioners filed the classification lists during 1973, 1974 and 1975 under which the said products were shown as non-excisable. The said classification lists were duly approved by the Excise Authorities and in the circumstances, the proviso to Rule 10 of the Central Excise Rules is not attracted. In this connection, our view is supported by the judgment of the Supreme Court in Tata Iron and Steel Co. Ltd. Vs. Union of India (UOI) and Others, and also by the judgment of the Supreme Court in the case of Nat Steel Equipment Pvt. Ltd. Vs. Collector of Central Excise, . In the afore-stated two decisions, it has been laid down that where classification list has been duly approved and accepted by the Department, the question of fraud or suppression does not arise. In the present case, the above facts show that the Department is not clear as to whether Tariff Item 33-B or Tariff Item 68 apply to the products in question (particularly after 1975 when Tariff Hem 68 was introduced). The impugned order does not give any reasons for coming to the conclusion as to how the petitioners are guilty of wilful suppression or fraud. In the circumstances, the impugned order is bad in law and is liable to be set aside. It may further be noted that there is no element of suppression or fraud. The show cause notice dated 20th November 1978 issued under Rule 10 of the Central Excise Rules (as it then stood) calling upon the petitioners to show cause why excise duty amounting to Rs. 16,64,972.21 for period 1st February 1973 to 20th February, 1978 is clearly barred under Rule 10 of the Central Excise Rules.
Before concluding our judgment, we may point out that by the impugned Order dated 11th February 1983, respondent No. 2 has withdrawn demand notice dated 31st October 1977, issued by the Superintendent of Central Excise, Range-IV, Division-III on the ground that Tariff Item No. 68 was not applicable and what was applicable was Tariff Item No. 33-B. However, as we have set aside the impugned Order dated 11th February 1983, passed by respondent No. 2 we make it clear that the question regarding applicability of Tariff Item No. 68 as mentioned in the demand notice dated 31st October 1977, is expressly kept open. We may also point out that the petitioners herein have also sought refund in respect of the duty paid by them during the period 1st August 1976 to 31st August 1978, which duty is paid by them under protest on the footing that Tariff Item No. 68 stood attracted and not Tariff Item No. 33-B. However, the question of refund is a subject matter of Writ Petition of 1447 of 1983. We may also mention that the question as to whether Tariff Item No. 33-B or Tariff Item No. 68 would apply in the present case will also be decided in Writ Petition No. 1447 of 1983.
Before concluding, we may point out that in the present Writ Petition, the petitioners have only challenged the demand confirmed by the impugned Order passed by respondent No. 3 for an amount of Rs. 13,77319.61 which has been set aside as stated above. The Department is, however, entitled to pursue their remedy in accordance with law if the provisions of Section 11-D, which has been introduced into Excise Act, 1944, during the pendency of the Petition, is applicable to the facts of the case.
In the circumstances, there is considerable merit in the present Writ Petition filed by the petitioners and accordingly, the impugned Order dated 11th February, 1983, passed by the Assistant Collector, Central Excise, Division-K III, Bombay is set aside. Subject to above, Rule is made absolute in terms of prayers (a) and (b). However, in view of the above facts, there will be no order as to costs.