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CASE NO.:

Appeal (civil) 3148 of 1985

PETITIONER:

RAINBOW INDUSTRIES (P) LTD.

RESPONDENT:

COLLECTOR OF CENTRAL EXCISE, VADODARA

DATE OF JUDGMENT: 04/10/1994

BENCH:

R.M. SAHAI & M.K. MUKHERJEE

JUDGMENT:

JUDGMENT

1994 SUPPL. (4) SCR 135

The Judgment of the Court was delivered by

R.M. SAHAI, J. The short question of law that arises for consideration in

this appeal directed against the judgment and order of the Customs, Excise

& Gold (Control) Appellate Tribunal, New Delhi, is whether the

classification and the price list accepted by the Department and acted

upon, found subsequently to be erroneous, is to be applied prospectively Or

retrospectively.

The appellant, a manufacturer of dye-stuff, filed a price list in.-Part IV

proforma as applicable for sales to related persons. The price list showed

various includible and excludible expenses as well as assessable value as

claimed by the appellant. This was approved by the Department on 6th

December 1975 and the assessable value as declared was accepted. The

approval was to be effective from 1st October 1975. After nearly a year the

Assistant Collector issued a show cause notice requiring the appellant to

show cause as to why the net assessable value as per the method shown in

the annexure should not be revised and differential duty recovered from the

appellant. The reply of the appellant was not accepted either by the

Assistant Collector Or by the appellate Collector or the Tribunal. In fact

before the Tribunal it was conceded on behalf of the appellant that the

method for determining the assessable value in the price list submitted by

the appellant was not correct.

The order of the Tribunal was challenged and it was urged that the

classification and the price list submitted by the appellant having been

accepted and acted upon under Rule 173(2) of the Central Excise Rules, 1944

the Department precluded the appellant from challenging it and, therefore,

it is estopped froth claiming that the appellant was guilty of suppression

of facts. The learned counsel urged that the classification and the price

list having been accepted and acted upon, the Department was not justified

in taking proceedings under Section 11A of the Central Excises & Salt Act,

1944. ft was also urged that the Department could not have changed its

opinion and the law does not contemplate issuing of any notice only

because the Department felt that a particular item was dutiable in another

entry. In the alternative the learned counsel submitted that where the

Department has been acting upon the price list submitted by the appellant

worked out in one manner but the Department claims that it should be

calculated in a different manner then even if the calculation resorted to

by the Department is held to be correct it should apply from the date of

issue of notice and not from the date when the price list was submitted.

Reliance for it was placed on the order passed by this Court in Civil

Appeal Nos. 1960-61 of 1988 in the case of Collector of Central Excises,

Calcutta Vs. Indian Oxygen Ltd., Khardah, Decided on 17th March, 1989-1990

(48) E.L.T. A 24.

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Since the appellant did not dispute that the method of calculation of the

duty by the department was correct, the submission of the learned counsel

on lack of jurisdiction to initiate proceedings is not necessary to be

decided as the power to issue show-cause notice vests even if the duty was

short- levied as a result of erroneous application of law. However, once

the Department accepted the price list, acted upon it and the goods were

cleared with the knowledge of the Department, then in absence of any

amendment in law or judicial pronouncement the reclassification should be

effective from the date the Department issued the show-cause notice. The

reason for it is clearance with the knowledge of the Department and no

intention to evade payment of duty.

In the result, this appeal succeeds and is allowed in part. The appellant

is held liable to pay duty on the dye-stuffs manufactured by ii in the

mariner calculated by the Department from 16th October, 1976, the date the

show-cause notice was issued to the appellant.

Parties shall bear their own costs.