Case: Shri V. Ananthraman, Indian &amp; Others Vs. The Union of India &amp; Others

Ordinarily, we would not have taken up the onerous responsibility of adjudicating the show cause notice on our self in exercise of writ jurisdiction, but in the facts of this case, we are satisfied that the condition precedent for invoking Rule 209A of the Central Excise Rules being not satisfied question of taking any penal action against the Petitioners does not arise at all and hence instead of permitting the authorities to adjudicate we have decided to hear the matter on merits itself. The facts having bearing of the subject matter of the present petition are as follows :In the year 1985, relevant to the present petition, the Petitioners were holding high ranking position as Production Manager, Deputy General Manager and General Manager (Taxation) in Larson and Tubro Limited (hereinafter Company" for short). The said company in the year 1985 decided to manufacture Programmable Controllers in collaboration with M/s. Yaskawa Electrical Manufacturing Company Limited, Japan. The said Programmable Controllers or Programmable Logic Controllers are electronic automatic data processing machines which according to the Petitioners were classifiable under Tariff Item No.33DD of the first schedule to the Central Excise and Salt Act, 1944 (Act for short). These machines monitor a given situation or a set of situations in a plant or a machine or equipment and give corresponding information and instructions.On 11th November, 1985, the company submitted an application to the excise authorities along with product literature seeking licence under Rule 174 of the Central Excise Rules, 1944 (Rules for short)and also sought approval of classification of the Programmable Logic Controllers ("PLC" for short) under Tariff Item No.33DD of the Central Excise Tariff. The Central Excise Collectorate, Bombay had also issued a Trade Notice dated 29th November, 1985 stating therein that the PLC would be classifiable under Item No.33DD of the Central Excise Tariff. Accordingly, the Respondents granted requisite licence to the company and also by their letter dated 3rd March, 1986 returned the classification list duly approving classification of PLC under Item No.33DD of the Central Excise Tariff. With effect from 1st March, 1986, the First Schedule to the Central Excise Tariff Act was repealed and the duty on PLC under Section 3 of the Act became payable at the rates set forth in the schedule to the Central Excise Tariff Act, 1985 ("CET" for short). By a letter dated 22nd July, 1986 the Petitioners filed revised classification list seeking approval of PLC under the new Tariff Heading No.84.71 of the CET, which according to the Petitioners corresponds to Item No.33DD of the erstwhile Tariff. The Superintendent of Central Excise after seeking certain clarifications from the Petitioners, by a letter dated 28th November, 1986 informed the Petitioners that the classification of the PLC under Heading No.84.71 is approved.As new exemption became available to the PLCs in the yearbudget, the company filed revised classification list classifying the goods under Chapter Heading No.84.71 which was also approved by the Excise authorities on 1st May, 1987. It is the case of the Petitioners that on 8th May, 1988, Central Excise officers had visited the factory and verified the manufacturing process ofthe PLCs which are classified under Heading No.84.71 of the CET. Subsequent classification list filed by the Petitioners were also approved by the Excise authorities vide letter dated 21st/24th June, 1988. Thus, it is clear that the Excise authorities althrough accepted and approved the classification of the PLC under the erstwhile Item No.33DD of the then First Schedule, and thereafter under Heading No.84.71 of the Schedule to the Tariff Act. Thereafter, by a show cause notice dated 29th September, 1988 the Collector of Central Excise called upon the company to show cause as to why the PLCs manufacture and cleared by the company during the period fro, 1st March, 1986 should not be classified under Heading No.85.37 of the CET instead of Heading No.84.71 of the CET and the differential duty amounting to Rs.51,17,257.17 on the clearance of the impugned goods during those period should not be demanded and recovered from the company. The said show cause notice was also directed against the Petitioners and the Petitioners calling upon them to show cause as to why the penalty should not be imposed upon them under Rule 209A of the Rules for knowingly removing and clearing the PLC on which no proper Central Excise Duty has been paid under the Rules.Challenging the validity of said show cause notice both the Company and the Petitioners filed separate writ petitions in this court. Writ Petition No.1021 of 1989 filed by the company was admitted by this Court and the adjudication of the show cause notice was stayed against the company. However, when the said petition filed by the company was taken up for final hearing, by an order dated 6th August, 2002 the company was permitted to withdraw the petition so as to allow the Respondents to adjudicate the show cause notice against the company in accordance with law regarding the classification of the goods. The present petition relates to challenging the said show cause notice dated 29th September, 1988 in so far as it purports to penalise the Petitioners under Rule 209A of the CET.

Reasoning: In view of the callous attitude of the Respondents in filing the affidavit in reply inspite of several opportunities given, we have no alternative but decide the matter on the basis of oral submissions made by the Counsel for thein light of the aforesaid decision of the Apex Court, it may be open to the Respondents to vary the approved classification list, but differential duty cannot be recovered on the ground of Short Levy. In the present case while seeking to vary the classification of the goods and recover differential duty, the Respondents have resorted to Rule 209A with a view to penalise thethe instant case, the show cause notice does not disclose any reasons or the basis on which the revenue considers that the goods in question were liable to be confiscated. On the contrary the specific case of the Respondents in the show cause notice is that the goods cleared on the basis of approved classification under Tariff Heading No.84.71 are liable to be classified under Tariff Heading No.85.37 and the differential duty is liable to be recover from the company. It is not the case of the revenue that any goods have been clandestinely removed so as to invoke penal provisions against the Petitioners.From the particulars set out in the writ petition which is not controverted by the revenue, it is evident that at the relevant time, even the excise authorities were of the opinion that the PLCs were classifiable under Tariff Heading No.84.71 of the CET. The classification list submitted by the company was thoroughly scrutinized by the Excise Officers and after obtaining necessary particulars from the company fromthe said classification lists were approved. When the classification list submitted by the Company were duly approved by the Respondents and the goods were cleared on payment of the excise duty as per the approved classification list, invoking penal action under Rule 209A of the Central Excise Rules does not arise at all. Neither in the Show Cause Notice nor in the oral submissions made by the Counsel, the revenue could substantiate their action in invoking Rule 209A of the Central Excise Rules. In absence of any particulars set out in the show cause notice as to basis of invoking Rule 209A, it will be impossible for the Petitioners to show cause and in such circumstances, it will be an exercise in futility to permit the authorities to adjudicate upon the show cause notice.Under the circumstances, we are of the opinion that the impugned show cause notice issued by the Respondents in so far as it pertains to initiating penal action against the Petitioners under Rule 209A of the Central Excise Rules is totally devoid of merit and the same is liable to be quashed and set aside.