P.G. Chacko, Member (J) - (1.)THE period of dispute involved in this case is 1981 -84, during which the appellants had imported Textile Grade Polyester chips (raw material) for manufacture of their final product viz. Polyester Filament Yarn. The imported goods were duly warehoused in Customs Bonded Warehouse. The appellants later filed a Bill of Entry for clearance of the goods from the Warehouse claiming classification of the goods under Heading 38.01/19(1) of the Customs Tariff Act. The proper officer changed the classification to Heading 39.01/06 and also included landing charges in the assessable value of the goods. Aggrieved by the change of classification and loading of assessable value, the appellants preferred appeal to the Appellate Collector of Customs and, shortly thereafter, filed a Writ Petition with the Delhi High Court. While the statutory appeal was pending, the High Court passed an interim order on 28 -5 -1982 permitting the appellants to clear the Polyester Chips forthwith upon payment of customs duty under Chapter 38 without loading the assessable value with landing charges and upon the Appellants furnishing a Bond for the disputed amount of customs duty supported by a Bank Guarantee for 50% of the disputed duty and upon payment of auxiliary duty @ 20% in respect of importation before 28 -2 -1982 and @ 25% in respect of importation subsequent to the said date. Meanwhile, the Appellate Collector, by order dated 27 -5 -1982, remanded the case to the original authority for passing a speaking order on the classification issue after hearing the party. During the pendency of the writ petition before the High Court, the Supreme Court, in another assessee's case, settled the classification of identical goods under Heading 38.01/19(1) vide 1997 (91) E.L.T. 537 (S.C.). Subsequently, the High Court, by order dated 23 -9 -99, disposed of the writ petition directing the original authority to readjudicate the classification dispute in the light of the Apex Court's judgment. It was also directed that the Bank Guarantees and Bond be kept alive till the readjudication was over. Subsequently, the Assistant Commissioner took up the case for de novo adjudication. During the course of the proceedings, apart from the classification and valuation issues the Asstt. Commissioner raised a further issue regarding payment of Additional Duty of Customs [Countervailing Duty -CVD, for short] on the imported goods under Section 3 of the Customs Tariff Act. This action was resisted by the party, who submitted that there had never been such an issue in any of the earlier proceedings and that the new demand was illegal for want of show cause notice. This objection was overruled and the Asstt. Commissioner raised a demand of CVD of Rs. 91,57,674/ - on the party in his order of de novo adjudication, and appropriated the amount from the Bank Guarantees. Aggrieved, the party preferred appeal to the Commissioner (Appeals), wherein the demand of CVD was challenged on the main ground that the demand without issuing show cause notice under Section 28 of the Customs Act was not maintainable. The Commissioner (Appeals) took the view that the assessment of Bill of Entry should be deemed to be provisional and the demand of CVD without show cause notice was valid. Against the decision of the Commissioner (Appeals), the party appealed to the Tribunal. The Tribunal remanded the case to the original authority for a decision on the question whether the assessment was provisional. Subsequently some correspondence took place between the Asstt. Commissioner and the party touching the said question. Ultimately, the Asstt. Commissioner passed order dated 27 -2 -2001 confirming the demand of CVD against the party. The appeal preferred against this order of the original authority was rejected by the Commissioner (Appeals). Hence the present appeal before us.
(2.)WE have heard both sides and carefully considered their submissions. In the earlier round of litigation also, the appellants' challenge in the appeal (E/2311/2000 -C) before us was against the same demand of CVD. We remanded the case to the original authority after finding that the relevant question (whether the assessment of the Bill of Entry was provisional or not) had not been examined by that authority. In its order passed in the remanded proceedings, the original authority held that, though the assessment of Bill of Entry was not a provisional assessment under Section 18 of the Customs Act, it was provisional on account of the fact that the goods were cleared against Bond and Bank Guarantees furnished by the importer as per the High Court's interim order/direction. After observing that "the only issue which was to be decided by the original authority was whether the assessment was provisional in terms of Hon'ble High Court's interim order or not", the Commissioner (Appeals) held that the assessment was provisional in terms of the High Court's interim order and of the bond executed by the party. He also observed that the High Court's final order of remand revived provisionally of the assessment and the original authority finalised it pursuant to the remand order. The above view was taken by the learned Commissioner (Appeals) relying on the Tribunal's decision in Metal Forgings (P) Ltd. v. CCE [1994 (73) E.L.T. 302] wherein it had been held that an order of stay, by competent court, of any decision by adjudicating authority on a classification dispute had the effect of rendering the final assessment (based on such decision) provisional and also that letters/documents in the nature of suggestion or advice or directive, issued by the Department to the assessee, prior to finalisation of classification, were not to be treated as show cause notice for recovery of duty. Ld. Counsel has pointed out to us that the above decision of the Tribunal was set aside by the Supreme Court in Metal Forgings v. Union of India [2002 (146) E.L.T. 241 (S.C.)], wherein it was held that any classification made by the Revenue or any clearance of goods based on such classification could not be treated as provisional merely because some appeal or other proceeding challenging the classification was pending, unless it was shown that there was a provisional classification of the goods and there was an order (under Rule 9B of the erstwhile Central Excise Rules, 1944) for clearance of the goods on the basis of the provisional classification. It was further held that it was mandatory for the Department to issue show cause notice in prescribed format for demanding duty.
(3.)BOTH the lower authorities in the instant case held that the assessment of Bill of Entry was provisional in terms of the High Court's interim order and of the Bond executed by the party. The lower appellate authority held so by relying on the Tribunal's decision in the case of Metal Forgings (supra). But this decision in relation to provisionality has been set aside by the Supreme Court vide 2002 (146) E.L.T. 241, according to which there should be a statutory order for clearance of goods on payment of duty on provisional basis so that the assessment could be treated as provisional. This condition was not fulfilled in the present case. As to the requirement of show cause notice for demanding duty from an assessee, the Apex Court has upheld the Tribunal's decision and has ruled that such notice in the prescribed format is mandatory for demanding duty.
In the instant case, admittedly, CVD was demanded without issuing show cause notice under Section 28 of the Customs Act. Such a demand is illegal as held by the Supreme Court, and we Section 28 vacate the same. The order of the Commissioner (Appeals) is set aside and the appeal is allowed.