ORDER
G.A. Brahma Deva, Member (J)
1. This stay application is filed by the applicants for waiver of pre-deposit of duty amounting to Rs. 3,32,816/- and stay of the recovery proceedings.
2. Arguing for the applicants, Shri A.L. Mathur, learned Consultant, submitted that the appellants are engaged in the manufacture of Elastic Clips. The manufacturing process is that the duty paid rods are cut into pieces of required length and subjected to bending/forming process with the aid of Horizontal Power Press which gives U-shape to the steel rod pieces. The U-shape Steel rod pieces are thereafter again put Horizontal Power Press to give them another U-bend at different angles. The said pieces are then put into a verticle power process, which gives them the desired bending. In order to harden them and give them greater elasticity the said shaped steel rod pieces are subjected to heat treatment in an electric furnace at a pre-determined temperature. These are tested and supplied to the Railway department for use as elastic rail clips. He contended that the process did not amount to manufacturing process and the item continues to remain as a forged product. Prior to 1.8.1983 it was classified under T.I. No. 26AA(1a) of CET and w.e.f. 1.8.1983 this item was substituted under Tariff Item No. 25(11), as a forged product. These classification lists were approved by the Assistant Collector. The goods were manufactured out of duty paid inputs and were being cleared free of duty in terms of Notification No. 208/83.
2A. He argued that show cause notice dated 6.6.1985 was issued without assigning any reason for the proposed change of approved classification. The demand relates to the past period from 12.12.1984 to 23.4.1985. He said that Assistant Collector himself has agreed that party has correctly cleared their goods under Tariff Item 26AA [now Tariff Item 25(11)] as per approved classification list but the demand was due to the fact that classification list was reviewed by the Collector on appeal filed by the Department. He strongly contended that change in the classification should be prospective and not retrospective as it was held in various judicial pronouncements. Since the demand relates to the period prior to the proposed change of classification, the demand is not sustainable. He also said that the financial position of the applicant-Company is not good as the Company earned meagre profit of Rs. 32,057.11 and the liquidity position of the Company is also not good as can be seen from the balance sheet for the period ending 31.3.1991. Under these circumstances, he requested for the absolute stay.
3. Shri Sharma, learned Departmental Representative, appearing for the Revenue, submitted that no doubt that the demand relates to the past six months, but since the demand was within six months prior to the date of show cause notice, the Department was justified in raising the demand in view of the change in classification.
4. We have carefully considered the submissions of both sides. We find that the Supreme Court has observed in the case of Union of India and Ors. v. Madhumilan Syntex Pvt. Ltd. , that if the approved classification list has been modified by the Assistant Collector without any opportunity and the Show Cause Notice is given only with regard to quantification of the amount of the short-levy, such a Show Cause Notice cannot be regarded as for modification of Classification List hence it is not covered under Section 11A of the Central Excises and Salt Act, 1944 and the period of six months is also not available. However, such a Show Cause Notice can be regarded proper for the period subsequent to its issue. Since the contention of the applicants seems to be at par with the observations made by the Supreme Court in the aforesaid decision, we feel that prima facie case is in favour of the applicants. In the view we have taken, pre-deposit of duty is dispensed with and the recovery proceedings are hereby stayed during the pendency of the appeal. Thus, the application is allowed.
PRONOUNCED IN THE OPEN COURT.