ORDER
Suresh, J.
1. The petitioner No. 1 is a company carrying on business as manufacturers of refrigeration and air-conditioning appliances and machinery. The company buys electric motors and blades and assembles them in the refrigeration and air-conditioning appliances and machinery manufactured by them. The assembly of motors and blades were classified as “electric motors” under Tariff Item 33(2) of the Central Excise Tariff. The petitioners contended that the motor and blade assembly would not constitute an electric fan as recognised in commercial and technical parlance. They further contended that they were merely components of refrigeration and air- conditioning machinery manufactured by them. They, therefore, contended that the same could not have been classified under Tariff Item 33(2), of Central Excise Tariff. This contention was negatived by all the authorities till the matter came before the Government in revision sometime in 1980. However, at the time of hearing of this matter, it was pointed out that even though the goods are not covered under Tariff Item 33(2), they could be classified under Item 33(3), i.e., “Electric Fans not otherwise specified.” Thereupon the petitioners submitted that this was being pointed out to them for the first time when the matter was being heard in revision and that, therefore, the same was not permissible in law. The Government accepted this contention on the part of the petitioners. In terms the Government held that the order of the lower authorities classifying the goods under Tariff Item 33(2) was not correct. As regards the question whether the goods could be classified under Tariff Item 33(3), the Government observed as follows :-
“However, the question now remains as to whether the impugned goods could be classified under Item 33(3), Central Excise Tariff. It is the petitioner’s contention that the question of classification of the impugned goods under Item 33(3) was not before the lower authorities and was raised for the first time at the time of personal hearing before the Government which was not permissible under law. Government observe that under sub-section (1) of Section 36 of the Central Government may on the application of any person aggrieved by any decision or order passed under the Act or the Rules made therein, and from which no appeal lies, reverse, or modify such decision or order. The powers of revision under this section are of wide amplitude and the Central Government can pass appropriate orders while deciding the question of classification of excisable goods under this section. However, having regard to the petitioner’s contention that the question of classification of the impugned goods under Item 33(3) has come up for the first time at the revisionary stage and also taking note of the fact that the rate of duty under Item 33(2) and 33(3), Central Excise Tariff was the same at the material time, Government consider that it would be in the fitness of things if the issue of confirmation of the demand with reference to Item 33(3), Central Excise Tariff were left to the lower authorities.
Having regard to the foregoing Government set aside the two orders in appeal by which the impugned goods have been held as classifiable under Item 33(2), CET. Government would, however, make it clear that this order is passed without prejudice to the Assistant Collector adjudging afresh the question of confirmation of the demand with reference to Item 33(3), Central Excise Tariff after the petitioners are given a proper opportunity of showing cause and also being heard if so desired against the proposed demand.”
In effect, the Government did not decide whether the goods could be classified under Tariff Item 33(3) or not. The Government in terms referred this question back to the lower authorities to decide this question after giving an opportunity of showing cause and also after being heard, if they so desired, against the said proposed demand. Therefore, the lower authorities were to consider this question afresh as to whether the goods could be classified under Tariff Item 33(3) and that could have been done on the evidence that would have been placed before the authorities and after hearing the petitioners in that behalf.
2. Consequently, since the earlier classification was set aside, the petitioners were entitled to a refund of the duty paid by them as contemplated under Section 11B, sub-section (3), Central Excises and Salt Act. Accordingly an application was preferred on 5-12-1980. On this, the Assistant Collector, Central Excise by a notice dated 18-7- 1981 issued a show cause notice [and] called upon the petitioners as to why the claim for refund of duty should not be rejected on the ground that “electric fans” manufactured by the petitioners are classifiable under Tariff Item 33(3) of the First Schedule to the said Act and why the duty already paid by them under Item 33(2) as aforesaid should not be confirmed as payable under Item 33(3) of the said tariff. The petitioners pointed out that that was not payable inasmuch as there was no classification under Tariff Item 33(3) of the Central Excise Tariff at all. They also pointed out that no adjustment was possible unless proper procedure was not (sic) followed in that behalf. They also pointed out that till such time the classification was done, there was no question of any adjustment of duty paid earlier.
3. This was negatived by the Assistant Collector by his order dated 18-11-1981. It is this order which is challenged in this petition.
4. The Assistant Collector passed the said impugned order on certain basic misconceptions as to the order passed by the Government in revision earlier. He proceeded on the assumption that the order in revision referred to above had already held that the goods would fall under Tariff Item 33(3) and that, therefore, there was no question of his sitting in judgment over the order in revision which has already settled the issue of classification of the “electric fans” in question under Tariff Item 33(3). He then proceeded to say that he was only only carrying out the directions given in the order in revision and that, therefore, he was not prepared to reopen the issue. It is on that basis, he made the following observations in his order :
“The classification of electric fans under T. I. 33(3) already stands decided vide the order in revision passed by the Government and it is not open to me, as rightly pointed out by the party, to reopen the provisions of the Customs Act before the appropriate forum. in question debars the department from issuing a fresh demand for duty on the same goods but under T. I. 33(2). In other words, as the duty has already been paid once on the impugned goods, it cannot be demanded again on the same goods. There is, therefore, no question of issuing a fresh demand for duty in this case. The only question that remains as per the order in revision is the confirmation of duty on the goods under Tariff Item 33(3). As at the material time the rate of duty on electric fans falling under T. I. 33(3) was the same as the rate of duty on electric fans falling under T. I. 33(2), the amount of duty payable on the impugned goods under T. I. 33(3) would be the same as already pad by M/s. Blue Star Ltd. In view of this, I hold that the duty which has already been paid by the party under T. I. 33(2 stands confirmed as duty paid on the impugned goods under T. I. 33(3). Since the amounts of duty payable under either sub-item would be same, there is no question of any excess amount paid by the party.”
5. In my view this is a clear case of complete misdirection on the part of the Assistant Collector of Central Excise. The Government had left the issue open and had in fact remanded the matter back to the lower authorities who were to hear the matter afresh after issuing a show cause notice. Therefore, no classification had been done as stated by the Assistant Collector in the impugned order. Therefore, the Assistant Collector could not have proceeded on the assumption that duty was payable under Tariff Item 33(3) and on that basis to adjust the duty as against the duty paid earlier. In this connection, Mr. Rana has drawn my attention to the case of Bharat Commerce of Industries Ltd. v. Union of India, reported in 1979 (4) E. L. T. (J 527). The relevant observations at 531 are as follows :
“Secondly, even assuming that duty is leviable on these goods under the above item, it is not open to the respondents to put up the plea at this stage. The assessment of the excise duty was in this case made under Sr. No. 2(iii) earlier referred to and this having been held illegal the respondents are bound to refund the duty so levied. If it is the department’s case that duty is leviable under Item 18 itself, the department should have raised a demand on that basis at the appropriate stage. Rule 10 of the Central Excise Rules at the relevant time read :
* * * *
It is admitted that no such demand can be raised in this case because the period mentioned in the rule has run out. While it may be legitimate for the respondent to adjust a refund payable to an assessee against other amounts of duty payable by him in accordance with law, it is certainly not open to them to make such an adjustment against a demand which has not been and which cannot be made. The orders of the Appellate Collector and the revisional order directing such appropriation by way of adjustment are wholly illegal and without justification.”
I am in agreement with these observations and, therefore, this petition will have to be allowed.
6. At this stage, Mr. Shah appearing for the respondents submits that the matter may be remanded back to the Government of India who had passed the order in revision. I find no substance in this submission of Mr. Shah. The order is clear. Government had not decided that the goods would fall under Item 33(3). That question had been clearly left open to be decided by the lower authorities after hearing the parties afresh. In these circumstances, there will be no question of remanding the matter back to the Government.
7. In the result, rule made absolute in terms of prayer (b) of the petition. Amount to be paid to the petitioners within a period of 8 weeks from today. In the circumstances of the case, there will be no order as to costs.