COLLECTOR OF CENTRAL EXCISE, BARODA versus M/S. COTSPUN LTD.

Citation: [1999] SUPP. 3 S.C.R. 184 · Decided: 23-09-1999 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Dismissed
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Judgment (excerpt)

A 
COLLECTOR OF CENTRAL EXCISE, BARODA 
v. 
MIS. COTSPUN LTD. 
. _, 
SEPTEMBER 23, 1999 
B 
(S.P. BHARUCHA, B.N. KIRPAL, V.N. KHARE, 
S.S. MOHAMMED QUADRI AND D.P. MOHAPATRA, JJ.] 
Excise Laws : 
C 
Central Excise Rules, 1944 : 
Rules JO and 173~Excise duty-Levy of-Classification of goods--
Classification list approved by Central Excise authorities-Subsequent reclas-
sification-Demand for differential duty retrospectively-Validity of-Held, 
levy of duty on the basis of approved classification list is not short levy and 
D differential duty cannot be recovered-Levy of duty on the basis of approved 
classification list is co"ect levy until show cause notice is issued questioning 
the co"ectness of approval-Only when the co"ectness of the approval is 
challenged, the approved classification ceases as such. 
E 
Respondent-assessee, engaged in the manufacture of NES yarn, filed 
classification lists which were approved under the provisions of Rule 
173-B of the Central Excise Rules 1944. Subsequently, the excise 
authorities issued show cause notices for reopening the assessment. A 
demand for differential duty was made. Respondent-assessee contended 
that the goods correctly classified and approved could not be reopened 
F and therefore demand for differential duty could not be raised. The said 
contention was upheld by the Assistant Collector. However, on appeal, the 
Appellate Collector upheld the reclassification and confirmed the 
demands for differential duty. Tribunal quashed the demands holding 
that revised assessment could be made affective only prospecti1'ely from 
G the date of show cause notices; not with reference to earlier removals 
made under approved classification lists. Hence the present appeal which 
has been referred to the Constitution Bench since there are two conflicting 
three-Judge Bench decisions on the issue involved. 
On behalf of the Revenue it was contended that by reason of Rule 
H 10, the reclassification of the NES yarn would operate retrospectively and 
184 
I 
' 1 
C.C.E. v. COTSPUN LTD. 
185 
that, therefore, the assessee was liable to pay excise duty on the basis of A 
the modified classification list for the period that commenced six months 
before the date on which the reclassification was made. 
Dismissing the. appeal, the Court 
HELD .: 1.1. Levy of excise duty on the basis of an approved clas-
B 
sification list is not a short levy and differential duty cannot be recovered. 
Thus, Rule 10 of the Central Excise Rules, 1944, providing for recovery 
of amount short levied and not dealing with classification lists or re-open-
ing of approved Classification lists; has no application. [187-B; 190-E] 
1.2. Levy of excise duty on the basis of an approved classification 
list is the correct levy, at least until such time as to the correctness of 
the approval is questioned by the issuance of a show cause notice. It is 
only when the correctness of the approval is challenged that an approved 
classification list ceases to be such. [190-D] 
c 
D 
Rainbow Industries (P) Ltd. v. Collector of Central Excise, Vadodara, · 
[1994] 6 sec 563, affirmed. 
Ballarpur Industries Ltd. v. Asstt. Collector of Customs and Central 
Excise & Ors., [1995] Suppl. 3 SCC 429, overruled. 
Collector of Central Excise v. Indian Oxygen Ltd., (1991) 51 ELT A36 
and Collector of Central Excise, New Delhi v. Bhiwani Textile Mills, [1996] 
88 ELT 639, referred to. 
CIVIL APPELLATE JURISDICTION : Civil Apeal No. 3304 of 
E 
1988. 
F 
From the Judgment and Order dated 15.3.88 of the Central Excise 
and Gold (Control) Appellate Tribunal, New Delhi in A. No. E-2611 of 
1987. 
C.S. Vaidyanathan, Additional Solicitor General, T.L.V. Iyer, G 
(Joseph Vellapally), (A.C.) Dileep Tandon, Shivram, T.A. Khan, P. 
Parmeswaran, A.R. Madhav Rao, Kotni Srinivas, Tarun Gulati, V. 
Balachandran, and (V. Sridharan), (A.G.) for the appearing parties. 
The following Judgment/Order of the Court was delivered : 
H 
186 
SUPREME COURT REPORTS [1999) SUPP. 3 S.C.R. 
A 
BHARUCHA, J. This appeal has been referred to a Constitution 
Bench for the reason that there are two conflicting three Judge Bench 
decisions of this Court on the point at issue. 
Briefly stated, the facts are : The assessee-respondent manufactures 
B NES yarn. It had filed classification lists with the Excise authorities, the 
appellants, which had been approved under the provisions of Rule 173B 
of the Central Excise Rules, 1944. The approval classified the NES yarn 
under ol
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