M/S. POULOSE AND MATHEN versus COLLECTOR OF CENTRAL EXCISE AND ANR.

Citation: [1997] 1 S.C.R. 888 · Decided: 04-02-1997 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
MIS. POULOSE AND MATHEN 
v. 
COLLECTOR OF CENTRAL EXCISE AND ANR. 
FEBRUARY 4, 1997 
B 
[S.P. BHARUCHA AND K.S. PARIPOORNAN, JJ.] 
Central Excise 
Central Excises and Salt Act, 1944 
c 
Schedule I Entry 14A-Central Excise Rule 1944-Rule JO-Appellant 
receiving waste carbon-di-oxide from fertilizer factory-Manufacturing pure 
carbon-di-oxide-Availing exemption under Tariff Advice 83/81-Wherein im-
pure carbon-di-oxide classifiable as item 68 and not as item UH-Tribunal 
relying on a later Trade Notice holding appellant not eligible for exemp-
D tion-No records to show the later Trade Notice was in pursuance of Tariff 
Advice by CBEC-Held, the decision of the Tribunal is incorrect in law. 
Section I IA-Show Cause Notice-Issued for shorter periotl-Later 
demand and levy for a longer period without prior notice and opportunity of 
E hearing to the assessee-Held, invalid and entire proceeding is vitiated. 
F 
Trade Notices issued at different times-Department in doubt about 
applicability-Held, where two opinions are possible the assessee should be 
given the benefit of doubt and that which is in its favour should be given effect 
to. 
The appellant, a manufacturer of liquid Carbon-di-Oxide conform-
ing to ISi grades, availed the benefit of exemption notification No. 7/65-Ce 
for removing the raw Carbon-di-Oxide from a fertilizer factory. The appel-
lants had taken IA licence for manufacturing pure Carbon-di-Oxide and 
a L6 licence for removing the waste gas generated in the fertilizer factory. 
G By the notification 7/65 Carbon-di-Oxide falling under item 14H CET was 
. 
exempted from. excise duty provided it was used for any "industrial pur-
pose" and as per procedure under Chapter X of the Central Excise Rules. 
The appellants received show cause notice in 1978 to explain why the 
licences should not be revoked and why duty should not be imposed from 
H March 1977 to September 1978. The Revenue contended that the appellant 
888 
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POULSOSEAND MATIIENv. CENTRAL EXCISE 
889 
was not eligible for exemption since they are not utilising tlie same for any A 
"industrial purpose'. The Assistant Collector held that the appellants are. 
not eligible for the benefit of the :Notification No.7/65 and duty was 
demanded for the period from March 1977 to February 1982. 
The Appellate Collector while deciding the appeal relied on a Trade 
Notice issued in 1981 by 'CBEC whereby it was decided that Carbon-di-
Oxide generated in fertilizer factories should be outside the purview of 
item 14H and it will be classifiable under item 68, and held that the order 
of Assistant Collector was incorrect. 
B 
On appeal by Revenue, the Tribunal relying on a Trade Notice issued C 
in 1985 wherein it was mentioned that impure Carbon-di-Oxide was cor-
rectly classifiable under item 14H held that it will be applicable for all 
transactions in question and reverseil. the order of the Appellate Collector. 
In appeal before this Court, the Appellant contended that the show 
cause notice was issued for the period from March· 1977 to September 1978 D 
and the demand and levy is for a longer period for whkh there is no notice 
which is violative of principles of natural justice, and that the Tribunal 
erred in discarding the Trade Notice issued in 1981 which was communi-
cated to the appellants for information. 
Allowing the Appeal, the Court 
E 
HELD: I. The show-cause notice served for a shorter period cannot be 
relied on for the purpose oflevy for a much longer period. The appellant was 
not served with a proper notice before saddling the liability for a period 
beyond September 1978. This is unfair and vitiates the proceedings. [897-E] 
F 
2. The reasoning and conclusion of the Appellate Tribunal is based 
on surmises and the Tribunal ignored the earlier Trade Notice of 1981 
without proper reasons therefor. There is no material on record to show 
. 
that Trade Notices of 1985 were issued by the Collectors in pursuance of 
the Tariff advice of the Central Board of Excise and Customs. The G 
Tribunal also omitted to notice that the earlier Tariff advice was in force 
at the time when the proceeding was pending before the Assistant Collector 
and also the Appellate Collector. [898-A-B] 
3. The appellate Tribunal casually referred to a later tariff advice 
No.6/85, without fully and effectively appreciating its contents, its' scope H 
890 
SUPREME COURT REPORTS 
(1997) 1 S.C.R .. 
A and the impact of the earlier tariff advice No.83/81. The ab

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