(Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. This appeal is filed by the assessee calling in question legality and validity of judgement of the Central Excise and Customs Appellate Tribunal ('the Tribunal' for short) dated 29.07.2008 as also a subsequent order dated 01.12.2008, by which the Tribunal refused to entertain an application for rectification filed by the present applicant against, its first order. In the present appeal, the appellant has suggested following substantial questions of law for our consideration:
“[a] Whether the action of the Appellate Tribunal in remanding the case to the original adjudicating authority for deciding the case on the basis of new grounds, new evidence and new issues which were never raised in the show cause notice and also not in the Revenue's appeal is within the competence and jurisdiction of the Tribunal?
[b] Whether the action of the Appellate Tribunal in sending the case for fresh adjudication by way of an open remand for deciding issues not arising out of the show cause notice and the adjudication order and also not arising out of the review application of the Revenue is legal and valid in the facts of this case?
[c] Whether the action of the Appellate Tribunal in allowing the Revenue to raise new grounds, new pleas and a totally new case in an application filed under Section 35E(1) of the Central Excise Act, 1944 is legally correct?
2. Counsel for the revenue raised a preliminary objection with respect to maintainability of this appeal on the ground that the decision of the Tribunal under challenge is related to the question of classification of goods. In that view of the matter, in view of the provisions contained in Section 35 L of the Central Excise Act, 1944 ('the Act' for short) appeal would be maintainable only before the Supreme Court.
3. To examine such contention, we may first record facts relevant for our purpose:
3.1 The appellant-company is engaged in manufacture of Plain Starches, Liquid Glucose, Modified Starches etc. falling under Chapter No. 11, 17 and 35 of the Act. The intelligence wing of the Excise Department, on the information that the assessee was manufacturing various kinds of starches which were deliberately misclassified to inviting nil rate of duty, carried out investigation. Record and documents of the appellant were seized. Upon completion of the investigation a show-cause notice dated 27.08.2004 came to be issued calling upon the appellant to show cause why duty amounting to Rs. 14,70,02,563/- should not be recovered with interest and penalties. Such proposal was based on the revenue's contention that certain products manufactured by the appellant which were declared as plain/maize starch powder were not simple grain starch produced out of ordinary process of manufacturing of processed starch, but that process involved centrifuging of the refined starch slurry and processing it by spinning and pressing to dewatering for cake formation whereupon the resultant mass having a moisture percentage of 35 would be further processed with the aid of a Flash Dryer at a temperature of 125 degrees to get the resultant dried product. The show-cause notice further alleged that since such product was obtained by transformation through the action of heat should be categorized as modified starch classifiable under Chapter Sub-Heading 35.05 of the Central Excise Tariff Act, 1985 in stead of Chapter Sub-Heading 1103.00. This is in short was the controversy between the parties.
3.2 The appellant opposed the show-cause notice proceedings and produced detailed materials and literature in support of its stand that the product classification was correctly declared and, on which basis, duty liability at the rate prevailing was discharged.
3.3 The Adjudicating Authority considered the materials on record including the assessee's objections and literature produced by the assessee in support of such objections. Referring to the literature produced by the assessee, the Commissioner of Central Excise, in his order dated 23.08.2006, observed as under:
“From above literature, it is clear that the use of Flash Dryer has been mentioned in the process of manufacture of Starch and not in the process of modified starch. The above fact supports the view that flash dryers are used in drying of starch and not in the manufacture of modified starch. In view of this authentic literature, allegation based on para 7 referred in 31.1 above does not survive. The manufacturing process of the assessee is exactly similar to the one described in Ullman's Encyclopedia referred above.”
3.4 The Commissioner further observed that on the basis of technical literature, the modified starch came to be produced by heat transformation but in such process, there has to be sustained heat for a longer period. In case of the present appellant finding that such process was missing, the Commissioner concluded that :
“36. in view of the foregoing, I hold that the Maize Starch Powder manufactured by the assessee is properly classifiable under chapter Heading 1103.00 of CETA 1985 and it is not Modified Starch classifiable under Chapter heading 35.05 of the CETA, 1985.”
On such basis, the demands were dropped.
3.5 The department carried the matter in appeal before the Tribunal. The Tribunal, by the impugned jugement, remanded the proceedings before the Commissioner for fresh consideration. The Tribunal took note of the contentions of the assessee that the objective is to correctly classify and levy the central excise duty. Therefore, once the whole manufacturing process has been explained in the show-cause notice, it is necessary for the Adjudicating and the Appellate Authority to look at the process as a whole and further if on the request of the manufacturer, if any, further verifications or tests have been carried out, the same also have to be considered so that final classification is decided in just manner.
3.5 The Tribunal, thereafter, proceeded to note several aspects which, according to the Tribunal, Commissioner had not taken into account while deciding the classification which was as under:
“a. The Commissioner did not take note of the difference in temperature and the period of steeping and its effect on the manufacture while coming to the conclusion.
b. He has also ignored the deposition of Shri Narendra Kumar, Chemical Examiner that the use of Sulphur Dioxide has an impact. Nowhere there is a finding as to the impact of use of Sulphur Dioxide on the ultimate product. Shri Narendra Kumar has stated based on technical literature that amount of Sulfur dioxide used temperature maintained and duration of steeping and application of heat play a vital role in modification of starch. His deposition is supported by the technical literature i.e. book by J.A.Radley publication by Indian Starch Institute and the explanatory notes in H.S.N.
c. Commissioner has relied upon the deposition of Dr. G.P.Sharma to say that what has been manufactured is plaint starch. Dr. G.P.Sharma in his answer to question No.7 in the cross examination stated “As per IS 1184, the viscosity of the product by Redwood Viscometer No. I should be minimum 30 and which is found as per records as being more than 30 for the purpose of ascertaining it as native starch.” As per IS 1184, the minimum viscosity is 40 seconds and not 30 seconds. Further knowing fully well that the chemical test was required to be done by using Redwood Viscometer No. I, the Chemical Examiner has used Redwood Viscometer No. II. The deposition is based on incorrect knowledge of the standard and the test has been conducted by using non-standard and non-prescribed equipment. The ld. Jt. CDR also pointed out that when the conversion is done by applying the ratios given by Dr. Sharma for comparison between two Viscometers, the result would be that the viscosity in respect of the three samples would come to less than 40. Further this is also supported by the test reports of the laboratory of the respondents themselves, which show that all the varieties of starches under dispute have viscosity of less than 40. Therefore, on the viscosity test alone, the products manufactured by the respondents based on the chemical laboratory appeared to answer the requirements of modified starch rather than plain starch.
d. Further the decision of Commissioner of Central Excise, Panchkula in the case of M/s. Bharat Starch Industries Ltd. referred to above also shows that addition of even a very small quantity of a chemical can have effect on the ultimate product.”
3.6 On the basis of such observations, the Tribunal remanded the proceedings before the Commissioner for fresh consideration with following observations and directions:
“8. In view of the fact that the chemical tests have not been conducted as per the standard; the Chemical Examiner was not aware of the correct standards; the deposition of Shri Narendra Kumar has not been considered; the laboratory tests conducted by the respondents in their own laboratory has not been taken into account; the addition of Sulphur Dioxide and its impact has not been considered; duration of heat and temperature and their impact has not been taken into account and other parameters of modified starch have not been considered or discussed, it is felt that the matter has to be remanded back to the original Adjudicating Authority to examine the issue thoroughly once again after taking into account the submissions made before this Tribunal and if the manufacturing process has not changed and remains the same by conducting fresh chemical examination of the sample. It is also necessary to examine all the relevant parameters of plain starch and the modified starch and compare the products manufactured by the respondents with the specifications for plain and modified starch and arrive at a conclusion whether the product manufactured by the respondents is plain starch or modified starch.”
4. It is this judgement of the Tribunal which the appellant- assessee has challenged before us. We may complete the recording of events by noting that against such judgement, the appellant initially approached the Tribunal for rectification which was turned down. Thereafter, the present appeal came to be filed.
5. Learned counsel for the appellant Mr. Dave vehemently contended that the questions, which the appellant has raised before this Court pertain to the manner in which the Tribunal provided for a remand. None of these questions pertain to either rate of duty or classification of goods and present appeal is, therefore, maintainable. Counsel further submitted that the Tribunal in the appeal filed by the revenue could not have re-opened the issues. Counsel further submitted that the entire process of manufacturing was laid bare before the Commissioner. He had taken into account the material on record. It was further not open for the Tribunal to reopen the entire inquiry before the Commissioner since if at all, it was the department who had failed to produce relevant material before the Commissioner.
6. Counsel relied on following decisions in support of his contention that the appeal is maintainable:
1. Anil Products Limited Vs. Commissioner of Central Excise, Ahmedabad-II reported in 2010 (257) ELT 523 (Guj.)
2. Commissioner of Central Excise, Noida Vs. Mil India Ltd. reported in 2008 (222) ELT 497 (All.)
3. Commissioner of Central Excise & Customs, Jaipur Vs. Reliance Chemotex Industries Ltd. reported in 2002 (146) E.L.T. 277 (Raj.)
7. On the other hand, Mr. Darshan Parikh for the department reiterated his contention that in view of the provisions contained in Section 35 L of the Act, the appeal would not be maintainable. He submitted that the entire controversy before the Tribunal pertained to the correct classification of the goods. Even if the questions raised by the appellant do not directly relate to the question of classification, nevertheless in appeal which was under challenge, the judgement of the Tribunal pertained to the question of classification. In support of his contentions, counsel relied on following judgements:
1. In case of Commissioner of Central Excise, Customs & Service Tax, Daman Vs. Gandhi Fibers reported in 2011 (268) ELT 354.
2. Order dated 19.01.2002 passed by this Court in Tax Appeal No. 2390 of 2010
8. Section 35 L of the Act pertains to appeal to Supreme Court and reads as under:
“35L. Appeal to Supreme Court.- An appeal shall lie to the Supreme Court from-
[(a) any judgement of the High Court delivered-
(i) in an appeal made under section 35G; or
(ii) on a reference made under section 35G by the Appellate Tribunal before the 1st day of July,2003;
(iii) on a reference made under Section 35H, in any case, which on its own motion or on an oral application made by or on behalf of the party aggrieved, immediately after passing of the judgement, the High Court certifies to be a fit one for appeal to the Supreme Court; or ] (b) any order passed [before the establishment of the National Tax Tribunal] by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment.
9. From such provision, it can be seen that appeal against an order passed by the Appellate Tribunal relating among other things to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purpose of assessment would lie before the Supreme Court.
10. Correspondingly, the legislature has also provided for exclusion of such appeals from the purview of the High Court under Section 35G of the Act. Sub-section (1) thereof which is relevant for our purpose which reads as under:
“35G. Appeal to High Court.- (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July,2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law.”
11. The question, therefore is does the present appeal fall within the exclusion clause contained in Sub section(1) of Section 35G of the Act or in other words, is covered by Clause-(b) of Section 35 L of the Act.
12. Clause (b) of Section 35 L, provides for appeals to the Supreme Court against any order passed by the Appellate Tribunal where such order relates among other things to determination of any question having a relation to the rate of duty or to the value of goods for the purpose of assessment. The fact that if a particular order relates to classification of goods, same would immediately be covered within the expression a question having relation to the rate of duty is not really in dispute. The fact that the entire question before the Commissioner, whose judgement was the subject matter of the appeal before Tribunal, related to classification of goods is neither disputable nor disputed. We have noted relevant portions of the show-cause notice, the order of the Commissioner and also that of the Tribunal which would demonstrate that the central, and in fact, the sole question in controversy between the parties was with respect to correct classification of the goods and its mis-declaration or otherwise by the assessee. The Commissioner, as we have noted, held that the process of manufacturing carried out by the assessee did not bring into existence modified starch and that therefore, the declaration made by the assessee was correct. The goods were, therefore, not required to be classified differently. It was this view of the Commissioner which was carried in appeal by the revenue before the Tribunal. The Tribunal gave its own findings to come to the conclusion that why the Commissioner ought not have come to such conclusion without further and thorough inquiry. On such basis, the Tribunal was prompted to remand the proceedings for further inquiry and fresh consideration by the Commissioner. At this stage, we are not concerned with the validity of the Tribunal's view and its conclusions. Inescapable conclusion, however, that we arrive at is that the Tribunal, in the impugned judgement, was dealing with the central question of classification of goods.
13. The appellant has challenged such judgement of the Tribunal on various grounds. Strong objection of the appellant is that the department ought not to have been granted further liberty to produce on record additional material in support of the allegations made in the show- cause notice. In essence thus, the appellant has challenged the judgement of the Tribunal which related to the question having relation to the rate of the duty. The orders against which Clause-(b) of Section 35L requires appeals to be filed to the Supreme Court and what sub section (1) of Section 35G bars an appeal before the High Court are the orders passed by the Appellate Tribunal relating among other things to the determination of a question having a relation to the rate of duty of excise or to the value of goods for the purpose of assessment. What is therefore to be ascertained while judging the maintainability of an appeal before the High Court would be whether what is in challenge is order of the Tribunal insofar as such order relates among other things to the determination of any question having relation to the rate of duty or to the value of goods for the purpose of assessment. On what grounds such order of the Tribunal is called in question before the High Court is of no consequence.
14. In the present case, the central and in fact the sole issue before the Tribunal was with respect to classification of the goods. Such issue was decided by the Tribunal in a particular manner. It is this decision which the assessee has challenged in the present appeal. Such appeal, in our view, would not lie before this Court. The fact, that the Tribunal instead of taking a final decision on the issue, remanded the proceedings for fresh consideration before the Commissioner, in our view, would not make any difference.
15. In case of Anil Products Ltd. Vs. Commissioner of Central Excise, Ahmedabad-II (supra.) this Court considered the objection of the revenue to the maintainability of the appeal on the ground that the issue regarding classification was involved. Such objection was turned down by this Court observing that the main grievance of the appellant was about non-speaking or non-reasoned order passed by the Tribunal. The said decision does not lay down the ratio which can be applied in the present case.
16. In case of Commissioner of Central Excise, Noida Vs. Mil India Ltd. Allahabad High Court (supra.), the objection to the maintainability of the appeal was turned down on the ground that the question of law presented therein was not the rate of duty or to the value of the goods and the only question raised was whether the order of remand passed by the Commissioner (Appeals) having attained finality, it was open to the respondent to re-agitate the matter before the Tribunal. In that context, the High Court distinguished the Bombay High Court judgements in case of Union of India Vs. Auto Ignition Ltd. reported in 2002 (142) E.L.T. 292 (Bom) and in case of Colour Chem Ltd. Vs. Union of India reported in 1998 (98) E.L.T. 303 (Bom) and entertained the appeal.
17. In case of Commissioner of Central Excise & Customs, Jaipur Vs. Reliance Chemotex Industries Ltd. (Raj.) (supra.), the objection to the maintainability of the appeal was turned down. It was noticed that the Tribunal without going into merits found force in the contention raised on behalf of the assessee that the demand covered by the show-cause notice was hit by limitation. The High Court observed that “the question of law which arises from the Tribunal's order is what it has decided”. We are in respectful agreement with the said expression of the High Court. In the present case, what the Tribunal has decided is that without further and sufficient material, the Commissioner could not have decided the issue of classification in favour of the assessee and for which purpose, the proceedings were remanded with certain observations.
18. On the other hand, as pointed out by learned counsel Mr. Darshan Parikh, this Court in Commissioner of Central Excise, Customs & Service Tax, Daman Vs. Gandhi Fibers (supra.) upheld the opposition to the maintainability of the appeal relying on the decision of the Apex Court in case of Navin Chemicals Mfg. & Trading Co. Ltd. Vs. Collector reported in 1999 (68) ELT 3 observing that the controversy which arises for determination is in the nature of classification of dispute. The decision of this court in case of Anil Products Ltd Vs. Commissioner of Central Excise, Ahmedabad-II (supra.) also came up for consideration.
19. Likewise, in a decision in case of Commissioner of Central Excise, Ahmedabad-II Vs. M/s. Claris Life Sciences Ltd. passed in Tax Appeal No. 2390 of 2010, this Court upheld the objection to the maintainability of the appeal making following observations:
“ We may notice that exclusion clause in sub-section (1) of Section 35G is worded in an expansive manner and excludes all appeals arising out of orders of the Tribunal relating among other thing to the determination of any question having a relation to the rate of duty of excise. In other words, what is excluded from the purview of the High Court's jurisdiction is not merely an order of Tribunal which decides the rate of duty of excise but any order which concerns determination of any question which has relation to such rate of duty of excise. Expression “any question having a relation to the rate of duty” is a wide one.
20. In the result, we are of the opinion that the respondent is correct in pointing out that the present appeal is not maintainable and the same is dismissed only on that ground.
21. In view of dismissal of appeal, civil application does not survive and disposed of accordingly.
[AKIL KURESHI, J.] [HARSHA DEVANI, J.]
JYOTI