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CASE NO.: Appeal (civil) 2552  of  1989

PETITIONER: COLLECTOR OF CENTRAL EXCISE,KANPUR

       Vs.

RESPONDENT: FLOCK (INDIA) PVT.  LTD.  C-7, PANKI INDUSTRIAL AREA, KANPUR

DATE OF JUDGMENT:       04/08/2000

BENCH: D.P.Mohapatro, B.N.Kirpal

JUDGMENT:

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     D.P.MOHAPATRA,J.

     The  consequence  of  non-challenge of  an  appealable order  passed  under the Central Excise and Salt  Act,  1944 (hereinafter   referred   to  as   ’the  Act’)  arises   for determination  in  this  appeal.  To be  more  specific  the question  is,  in  a case where the Assistant  Collector  of Central Excise passes an order classifying a product under a particular tariff item and the said order, though appealable is  not challenged by the assessee in appeal whether in  the application  for  refund  of the duty paid the  assessee  is entitled to question the order of the Assistant Collector as erroneous ?

     The  facts relevant for determination of the  question may  be  stated  thus:   M/s   Flock  (India)  Pvt.    Ltd.- respondent  herein, was manufacturer of jute hessian  floked with  nylon  flocks under L-4 licence issued under the  Act. The  respondent filed a classification list in which it  was claimed  that the said product comes under tariff item 22-A. The  Assistant Collector after examining the contents of the product  and  the  particulars furnished by  the  respondent passed  an  order on 21.1.1978 holding that the  product  in question  is  classifiable  under tariff item 22-B  and  not under tariff item 22-A and the applicable rate of duty would be  25%  ad  valorem.   In  the  said  order  the  Assistant Collector  expressly stated that the assessee may prefer  an appeal  against  his order to the Collector (Appeals).   The assessee  neither  challenged the said order by  filing  any appeal nor did it pay the duty under protest.

     The  respondent  filed  an   application  on  6.4.1979 claiming  refund  of duty paid alleging inter alia that  the product  in  question were wrongly classified  under  tariff item No.22-B, instead it ought to have been classified under tariff item No.22-A and that the differential duty should be refunded.   The Assistant Collector after service of  notice on   the  respondent  passed   the  order  dated   27.8.1980

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dismissing the claim for refund on the ground that the order dated  21.1.1978  classifying the product as  falling  under tariff  item 22-B had attained finality, and therefore,  the claim for refund was not maintainable.

     The  respondent  filed  appeal  before  the  Collector (Appeals),  New  Delhi,  assailing   the  said  order.   The Collector  by  order dated 6.1.1984 allowed the appeal,  set aside  the  order  dated  27.8.80 passed  by  the  Assistant Collector  and remanded the matter to him with direction  to reconsider  the  matter  on merits  including  the  question whether  the goods were classifiable under tariff item  22-A or  22-B.  The appellant herein challenged the order of  the Collector  (Appeals) by filing an appeal before the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT) which was dismissed by the order passed on 19.9.88.  The said order is under  challenge  in this appeal filed by the  Collector  of Central Excise, Kanpur.

     On  the  facts stated in the foregoing paragraphs  the question  formulated earlier arises for determination.   The solution  of  the point formulated depends on the answer  to the  question  whether  the jurisdiction  of  the  Assistant Collector  while  considering an application for  refund  of duty  paid  is independent of the jurisdiction exercised  by him   in  determining  classification  of  the  product   in question.   It is the contention of the  respondent-assessee that   the  jurisdiction  to   determine  the  validity  and sustainability  of  the  claim  for refund  of  duty  is  an independent   jurisdiction   and  in    exercise   of   that jurisdiction  the Assistant Collector is not fettered by any order  passed  by the authority regarding classification  of the   product.   As  such   the  Assistant  Collector  could independently  consider  the  claim for refund  of  duty  on merits  without being fettered by the previous order  passed by   him  in  the  matter   relating  to  the  question   of classification of the product and failure on the part of the assessee  to  challenge the orders of classification of  the product under tariff item 22-B is of no consequence.

     At  the  relevant  time the provision  for  claim  for refund  of duty was made in Rule 11.  The said Rule reads as follows:

     "Rule  11  Claim for refund of duty :- (1) Any  person claiming  refund  of  any  duty  paid by  him  may  make  an application  for  refund  of  such  duty  to  the  Assistant Collector  of Central Excise before the expiry of six months from the date of payment of duty :

     Provided,  that the limitation of six months shall not apply where any duty has been paid under protest.

     Explanation  :   Where any duty is paid  provisionally under  these rules on the basis of the value or the rate  of duty,  the  period of six months shall be computed from  the date on which the duty is adjusted after final determination of the value or the rate of duty, as the case may be.

     (2)  If  on  receipt  of   any  such  application  the Assistant  Collector of Central Excise is satisfied that the whole  or any part of the duty paid by the applicant  should

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be refunded to him, he may make an order accordingly.

     (3) Where as a result of any order passed in appeal or revision under the Act, refund of any duty becomes due to an person,  the  proper officer may refund the amount  to  such person without his having to make any claim in that behalf.

     (4) Save as otherwise provided by or under these rules no claim for refund of any duty shall be entertained.

     Explanation :  For the purposes of this rule, "refund" includes rebate referred to in Rules 12 and 12A."

     Section  35  of the Act provides regarding appeals  to Collector  (Appeals).  In sub-section (1) thereof it is laid down  that  any  person aggrieved by any decision  or  order under the Act by a Central Excise officer lower in rank than a  Collector  of Central Excise may appeal to the  Collector (Appeals)  within 3 months from the date of communication to him   of  such  decision  or   order.   In  the  proviso  to sub-section  (1) the power is vested in Collector  (Appeals) to  extend  the  period  by further three months  if  he  is satisfied  that  the appellant was prevented  by  sufficient cause from presenting the appeal aforesaid within the period of  three months prescribed under sub-section.  Section 35-A lays  down  the procedure to be followed in disposal of  the appeal.   In sub-section(3) thereof it is provided that  the Collector (Appeals) may after making such further inquiry as may   be  necessary  pass  such   order  as  he  thinks  fit confirming,  modifying  or annulling the decision  or  order appealed  against,  or  may  refer  the  case  back  to  the adjudicating  authority with such directions as he may think fit for a fresh adjudication or decision, as the case may be .   The proviso to the said sub-section are not relevant for the purpose of the present case.  Section 35B(1)(b) makes an order  passed  by the Collector (Appeals) under section  35A appealable   to   the   appellate    tribunal.    From   the aforementioned  provisions of the Act the position is  clear that  any  order  passed by an authority under  the  Act  is appealable  to the Collector (Appeals) and a further  appeal to the appellate tribunal against the order of the Collector (Appeals)  is also provided in section 35.  The hierarchy of authorities  for adjudication and determination of a  matter relevant  for charging the excise duty is for a purpose.  It is  not  an  empty formality.  Classification of  the  goods manufactured  by an assessee is important for the purpose of levy  and collection of excise duty.  Under Rule 173 B every assessee  is required to file with the proper officer a list of  goods  manufactured by him for approval and  the  proper officer shall after such inquiry as he deems fit approve the list with such modifications as are considered necessary and all clearances are to be made only thereafter.

     A right of appeal is a creature of the statute.  It is a substantive right.  An order of the appellate authority is binding  on  the  lower  authority  who  is  duty  bound  to implement  the order of the superior authority.  Refusal  to carry out the direction will amount to denial of justice and destructive   of  one  of  the   basic  principles  in   the administration of justice based on hierarchy of authorities.

     Coming  to the question that is raised there is little scope  for  doubt  that  in a  case  where  an  adjudicating authority  has passed an order which is appealable under the

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statute  and the party aggrieved did not choose to  exercise the  statutory right of filing an appeal, it is not open  to the  party  to question the correctness of the order of  the adjudicating  authority  subsequently by filing a claim  for refund  on  the ground that the adjudicating  authority  had committed  an error in passing his order.  If this  position is  accepted then the provisions for adjudication in the Act and  the Rules, the provision for appeal in the Act and  the Rules will lose their relevance and the entire exercise will be rendered redundant.  This position, in our view, will run counter  to  the  scheme of the Act and  will  introduce  an element  of  uncertainty in the entire process of  levy  and collection  of  excise  duty.   Such a  position  cannot  be countenanced.   The view taken by us also gain support  from the  provision in sub-rule (3) of Rule 11 wherein it is laid down that where as a result of any order passed in appeal or revision  under  the Act, refund of any duty becomes due  to any  person,  the proper officer, may refund the  amount  to such  person  without his having to make any claim  in  that behalf.   The provision indicates the importance attached to an  order of the appellate or revisional authority under the Act.   Therefore, an order which is appealable under the Act is  not  challenged  then  the order is  not  liable  to  be questioned  and  the  matter  is not to  be  reopened  in  a proceeding for refund which, if we may term it so, is in the nature  of execution of a decree/order.  In the case at hand it  was specifically mentioned in the order of the Assistant Collector  that  the  assessee may file appeal  against  the order before the Collector (Appeals) if so advised.

     On  the  discussions made in the foregoing  paragraphs and for the reasons stated therein the order of the tribunal is unsustainable.  Accordingly the appeal is allowed and the impugned order is set aside with costs.