2007 (8) TMI 165 - HC - Central Excise

Execution of B-13 bond and endorsement of RT-12 is sufficient proof of provisional assessment On finalization of provisional assessment, there is no need to issue SCN, assessee has to pay differential duty on finalization of assessment No new ground can be raised before the High Court

Issues Involved
1. Provisional assessment of excise duty on yarn cleared for captive consumption.
2. Requirement of a show cause notice under Section 11A of the Central Excise Act, 1944.
3. Validity of the retrospective amendment to Rules 9 and 49 of the Central Excise Rules, 1944.

Detailed Analysis

1. Provisional Assessment of Excise Duty on Yarn Cleared for Captive Consumption

The appellants were engaged in manufacturing cotton and manmade yarn, which was either sold or used for captive consumption in fabric manufacturing. The classification and price lists for the yarn were approved by the excise authorities, and the yarn was cleared for captive consumption without dispute over classification or valuation.

Following the Delhi High Court's judgment in J.K. Cotton Spg. Wvg. Mills (1981), which held that excise duty was not leviable on yarn cleared for captive consumption in a continuous manufacturing process, the appellants filed a writ petition seeking a declaration that excise duty was not leviable on yarn cleared for captive consumption. An interim order allowed the appellants to clear yarn without excise duty by furnishing a bond and a bank guarantee.

From May 1981 to May 1984, the appellants cleared yarn for captive consumption by executing a B-13 bond, stating that the yarn was cleared under provisional assessment pending final assessment. The Central Government later amended Rules 9 and 49 with retrospective effect to validate the liability to pay excise duty on goods cleared for captive consumption.

The Delhi High Court upheld the retrospective amendment, and the Supreme Court also upheld the constitutionality of the amendment, stating that recovery of excise duty would be subject to the limitation prescribed under Section 11A of the Central Excise Act, 1944.

2. Requirement of a Show Cause Notice under Section 11A of the Central Excise Act, 1944

The appellants contended that the clearance of yarn for captive consumption was not under provisional assessment and that no show cause notice was issued under Section 11A within the prescribed limitation period, making the recovery of excise duty time-barred. The appellants argued that provisional assessment under Rule 9B was not applicable as none of the conditions for provisional assessment existed, and no provisional assessment order was made before the clearance of goods.

The revenue argued that the B-13 bond executed by the appellants indicated that the clearances were on a provisional assessment basis. The RT-12 returns also had endorsements stating that the assessments were provisional. The revenue contended that the clearances were effected on provisional assessment basis pending the final decision of the Delhi High Court.

The court held that the circumstances for making provisional assessment existed due to the pending dispute before the Delhi High Court. The B-13 bond executed by the appellants and the endorsements on the RT-12 returns indicated that the clearances were on a provisional assessment basis. The court found that the clearances were effected on provisional assessment basis as per the directions given by the excise officers.

3. Validity of the Retrospective Amendment to Rules 9 and 49 of the Central Excise Rules, 1944

The retrospective amendment to Rules 9 and 49 was upheld by the Delhi High Court and the Supreme Court. The amendment aimed to validate the liability to pay excise duty on goods cleared for captive consumption with retrospective effect from 28th February 1944. The court held that the retrospective amendment was valid and constitutional.

The court concluded that the clearances were on a provisional assessment basis, and the finalisation of the provisional assessments after the dismissal of the writ petition and civil appeal was justified. The court dismissed the appeal, holding that the revenue was entitled to recover the excise duty without issuing a show cause notice under Section 11A, as the assessments were provisional.

Conclusion

The court affirmed that the yarn cleared for captive consumption from May 1981 to May 1984 was under provisional assessment. The retrospective amendment to Rules 9 and 49 was valid and constitutional. The revenue was justified in finalising the provisional assessments and recovering the excise duty without issuing a show cause notice under Section 11A. The appeal was dismissed with no order as to costs.

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