1978 (3) TMI 109 - HC - Central Excise

Short levy due to error - Inadvertence or error - Short levy - Show cause notice - Quoting of wrong rule - Effect

Summary

Issues Involved:
1. Applicability of Rule 56A(3)(v) of the Central Excise Rules, 1944.
2. Applicability of the second proviso to Rule 56A(2) of the Central Excise Rules, 1944.
3. Applicability of Rule 10 or Rule 10A of the Central Excise Rules, 1944.
4. Limitation period for demanding short-levied duty.

Detailed Analysis:

1. Applicability of Rule 56A(3)(v) of the Central Excise Rules, 1944:
The court found that Rule 56A(3)(v) was wholly irrelevant and inapplicable based on the allegations contained in the show cause notice. Clause (v) provides for the collection of duty when materials or component parts, in respect of which credit has been allowed under sub-rule (2), are not duly accounted for as having been disposed of in the manner authorized by the said Rule. The court agreed with the learned single judge that this clause does not apply to the facts and circumstances of this case.

2. Applicability of the second proviso to Rule 56A(2) of the Central Excise Rules, 1944:
The court held that the second proviso to sub-rule (2) of Rule 56A is equally inapplicable. According to this proviso, if the duty paid on such material or component parts is varied subsequently, resulting in payment of refund or recovery of more duty, the credit allowed shall be varied accordingly. However, this case did not involve a subsequent variation in the duty on stators and rotors, thus making the proviso irrelevant.

3. Applicability of Rule 10 or Rule 10A of the Central Excise Rules, 1944:
The court discussed whether Rule 10 or Rule 10A was applicable. Rule 10 provides for the collection of excise duty short-levied through inadvertence, error, or misconstruction on the part of an officer. The court concluded that the short-levy in this case could be attributed to inadvertence or an error of law, making Rule 10 applicable. The court rejected the argument that Rule 10A, a residuary provision, should apply, noting that Rule 10A was introduced to address specific circumstances not analogous to the present case.

4. Limitation period for demanding short-levied duty:
The court emphasized that any action under Rule 10 must be taken within the period prescribed therein. Since the proceedings were initiated beyond this period, the impugned levy was barred by limitation. The court noted that there were final assessments in respect of the period in question, thus excluding the application of Rule 10A.

Conclusion:
The court concluded that the proposed show cause notice and the levy of excise duty short-levied were issued and made beyond the period of limitation prescribed by Rule 10, rendering them invalid. Neither Rule 10A, nor the second proviso to Rule 56A(2), nor clause (v) of Rule 56A(3) were applicable in this case. Consequently, the Writ Appeal and the Writ Petitions were allowed, with no order as to costs.