1983 (1) TMI 91 - HC - Central Excise

Demand raised after vacation of Court injunction - Removal of goods without payment of duty due to Court Judgment

Summary

Issues Involved:
1. Validity of Proviso 3 to Notification No. 201/79-C.E.
2. Applicability of Section 11A of the Central Excises and Salt Act for recovery of differential duty.
3. Applicability of Rule 9(2) and Rule 10 of the Central Excise Rules.

Detailed Analysis:

1. Validity of Proviso 3 to Notification No. 201/79-C.E.:

The appellants, manufacturers of safety matches, challenged the validity of Proviso 3 of Notification No. 201/79-C.E., which denied the benefit of set-off of excise duty for manufacturers who paid duty through banderolls. They argued that this proviso resulted in discrimination against them. The writ petitions challenging this proviso were dismissed by a Division Bench of the High Court, which upheld the validity of Proviso 3. Consequently, the Central Excise department issued notices demanding differential duty from the appellants.

2. Applicability of Section 11A of the Central Excises and Salt Act for recovery of differential duty:

The appellants contended that the recovery of excise duty should be initiated under Section 11A of the Central Excises and Salt Act, which prescribes a procedure involving a show cause notice, representation, and determination, along with a time limit. They argued that the Superintendent of Central Excise could not bypass this procedure by merely issuing a demand notice. The court, however, rejected this contention, stating that Section 11A applies to cases where duty was not levied, short-levied, or erroneously refunded. In this case, the court held that the duty was not levied due to an injunction order, and thus Section 11A was not applicable.

3. Applicability of Rule 9(2) and Rule 10 of the Central Excise Rules:

The appellants argued that any recovery of duty should be under Rule 9(2) or Rule 10 of the Central Excise Rules. Rule 9(2) pertains to clandestine removal of goods without payment of duty, and Rule 10 deals with the recovery of duty not levied or short-levied. The court held that Rule 9(2) was not applicable as there was no clandestine removal; the goods were removed under a court order. Similarly, Rule 10 was not applicable because the duty was not levied due to the injunction, not due to any failure or short-levy by the appellants. The court emphasized that the charge for duty was already attached to the goods upon removal, and the right to recover the duty was merely postponed due to the court order.

Conclusion:

The court concluded that the Central Excise department was justified in demanding the differential duty without resorting to Section 11A or Rule 9(2) and Rule 10, as the duty was not levied due to a court injunction. The court dismissed the writ appeals, affirming the validity of Proviso 3 to Notification No. 201/79-C.E. and the department's right to recover the differential duty.