2005 (9) TMI 114 - HC - Central Excise

Summary

Issues Involved:
1. Whether proceedings initiated under Rule 10 of the Central Excise Rules, 1944 cannot be continued under Section 11A of the Act?
2. Whether the proceedings initiated under Rule 10 lapsed on the date Rule 10 was omitted, 17-11-1980, as held by the Division Bench of this Court in M/s. Ajanta Paper Products v. Collector, Central Excise Collectorate, Kanpur (1982 U.P.T.C. 165)?

Detailed Analysis:

Issue 1: Continuation of Proceedings under Section 11A
The petitioner, a company engaged in sugar manufacturing, challenged the continuation of proceedings initiated under Rule 10 of the Central Excise Rules, 1944, after its omission and replacement by Section 11A of the Central Excise and Salt Act, 1944. The petitioner argued that since Rule 10 was omitted without a saving clause, the proceedings could not continue under Section 11A. The Division Bench referred to the Full Bench the question of whether proceedings initiated under Rule 10 could be continued under Section 11A. The Full Bench, after considering the relevant legal provisions and precedents, concluded that Section 38A of the Central Excise Act, introduced retrospectively by the Finance Act, 2001, saved the proceedings initiated under Rule 10. Section 38A postulates that any investigation, legal proceeding, or remedy pending under a rule, notification, or order that has been amended, repealed, superseded, or rescinded shall continue as if the rule or order had not been amended or repealed. Therefore, the proceedings initiated under Rule 10 would continue under Section 11A in view of Section 38A.

Issue 2: Lapse of Proceedings on Omission of Rule 10
The petitioner relied on the decision in M/s. Ajanta Paper Products v. Collector, Central Excise Collectorate, Kanpur, which held that proceedings initiated under Rule 10 would lapse on its omission without a saving clause. The Full Bench, however, noted that the Finance Act, 2001, introduced Section 38A with retrospective effect from 28-2-1944, which validated and continued all actions taken under any rule, notification, or order, notwithstanding its amendment, repeal, supersession, or rescission. This legislative intent was to ensure that proceedings initiated under Rule 10 did not lapse but continued under the newly introduced Section 11A. The Full Bench emphasized that the legislative purpose behind Section 38A was to cure the defect pointed out in the Kolhapur Sugarcane Works Limited case and ensure the continuity of proceedings despite the omission of Rule 10. Consequently, the proceedings under Rule 10 did not lapse due to its omission.

Conclusion:
The Full Bench answered both questions in favor of the continuation of proceedings. It held that proceedings initiated under Rule 10 of the Central Excise Rules, 1944, would continue under Section 11A of the Central Excise and Salt Act, 1944, in view of Section 38A. The proceedings did not lapse on the omission of Rule 10 due to the retrospective effect of Section 38A, which validated and continued all pending proceedings. The case was remitted to the Division Bench for determination of other issues raised in the writ petition.