1986 (8) TMI 237 - AT - Central Excise

Issues Involved:
1. Time-barred notice under Section 36(2) of the Central Excises and Salt Act, 1944.
2. Interpretation of provisos to Section 36(2).
3. Formation of opinion by the Central Government regarding short levy of duty.

Detailed Analysis:

1. Time-barred Notice under Section 36(2) of the Central Excises and Salt Act, 1944:
The core issue revolves around whether the notice issued by the Government of India on 15th November 1978 is time-barred under the proviso to Section 36(2) of the Central Excises and Salt Act, 1944. The Appellate Collector's order was dated 9-12-1977, and the notice was issued almost a year later. The learned counsel for M/s. Fedders Lloyd Corporation argued that the notice is time-barred as it was issued beyond the one-year time limit specified in Section 11A.

2. Interpretation of Provisos to Section 36(2):
The learned counsel for the department contended that the notice did not aim to recover any money but was issued because the Government believed the Appellate Collector's order was incorrect. She argued that provisos 2 and 3 of Section 36(2) should not be interpreted in a way that makes one nugatory. The Tribunal's decision in Mizar Govinda Annappa Pai was cited, indicating that if the notice did not quantify or demand payment of any duty, proviso 3 (six months limit) would not apply, and the notice would be governed by proviso 2, which allows a one-year limit.

3. Formation of Opinion by the Central Government Regarding Short Levy of Duty:
The counsel for M/s. Fedders Lloyd argued that the notice must be read as a composite whole, and the Government's omission to mention a short levy should not allow it to bypass the six-month limit. The New Delhi High Court's decision in Associated Cement Company was referenced, asserting that the notice must be read with the order passed under Section 35 or 35A to determine if it concerns duty short levied. The learned counsel for the department countered that the law only requires the Central Government to form an opinion about the short levy, which was not expressed in the notice to Fedders Lloyd.

Tribunal's Findings:

1. Mizar Govinda Decision Analysis:
The Tribunal examined the Mizar Govinda decision, which concluded that if a notice does not quantify or demand duty, it falls under proviso 2. The decision did not address whether there was a short levy but focused on the notice's content. The Tribunal found that the Government did not declare an opinion on short levy in the notice, making proviso 2 applicable.

2. Supreme Court Judgments:
The Tribunal reviewed the Supreme Court judgments in Barium Chemicals and Rohtas Industries, which discussed the formation of opinion by the Central Government. These judgments highlighted that while the opinion formation is subjective, the existence of circumstances justifying the opinion is open to judicial review. The Tribunal concluded that these judgments do not directly apply to the current issue but underscore the need for the Government to form a clear opinion on short levy.

3. Examination of Government's Notice:
The Tribunal scrutinized the Government's notice, which criticized the Appellate Collector's order and implicitly supported the Assistant Collector's duty demands. The Tribunal inferred that the notice aimed to recover the short-levied duty, indicating that the Government had formed an opinion on the short levy.

4. Associated Cement Company Case:
Relying on the New Delhi High Court's decision in the Associated Cement Company case, the Tribunal concluded that the notice was issued with the intention of recovering short-levied duty. Therefore, the six-month time limit under proviso 3 should apply, making the notice time-barred.

Conclusion:
The notice issued by the Government of India is time-barred and is set aside. The Tribunal relied on the New Delhi High Court's decision in the Associated Cement Company case to reach this conclusion. The judgment emphasizes that the Government's notice must explicitly state the formation of an opinion on short levy to fall within the six-month limit; otherwise, it is governed by the one-year limit under proviso 2.

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