1985 (5) TMI 178 - AT - Central Excise

Summary

Issues Involved:
1. Interpretation of Notification No. 198/76.
2. Fixation of base clearances.
3. Authority of the Assistant Collector to review and revise base clearances.
4. Time limit for raising the demand for duty.

Issue-wise Detailed Analysis:

1. Interpretation of Notification No. 198/76:
The primary issue in this case pertains to the interpretation of Notification No. 198/76. The appellants argued that the notification should be interpreted such that the base clearance should be fixed with reference to the clearances made by a particular manufacturer. They contended that the base clearance should be determined based on the clearances made by the appellants after they leased the factory from the previous owners. However, the respondent argued that the notification should be read plainly, and the base clearances should be fixed based on the clearances made from the factory, irrespective of the manufacturer.

2. Fixation of Base Clearances:
The Assistant Collector initially fixed the base clearances at 111789 kgs. However, upon audit, it was pointed out that the clearances should have been fixed by taking the average of the clearances made during the previous three years, as per para 2(2)(c) of the notification. Consequently, the base clearances were revised to 227787 kgs, and demands were raised for the duty short paid. The appellants contested this revision, arguing that the Assistant Collector had no authority to change the base clearances once fixed unless there was a change in law, tariff entry, or a pronouncement by the Supreme Court.

3. Authority of the Assistant Collector to Review and Revise Base Clearances:
The appellants argued that the Assistant Collector had no power to review and revise the base clearances once fixed. They contended that the Assistant Collector could only exercise limited power of review in specific circumstances, such as a change in law or fresh facts coming to light. The respondent, however, maintained that the Assistant Collector had the power to review and revise the base clearances if they were erroneously fixed. The judgment held that the Assistant Collector had the authority to rectify wrong fixation of base clearances, as it was necessary to correct errors and ensure proper duty collection.

4. Time Limit for Raising the Demand for Duty:
The appellants argued that the demand for duty was raised after the six-month period and, therefore, a part of the demand was out of time. The respondent contended that the demand should be reckoned from the date of the letter by the Superintendent. The judgment concluded that the relevant show cause notice for raising the demand was issued on 23-11-1978, and any demand should be limited to the six-month period preceding this show cause notice. The judgment partially allowed the appeal, limiting the demand to the six-month period.

Conclusion:
The judgment clarified that the base clearances should be fixed based on the clearances made from the factory, irrespective of the manufacturer. It upheld the authority of the Assistant Collector to review and rectify erroneous base clearances. However, it limited the demand for duty to the six-month period preceding the relevant show cause notice issued on 23-11-1978. The appeal was partially allowed on these grounds.