1989 (12) TMI 206 - AT - Central Excise

Summary

Issues Involved:
1. Validity of demands issued under Section 11-A prior to 20-2-1982.
2. Automatic validation of demands under Section 51(2) of the Finance Act, 1982.
3. Endorsements on RT-12 returns as valid notices under Section 11-A.

Detailed Analysis:

1. Validity of Demands Issued Under Section 11-A Prior to 20-2-1982:
The primary issue is whether the demands issued under Section 11-A of the Central Excises & Salt Act before the amendment on 20-2-1982 are valid. The appellants argued that these notices are ab initio void because the cause of action for excise duty demands arose only after the amendment of Rules 9 and 49 on 20-2-1982. The Supreme Court did not accept the argument of the learned Attorney General that the cause of action arose only on 20-2-1982. The court observed that Section 51 of the Finance Act, 1982, does not override Section 11-A. The Tribunal noted that the appellants had been paying duty on yarn captively consumed for years until the Delhi High Court's judgment in 1980. Given the Karnataka High Court's decision that pre-amendment Rules 9 and 49 already contemplated duty on captively consumed yarn, the Tribunal held that the notices issued before 20-2-1982 are not ab initio void. The Supreme Court's judgment in J.K. Spinning & Wvg. Mills Ltd. clarified that the amendments to Rules 9 and 49 are subject to the provisions of Section 11-A, and notices issued in compliance with Section 11-A could be acted upon, regardless of whether they were issued before or after 20-2-1982.

2. Automatic Validation of Demands Under Section 51(2) of the Finance Act, 1982:
The Tribunal examined whether demands issued before 20-2-1982 are automatically validated by Section 51(2) of the Finance Act, 1982. Section 51(2) states that any action taken before 20-2-1982 under the Central Excises Act shall be deemed valid as if the amendments were in force at all material times. The Tribunal held that demands issued under Section 11-A before 20-2-1982 are automatically validated by Section 51(2), making further notices redundant. This interpretation aligns with the decision of the Tribunal in J.K. Spinning & Wvg. Mills Ltd., which held that demands made under Section 11-A for duty on captively consumed yarn are valid retrospectively due to the amendments.

3. Endorsements on RT-12 Returns as Valid Notices Under Section 11-A:
The appellants argued that endorsements on RT-12 returns pointing out short-levy do not constitute valid notices under Section 11-A. The Tribunal noted that the Bombay High Court, in Swan Mills Ltd., held that assessments finalized under Rule 173(I) do not require further notices under Section 11-A if the amounts were stayed by court orders. However, the Supreme Court in Kosan Metal Products Ltd. held that endorsements on RT-12 returns do not constitute valid notices under Section 11-A. Given the Supreme Court's specific direction to adjudicate the validity of notices, the Tribunal concluded that endorsements on RT-12 returns do not meet the requirements of Section 11-A.

Conclusion:
1. The Tribunal held that demands issued under Section 11-A before 20-2-1982 are not ab initio void and can be acted upon.
2. Demands issued before 20-2-1982 are automatically validated by Section 51(2) of the Finance Act, 1982, making further notices unnecessary.
3. Endorsements on RT-12 returns do not constitute valid notices under Section 11-A.

Specific Cases:
- M/s. Ahmedabad Advance Mills Ltd.: Demand of Rs. 8,23,180.60 based on RT-12 returns is not enforceable.
- M/s. Maheshwari Mills Ltd.: Demand of Rs. 7,14,998.40 based on RT-12 returns is not enforceable.
- M/s. Rohit Mills Ltd.: Demand for June 1982 amounting to Rs. 4,29,576 is time-barred if RT-12 returns were filed on 3-12-1982. The department is to verify the filing date and proceed accordingly.

Final Order:
The appeals are largely rejected except for the modifications regarding the unenforceable demands based on RT-12 returns for M/s. Ahmedabad Advance Mills Ltd. and M/s. Maheshwari Mills Ltd., and the time-barred demand for M/s. Rohit Mills Ltd.