1991 (3) TMI 161 - HC - Central Excise

Summary

Issues Involved:
1. Validity of the order passed by the Government of India on 5-7-1980.
2. Applicability of Rule 9(2) versus Rule 10 of the Central Excise Rules, 1944.
3. Limitation period for issuing a show cause notice under Rule 10.

Issue-wise Detailed Analysis:

1. Validity of the Order Passed by the Government of India on 5-7-1980:
The petitioners challenged the validity of the order dated 5-7-1980, which dismissed their revision petition against the Appellate Collector's judgment dated 25-9-1979. The Appellate Collector had found that the petitioners did not make any attempt to mis-declare or suppress material facts and that it was the responsibility of the Assistant Collector to ensure the correct classification of goods. Despite this, the Appellate Collector upheld the duty demand under Rule 10 but vacated the penalty imposed.

2. Applicability of Rule 9(2) versus Rule 10 of the Central Excise Rules, 1944:
The petitioners contended that the Appellate Collector erred in sustaining the levy under Rule 10, which was never invoked by the Assistant Collector. Rule 9(2) pertains to the removal of excisable goods without paying duty, whereas Rule 10 deals with the recovery of duties short-levied through inadvertence, error, collusion, or misconstruction on the part of an officer. The court agreed with the Appellate Collector that Rule 9(2) was not applicable since the goods were removed based on an approved classification list. The appropriate rule was Rule 10, as it covered the situation where duty was short-levied due to an error by the officers.

3. Limitation Period for Issuing a Show Cause Notice Under Rule 10:
The court examined Rule 10, which, at the relevant time, prescribed a three-month limitation period for issuing a show cause notice. The duty was demanded for the period from 20-2-1974 to 18-10-1974, but the show cause notice was issued on 7-4-1975, beyond the three-month limit. The Appellate Collector applied the amended Rule 10, which allowed a six-month period, but this amendment came into effect only on 6-8-1977, well after the issuance of the notice. Therefore, the court held that the show cause notice was time-barred, rendering the entire recovery action invalid.

Conclusion:
The court allowed the writ petition, quashing the impugned order of the Central Government dated 5-7-1980. The court found that the show cause notice was issued beyond the prescribed limitation period under Rule 10 as it stood at the relevant time. Consequently, the entire action for recovery of duty for the period from 20-2-1974 to 18-10-1974 was deemed invalid. The court did not find it necessary to address the first contention regarding the applicability of Rule 10 over Rule 9(2) due to the decisive nature of the limitation issue. No costs were awarded.