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TMI Blog1989 (1) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturers, namely, (i) Messrs Digital Systems International, Baroda and (ii) Messrs Orbit Electronics, Baroda and were sold through Messrs Adprint Services Ltd., Baroda and the assessable value on which the duty was paid by these manufacturers of computers was considerably low in comparison to the value ultimately collected from the customers to whom these computers were sold by ORG through Adprint. 2. On 22nd March, 1984, the officers visited the factory premises of Orbit and obtained records of the unit for scrutiny examination and the preliminary scrutiny of the records revealed that Orbit was manufacturing computers exclusively for and on behalf of ADPRINT on job work basis. On 26th March, 1984, the officers also visited the factory and office premises of Messrs Digital Systems International, Baroda, and collected records from the unit for further scrutiny and examination. It was found that Messrs Digital Systems International, Baroda, were also manufacturing the computers for and on behalf of Adprint on job work basis, besides manufacturing the computers of their own. Thereafter, the officers visited the office premises of Adprint situated at Chhani, Distt. Bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Section 6 of the Central Excises and Salt Act, 1944, Rule 173-F read with Rule 9(1), Rule 173-B, Rule 173-C, Rule 173-G(2) read with Rule 52-A and Rule 173-C (4) read with Rule 53 of the Central Excise Rules, 1944 and calling upon them to show cause against recovery of duty on the goods i.e. Computers, falling under Tariff Item 33-DD at Rs. 19,50,07,989.08 manufactured and removed by them during the period from 1979 to May, 1984 less duty already paid on the said goods by (i) M/s Digital Systems International, Baroda and (ii) M/s. Orbit Electronics, Baroda and by themselves under the proviso to sub-section (1) of Section 11-A of the Central Excises and Salt Act, 1944 (corresponding to provisos (a) and (b) of sub-rule (1) of Rule 10 of the Central Excise Rules, 1944, as it stood before being omitted vide Notification No. 177/80, dated 12.11.80) read with Rule 9(2) of the Central Excise Rules, 1944, and against imposition of penalty under sub-rule (1) of Rule 173-Q of the Central Excise Rules, 1944. 4. On 20th December, 1984 interim reply was filed by the appellant. Thereafter, a detailed reply vide letter dated 19th April, 1985 was also filed. 5. The learned Collector of Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Collector of Central Excise and Customs, Baroda in terms of para 17 of the show cause notice dated 22nd October, 1984 which appears on pages 174 to 188 of the paper book. Shri Sorabjee stated that as per sub-section (2) of Section 11-A of the Central Excises and Salt Act, 1944 as it stood at that time, after considering the representation made by the appellant in response to the show cause notice issued under subsection (1), the Assistant Collector was to determine the amount of duty of excise due from the appellant and thereupon the appellant shall pay the duty so determined. In the present matter, the appellant was to show cause to the Collector of Central Excise and Customs, Baroda and not to the Asstt. Collector and as such the adjudication proceedings were ab initio void, illegal and bad in the eyes of law. Shri Sorabjee had further argued that the show cause notice was dated 22nd October, 1984 and the adjudication order is dated 29th June, 1985 i.e. much before the vesting of the jurisdiction for the adjudication of the matters where extended period of limitation was invoked. Section 11-A was amended by Act No. 79 of 1985 and amended provisions came into operation from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any of the powers, assigned to an officer under these rules . Shri Sorabjee has argued that the Central Excise Rules, 1944 which are very important in terms of the provisions of Section 37 of the Central Excises and Salt Act, 1944 cannot override the provisions of the Central Excises and Salt Act, 1944. He has also referred to sub-rules (1) and (2) of Rule 9 of the Central Excise Rules. He has argued that the scheme will not apply to Chapter VII-A (Self-removal Procedure). Rule 9(2) is a general rule. Under Section 11-A, as it stood at the relevant time, Asstt. Collector was the proper officer. Rule 9(2) has to be harmonious with Section 11-A of the Central Excises and Salt Act, 1944. In the present matter, there is no clandestine removal and as such Rule 9(2) is not applicable. In support of his argument, he has referred to a judgment of the Supreme Court in the case of N.B. Sanjana, Assistant Collector of Central Excise, Bombay and others v. The Elphinstone Spinning and Weaving Mills Co. Ltd. reported in AIR 1971 S.C. 2039 at 2048 = 1978 E.L.T. 399 page 407. The Supreme Court had held that To attract sub-rule (2) to Rule 9, the goods should have been removed in contravention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and to appear before him, if the petitioner wanted personal hearing. The representation has to be made before the adjudicating authority and the personal hearing must also be before him. Exhibit P6 notice was defective in this respect namely that it only indicated that the petitioner should appear with his evidence before the Assistant Collector of Customs. The petitioner s counsel relied on the ruling of the Supreme Court in G. Nageswara Rao v. A.P. S.R. T. Corporation, AIR 1959 S.C. 308 at p. 327 for the proposition that the hearing must be before the person who is to adjudicate on the controversy. By Ex. P-7 the petitioner had waived the right of personal hearing before the Asstt. Collector of Customs. That does not mean that he had waived his right of being heard by the adjudicating authority, namely the Collector. I think the principles of natural justice required that the petitioner should have been given an opportunity of being heard before the authority making the adjudication. At any rate, I am of opinion that Section 124 of the Act required that the petitioner should have been given an opportunity of being heard before the Collector, who has made the adjudication. As no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Central Excise Rules, 1944 which relates to the appointment of officers and the powers are assigned by the Collector to the Assistant Collector and the assigning of the power is being done .under Rule 4 of the Central Excise Rules, 1944. He has referred to the meaning of the word assign as given in Black s Law Dictionary, fifth edition page 108. Assign means to transfer, make over, or set over to another. To appoint, allot, select, or designate for a particular purpose, or duty. To point at, or point out; to set forth, or specify; to mark out or designate; to particularize, as to assign errors on a writ of error; to assign breaches of a covenant . He has argued that provisions of sub-section (2) of Section 5 of the Customs Act, 1962 are similar to the provisions of Central Excise Act. He has further argued that words assign and confer are not synonymous and under the rules all the powers are with the Collector and up to 6th August, 1987 no specific power was given to the Asstt. Collector. In old Rule 10 the word Assistant Collector was there but no rule gives any specific power to the Asstt. Collector. Same officer can be posted under the Customs Act. He further states ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument, he has referred to a judgment of the Delhi High Court in the case of Hindustan Aluminium Corporation Ltd. v. Superintendent, Central Excise, Mirzapur and others reported in 1981 E.L.T. 642 (Delhi) where the Delhi High court had held that show cause notice not void, if amount of duty is not specified and also there is no mention as to the procedure for reply. He has laid special emphasis on paras 19 and 20 of the said judgment. It was further held by the Delhi High Court at page 643 as under: The broad maxim that a fiscal provision has to be construed against the Department and in favour of a citizen on any supposed reason of technicality and strict construction is not a sound law. It is only when there is some equivocation or ambiguity about a word or a provision that a rule of strict construction or narrow construction in favour of a subject is to he applied but; if there is no ambiguity and the act or omission clearly falls within the mischief of statute, then the construction of penal statute will not differ from that of any other enactment. In support of his argument he has also referred to the following judgments : (1) AIR 1957 S.C. 397 para 45 M/s. Pannalal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. The only course open to him was to quash the order passed without jurisdiction which was a nullity in the eyes of law. He could have remitted the matter to the Asstt. Collector having jurisdiction for a de novo adjudication . The Collector s order was, therefore, neither legal nor proper. The Tribunal had remanded the matter to the Asstt. Collector having jurisdiction for re-adjudication. (3) AIR 1975 SC 67 The Director of Inspection of Income-tax v. M/s. Puranmal Sons The matter was remanded to officer having jurisdiction. Shri Doiphode has argued that Section ] 1-A was amended and came into force with effect from 27th December, 1985 vide Act No. 79 of 1985 and it was provided that the proceedings were to be transferred to the Collector which were pending before the Asstt. Collector. Shri Doiphode has further argued that the procedural amendment of law can be retrospective and in support of this proposition he has referred to the judgment of the Supreme Court in the case of Smt. Dayawati and another v. Inderjit and others reported in AIR 1966 SC 1423. Shri Doiphode has pleaded for the dismissal of the appeal. 10. Shri Soli J. Sorabjee, the learned senior advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rule 9(2) and Section 11-A, Section 11-A will prevail. The base of the show cause notice is under valuation and the penalty is under Rule 173-Q and penalty is always consequential. Shri Sorabjee, the learned senior advocate, has pleaded for the acceptance of the appeal. 11. We have heard both the sides and have gone through the facts and circumstances of the case. For the proper appreciation of the facts para No. 17 of the show cause notice which appears on page 187 of the paper book is reproduced below :- 17. Now, therefore, M/s. ORG Systems, Wadi Wadi, Baroda, are hereby called upon to show cause to the Collector of Central Excise Customs, Baroda, Opp: Maganwadi, Sayajigunj, Baroda, as to :- (i) Why the duty of excise at the appropriate leviable rate should not be recovered from them on the value of goods i.e. Computers, falling under Tariff Item 33DD amounting to Rs. 19,50,07,989.08 Ps. manufactured and removed by them during the period from 1979 to May, 1984 less duty already paid on the said goods by (1) M/s. Digital Systems International Baroda (2) M/s. Orbit Electronics Baroda and by themselves as per chart enclosed, under the proviso to subsection (1) of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the duties, or exercises all or any of the powers, assigned to an officer under these rules. (2) Subject to the provisions of sub-rule (1), the Deputy Collector of Central Excise appointed by the Central Board of Excise and Customs, may, within his territorial jurisdiction, perform all or any of the duties, or exercise all or any of the powers, assigned under these rules to an officer subordinate to him. Rule 9(2). If any excisable goods are, in contravention of sub-rule (1) deposited in, or removed from, any place specified therein, the producer or manufacturer, thereof shall pay the duty leviable on such goods upon written demand made within the period specified in Section 11A of the Act by the proper officer, whether such demand is delivered personally to him, or is left at his dwelling house, and shall also be liable to penalty which may extend to two thousand rupees, and such goods shall be liable to confiscation. Explanation : For the purposes of this rule, excisable goods produced, cured or manufactured in any place and consumed or utilised - (i) as such or after subject to any process or processes; or (ii) for the manufacture of any other commodity, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 11A that should be followed. As we have observed this was to curb the tendency of the officers frequently to resort to the demands under Rule 9(2) without regard to the time when the short levy occurred. The timeless limit of Rule 9(2) was a weapon that had been frequently misused; we think that the Govt. did right in cutting down such unlimited power. We think that the learned counsel for M/s. Piya Pharmaceuticals was mistaken when he argued that only the Asstt. Collector could have issued an order of the kind the Collector did in this case. In another matter in the case of U.P. Laminations v. Collector of Central Excise, Kanpur reported in 1988 (35) E.L.T. 398, the Tribunal had held that the Collector was competent to exercise the powers of the Asstt. Collector and to adjudicate. Para No. 13 from the said judgment is reproduced below: - 13. As to the next ground that the Collector of Central Excise had not jurisdiction to adjudicate in the proceedings and jurisdiction under Section 11A (2) of the Act was only with the Assistant Collector of Central Excise and reliance for the argument on the Tribunal decision in Kwality Containers case 1987 (29) E.L.T. 304, on going th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the powers of a Central Excise Officer is entitled to exercise any of the powers given in the statute, including adjudicatory functions. The investing of the powers means the totality of the powers, administrative, territorial and pecuniary. This interpretation would effectuate the power under Section 2(b). Para No. 24 from the said judgment is reproduced below :- 24. The definition contained in Section 2(b) of the Act says in addition that Central Excise Officer means any person (including an officer of the State Government) invested by Central Board of Excise and Customs constituted under the Central Board and Revenue Act, 1963 (54 of 1963) with any of the powers of the Central Excise Officer under this Act. By the impugned notification dated May 29,1986 in exercise of the powers conferred by clause (b) of Section 2 of the Act, and Rule 4 of the Rules, the Central Board of Excise and Customs thereby appointed a Director (Audit) in the Directorate General of Inspection and Audit (Customs and Central Excise), New Delhi, as Central Excise Officer and invested him with the powers of Collector of Central Excise, to be exercised by him throughout the territory of India. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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