9911796707
TMI Blog1990 (6) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... ief facts relating to their appeal as below: 5. The Assistant Collector of Central Excise, adjudicated 19 show cause notices issued for the purpose of recovery of duty on yarn captively consumed by the respondents mills during the various periods in the years 1981, 82 and 83 for a total amount of Rs. 4,69,85,529.29. The question of liability to duty in respect of yarn captively consumed in the composite mills was finally decided by the Supreme Court in the case of J.K. Spinning and Weaving Mills Ltd. Another v. Union of India Others reported in 1987 (32) E.L.T. 234 (SC) = 1989 (23) ECR 178 (SC) in favour of the Revenue holding that the amendment carried out in Rules 9 and 49 and retrospective validity of the said amendment brought out by Sec. 51 of the Finance Act, are valid. However, the Supreme Court did not accept the contention of the Learned Attorney General that the demands could be issued for periods beyond six months but held that all the demands should be within the purview of Sec. 11A of the Central Excises and Salt Act, 1944 and Sec. 51 of the Finance Act, 1982 cannot over-ride the provisions of Sec. 11A of the Central Excises and Salt Act. The Supreme Court, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor for consideration of their claim in respect of the duty paid on yarn cleared outside and on waste yarn for working out the extent of demand payable. However, as regards other show cause notices, the Collector (Appeals) has upheld the order of the Assistant Collector, confirming the demands covered by those show cause notices. 6. Shri K.M. Mondal, the Learned SDR, indicated that the department s appeal is only confined to the proposition of law set out by the Collector (Appeals) in respect of the 9 show cause notices, which are held by the Collector (Appeals) as not tenable and also is against the remand of the case by the Collector (Appeals) for considering the claim of the respondent mills in respect of the duty paid on yarn removed outside and on waste yarn for arriving at the duty payable. Shri Mondal, contended that the arguments taken by the respondent mills before the Collector (Appeals) were briefly, as below: i) The show cause notices which were not issued in accordance with the provisions of Sec. 11A of the Central Excises and Salt Act, 1944 but have been issued under Sec. 51 (2)(d) of the Finance Act, 1982, do not vest power in the revenue for the issue of notices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sec. 11A of the Central Excises and Salt Act. He referred to the judgment of the Supreme Court in J.K. Spinning and Weaving Mills Ltd. reported in 1989 (23) ECR 178 (SC), particularly, he read out the relevant paragraphs 32, 33 and 34 of the aforesaid judgment and contended that the Supreme Court has clearly indicated that any demand, even if issued under Sec. 51 of the Finance Act, should be subject to the provision of Sec. 11A of the Central Excises and Salt Act. In this case, all these 9 show cause notices, though they have been issued under Sec. 51(2)(d) of the Finance Act, they are subject to the provisions of Sec 11A of the Central Excises and Salt Act, inasmuch as they are well within the period of limitation of six months prescribed under Sec. 11A of the Central Excises and Salt Act. Merely because the notices invoked Sec. 51 of the Finance Act, they cannot be said to be legally invalid and hence cannot be quashed by the Collector (Appeals), because of the fact that the Supreme Court s decision directly applicable in this case clearly envisages that there should be notices and such notices, even if they are issued under Sec. 51 of the Finance Act should be subject to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 51(2)(d) of the Finance Act may not be called for. Even assuming that the Section invoked is not appropriate in these cases, that cannot justify the order of the Collector (Appeals) quashing the notices themselves as invalid because of the following reasons: The Supreme Court s observations in J.K. Spinning and Weaving Mills Ltd. clearly indicate that even if the recoveries are to be effected under Sec. 51(2) (d) of the Finance Act, they are subject to the provision of Sec. 11A of the Central Excises and Salt Act. Hence the main and substantive question to be looked into is whether notices have been issued and if notices are issued, whether they are subject to the provision of limitation under Sec. 11A of the Central Excises and Salt Act. The Collector (Appeals), instead of looking into this main aspect, has only gone by the Section invoked for arriving at the wrong conclusion to hold that the notices have become ab initio void. In this context, he cited the judgment of the Supreme Court in J.K. Steels Ltd. v. U.O.I. in 1978 (2) E.L.T. 355, he particularly took us through paragraph 45 of the aforesaid Supreme Court judgement. He also indicated that the Tribunal has also held i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been remanded for the limited purpose of ascertaining certain facts and re-determining the duty amount to be demanded, and hence unless the entire matter including the factual position is determined by the Assistant Collector, the appeal from the department is premature and is not maintainable. 14. We have carefully considered this preliminary submission but are unable to accede to the same because of the fact that the Collector (Appeals) has specifically given a finding on a point of law that 9 show cause notices are not legally valid, if they have been issued under Sec. 51(2)(d) of the Finance Act, 1982. If the department does not challenge this finding by way of appeal, it would amount to acceptance of this finding and the Assistant Collector to whom the case has been remanded back is only required to verify whether the demand has been issued under Sec. 51(2) (d) of the Finance Act and if so, drop the show cause notices. He has no other alternative but to drop the proceedings if the demand is issued under Sec. 51(2)(d) of the Finance Act. Hence in our view, the department is right in coming up in appeal against the decision of the Collector (Appeals), on this point of law at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s can be issued straight-away under Sec. 11A of CESA. Even after this direction of the Board, if the Assistant Collector, who ought to be aware of the Board s circular, has chosen to issue show cause notices under Sec. 51(2)(d) of the Finance Act, whatever the motive be, such show cause notices per se are bad in law. It can not be construed to be a mistake on the part of the Assistant Collector in applying a wrong section. Even when this plea was taken before the Assistant Collector, he has not admitted that section invoked by him was wrong nor such an argument was advanced by the Department before the Collector (Appeals). Hence it is not open to the department to contend, at this stage, that the section invoked is wrong and even if it is wrong, citing of a wrong section cannot invalidate the show cause notice. By such an argument, the department seeks to urge the Tribunal to rectify the patently illegal show cause notices, which are required to be set aside as ab initio void, by giving life to the same by way of substitution of the appropriate provision of law. 17. He also argued that it is conceded by the Learned SDR that wrong section is quoted, but this point is raised only f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ratio of the judgment in Tailor v. Tailor case, have held that, where a power is given to do a certain thing, in a certain way, the thing must be done in that way or not at all and that the other methods of performance are necessarily forbidden, applies to judicial officers. In this case, the statutorily recognised method is provided under Sec. 11A of CESA and when that sec. has not been invoked in the show cause notice, the notice cannot be invoked at all. He therefore contended that even going by the judgment of the Supreme Court in the case of State of U.P. v. Singhara Singh, the show cause notice issued under a totally different provision of the Finance Act, especially when there is a specific provision in the Central Excise Act itself, such a notice is ab initio invalid and is required to be quashed. The Collector (Appeals) is therefore justified in doing that. He also contended that the doctrine of tracing power cannot be extended in such an extreme case. Even in the judgment of Special Bench D of CEGAT, New Delhi, in the case of J.K. Cotton Mills (supra) there were two sets of show cause notices covering the same period in respect of the same goods, one issued under Sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evise or modify his own order or review on the question whether he has rightly or wrongly applied the correct provision of law. It is the appellate authority who can correct or modify, if the order is taken up in appeal. Hence the appropriate stage for agitating the issue is only now before the Tribunal. Hence it cannot be alleged that this issue is raised for the first time. He also stated that it is not as though the provisions of the CESA and Rules have been totally ignored in the impugned show cause notices. The notices also quote Sec. 3 of the CESA and Rules 9 and 49 of the Rules. On the question of doctrine of tracing the power, he contended that in this case if is not disputed that the Superintendent or Assistant Collector can issue show cause notice both under Sec. 51 of the Finance Act and Sec. 11A of CESA. If the authority has wrongly invoked the provision of Sec. 51 of Finance Act instead of Sec. 11A of CESA, so long as the demand is well within the purview of Sec. 11A of CESA, it cannot be held to be invalid, because for exercising the powers in respect of both the provisions of law, source can be traced to the same authority, namely the Supdt. or the Assistant Collecto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of tracing of power would be applicable in this case for sustaining the ratio of the judgment of the Supreme Court in the case of J.C. Steels Ltd. reported in 1978 (2) E.L.T. 355? (iv) Whether the ratio of the judgment of the Supreme Court in the case of State of Uttar Pradesh v. Singhara Singh reported in AIR 1964 Supreme Court 358 would be applicable and on that basis the show cause notice issued under Sec. 51 of the Finance Act, 1982 could be held ab initio bad and are contrary to the statutory provisions laid down under Sec. 11A of the CESA? (v) Whether the ratio of the judgments cited by the Learned Senior Counsel in the case of Jay Engineering Works reported in 1979 (4) E.L.T. J 307, in the case of Hydraulics Ltd. reported in 1983 (12) E.L.T. 533 and the judgment of this Bench in the case of M/s. Mafatlal Industries Ltd. Ors. would be applicable 27. Once these questions are decided, the main issue raised in the appeal would be answered. 28. Taking the first question, we observe that the Learned SDR has conceded that the demands are to be issued invoking Sec. 11A of the CESA, since the period relates to after 20-2-82. Hence no major arguments have been advanced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material times; (d) recovery shall be made of all such duties of excise which have not been collected or, as the case may be, which have been refunded but which would have been collected or, as the case may be, would not have been refunded, if the amendments referred to in sub-section (1) had been in force at all material times. Explanation - For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force." 29. From the aforesaid position, it is clear that Sec. 51 of the Finance Act is intended to give retrospective effect for amendments made in Rules 9 and 49 of the Rules and sub-sec. 2 (d) of Sec. 51 is specifically intended to provide the enabling provision for recoveries of duties not collected during the period prior to amendment enabling the department to effect recovery as if the amendment had been in force at all material times. In view of this, we share the view expressed by both the sides that invoking Sec. 51(2)(d) is not appropriate in respect of the demands issued after the amendment of Rules 9 and 49 of the Rules an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eries to be effected for the period prior to amendment, nevertheless the authority issuing the show cause notice could have reason to misconstrue this as empowering them to issue show cause notices under Section 51 of the Act. It is also likely that this mistake has been realised subsequently and thereafter notices came to be issued under Section 11A of the CESA. 32. Coming to the third question, the issue canvassed by the Learned SDR is that notwithstanding the citation of a wrong section, so long as the notice is well within the time limit prescribed under Section 11A of the CESA, citing of a wrong section does not invalidate the notice. For this, he placed reliance mainly on the judgment of the Supreme Court in J.K. Steel Ltd. (supra). 33. The Learned Senior Counsel, on the other hand, contends that this judgment would be applicable only in a case, where the doctrine of tracing of powers could be available and the officer exercising the power has committed a mistake in applying the wrong provision. For appreciating the arguments of both sides, it would be relevant to reproduce the relevant para 45 of the aforesaid judgment of the Supreme Court: I shall now take up the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing authority demanded duty under Rule 9(2) which has been held to be not applicable in the facts of the case because of the fact that the assessee had cleared the goods on payment of appropriate duty at the time of removal of the goods. Both the Assistant Collector as well as the Collector (Appeal) have ignored their contention of the non-applicability of Rule 9(2) and when the matter was taken up to the Government if acceded to this argument that the demand is not maintainable under Rule 9(2) but sustained part of the demand under Rule 10 within time limit prescribed therein. The Supreme Court have rejected the contention of the petitioners that the Government could not have confirmed part of the demand under Rule 10, when the original demand was not made under Rule 10 but under Rule 9(2) of the Rules. In that context the Supreme Court held that if the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. We are now to look into as to how far the present facts of the case would come within the purview of the decision applying the doctrin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a limited period under Rule 10. Hence we fail to appreciate the argument of the Learned Senior Counsel as to how the Tribunal could not treat this as a demand which can be enforced under Section 11A of the CESA. In the case decided by the Supreme Court, the Government in exercise of the revisionary powers held that though the demand was not issued under Rule 9(2) of the Central Excise Rules, the demand can be enforced for the time limit prescribed under Rule 10 of the Rules. This has been upheld by the Supreme Court. We also find that the show cause notice does not merely refer to Section 51(2)(d). It also refers to the provisions of Rule 9 of the Rules and Section 3 of the CESA. It also indicates that the duty is payable in respect of captively consumed yarn which have been cleared without payment of duty because of the Court s order. Hence no prejudice is caused to the respondents by not mentioning specifically Section 11A of the CESA. We, therefore, answer the question in favour of the Revenue and dismiss the contention of the Learned Senior Counsel that the case is not falling within the purview of the doctrine of tracing the powers and hence not covered by the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The principle is as follows: If a statute has conferred a power to do an act and has laid, down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any other manner that that which has been prescribed . (emphasis supplied). Now we proceed to apply, the principle to the present facts of this case. 38. Under Sec. 11A of the CESA, the method prescribed is that when any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, a Central Excise Officer may, have to issue a show cause notice calling for explanation from the assessee as to why the amount specified in the notice should not be recovered. The Assistant Collector, after considering the representation made by the assessee, shall determine the amount of duty of excise due from the assessee and such duty shall not be in excess of the amount prescribed in the show cause notice. The notice is also required to be issued within a period of six months and if there is an allegation of suppression of facts or wilful mis-statement etc., the notice is required to be issued by the Collector and also adjudicated by the Collector and in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Andhra Pradesh, disagreeing with the contention of the Standing Counsel for the Central Government that the error referred to in Rule 10 of the Rules does not include the error of law, finally held that the proposed show cause notice as well as the levy of excise duty short levied was issued and made beyond the period of limitation prescribed by Rule 10 and is therefore bad. In the case before us, it is conceded by the Learned SDR that the show cause notice has been issued invoking Sec. 51 of the Finance Act on a wrong understanding of law by the Assistant Collector. Hence even if it is construed as a wrong understanding of law, so long as the duty is not paid or not collected and notice has been issued for the purpose of recovery of such duties not paid, that would come within the purview of the provision of Sec. 11A of the CESA intended for recovery of such dues. Undisputedly in this case, notices have not been issued for a period extending beyond six months and hence on that ground they come within the purview of Sec. 11A of the CESA. We, therefore, do not appreciate the applicability of the ratio of the judgment of the Andhra Pradesh in the case of Jay Engineering Works (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se would not help the case of the respondents, where in the show cause notices issued in that case was under Rule 9(2) of the Rules alleging clandestine removal, which stand was subsequently altered during the adjudication proceedings causing greater prejudice to the assessee. We, therefore, reject the contention of the Learned Senior Counsel with regard to the applicability of this case. 41. The other case law relates to the decision of this Bench in Mafatlal Industries Ltd. This Bench rejected the contention of the department that endorsements on RT-12 Returns should be construed as show cause notices under Sec. 11A of the CESA, and thus can save the period of limitation. Even this case does not come to the rescue of the respondents because of the fact that the endorsement made on the RT-12 Returns cannot be a notice issued for showing cause as to why the duty should not be recovered. It is a straight demand made on the assessment. Sec. 11A of the CESA prescribes the method of issue of show cause notice, getting the representation from the assessee and thereafter passing the order confirming the demand to the extent of duty indicated in the show cause notice. Hence the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of adjustment of the duty paid on yarn removed outside and also the duty paid on waste yarn, we find that no documents were presented even before us on this point. Moreover, even if it is assumed that the demand confirmed is in excess of the actual duty payable, because of inclusion of certain alleged payments towards waste yarn and other yarn cleared outside, the respondents have the remedy to claim the refund thereof by filing the refund claim within six months from the date of payment of the duty ordered to be paid, inasmuch as the alleged excess payment would accrue only, when the duty demanded by these show cause notices are paid by the respondents. The question of consideration of adjustment of duty paid on waste or other yarn at this stage does not appeal to us particularly when these figures have been confirmed, even before the judicial forums and on that basis orders have been passed. It is not the case as though the respondents are left with no legal remedy and once they paid the duty confirmed, that will be final. They are entitled to claim the refund of duty in case the figures of demand confirmed include such duty on yarn cleared outside and on waste yarn entitled to e ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
