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TMI Blog1991 (3) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... 079.69 cleared to their Ballabgarh factory during the period from 18-6-1977 to 20-11-1977 should not be recovered from them. After holding adjudication proceedings, the Assistant Collector of Central Excise, Faridabad, by his order dated 29-5-1981, confirmed the demand for duty. The appeal filed before the Collector of Central Excise (Appeal) against the Assistant Collector s order did not meet with success. It is the Collector (Appeal) s order dated 11-7-1983 that is impugned in the present appeal. 2. We have heard Shri M. Chandrasekharan, Advocate, for the appellants and Shri K.C. Sachar, D.R., for the respondent and read the record. 3. At the outset, the counsel for the appellants made it clear that the only point on which he would be making submissions was on the issue of limitation. According to him, the show cause notice dated 31-10-1980 demanding duty for the period from 18-6-1977 to 20-11-1977 without alleging any suppression of material facts or other ingredients required for invocation of the extended period of five years for recovery of duty was barred by limitation. He drew our attention to the correspondence exchanged between the appellants and the Central Excise a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnishing the required particulars and taking out the necessary licence which they did only on 24-10-1977 (Annexure 2). Shri Sachar submitted that the department s letter dated 8-12-1977 at page 22 could also be said to be a notice of demand and, in any event, the show cause notice dated 31-10-1980 was within the period of five years from the relevant dates. 5. In a brief rejoinder, Shri Chandrasekharan submitted that the department s letter dated 8-12-1977 at page 22 was not in the nature of a show cause notice as contemplated in the Central Excise Law. It could not be said that by responding to the said letter, the appellants had been afforded an opportunity which they had availed themselves of. The fact that the department had considered it necessary to issue a formal show cause notice on 31-10-1980 itself would show that the said letter dated 8-12-1977 could not be considered as a show cause notice. 6. We have carefully considered the submissions. It is clear from the record that, as early as 22-7-1977, the Superintendent had intimated to the appellants that they should take out a licence for the manufacture of tools and that such manufacture without a valid licence would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e demand have been clearly spelt out. If, however, the formal show cause notice of 31-10-1980 is alone to be considered, that demand also could not be considered as barred by limitation since it was only on or around 25-8-1980 that the appellants had furnished the particulars necessary for computation of the duty amount. Thus from whatever point one looks at the matter it must be held that the department has acted within time. We are fortified in this view by the ratio of the Tribunal s judgment in the case of Simon Carves, 1987 (32) E.L.T. 186 (supra). In this view of the matter, we reject Shri Chandrasekharan s contention that the notice of demand was barred by limitation. 7. Shri Chandrasekharan correctly points out that in the original calculation, the rate of duty shown in the department s letter of 8-12-1977 was 10% basic duty with no special excise duty whereas in the show cause notice dated 31-10-1980 as well as in the order-in-original passed by the Assistant Collector, the duty amount has been computed at the rate of 15% + Special Excise Duty. This appears to be erroneous. 8. In the result, white we hold that the demand was not barred by limitation, we direct the Assi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use. The notice dated 31-10-1980 also did not refer to, or rely upon, this letter of 8-12-1977 as part of the show cause notice. It was only under the notice dated 31-10-1980 that the appellants were directed to show cause against the demand for payment of duty. 8.4 Shri Sachar submitted, and the Senior Vice President has also agreed, that the decision in the Simon Carves case (1987 Vol. 32 E.L.T. 186) would cover the present situation. It may be noted that in the said case what came up for consideration was the validity of a show cause notice which, according to the assessee, was defective in two senses (failure to indicate the amount of duty demanded and failure to indicate the period for which demand was being made). The notice under consideration in the said case was a full-fledged show cause notice containing all the formalities required of a show cause notice. The decision of the majority was that the mere omission to mention the amount or the period did not, in the peculiar circumstances of the said case, amount to an irreparable defect which, for that reason itself, would result in the demand (confirmed pursuant to the show cause notice) being set aside. The said case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to be within time for the reason mentioned by the Senior Vice President. 8.6 In view of the above I hold that the demand in the present instance was barred by time. I would, therefore, propose an order allowing the appeal and setting aside the orders of the lower authorities. (V.T. Raghavachari) Member (J) Dated 15th Feb., 1988. In view of the difference of opinion between the two members the following point of difference is referred to the President in terms of Section 35D(1) of the Central Excises and Salt Act read with Section 129C(5) of the Customs Act : Whether, or not, on the facts and in the circumstances of this case, the demand for duty as raised under the notice dated 31-10-1980 is barred by time. (G. Sankaran) Sr. Vice President (V.T. Raghavachari) Member (J) Dated 15th Feb., 1988. 8.7 [Per : Harish Chander]. - There was a difference of opinion between the Senior Vice-President (now President) and the Judicial Member and the following point of difference has been referred to me in terms of provisions of Sec. 35D(1) of the Central Excises and Salt Act, 1944 read with Section 129C(5) of the Customs Act, 1962 :- Whether, or not, on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be read to include factories of production belonging to the same manufacturer. The appellant, therefore, contended that the use of the tools in their Ballabgarh factory should be treated as use in the factory of production of the same manufacturer. 10. The Assistant Collector did not accept the contention of the appellant and had confirmed the demand. 11. Being aggrieved from the aforesaid order, an appeal was filed before the Collector of Central Excise (Appeals), New Delhi and before the Collector of Central Excise (Appeals), the appellant had filed a letter dated 12th September, 1977 written by the Suprintendent of Central Excise SRP VI, Faridabad to the effect that the appellant had been advised to take out a licence for the manufacture of tools in their factory under T.I. 51A. The Appellate Collector had observed that: It is, therefore, evident that the appellants must have taken out a licence after the receipt of this letter, whereas they had started removing tools without payment of duty from 18-6-1977 to 20-11-1977 and, therefore, when the appellants did not possess a licence and they were not willing to take out a licence, the matter of wilful mis-statement and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Simon s case was distinguishable. In support of his argument, he has referred to the following judgments :- (1) 1989 (42) E.L.T. 618 - Raj Nigam v. Collector of Central Excise. Where the Tribunal had held that the extended period of five years could not be invoked in the absence of any allegation in the show cause notice of mis-statement, suppression of facts, fraud, etc. with intent to evade payment of duty and the department could not invoke the period beyond six months. (2) 1989 (43) E.L.T. 195 (SC) - Padmini Products v. Collector of Central Excise. Where the Hon ble Supreme Court had held that mere failure or negligence on the part of the manufacturer either not to take out a licence or not to pay duty in case where there was scope for doubt, does not attract the extended limitation. Unless there was evidence that the manufacturer knew that goods were liable to duty or he was required to take out a licence. For invoking extended period of five years limitation duty should not have been paid, short-levied or short-paid or erroneously refunded because of either any fraud, collusion or wilful mis-statement or suppression of facts or contravention of any provision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the procedure relates. Thus the claim for refund lodged by the appellants was not time-barred in view of old Rule 11, which would apply in the instant case. Shri Chandrasekharan argued that Rule 10 was amended with effect from 6th August, 1977 and in the matter before the Tribunal the period is from 18th June, 1977 to 20th November, 1977. So part of the period is covered by old Rule 10 as prevalent upto 6th August, 1977 and later period after the amendment. Lastly, Shri Chandrasekharan has taken an alternative argument that in case his plea of limitation is not accepted, alternatively he pleaded that subsequent amendment of law will not revive the right. In support of the same he has referred to a judgment of the Tribunal in the case of Rajasthan Worsted Spinning Mills v. Collector of Central Excise reported in 1990 (47) E.L.T. 483 (Tribunal). Shri Chandrasekharan has pleaded for the acceptance of the appeal. 14. Mrs. Vijay Zutshi, the learned Joint CDR who has appeared on behalf of the respondent, pleaded that she admitted the infirmities in the show cause notice to the effect that there was no allegation of suppression in the show cause notice. She has pleaded that for ascert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without conforming to the basic legal requirements of giving a show cause notice to the aggrieved party unless otherwise waived as per law, and in the instant case Rule 10 of the Central Excise Rules, 1944 which would govern the situation enjoins on an authority to give a show cause notice to the aggrieved party. As rightly contended by the learned representative for the appellants, a show cause notice should be issued to the aggrieved person in terms of Rule 10, objections of the appellants. should have been invited, heard and the objections considered to be an appealable order. It is more a communication in the exercise of his administrative functions rather than an appealable order in exercise of his quasi-judicial functions. The ratio decidendi of the Division Bench ruling of the Delhi High Court reported in 1981 (8) E.L.T. 632 (Delhi) in the case of International Computers Indian Manufacturers Ltd. and Another v. Union of India and Others, relied upon by the learned representative for the appellants supports the view I have taken and the Delhi Bench has held that issuance of show cause notice to a person to whom the refund has been erroneously made has been statutorily provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the show cause notice; and (vi) such amount which the party is ordered to pay must be stated and manifestly specified in the order without relegating the party to conjecture or calculations for ascertainment of the amount ordered to be paid. None of these mandatory requirements of Rule 10 have been complied with in this case. Hence the show cause notice and the impugned orders are liable to be set aside. He has also 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 (8) E.L.T. 642 (Delhi) where the Hon ble Delhi High Court had observed as under :- 17. The next challenge was to the demand of arrears from the period 17-5-1969 to 23-6-1979. Rule 10 provides for recovery of duty not paid and provides that the proper officer may within 6 months from the relevant date serve a notice on the person chargeable with duty which has not paid the duty requiring him to show cause why he should not pay the amount specified in the notice. Relevant date is defined in sub-rule 2(ii) (a) of Rule 10 to mean in the case of excisable goods on which duty has not been levied the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on this amount worked out at Rs. 1,02,230.04. Shri G. Sankaran, President (then Senior Vice President) had taken the view that the letter dated 8th December, 1977 and the show cause notice dated 31st October, 1980 have to be read together. In para No. 6 of his order he had observed that though the show cause notice did not refer to the letter dated 8th December, 1977, on a reasonable view of the entire correspondence exchanged between the appellants and the department, there was no excape from concluding that the show cause notice must be read together with, and not divorced from the department s letter dated 8th December, 1977 and if the letter of 8th December, 1977 was considered as a demand, then it was well within time and non-specification of the duty amount would not vitiate its character. The said letter no doubt did not use words like show cause but the precise basis for demanding duty, the rate of duty and the period covered by the demand had been clearly spelt out, and if the formal show cause notice of 31st October, 1980 was alone to be considered, that demand also could not be considered as barred by. limitation since it was only on or around 25-8-1980 that the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngredients of the proper show cause notice. Para No. 21 from the said judgment is reproduced below :- 21. To summarise (i) it is not necessary that a show cause notice under Rule 10 must state the rule under which it is issued as long as the requirements of that rule are satisfied; (ii) the notice must require the party to show cause to the proper officer why he should not pay a certain stated amount; (iii) the amount must be stated and manifestly specified in the notice itself; (iv) the party must not be relegated to conjecture, speculation or calculations in order to ascertain the amount in respect of which the show cause notice is issued; (v) the amount determined by the authority as payable shall not exceed the amount specified in the show cause notice; and (vi) such amount which the party is ordered to pay must be stated and manifestly specified in the order without relegating the party to conjecture or calculations for ascertainment of the amount ordered to be paid. None of these mandatory requirements of Rule 10 have been complied with in this case. Hence the show cause notice and the impugned orders are liable to be set aside. Delhi High Court in the case of Hindustan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five years could not be invoked in the absence of allegation in the show cause notice of mis-statement, suppression of facts, fraud, etc. with intent to evade payment of duty, and the department could not invoke the period beyond six months. Hon ble Supreme Court in the case of Padmini Products v. Collector of Central Excise reported in 1989 (43) E.L.T. 195 (SC) had held that mere failure or negligence on the part of the manufacturer either not to take out a licence or not to pay duty in case where there was scope for doubt, does not attract the extended limitation. Hon ble Supreme Court in the case of Collector of Central Excise v. Chemphar Drugs Liniments reported in 1989 (40) E.L.T. 276 (SC) had held that extended period of Five years applicable only when something positive other than mere inaction or failure on the part of manufacturer is proved - Conscious or deliberate withholding of information by manufacturer necessary to invoke larger limitation of five years. Para Nos. 8 and 9 from the said judgment are reproduced below :- 8. Aggrieved thereby, the revenue has come up in appeal to this Court. In our opinion, the order of the Tribunal must be sustained. In order to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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