9911796707
TMI Blog1995 (8) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... s. M/s Davangere Cotton Mills Ltd. is a composite mill and manufactures cotton and fabrics. The mills also manufacture different kinds of yarn and which is ultimately consumed in the factory for manufacture of different kinds of fabrics. The expression "composite mill" means a manufacturer, who is engaged in spinning of cotton yarn or weaving and processing of cotton fabrics with the aid of power in the same factory. The different kinds of yarn manufactured by the Mills was liable to payment of excise duty under Tariff Item 18-111, 18A and 18E of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred as 'the Act'). The Mills were paying excise duty on yarn manufactured and consumed till August 9,1981. The Mills then became aware of the decision rendered by the Delhi High Court in Delhi Cloth and General Mills Co. Ltd. v. Joint Secretary, Govt. of India 1978 Cen-Cus 55D (Del.) : 1978 ELT (J 121). The Delhi High Court held that yarn manufactured in the factory and exclusively consumed within the same factory is not liable for payment of excise duty. The Mills thereupon preferred W.P. No. 19994/81 in this Court under Article 226 of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... memorandum on the returns. The Rule further provides that the assessee shall pay the deficiency of the duty determined within 10 days of receipt of the copy of the returns. Inspite of the order of stay granted by this Court from levy and collection of duty, the Mills had filed Form RT-12 from month to month. The assessment memorandum is printed at the foot of the form. While filing the return the Mills made an endorsement on the form that yarn was removed to weaving Section without paying excise duty in pursuance of the stay order granted by the High Court, the Central Excise Officer therefore did not complete the assessment. RT-12 form clearly sets out the quantity removed without payment of duty during each month. After the dismissal of the writ petition preferred by the Mills and after the stay order for levy and collection stood vacated, the Superintendent of Central Excise by letter dated May 2, 1986 informed the Mills that a sum of ₹ 2,11,86,467.27 is due for the period commencing from September 1981 ending with July 20, 1985 for the clearance of cotton yarn, Cellulosic spun yarn and non-cellulosic spun yarn captively consumed by the Mills for the manufacture of fabri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e thereof, the demand cannot be sustained. The Mills further claimed that as the demand was invalid the amount paid by the Mills pending the petition in accordance with the interim order should be directed to be refunded. To appreciate the claim of refund, it is necessary to set out the portion of the interim relief dated October 28, 1986 passed by the learned single Judge in the writ petition. As regards the interim prayer, the learned Counsel for the petitioner invited my attention to an interim order granted by the Supreme Court in the appeals presented by the Associated Cement Company Limited granting stay subject to the petitioners therein paying the entire amount due in four equal quarterly instalments. The learned Counsel submitted that having regard to the fact that in the present case the liability of the petitioner is to the extent of 2.2 crores, the petitioner may be permitted to pay in twelve equal quarterly instalments. In the circumstances, I make the following order: There will be no stay of the impugned order. But the petitioner shall pay the entire amount due by it to the respondents in twelve equal quarterly instalments. The petitions' shall pay the first in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted to the demand made is erroneous, and indeed Section HA had no application whatsoever to the facts of the case. It was further contended on behalf of the department that the Mills could not take advantage of the interim relief secured from this Court to claim that the department was duty bound to make demand of excise duty due for the period September 1981 to July 20, 1985 within a period of six months. The counsel for the Mills on the other hand submitted that the decision of the learned Single Judge that the demand must precede with notice to the assessee and assessment can be completed only after notice is correct and does not suffer from any infirmity. The counsel for the Mills tried to sustain the impugned decision by reference to the decision of the Supreme Court in the case of Gokak Patel Volkart Ltd. , and some observations made in Union of India and Ors. v. Madhumilan Syntex Pvt. Ltd. . In our judgment the impugned decision is not correct and is required to be set aside. 7. It is not in dispute that the Mill is a composite mill in the sense that the yarn manufactured by the mill is consumed in the mill itself for the manufacture of cotton fabrics. Rule 9 of the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the return so completed shall be sent to the assessee. (2) The duty determined and paid by the assessee under Rule 173F shall be adjusted against the duty assessed by the proper officer under Sub-rule (1) and where the duty so assessed is more than the duty determined and paid by the assessee, the assessee shall pay the deficiency by making a debit in the account-current within ten days of receipt of copy of the return from the proper officer and where such duty is less, the assessee shall make credit in the account-current for the excess on receipt of the assessment order in the copy of the return duly counter-signed by a Superintendent of Central Excise. 8. The Mills had opted for special procedure prescribed under Chapter VIIA and the returns were filed in Form RT-12 and consequently the officer had to assess the return under Rule 173-1. It is not in dispute that before completing the assessment, the officer is not required to serve any notice on the assessee who files a return in the form prescribed under Form RT-12. The learned single Judge was in error in observing that the procedure under Chapter VIIA is to be observed in normal cases and not when levy and collection is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumption in the Mills premises. There was also no dispute as regards the rate of duty to be paid. The department accepted the returns filed by the Mills and the duty demanded is in accordance with the returns filed. The Mills did not choose to file any appeal against the determination of the quantum and we are unable to appreciate how the demand can be nullified on the ground that prior notice before carrying out exercise of arithmetic calculation was necessary. 9. The learned Counsel for the Mills submitted that even if the procedure prescribed under Rule 173-1 did not demand issuance of prior notice before ascertaining the quantum of duty payable, still the department was bound to give an opportunity to the Mills to show cause why the quantum as determined is not payable. It was contended that there cannot be any valid adjudication without prior notice and this Court while dismissing the earlier petition preferred by the Mills had directed the department to adjudicate the duty payable by the Mills. We are unable to find any merit in the contention. The expression 'adjudicate' used by this Court while dismissing the petition of the Mills cannot be understood as determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to commence any proceedings for recovery of duty set out in the demand letter dated May 2, 1986, because the Mills preferred writ petition in this Court before the expiry of six months i.e. on October 28. 1986. As mentioned hereinabove this Court declined to grant stay of enforcement of the demand by order dated October 28, 1986. The Mills thereupon requested the court to grant instalments for payment of the amount of duty and on the request of the Mills, this Court granted 12 equal quarterly instalments for making the payment. It is not in dispute that the Mills paid certain quarterly instalments as promised. In view of the voluntary payment made by the Mills, the question of adopting the proceedings under Section 11A of the Act did not arise. The contention of the learned Counsel that the case of the Mills falls within the ambit of Section 11A of the Act as the Mills did not pay the duty is not correct. There is second aspect of the matter which cannot be overlooked. Section 11 of the Act provides for recovery of sums due to the Government and inter alia sets out that in respect of a duty and any other sums payable to the Central Government under any of the provisions of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispense with the notice is also inaccurate inasmuch as there was no occasion to serve any notice under Rule 173-1 of the Rules. 11. The learned single Judge held that the dispute in the present proceedings stands covered by decision of the Supreme Court in Gokak Patel Volkart Ltd. v. Collector of Central Excise . We are afraid we cannot share the view of the learned single Judge. In the case before the Supreme Court, the fate of the dispute depended upon the meaning and scope of the Explanation to subsection (1) of Section 11A of the Act. The assessee had filed a petition in Karnataka High Court and interim relief was granted restraining the department from collection of excise duty as a fabric, but the assessee was directed to pay excise duty as yarn. The writ petition was ultimately dismissed. The Assistant Collector thereupon served a notice on the assessee for the period from June 1976 to February 1981 for recovery of differential duty. For the earlier period from April 1975 to August 1975 another show cause notice was also issued on January 9, 1976. It was not in dispute before the Supreme Court that appropriate period of limitation to apply to the facts of the case was six m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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