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TMI Blog1991 (3) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... and dismissed the writ petition by its order dated 3-3-1986. 3. After the dismissal of the writ petition, the Superintendent of Central Excise, Davanagere - Respondent - 2, issued a letter dated 2-5-1986 (Anx. B), demanding a sum of Rs. 2,11,86,467.27 being the duty liable to be paid by the petitioner on the clearances of cotton-yarn, cellulosic spun-yarn and non-cellulosic spun-yarn captiyely consumed by the petitioner-mill, without payment of duty during the period September 1981 to 20th July 1985. This demand is challenged by the petitioner in this writ petition which was filed on 26-9-1986. 4. The following contentions are urged in the writ petition challenging the demand as per Annexure B dated 2nd May 1986: (i) that the demand impugned in the writ petition is made in defiance of the order of this Court in W.P. No. 19994/81; (ii) no notice was served on the petitioner before the letter dated 2-5-1986 was issued demanding central excise duty of Rs. 2,11,86,467.27; (iii) that no demand can be made under the Act without an order of determination of the duty of excise due from the petitioner; (iv) that no such determination of the amount can be made without issue of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law. 7. It is also the contention of the petitioner that the directions issued by this Court in W.P. No. 19994/81 is no longer a good law in view of the Judgment of the Supreme Court in J.K. Cotton Mills' case. Lastly, it was contended that the demand made without issuing a show cause notice is bad in law as held by the Supreme Court in Gokak Patel's case (AIR 1987 S.C. 1161). 8. On the arguments advanced by the learned Counsel for the petitioner and the Department, the following points arise for decision in this case :- (i) Whether the observations made and directions given by this Court in Para 47 of the order made in W.P. No. 19994/81, is no longer good law in view of the ratio of the decisions of the Supreme Court in : (a) Gokak Patel's case - [AIR 1987 S.C. 1161 = 1987 (28) E.L.T. 53 (SC)] and (b) J.K. Cotton Mills' case - [AIR 1988 S.C. 191 = 1987 (32) E.L.T. 234 (SC)]; (ii) whether the demand made as per the letter dated 2-5-1986, Annexure B to the writ petition, is a valid demand made in accordance with the provisions of Section 11A of the Central Excises Act; and (iii) whether the impugned demand is barred by limitation prescribed under Section 11A(1)? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his context (in para 33) that any such demand, though it may include within it, the demand for more than six months must be made within a period of six months from the date of amendment. It was categorically held by the Supreme Court that in the absence of any specific provision over-riding Section 11A, the amended rules would be subject to the restriction envisaged in Section 11A. 14. Keeping this enunciation in view, let me now examine the contentions of the petitioner as well as the Department in this case. The levy and collection of excise duty by the Department on different types of yarn manufactured by the petitioner was stayed by an interim order dated 18-9-1981 made by this Court in W.P. No. 19994/81. The petitioner-Mill was paying the central excise duty on the yarn manufactured by it and consumed in its mill without demur till the end of August 1981. The petitioner, thereafter, filed Writ Petition No. 19994/81 on 8-9-1981 for a declaration that the yarn manufactured by it and consumed in the manufacture of fabrics, was not dutiable without being removed from the factory. The effect of the amendment of Rule 9 on the petitioner's goods, was that the captive consumption of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught for an injunction restraining the respondents from levying and collecting excise duty on different types of yarn manufactured and used in the manufacture of fabrics within the factory and that interim prayer granted by this Court on 18-9-1981 has continued ever since then without any modification. With the dismissal of this Writ petition, the interim order will stand terminated and the respondents are entitled to adjudicate and recover the amounts that may be found due for the said period also. The petitioner who had the benefit of the aforesaid interim order, cannot obviously plead the bar of limitation, if any, for such levy and collection of duty. In this view, it is undoubtedly open to the respondents to recover all the amounts from 18-9-1981 ignoring the bar of limitation if any under the Act and the Rules. In order to enable them to determine the taxes and collect the same it is undoubtedly open to the respondents to call upon the petitioner to produce all such books of accounts and other documents that are necessary for such determination. But, in recovering the huge arrears that now become due, it would be proper for the respondents to permit the petitioner to pay the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bar of limitation, is very strongly utilised by the Department's Counsel to justify the demand. 21. I will now deal with the interpretation of the Department on the expression, "adjudicate" as stated in the statement of objections which needs careful examination. The term, "adjudicate", according to the Department means, only quantification of the amount recoverable. The demand impugned in the present case is sought to be justified solely on the ground that the petitioner admitted its liability to pay the duty on the different types of yarns produced, the value of which was disclosed in the monthly returns and also on the fact that the petitioner had not disputed its liability to pay duty on the yarn. It is also submitted that the excise duty payable on the yarn was not quantified for the period covered by the interim order made by this Court since the Department was restrained from levying the duty during the pendency of the writ petition. In addition to this argument, the Department also relied upon Rules 173F and G which provide for self-removal system on crediting the duty in its account in RG-23 Register under which, according to the Department, it was the statutory obligat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner as a result of the dismissal of the writ petition. The relevant direction given by this Court was, in these words :- "the respondents are entitled to adjudicate and recover the amounts that may be found due for the said period also. The petitioner who had the benefit of the aforesaid interim order, cannot obviously plead the bar of limitation, if any, for such levy and collection of duty. In this view it is undoubtedly open to the respondents to recover all the amounts from 18-9-1981 ignoring the bar of limitation if any under the Act and the Rules". 25. There is no satisfactory explanation, much less any explanation is offered as to why such determination was not made in accordance with law in this case after the dismissal of the writ petition. 26. On the other hand, an inconsistent stand is adopted by the Department, as can be seen from its statement of objections. It is admitted therein that the "Explanation" to Section 11A(1) applies to the facts of this case. Once this position is admitted, it is necessary to ascertain whether the Department took appropriate action in the light of the explanation which extended the period of limitation for issue of notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the provisions of Section 11A, including the procedure prescribed therein. 33. Therefore, the observations made by their Lordships in Paragraph 32 of the Judgment in J.K. Cotton Mills case - provides the key to the understanding of the provisions of Section 11A and is a complete answer to the stand taken by the Department and the arguments of its Counsel, in this case. . 34. It is best to reproduce what their Lordships said in their own words thus: "32. Under Section 11A(1) the excise authorities cannot recover duties not levied or not paid or short-levied or short-paid or erroneously refunded beyond the period of six months, the proviso to S. 11A not being applicable in the present case. Thus although S. 51, Finance Act, 1982 has given retrospective effect to the amendments of Rules 9 and 49, yet it must be subject to the provision of S. 11A of the Act. We are unable to accept the contention of the learned Attorney General that as S. 51 has made the amendments retrospective in operation since Feb. 28, 1944, it should be held that it overrides the provision of S. 11A. If the intention of the Legislature was to nullify the effect of S. 11A, in that case, the Legislature wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short-paid for a period of beyond six months, was mandatory. The Department lost the revenue for failure to issue show cause notice in that case. 38. One other decision of the Supreme Court in Collector of Central Excise, Baroda v. Kosan Metal Products Ltd. - [1988 (38) E.L.T. 573] rendered on 26-10-1988, was cited by Sri Srinivasan, learned Counsel for the petitioner, on the same point. Though no reference is made to the two earlier decisions viz. cases of Gokak Patel and J.K. Cotton Mills, which were rendered in 1987, the appeal of the Department was dismissed for the very same reason. It was found, on facts, that a proper notice under Section 11A had not been issued by the Department to recover the duty in that case. Referring to Section 11A, it was observed by the Supreme Court as under :- "The said section provides that when any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a notice may be served on the concerned person within a period of six months. In the instant case, the time taken for the service of the notice is beyond a period of six months". 39. After giving a careful thought, and considering all import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulars of payment made in respect of the disputed levy, according to which the petitioner is entitled for refund of Rs. 2,53,59,661.79. 46. The petitioner is at liberty to make a separate claim for refund before the Department in respect of payments made other than by way of installments mentioned above. The Department is directed to examine the rest of the claim in accordance with law. 47. A prayer is made by the petitioner for award of interest on the refund amount. I am not convinced that this is a case where interest should be awarded on the refund. The installments were granted by this Court on the prayer made by the petitioner relying on the Associated Company case. I reject the prayer for award of interest. 48. Before parting with the case, I deem it appropriate and necessary to observe, with some concern, that the Department was not vigilant and failed to issue notice for recovery of the arrears of excise duty which was not levied and not paid during the period covered by the stay-order. It is needless to point out that any such notice should have been issued within six months from the date of dismissal of the writ petition. But the Department, on the other hand, chose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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