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TMI Blog1991 (6) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... ed show cause notice. This writ petition was filed on 5-6-1989 and an interim order was issued on 15-6-1989 and after notice to the respondents, Rule was issued on 15-12-1989. 3. The impugned show cause notice was issued by respondent No. 1 consequent on the dismissal of writ petition No. 31466/1981 by this Court by order dated 4-10-1985. In the said writ petition, the petitioner had challenged the constitutional validity of Entry 28-A and the classification of laminations under the said entry and had also challenged the levy of excise duty on the laminations captively consumed in the petitioner's factory in the production of transformers. Consequent on the dismissal of the writ petition by this Court and on a remand by the Collector (Appeals), the matter is now pending adjudication before the Assistant Collector. 4. The show cause notice which is challenged in this writ petition is issued for the following purposes :- (i) to decide the classification of the laminations manufactured by the petitioner-Company under erstwhile Tariff Item 28-A; (ii) to show cause why the Central Excise Duty of Rs. 1,75,75,571.67 which was provisionally assessed for the period 10-12-1981 to 4-10-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s' to attract Central Excise Duty. This Court, while dismissing the writ petition observed in the course of its order that the question whether laminations are excisable goods under the Act is highly technical in nature and the question as to excisability or otherwise under the Act in the light of the contentions of the petitioner raised in the writ petition has to be decided by the Competent Authority appointed under the Act and is therefore not a matter for the High Court to decide. The petitioner was therefore permitted to file an appeal to the Appellate Collector and agitate all the grounds in the appeal. This Court also reserved liberty to the Department to take such action as it deemed necessary for the subsequent period viz., from 21-7-1981 to 4-10-1985 in respect of which this Court had stayed the levy and recovery. 6. The Appellate Collector in the appeal filed by the petitioner thereafter set aside the classification list approved by the Assistant Collector and directed him to decide the classification of the goods on the basis of evidence if any and make a de novo order. This matter is now pending adjudication before the Assistant Collector. Since the period involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner every month from December 1981 to 4th October 1985 cannot be construed as 'provisional assessment' made under Rule 9B. Relying on the factual position as borne out from the relevant documents viz., the classification lists and the RT 12 returns and the endorsements made on the respective memoranda, it was demonstrated and urged, with emphasis, that a statutory order as contemplated under Rule 9-B did not come into existence at all. It was therefore submitted by the learned Counsel that RT 12 is not a document of provisional assessment but it is only a document of recapitulation and a separate specific order is required to be made under Rule 9B. 10. The learned Counsel also pointed out that under Rule 9B, provisional assessment may be done only in three circumstances referred to at (a), (b) and (c) of Rule 9B(1) and it was argued that the Department has failed to establish on facts of the present case that a provisional assessment was actually made in accordance with Rule 9B. 11. Referring to the classification lists and the returns in Form RT 12 filed by the petitioner in this case for the relevant period, it was contended by the learned Counsel that the rules do not con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd included in this return has been assessed provisionally under Rule 9B and provisions of the said rule shall apply for recovery of deficiency in or refund of excess duty. Assessment is subject to finalisation of price list for the year 1982-83. Differential duty if any is demanded, duty on laminations is payable but for the stay order of the Hon'ble High Court of Karnataka. (Underlining supplied) Place: Bangalore Sd/-Dated: Signature and Stamp of Central Excise Officer incharge." 12. The argument developed by the learned Counsel for the petitioner on these facts is that the rules do not contemplate "provisional approval" and there can be either an approval of the classification list or rejection for reasons to be recorded or "a provisional assessment" as contemplated under Rule 9B. It is also pointed out that Note 1 and Note 2 in classification list are mutually exclusive and both cannot co-exist. If it is a case of approval and Note 1 is ticked, Note 2 does not arise and the argument is that the department's stand in this behalf is self-contradictory and mutually destructive. It was also argued that Note 2 in the memorandum of assessment made on RT 12 cannot be construed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention should be rejected out right. 13. Another point urged by Sri Jagadeeshan, was that the 'proper officer' to make a provisional assessment under the Act is either the Collector or the Assistant Collector and not a Superintendent or an Inspector of Central Excise. On this premise, it was argued that even if the endorsement on RT 12 should be construed as a provisional assessment, the Inspector of Central Excise is not competent to make an order of provisional assessment and the requirement of the rules in this behalf is mandatory. The learned Counsel pointed out from the definition of "proper officer" in Rule 2(11), that a proper officer for the purpose of Rule 9B is an Assistant Collector who is also the designated authority under Rule 5 for purposes of Rule 9B(3). It was therefore submitted that the requirement of the rules as to the proper officer is mandatory and should be strictly followed and the department's case should be rejected. It was also submitted that no bond was taken from the petitioner for the payment of the difference of duty as required under Rule 9B(1) in evidence of 'provisional assessment' of any period which further establishes that there was no provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment until the writ petition was dismissed on 4-10-1985. It was pointed out that though the subject matter of the writ petition was in respect of only one year viz., 21-7-1980 to 21-7-1981, a general order of stay was issued for future periods also and the department was restrained from taking any action to levy and to collect the duty payable on laminations. The application filed by the department to vacate the interim order was also dismissed by this Court and thus the department could not collect the Central Excise Duty amounting to nearly Rs. 39 lakhs every year. It was therefore vehemently argued by the learned Counsel that all these circumstances must be taken into consideration for deciding this writ petition. 16. On the principal question whether there was a provisional assessment, Sri Ashok Harnahalli submitted the following points for consideration : (i) that the assessment memorandum recorded on RT 12 returns filed by the petitioner every month from December, 1981 upto 4th October 1985 should be construed as 'provisional assessment' made under Rule 9B in the special circumstances of the case; (ii) that the expression "provisional approval" referred to in Note 2 to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under which it is permissible to make a provisional assessment for reasons other than those mentioned in (a) & (b). It was therefore argued by the learned counsel, that the inevitable conclusion that flows from the facts narrated above can only be that the classification lists, though approved, did not and could not culminate in final assessment and the recovery or collection of the duty also could not be enforced in view of the stay order by the High Court and the proceedings rested with the endorsement made on each RT 12 thus : "Duty on the goods removed under gate pass/passes and included in the return has been assessed provisionally under Rule 9B". The interim order restraining the department from levying and collecting the duty payable on laminations was in force till the writ petition was dismissed on 4-10-1985 and it is in these circumstances that final assessment was not made. It was therefore vehemently argued by Sri Ashok that his contention should be upheld and the writ petition dismissed, and the department be allowed to make final order of assessment in the peculiar circumstances of the case and in the interests of the revenue. 20. It was argued by Sri Jagadeeshan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermination of duty, making an order of assessment and all other incidental matters including recovery. Chapter III may be taken up first for consideration. This Chapter starts from Rule 7 which provides for recovery of duty. Rule 8 confers on the Central Government the power to authorise exemption from duty in special cases. Under Rule 9, it is stipulated that no excisable goods shall be removed from any place where they are produced, cured or manufactured until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in the rules. Rule 9A fixes the date for determination of duty and tariff. Rule 9B provides for making a provisional assessment in the circumstances referred to therein. This rule is important for the purpose of this case and requires to be carefully analysed. Chapter VII-A: Chapter VII-A prescribes the procedure for removal of excisable goods on determination of duty, by producers, manufacturers or private warehouse licensees. This Chapter starts from Rule 173A. It says that Chapter VII-A shall prevail if there is conflict between the provisions of Chapter VII-A and the provisions contained in any other Chapter in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e information contained in the returns. The other rules in this Chapter are not necessary for the purpose of this case. This is the Scheme of the Rules relating to determination of duty on the excisable goods and their removal after payment of the duty. In the light of the scheme of these rules referred to above, the question that arises for decision on the facts borne out from the relevant documents in this case is, whether the assessment memorandum made on RT 12 returns for the relevant period can properly be construed as "provisional assessment" under the rules? 22. Now the contentions : I have carefully considered the arguments advanced by both the learned counsel and have carefully perused each one of the documents relied upon by both sides. In fact, both the counsel relied upon a common set of documents. But the interpretation and construction placed on these documents viz., classification lists and the monthly returns filed in form RT 12 and the endorsements made thereon, are diametrically opposite. At the outset, it must be mentioned that the construction and interpretation to be placed on the endorsements made by the department on the classification lists and on the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xclusive. It was demonstrated that if the classification list is approved, the question of making a provisional assessment under Note 2 does not arise. It was also argued that there could be only one order either of approval or rejection of the classification list and if the classification list cannot be approved for any reason, the proper Officer may resort to provisional assessment to duty under Rule 9B. If it is a case of rejection of classification list, an order must be made after hearing the assessee and this order becomes an order of adjudication under the Act which is appealable. 25. It was next argued by Sri Jagadeeshan that the memorandum of approval of the classification list must be read along with the memorandum of assessment on the monthly returns RT 12 and so read and reconciled, this is a clear case of final approval of classification followed by an order of assessment. In support of this contention, the scheme of assessment was referred to. Monthly returns are filed in Form RT 12 as required under Section 173G(3) showing the quantity of excisable goods removed on payment of duty and quantity of goods removed without payment of duty and other particulars. The RT 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be decided by the appellate authority constituted under the Act. It is purely a question of fact and any conclusion must follow an appreciation of the facts, materials on record and all other circumstances considered together. Since Rule is issued in the present case, I am left with no alternative and therefore, I proceed to decide this question on merits. Normally, the assessment should be completed pursuant to the approval of the classification list which gives the particulars of the goods and the classification for the purpose of levy etc., RT 12 as rightly submitted by Sri Jagadeeshan is a document of recapitulation and is not a document of provisional assessment. But this contention and the proposition should be examined in the light of the endorsements made on both the documents and the circumstances in which they were made. No doubt, the classification lists in this case were approved by the Proper Officer without any controversy. But after approving the classification lists, it was stated in Note 2 to the memorandum of approval that the tariff clarification rate of duty is approved provisionally. It is also mentioned in the said Note 2 that the concerned Officer may mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer including the rate of duty payable on the goods. There is no dispute that the price list which was filed by the petitioner under Rule 173B was also approved. In the assessment that followed, though the petitioner was liable to pay full duty as per the approved classification lists and the price lists, it was mentioned in the assessment memorandum that "the assessment is subject to finalisation of price list for the year 1982-83". It was further mentioned therein that the differential duty due on the laminations was not recovered by virtue of the stay order passed by this Court in W.P. 31466/81. Hence it was endorsed in the assessment memorandum on RT 12 also (it was submitted on behalf of the department that such recording was made for the entire period) that the duty was provisionally assessed under Rule 9B. These are the undisputed facts borne out from the records on the basis of which an argument was advanced on behalf of the department that the final assessment could not be completed on any of the monthly returns nor any recovery made since the High Court had restrained the department from levying, collecting or demanding the duty, nor was any recovery permitted under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Supreme Court concluded on the facts of the case that it was neither a provisional assessment nor a final assessment, but it was a case of 'incomplete assessment'. On the peculiar facts of the case, the Supreme Court observed (at paragraphs 16 to 19) that it was admittedly a case of 'incomplete assessment'. The observations of the Supreme Court occurring in Para 17 which has a bearing is reproduced and it reads: "17. Section 4 of the Act lays down what would determine the value of excisable goods. But, the Act itself does not specify a procedure for assessment presumably because it was meant to be provided for by the Rules. Section 37(1) of the Act lays down that "the Central Government may make rules to carry into effect the purposes of this Act". Section 37, sub-section (2), particularises "without prejudice to the generality of the foregoing power" that "such rules may provide for the assessment and collection of duties of excise, the authorities by whom functions under this Act are to be discharged, the issue of notice requiring payment, the manner in which the duty shall be payable, and the recovery of duty not paid". It is clear from Section 37, that "assessment and col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturer, yet neither that rule nor any other rule, as already indicated above, has specified the detailed procedure for an assessment. There is no express prohibition anywhere against an assessment at any other time in the circumstances of a case like the one before us where no "assessment" as it is understood in law, took place at all. On the other hand, Rule 10A indicates that there are residuary powers of making a demand in special circumstances not foreseen by the framers of the Act or the rules. If the assessee disputes the correctness of the demand, an assessment becomes necessary to protect the interests of the assessee. A case like the one before us falls more properly within the residuary class of unforeseen cases. We think that from the provisions of Section 4 of the Act read with Rule 10A an implied power to carry out or complete an assessment not specifically provided for by the rules can be inferred. No writs of prohibition or Mandamus, were, therefore called for in the circumstances of the Case." [Underlining supplied] 31. The other decision relied upon by the Counsel for the Department is the Bombay High Court decision in D.N. Kohli's case [1983 (12) E.L.T. 216]. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that it is a case of 'provisional assessment'. The argument of the learned Counsel for the Department that this case is covered by the residuary powers under Rule 9B(l)(c) also merits acceptance. In the ultimate analysis, I conclude that the petitioner has failed to establish that there was a final assessment made by the Department for the relevant period. I therefore exercise my discretion under Article 226 in favour of the Revenue and my decision on the facts is that the Department must be allowed to complete the final assessment pursuant to the show cause notice and the Department cannot be barred completely from making a final assessment and recover the duty payable in accordance with law. 33. This was undoubtedly a very hard case for the Department to sustain its action proposed to be taken as per the show cause notice. A very strong case was made out by Sri Jagadeeshan, that the show cause notice is clearly without jurisdiction both on facts and limitation to recover the duty which was already determined as payable. His endeavour was to establish that no provisional assessment was made in accordance with law on all the monthly returns for the relevant period. For this arg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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