9911796707
TMI Blog1992 (10) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... . 365 per M.T. Rods themselves are obtained from rolling of billets. Billets are charged to duty at the rate of Rs. 365 per M.T. under Heading 72.07 of the Tariff. Although they have named from whom rods are ordinarily procured they have said : "The petitioner purchases the wire rods from the market and produces electrodes from them. These electrodes are subject to excise duty under Section 3 of the Act read with the Tariff and they are classified under Heading 83.10 of the Tariff." Petitioner, Advani Oerlikon Ltd., hereinafter called 'Advani' also manufactures electrodes using steel wire rods as raw materials. In their petition, however, they have said : "The raw materials for manufacture of welding electrodes is steel billets which are rerolled into steel wire rods. M/s. Tata Iron and Steel Company, (hereinafter referred to as "TISCO") are one of the suppliers of the said raw materials to the petitioner. The petitioner places its orders for the billets rerolled into steel wire rods on TISCO. TISCO arranges with the Indian Steel Rolling Mills Nagapattinam (hereinafter referred to as "ISRM") to have the billets rerolled into rods and under the instructions of TISCO the rods are del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of excise or the additional duty under Section 3 of the Customs Tariff Act on the inputs used in or in relation to the manufacture of final products, the Central Government has been issuing notifications from time to time and specifying the inputs as well as the duty payable, if any. One such notification has been issued in F. No. B. 22/5/86-TRU, dated 7-4-1986 in supersession of an earlier direction dated 14-3-1986 stating inter alia that the inputs specified in Column (2) of the Table thereto annexed and falling under the heading Nos. of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) specified in the corresponding entry in Column (3) of the said Table, purchased from outside and lying in stock on or after 1-3-1986 with the manufacturers manufacturing the final products specified in the Notification No. 177/86-C.E., dated the 1st March, 1986, may be deemed to have paid the specified duty at the rates specified in Column (4) of the said Table and a credit of the specified duty in respect of such inputs used in the manufacture of the said final products on which the duty of excise is leviable either in whole or in part, may be allowed at the rate specified in Col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners have questioned the demand saying that their cases do not fall under the exceptions in the Notification dated 7-4-1986 inasmuch as their inputs can now be said to be 'non-duty paid' or charged to 'nil rate of duty' as well as that they have not availed of under any Rule or Notification any credit on their inputs or any part of the duty. 4. Respondents/State have filed a common return stating as follows : "The petitioner herein are engaged in the manufacture of welding electrodes falling under Chapter Heading 83.10 of Central Excise Tariff. They manufacture welding electrodes out of steel wire rods (falling under Chapter Heading 7209) which in turn has been rerolled out of steel billets. These steel billets are liable to pay duty at Rs. 365/- per metric ton under Heading 72.07. If steel wire rods are manufactured out of duty paid billets, then duty on steel wire rods are exempted from duty in terms of Notification No. 208/83 on the condition that no credit of duty paid on the billets has been taken by following the procedure prescribed under Rule 56A or 57A. The petitioners herein procure steel wire rods from M/s. Indian Steel Rolling Mills (I.S.R.M.). M/s. I.S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to 'nil' rate of duty. Steel wire rods falling under Chapter 72.09 and used as input in the manufacture of welding electrodes is one such specified input enumerated in the Government of India's directions. There is no need for production of documentary evidence to show that duty has been paid on the steel wire rods unless it is dearly recognisable that no duty has been paid or it has been charged to 'nil' rate of duty. In the case of the petitioner, it is clearly established that steel wire rods received by them from M/s. I.S.R.M. have been cleared by M/s. I.S.R.M. without payment of duty under Notification No. 208/83. The contention of the petitioner that duty paid by M/s. T.I.S.C.O. at Rs. 365/- per metric tonne on steel billet sent to M/s. I.S.R.M. for rolling out steel wire rods can be availed as MODVAT credit is not tenable. The billets on receipt by M/s. I.S.R.M. are rolled into steel wire rods and cleared without paying any duty under a Central Excise gate pass and sent to the petitioner for manufacture of welding electrodes. Since it is clearly recognisable that no duty has been paid on the inputs viz. steel wire rods, the petitioner is not eligible for any MODVAT cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 29-4-1987. The petitioners in their letter MAN/300 dated 4-5-1987 addressed to the Superintendent of Central Excise VII-D Range and copy endorsed to Assistant Collector, Madras VII Division, have stated that they would comply with the instructions of the Superintendent after getting clearance from their Head Quarters Office. After that no communication was received from the petitioner and therefore the Assistant Collector passed an order dated 23-6-1987 in his file C. No. IV/16/36/87 T.5. It is therefore submitted that the petitioners were fully aware of the situation much earlier and the petitioner cannot argue at a later date that they have received the communication suddenly and there is no speaking order on the issue. Thus it may be seen that the petitioners had reasonable time to explain their difficulties immediately after receipt of the Superintendent's letter dated 29-4-1987 but they have not raised any objections to the Superintendent's letter. Instead they stated that they would comply with the same on receipt of the clearance from their Head Office. It therefore, proves that they were aware of wrong availment of credit." 5. Prior to the Notification dated 7-4-1986 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which provided, "Recovery of duties or charges short-levied, or erroneously refunded. - When duties or charges have been short-levied through inadvertence, error, collusion or misconstruction on the part of an officer, or through mis-statement as to the quantity, description or value of such goods on tile part or" the owner, or when any such duty or charge, after having been levied has been owing to any such cause, erroneously refunded; the person chargeable with the duty or charge, so short-levied, or to whom such refund has been erroneously made, shall pay the deficiency or pay the amount paid to him in excess, as the case may be on written demand by the proper officer being made within three months from the date on which the duty or charge was paid or adjusted in the owner's account-current, if any, or from the date of making the refund." has said: "(I) Expression 'paid' in the context of a particular statute may mean "ought to have been paid" and (2) Nil assessment may mean "assessed to duty". and quoted with approval what is said in a judgment of the Court of Appeal in the case of Alien v. Thorn Electrical Industries Ltd. (1968I. Q.B. 487): " The literal meaning of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the controversy between the parties in some detail. 7. In view of the weighty authorities noticed in the judgment and the interpretation of the words 'nil duty and paid or already paid' almost universally accepted, we have to see as to what meaning the words "non duty paid" or "charged to nil rate of duty" should receive in the Notification dated 7-4-1986. The words "duty paid" can receive no other meaning than one approved judicially and universally accepted, that is, ought to have been paid or contracted to be paid. 'Non-duty paid' in that context has to be read, non-duty ought to have been paid or non-duty contracted to have been paid. 'Non' however is a prefix which gives the negative sense of the words with which it is combined. The new edition for the 1990s of the Concise Oxford Dictionary says, "Non-(non)/prefix giving the negative sense of the words with which it is combined especially (1) not doing or having or involved with (non-attendance, non-payment, non-productive). (2) a. not of the kind or class described, (non-alcoholic, non-member, non-event) b. forming terms used adjectively, (non-union, non-party) (3) a lack of (non-access) (4) (with adverbs) not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in the case of Godavary Electrical Conductors v. Collector of Central Excise [1992 (61) E.L.T. 703] felt the desirability of referring the matter to the Larger Bench of the Tribunal in view of the decision of West Regional Bench, i.e. Arun Auto Spinning Mfg. Co. v. Collector of C. Ex. Cus. [1990 (48) E.L.T. 543]. One view is to the effect that the words 'charged to nil rate of duty' appear to have a special significance. Section 3 of the Central Excises and Salt Act is the charging section. Thereunder, it is laid down that duty of such excise on all excisable goods shall be levied and collected at the rates set forth in the First Schedule. Where duty on any goods is leviable at nil rate of duty as per the Schedule, such goods may be construed to be the goods charged to nil rate of duty. Where goods are charged to rates specified as set out in the Schedule and they are exempted by way of an exemption notification under Rule 3(1) of the Central Excise Rules, they could be construed as goods subject to the rates specified in the First Schedule but are exempted and they cannot be construed as goods charged to nil rate of duty. Similarly, if for the reason of exemption, duty is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ognisable as being non-duty paid or charged to nil rate of duty; or (iii) if in respect of any inputs where the reduction of duty as provided under the proviso to Notification No. 55/86-C.E., dated the 10th Feb., 1986, is claimed on the ground that the inputs have been manufactured with the aid of electric furnace and documentary evidence exists to show that the reduced duty has been paid on such inputs, that in such cases actual duty paid should be allowed." "That the contention of the learned counsel for the petitioners is that the burden of proving that a certain input falls in any one of the exceptions enumerated at (i) to (iii) above is on the department, the tenor of the notification Annexure P 3 being to cover all inputs as deemed to have paid the duty without production of documents evidencing payment of duty. It was also argued that the system in force in the country is such that without payment of requisite duty no scrap can come out of the factory gate. The scrap changes several hands before it is ultimately purchased by the manufacturer for production of the final products. In such circumstances, the purchaser was entitled to presume that necessary duty had already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there are omissions, Court cannot introduce in a Legislation words of their own to fill up the gap. We would have given our own interpretation, but for the other two contentions that we have already noticed and in case we have to interfere with the notices of demand for the reason of any of the said two grounds, we shall have to remit the case to the proper Authority for compliance with the requirements of law. We are informed that the reference made to the Larger Bench of the Tribunal by the Madras Bench of the Tribunal in Godavari Electrical Conductors, v. Collector of Central Excise [1992 (61) E.L.T. 703] is still to be disposed of. Those who are regularly attending to the tax disputes and involved in the interpretation of the taxing statutes, are themselves, it appears, seized with the problem of giving a proper meaning to the expressions 'non-duty paid' and 'charged to nil rate of duty'. If Court is required to go into this question despite a verdict by a Larger Bench of the Tribunal, the Court may do so, but in our opinion, any final verdict by us on the subject should await the decision of the Larger Bench of the Tribunal. 11. A learned single Judge of this Court in Ennore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irness in action as a rule inherent in all administrative actions. There has been two well recognised principles of natural justice, (1) that a Judge or an Umpire, who is entrusted with a duty to decide a dispute should be disinterested and unbiased (nemo judex in causa aus); and (2) that the parties to dispute should be given adequate notice and opportunity to be heard by the authority (audi alteram partem). In the former, the expression 'judge' or 'Umpire' does not mean a Judge presiding in a Court of law or an umpire deciding a dispute between two individuals. It is a concept extended to any person who has been given the authority to adjudicate or act in his discretion within the bounds of law and in that sense thus it embraces persons, who, exercising their authority, call upon another to do a thing which might cause prejudice to him. The second rule is similarly understood. It not only to be found in the acts of the Judges or Umpires, but in the acts of all such persons in authority, who call upon another to do a thing which they think they are not bound to do. A third rule has since been recognised, called the rule of speaking orders, as observed in the judgment of the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of an officer or a manufacturer, or an assessee the proper officer may, within six months from the date of such credit, serve notice on the manufacturer or the assessee who has taken such credit requiring him to show cause why he should not be disallowed to such credit and where the credit has already been utilised, why the amount equivalent to such credit should not be recovered from him : Provided that where such credit has been taken on account of wilful mis-statement, collusion or suppression of facts on the part of a manufacturer or an assessee, the provisions of this clause shall have effect as if for the words 'six months' the word 'five years' were substituted. (ii) The proper officer, after considering the representation, if any, made by the manufacturer or the assessee on whom notice is served under clause (i), shall determine the amount of such credit to be disallowed (not being in excess of the amount specified in the show cause notice) and thereupon such manufacturer or assessee shall pay the amount equivalent to the credit disallowed, if the credit has been utilised, or shall not utilise the credit thus disallowed. (2) If any inputs in respect of which cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any duty of Excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if, for the words 'Central Excise Officer', the words 'Collector of Central Excise' and for the words 'six months', the words 'five years' were substituted. Explanation : Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of six months or five years as the case may be. (2) The Assistant Collector of Central Excise or, as the case may be, the Collector of Central Excise shall, after considering the representation, if any, made by the person on whom notice is serve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation in terms of Section 11-A of the Act to serve a notice upon the petitioners to show cause within the period of limitation prescribed therein. On the above principle, as we find applicable in all fours on the facts of the instant case, we have no hesitation in holding that even while acting under Rule 57-1, as it existed prior to the amendment, the respondents were obliged to issue notice calling upon the petitioners to show cause why they should not be disallowed MODVAT credit on the inputs and if the credit had already been utilised why the amount, equivalent to such credit, should not be recovered from them, before issuing a written demand, as contemplated under sub-rule (2) thereof. 14. We are thus of the opinion that notwithstanding the rule, which did not contemplate any notice or any period of limitation for the demand, the rule of limitation, as found in Section 11A of the Act, has still to be applied to the case of the petitioners. We have come to this conclusion following the rule of strict construction of a taxing statute. It is said in Maxwell on the Interpretation of Statutes - 10th Edition, Page 284, "The tendency of modern decisions, upon the whole, is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e far reaching consequences. They cannot, assume into themselves a finality of the judgment as to the tax liability of certain persons, without informing them of the grounds on which they have come to think that the person concerned had not paid the tax or had short-paid the tax or he had not been levied to tax or had been short-levied. It is only after knowing what is the representation of the person, who is chargeable to tax, in the situations as above, that they should decide to issue demand notice. Any ex parte decision without affording opportunity of being heard to a tax payer, in the situations of this kind, in our opinion, apart from what is stated in Section 11A, shall be hit by the principle of audi alteram partem, one of the three well recognised rules of the principles of natural justice. 16. We are not adverting in this case to decide whether it can be said definitely, on the facts, as presented before us, that petitioners have any plea of limitation available and that the demand notices, for the reasons of admitted facts, are barred by limitation. The reasons for our not doing so are : (1) Pleadings and facts in this behalf are insufficient; (2) Respondents had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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