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TMI Blog2003 (11) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... taking Modvat credit of the duty paid on cold rolled steel strips. These aspects of the matter, in our opinion, required to be gone into by the Tribunal. Appeal allowed. The impugned judgment cannot be sustained which is set aside and the matter is remitted to the Tribunal for consideration thereof afresh - 7868 of 1995 - - - Dated:- 19-11-2003 - V.N. Khare, CJI, S.B. Sinha and Dr. A.R. Lakshmanan, JJ. [Judgment per : S.B. Sinha, J.]. - The primal question involved in this appeal which arises out a judgment and order of the Customs, Excise Gold (Control) Appellate Tribunal dated 6-4-1995 revolves round the effect of a validating statute. Background Facts : 2.The appellant manufactures and deals in box strappings. For the said purpose they receive duty paid cold rolled steel strips. Several processes are undertaken for manufacturing the end product. 3.The appellant allegedly informed the Superintendant of Central Excise about the processes undertaken by them contending that the resultant product falls under Tariff Item No. 26AA(iii) and no further excise duty is leviable thereupon. The Assistant Collector by a letter dated 25-6-1983 stated that the box strappings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll along the appellants have filed classification lists right from 1986 claiming the classification as strips under Tariff Item 26AA under the old Tariff according to the order passed by the Assistant Collector. All the classification lists described the process manufacture adopted by the appellants. This was finally approved by the department without any modification in favour of the appellants. This classification continued even for the period effective from March 1987. Thus, no demand could have been raised against the appellant under Section 11A for the past period since there was no short levy and in any event no suppression can be attributed to the appellants. 6.A reply to the show cause was filed by the appellant highlighting the processes undertaken. The Collector by his order dated 24-9-1987 held that the processes undertaken by the appellant do not amount to manufacture and as such their product is classifiable under Chapter 72 only. An appeal thereagainst was filed by the respondents before the Appellate Tribunal. 7.The matter was heard by three members of the Tribunal who constituted the Bench. Three separate orders in the matter were passed on 6-4-1995. The Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines (supra) and submitted that the point involved in this appeal is covered by the said judgment. In Collector of Central Excise, Baroda v. Cotspun Ltd., [(1999) 7 SCC 633], a Constitution Bench of this Court laid down as follows : The"14. levy of excise duty on the basis of an approved classification list is the correct levy, at least until such time as to the correctness of the approval is questioned by the issuance to the assessee of a show cause notice. It is only when the correctness of the approval is challenged that an approved classification list ceased to be such. The15. levy of excise duty on the basis of an approved classification list is not a short levy. Differential duty cannot be recovered on the ground that it is a short levy. Rule 10 has then no application." The Parliament has amended Section 11A of the Central Excise Act, 1944 by Finance Act, 2000 (10 of 2000) with effect from November 17, 1980 with a view to change the basis of the judgment in the afore-mentioned case. The question whether the amendment has changed the basis of the judgment in Cotspun's case (supra), is the question that arises in this case. The same question came up for consideration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73B deals with classification lists but therein the question as regard different stages for correct levy had been laid down. 14.Mr. Lakshmikumaran would contend that levy of excise duty on the basis of an approved classification list would not be a short levy and as such differential duty could not be recovered on the said premise and in that view of the matter Section 11A of the Act will have no application. 15.Submission of the learned Counsel is that Section 11A of the Act as amended only provides that even if the short levy is based on the approved classification list, show cause notice can be issued, but the same cannot be said to be sufficient to get over the basis of the judgment/Constitution Bench in Cotspun (supra). Once it is held in Cotspun (supra), Mr. Lakshmikumaran would argue, that the levy based on the approved classification list is not short levy, the entry point in Section 11A must be held to have been closed. According to the learned Counsel, by reason of the amendment as also the retrospective effect given thereto the short levy having been redefined for the purpose of Section 11A contrary to what had been held in Cotspun (supra), it must be held that even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be six months and not five years. In support of the aforementioned contention, reliance has been placed on Padmini Products Ltd. v. CCE [1989 (43) E.L.T. 195], P B Pharmaceuticals Ltd. v. CCE [2003 (153) E.L.T. 14] and Pushpam Pharmaceuticals Ltd. v. CCE [1995 (78) E.L.T. 401]. 20.In this connection, the learned Counsel has drawn our attention to the fact that the issue of classification had been raised by the appellant since 1983 and the same had been approved and even received the seal of approval by the Collector. 21.The learned Counsel would lastly contend that even if the product in question is held to be dutiable the appellant should be allowed to take the Modvat credit of the duty paid on the cold rolled steel strips. 22.Mr. Dhruv Mehta, learned Counsel appearing on behalf of the respondent, on the other hand, would submit that by reason of amendment carried out in Section 11A of the Central Excise Act by Act No. 10 of 2000, the basis of judgment in Cotspun has been removed inasmuch as the words "erroneously refunded" in the unamended Act had been supplemented by "whether or not such non-levy or nonpayment, short-levy or short-payment or erroneous refund, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f duties not levied or not"10. paid or short-levied or not paid in full or erroneously refunded.- When any duty has not been levied or paid(1) or has been short-levied or erroneously refunded or any duty assessed has not been paid in full, the proper officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid, or which has been short-levied, or to whom the refund has erroneously been made, or which has not been paid in full, requiring him to show cause why he should not pay the amount specified in the notice : Provided that : (a) where any duty has not been levied or paid or has been short-levied or has not been paid in full by reason of fraud, collusion or any wilful mis-statement or suppression of facts by such person or his agent, or (b) where any person or his agent, contravenes any of the provisions of these rules with intent to evade payment of duty and has not paid the duty in full, or (c) where any duty has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts by such person or his agent, the provisions of this sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, after such(2) inquiry as he deems fit, approve the list with such modifications as are considered necessary and return one copy of the approved list to the assessee who shall, unless otherwise directed by the proper officer, determine the duty payable on the goods intended to be removed in accordance with such list. All clearances shall, subject to the(2A) provisions of Rule 173CC, be made only after the approval of the list by the proper officer. If the proper officer is of the opinion that on account of any inquiry to be made, in the matter or for any other reason to be recorded in writing, there is likely to be delay in according the approval, he shall, either on a written request made by the assessee or on his own accord, allow such assessee to avail himself of the procedure prescribed under Rule 9B for provisional assessment of the goods. Where the assessee disputes the rate of(3) duty approved by the proper officer in respect of any goods, he may, after giving an intimation to that effect to such officer, pay duty under protest at the rate approved by such officer. If in the list approved by the proper(4) officer under sub-rule (2) any alteration becomes necessary be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot involve sale to a non-related person; or (v) clears the goods of the same kind and quality from his factories located in the jurisdiction of different Collectors of Central Excise or Assistant Collectors of Central Excise; or (vi) submits a fresh price-list or an amendment of the price-list already filed with the proper officer and which has the effect of lowering the existing value of the goods. ****** Subject to the provisions of Rule 173CC,(5) an assessee specified in sub-rule (2) shall not clear any goods from a factory, warehouse or other approved place of storage unless the price-list has been approved by the proper officer. In case the proper officer is of the opinion that on account of any enquiry to be made in the matter or for any other reasons to be recorded in writing, there is likely to be delay in according approval, he shall either on a written request made by the assessee or of his own accord allow such assessee to avail himself of the procedure prescribed under Rule 9B for provisional assessment of the goods." 30.Section 11A of the Central Excise Act, 1944 introduced from 15-11-1980 reads as follows : "11A. Recovery of duties not levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise or with his prior approval by any officer subordinate to him : Provided also that where the amount of duty which has not been levied or paid or has been short-levied or short-paid or erroneously refunded is more than one crore rupees, no notice under this sub-section shall be served without the prior approval of the Chief Commissioner of Central Excise". 32.Section 11A after amendment by Section 110 of the Finance Act, 2000 reads as under : Recovery of duties not levied or not"11A. paid or short-levied or short-paid or erroneously refunded. - When any duty of excise has not been(1) levied or paid or has been short-levied or short-paid or erroneously refunded, whether or not such non-levy or non-payment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder a Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leviable thereon and such other particulars as may be required. In terms of sub-rule (2) of Rule 173B the proper officer was required to determine the duty payable on the goods upon making an enquiry in that regard. Provision for a dispute as to the approved rate of duty was made in Clause (3). Sub-rule (5) of Rule 173B reads as under : When the dispute about the rate of duty"(5) has been finalized or for any other reasons affecting rate or rates of duty a modification of the rate or rates of duty is necessitated, the proper Officer shall make such modification and inform the assessee accordingly." 34.In Rainbow Industries (supra), it was held : "Once the Department accepted the price list, acted upon it and the goods were cleared with the knowledge of the Department, then, in absence of any amendment in law or judicial pronouncement, the reclassification should be effective from the date the Department issued the show cause notice. The reason for it is clearance with the knowledge of the Department and no intention to evade payment of duty." 35.The reason for arriving at the aforementioned conclusion, thus, was that clearance had been made with the knowledge of the Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a short levy. Rule 10 has then no application." Validation Act : 39.Section 11A as amended by Finance Act, 2000 brings about absolutely a different situation. Statement of Objects and Reasons for amending Section 11A reads, thus : "Clause 106 seeks to validate certain action taken under Section 11A of the Central Excise Act with retrospective effect from 17th November, 1980, so as to prescribe that the notices issued under the said section for non-recovery or short-recovery or erroneous refund of duties for a period of six months or five years in certain situations will prevail notwithstanding any approval, acceptance or assessment of duty under the provisions of the Central Excise Rules. The clause also seeks to validate actions taken in the past on this basis in conformity with the legislative intention. This amendment has become necessary to overcome certain judicial pronouncements." Further, Clause 110 of the Finance Act validating actions taken under Section 11A provides as under :- Any notice"110.(1) issued or served on any person under the provisions of Section 11A of the Central Excise Act during the period commencing on and from the 17th day of November, 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this section had not come into force." The law operating in the field : 40.A Validation Act removes actual or possible voidness, disability or other defect by confirming the validity of anything which is or may be invalid. 41.In Shri Prithvi Cotton Mills Ltd. Anr. v. Broach Borough Municipality Ors. [(1969) 2 SCC 283], it was pointed out that a legislature does possess the power to validate statutes and to pass retrospective laws. The Court, however, laid down : "When a Legislature sets out to validate a tax declared by a court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition, of course, is that the Legislature must possess the power to impose the tax, for, if it does not, the action must ever remain ineffective and illegal. Granted legislative competence, it is not sufficient to declare merely that the decision of the Court shall not bind for that is tantamount to reversing the decision in exercise of judicial power which the legislature does not possess or exercise. A court's decision must always bind unles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier judgment becomes irrelevant and unenforceable, that cannot be called an impermissible legislative overruling of the judicial decision. All that the legislature does is to usher in a valid law with retrospective effect in the light of which earlier judgment becomes irrelevant. (See Shri Prithvi Cotton Mills Ltd. Broach Borough Municipality [(1969) 2 SCC 283 : (1970) 1 SCR 388 : (1971) 79 ITR 136)]. Such legislative experience of validation66. of laws is of particular significance and utility and is quite often applied, in taxing statutes. It is necessary that the legislature should be able to cure defects in statutes. No individual can acquire a vested right from a defect in a statute and seek a windfall from the legislature's mistakes. Validity of legislations retroactively curing defects in taxing statutes is well recognised and courts, except under extraordinary circumstances, would be reluctant to override the legislative judgment as to the need for and the wisdom of the retrospective legislation. In Empire Industries Ltd. v. Union of India [(1985) 3 SCC 314 : 1985 SCC (Tax) 416 : 1985 Supp. 1 SCR 292)], this Court observed : … not only because of the paramount Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment has become final. The Validating Act provides that,16. notwithstanding anything contained in Sections 4 to 7 of 1959 Act or in any judgment, decree, order or direction of any court, the villages of Raipura and Ummedganj should be deemed always to have continued to exist and they continue to exist within the limits of the Kota Municipality, to all intents and for all purposes. This provision requires the deeming of the legal position that the villages of Raipura and Ummedganj fall within the limits of the Kota Municipality, not the deeming of facts from which this legal consequence would flow. A legal consequence cannot be deemed nor, therefrom, can the events that should have preceded it. Facts may be deemed and, therefrom, the legal consequences that follow." As Sections 4 to 7 of Rajasthan Municipalties Act, 1959 remained unamended which were mandatory, the defect was held to have not been cured. 44.Yet again in K. Shankaran Nair (Dead) through LRs. v. Devaki Amma Malathy Amma and Others [(1996) 11 SCC 428] this Court followed the aforementioned as well as and other decisions of this Court. It was observed : "It becomes at once clear that once this Court struck dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of a Court of law." In Easland Combines (supra), this Court held : "In our view, there is no substance in this submission. As stated earlier, the relevant amended portion of Section 11A inter alia makes it abundantly clear that when any duty of excise has been short levied or short paid, whether or not such short levy or short payment was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of the Act or the rules, the Central Excise Officer, can within one year from the relevant date, serve notice on the person chargeable with the duty, which has been short levied or short paid, requiring him to show cause why he should not pay the amount specified in the notice. This amendment changes the entire basis or foundation of the judgment rendered in Cotspun's case (supra). The entire discussion in the said case is based upon Rule 173B which dealt with classification list and that assessee must determine the excise duty which is payable by him on the goods which he intends to remove in accordance with approved classification list. The Court based its reasoning by holding "Rule 10 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist or relate to reopening of the approved classification list. According to the Constitution Bench, the same is exclusively provided by Rule 173B. 49.Section 11A deals with a case when inter alia excise duty has been levied or has been, short-levied or short-paid. The word "such" occurring after the words "whether or not" refers to non-levy, non-payment, short-levy or short-payment or erroneous refund. It is, therefore, not correct to contend that the word "such" indicates only such short-levy which has been held to be non-existent in Cotspun having regard to Rule 173B. Such short-levy or non-levy may be on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods. Thus, any approval made in terms of Rule 10, in the event, any mistake therein is detected, would also come within the purview of the expression "such short-levy or short-payment". Such notice is to be served on the person chargeable with the duty which inter alia has been short-levy or short-paid. 50.It is true that Rule 173B has not been amended. But even if the same has not been done, it would not make a material difference as now a comprehensive provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d principle of interpretation of statute. A different situation has arisen now having regard to the fact that not only the substantive provision dealing with the consequence of non-levy, non-payment or short levy or short-payment or erroneous refund but also has laid down the procedure therefor. 55.A statute, it is trite, must be read as a whole. The plenary power of legislation of the Parliament or the State Legislature in relation to the legislative fields specified under Seventh Schedule of the Constitution of India is not disputed. A statutory act may be enacted prospectively or retrospectively. A retrospective effect indisputably can be given in case of curative and validating statute. In fact curative statutes by their very nature are intended to operate upon and affect past transaction having regard to the fact that they operate on conditions already existing. However, the scope of the Validating Act may vary from case to case. 56.For the reasons aforementioned, we are of the opinion that the Section 11A of the Act as amended is a valid piece of legislation. Limitation : 57.Having answered the reference, we are of the opinion that this Court in the peculiar facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue went up in appeal. The Tribunal was, therefore, bound to take the aforementioned question into consideration inasmuch a finding of fact was required to be arrived at that the period of limitation for issuing such notices under Section 11A of the Act would depend upon the question as to whether such short-levy was due to any act of fraud, collusion, wilful, mis-statement or suppression of facts, the extended period of limitation of five years could not have been invoked. 61.Such an extended period of limitation can be invoked only on a positive act of fraud etc. on the part of assessee is found. Such a positive act must be in contradistinction to mere inaction like non-taking of licence etc. It has to be pleaded and established. [See Padmini Products (supra), P B Pharmaceuticals Ltd. (supra) and Pushpam Pharmaceuticals Ltd. (supra)] Even in Easland Combines (supra) this Court held : "It is settled law that for invoking the extended period of limitation duty should not have been paid, short levied or short paid or erroneously refunded because of either fraud, collusion, wilful misstatement, suppression of fact or contravention of any provision or rules. This Court has hel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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