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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 ..... teel strips would be classifiable under Tariff Item 68 and not under Tariff Item 26AA(iii). The appellant protested thereagainst by a letter dated 2-7-1983 inter alia contending that having regard to the specifications and certain judicial pronouncements, Tariff Item 68 would not be applicable. The Assistant Collector by an order dated 11-7-1983 held : "Considering all aspects, the cold rolled strips known as box strappings continue to be cold rolled strips under Tariff Item 26AA (iii). The painting and waxing on the product does not change the classification of the product. As the raw material, cold rolled strips has discharged its duty liability under T.I. 26AA(iii) and the resultant product continues to be cold rolled strips under T.I. 26AA (iii), no further duty liability arises." 4.The said order is said to have become final. Thereafter on or about 4-2-1986 a classification list was filed by the appellant effective from 1-3-1986 stating that box strappings are made by cutting duty paid steel strips under the column "particulars of other goods produced or manufactured and intended to be removed by the assessee". Reference in this behalf was also made to the order of the Assi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter to the Collector for a de novo consideration on the merit; whereas the Vice-President and the Member (Technical) decided the merit of the matter against the appellant. The majority of the Appellate Tribunal classified the box strappings in running length and in coil under Heading 73.08 as articles of iron or steel. However, none of the members took into consideration the question as to whether the demand made by revenue was barred by limitation. Aggrieved thereby and dissatisfied therewith the appellant is in appeal before us. Reference to Constitution Bench as regard short-levy : 8.Having regard to the conflict of decision in Ballarpur Industries Ltd. v. Asstt. Collector of Customs & Central Excise [1995 Supp. (3) SCC 429] and Rainbow Industries (P) Ltd. v. Collector of Central Excise, Vadodara [(1994) 6 SCC 563] the question was referred to a Constitution Bench. This Court in Collector of Central Excise, Baroda v. Cotspun Ltd. [(1999) 7 SCC 633] (wherein one of us V.N. Khare, CJI was a member) overruled the decision of this Court in Ballarpur Industries (supra) and held that the Rainbow Industries (supra) has correctly laid down the law. Amendment in Sec. 11A : 9.The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Judges took the view that the amendment which conferred power to correct the errors or mistakes in approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods cannot be said to be unreasonable. It was further held that with retrospective effect, the legislature has empowered the Central Excise Officer to set at naught the erroneous approval of classification list or acceptance of price list or assessment order, and, on that premise, it was laid down, "Hence, it is held that in view of the amendment of Section 11A(1), the decision rendered by this Court in Cotspun's case (supra) would not be a good law. Show cause notice for correcting errors or mistakes in approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under the provisions of the Act or the Rules made thereunder could be issued within the prescribed period." Having gone through the judgment carefully and given our anxious consideration to the said judgment in Easland Combines (supra), we are unable to agree with the view taken by the bench of two learned Judges in regard to either the import of the amendment or the effect thereof an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the Tribunal misdirected itself in holding that the processes undertaken by the appellants on the duty paid cold rolled steel strappings amounts to manufacture in terms of Section 2(f) of the Central Excise Act, 1944. 17.According to the learned counsel, having regard to the processes undergone the resultant product would not attain any new and distinct character so as to warrant fresh levy of duty. In other words, Mr. Lakshmikumaran would contend, that the characteristics of cold rolled strip which is the starting material are retained in the box strappings. Relying on the decision of Gujarat Steel Tubes Ltd. v. State of Kerala [1989 (42) E.L.T. 513] it was urged that galvanization of pipes undertaken for the purpose of making them weather proof would not bring into existence a new commodity and even by a Circular dated 9-2-1994 the Board of Excise and Customs has clarified that the process of galvanization does not amount to manufacture. 18.As regard question of classification, the learned counsel would submit that box strappings is classifiable under 7211.31 as strip only and not under 7308.90. Heading 7308, it was contended, covers other articles of iron or st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder". According to the learned Counsel, what was exclusively provided for by Rule 173B has now specifically been included in Section 11A of the Act. 23.Mr. Mehta would urge that Section 11A, as it now stands, provides for reopening of approved classification lists and by reason of a show cause notice issued in terms thereof, the correctness of approval itself can be questioned and in that view of the matter the ratio of the judgment as laid down in paragraph 13 of the Cotspun (supra) has been removed. 24.Relying heavily on M/s. Easland Combines, (supra), the learned Counsel would argue that the Cotspun (supra) could not have been rendered if the amended provisions of Section 11A of the Act had been in existence at the time of the said decision. 25.As regard the question as to whether the processes undertaken by the appellant for obtaining the end product known as box strappings would amount to manufacture or not, the learned Counsel would submit that the several stages of processes which are undertaken by the appellant is a clear pointer to the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this sub-section shall, in any of the cases referred to above, have effect as if, 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 period of six months or five years, as the case may be. The Assistant Collector of Central Excise(2) shall, after considering the representation, if any, made by the person on whom notice is served under sub-rule (1), determine the amount of duty due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. For the purposes of this rule,(3) - (i) "refund", includes rebate referred to in Rules 12 and 12A; (ii) "relevant date" means, - (a) in the case of excisable goods on which duty of excise has not been levied or paid or on which duty has been short levied or has not been paid in full, the date on which the duty was required to be paid under these rules; (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 because of- (a) the assessee commencing production, manufacture or warehousing of goods not mentioned in that list, or (b) the assessee intending to remove from his factory any non-excisable goods not mentioned in that list, or (c) a change in the rate or rates of duty in respect of the goods mentioned in that list or, by reason of any amendment to the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) change in the Chapter Heading No. and sub-heading No. the assessee shall likewise file a fresh list or an amendment of the list already filed for the approval of such officer in the same manner as is provided in sub-rule (1) When the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified 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 or not 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, a Central Excise 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 short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 an intent to evade payment of duty, by such person or his agent, the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessitated, 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 Department and there had been no intention to evade payment of duty. 36.However, in Ballarpur Industries (supra), this Court had held that reclassification would operate retrospectively. In Ballarpur Industries (supra), Rainbow Industries (supra) was distinguished stating that the observations made therein were confined to the facts of that case. Placing reliance on Rule 10 which was in pari materia with unamended Section 11A, it was observed : "The Bench placed reliance upon Rule 10 and held that, on a plain re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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, 1980 and ending on the date on which the Finance Act, 2000 receives the assent of the President (hereinafter referred to as said period) demanding duty on account of non-payment, short payment, non-levy, short-levy or erroneous refund within a period of six months or five years, as the case may be, from the relevant date as defined in Clause (ii) of sub-section (3) of that section shall be deemed to be and to always have been, for all purposes, validly and effectively issued or served under that section, notwithstanding a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etrospective 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 unless the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances. Ordinarily, a Court holds a tax to be invalidly imposed because the power to tax is wanting or the statute or the rules or both are invalid or do not sufficiently create the jurisdiction. Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erience 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 Governmental interest in obtaining adequate revenues, but also because taxes are not in the nature of a penalty or a contractual obligation but rather a means of apportioning the costs of Government amongst those who benefit from it. In testing whether a retrospective imposition of a tax operates so harshly as to violate fundamental rights under Article 19(1)(g), the factors considered relevant include the context in which retroacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 down the rule concerned permitting compulsory retirement of a government servant the very basis of the earlier judgment upholding such an exercise got knocked off and was totally obliterated from the Statute-Book. Consequently the very foundation of the judgment vanished. Such a judgment would obviously become baseless lacking the very foundation on which it could operate. The very foundation of an earlier judgment can be displaced b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 does not deal with classification list or relate to reopening of approved classification lists. That is exclusively provided by Rule 173B." The Court further held that the levy of excise duty on the basis of approved classification list is not short levy and the differential duty cannot be recovered on the ground that it is a short levy and Rule 10 then has no appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 has been made in the primary Act, and, thus, a rule framed thereunder even in case of conflict must give way to the substantive statute. It is a well-settled principle of law that in case of a conflict between a substantive act and delegated legislation, the former shall prevail inasmuch as delegated legislation must be read in the context of the primary/legislative ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation 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 circumstances of this case at this stage need not go into the question as to whether the processes undertaken by the appellant would amount to manufacture or whether the classification of goods under sub-heading 7308.90 is correct, in view of the fact that the question as regard limitation and availability of Modvat had not been considered. 58.It is not in dispute that in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion 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 held that these, ingredients postulate a positive act and, therefore, mere failure to pay duty and/or take out a licence which is not due to any fraud, collusion or wilful misstatement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation." 62.The question of limitation involves a question of jurisdiction. The findings of f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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