Customs, Excise and Gold Tribunal - Delhi
Vipul Dyes Chemicals (P) Ltd. vs Collector Of C. Ex. on 8 September, 1989
Equivalent citations: 1989(44)ELT724(TRI-DEL)
ORDER
G. Sankaran, Sr. Vice-President
1. The facts of the case, briefly stated, are that the appellants were engaged, at the material time, in the manufacture of Synthetic Organic Dye Stuffs falling under Item 14D of the First Schedule to the Central Excises and Salt Act, 1944 (the Schedule is hereinafter referred to as 'CET'). Some of the dye stuffs were exempt from payment of excise duty in terms of Notification 180/61 dated 23-11-1961 issued under Rule 8(1) of the Central Excise Rules, 1944 (the 'Rules' for short). With the issue of Central Excise Notification 71/78 dated 1-3-1978, the appellants became eligible for duty exemption on all synthetic organic dyestuffs manufactured by them subject, however, to the conditions set out in the notification. One of the conditions was that during the financial year the total value of the clearances eligible for duty exemption should not exceed rupees five lakhs. The notification did not contain a specific provision as to whether the value of clearances free of duty in terms of notification 180/61 dated 23-11-1961 were to be included or excluded from this figure of rupees five lakhs. The appellants did not include the value of clearances of such dyestuffs while computing the limit of rupees five lakhs. The Superintendent of Central Excise assessed the RT12 (assessment) Returns filed by the appellants for the months of August 78 to November 78 on 2-2-1979,8-2-1979 and 12-3-1979 pointing out and demanding payment of short recoveries aggregating Rs. 51,674.51. Appellants did not pay the amount even after two reminders, whereupon the Superintendent issued a show cause-cum-demand notice on 17-12-1979 to the appellants under Rule 10 for the period August 78 to November 78. In due course, on conclusion of the adjudication proceedings, the Assistant Collector confirmed this demand and, the appeal against this order was dismissed by the Collector (Appeals).
2. We have heard Shri B.N. Gujral, Advocate, for the appellants and Shri G.V. Naik, JCDR, for the respondent Collector.
3. Shri Gujral made detailed submissions in respect of the following three points:
(a) The demand notice was barred by limitation having been issued beyond the stipulated period of six months.
(b) The Superintendent's endorsement or direction on the assessment Returns and his two letters were not preceded by show cause notice as required under the law and were therefore not enforceable.
(c) The goods exempted from payment of excise duty by a Rule 8(1) notification ceased to be excisable goods and would therefore need to be excluded from the computation of the limit of the value of the goods eligible for duty exemption in terms of notification 71/78.
4. In so far as the first aspect is concerned, the show cause notice, as we have noted, was issued on 17-12-1979, the period of demand being August 78 to November 78. The notice was therefore evidently barred by limitation. It will be clear from what follows that the benefit of the extended period of limitation was not available to the Revenue on the facts and in circumstances of this case.
5. As regards the second aspect, Shri Gujral drew our attention to the Superintendent's letter dated 17-6-1978 in response to the appellant's letter dated 12-6-1978. By this letter the Superintendent informed the appellants that the value of exempted goods would not be counted for the amount of rupees five lakhs. Though the language is somewhat cryptic, the meaning is very clear and it is that the value of goods exempted by notification 180/61 would not be included in the rupees five lakhs limit of goods eligible for exemption in terms of notification 71/78. Our attention was next drawn to letter dated 27-11-1978 from the Superintendent to the appellants. After drawing attention to the previous letter, the Superintendent stated that the issue was under consideration. Hence, till a decision was received from the higher authority the value of exempted goods would be counted for the rupees five lakhs exemption. This was followed by letter dated 17-10-1979 from the Superintendent on finalisation of RT 12 Returns for the months of August 78 to November 78. The Superintendent stated that in each of the four RT 12 Returns there was short payment of duty due to wrong working of the first clearances of rupees five lakhs worth of goods with reference to notification 71/78. He indicated the extent of short levy and requested the appellants to pay the amounts at an early date or get stay order from the Appellate Collector in case they had gone in appeal. The letter dated 27-11-1979 was a reminder to this letter. It was on 17-12-1979 that a proper show cause notice was issued for the first time. In the said notice there is no allegation of suppression of fact or any other circumstance which would entitle the Department to demand duty for the extended period of limitation beyond six months.
6. Shri Gujral cited before us a number of authorities in support of his proposition that demands arising as a consequence of finalisation of Assessment Returns (RT12) should be preceded by a proper show cause notice and adjudication proceedings. It is not necessary to refer to all of them. In the case of Union of India & Ors. v. Madhu Milan Syntex Private Ltd. 1988 (35) E.L.T. 349 (SC), the Supreme Court has clearly laid down that before any demand for duty is made on any person chargeable in respect of non-levy or short-levy or under payment of duty, a notice requiring him to show cause why he should not pay the amounts specified in the notice, must be served on him. This was with reference to the provisions of Section 11A of the Central Excises & Salt Act which are in pari materia with the provisions of Rule 10. In the case before the Supreme Court, the Counsel for the Union of contended, inter alia, that though no prior show cause notice was given and the petitioners were not given an opportunity to be heard before the notice of demand was issued, such a notice was issued and an opportunity to show cause was given after the demand was made and the demand confirmed after hearing and hence it must be regarded as valid. The Counsel submitted that a post facto show cause notice should be regarded as adequate in law. This contention was negatived by the Court which held that a notice and an opportunity of making representation against the notice and of being heard were essential before a demand could be created against an assessee. This was emphasised by the Supreme Court in its judgment in the case of Gokak Patel Volkart Limited v. Collector of Central Excise, Belgaitm 1987 (28) E.L.T. 53 (S.C.). The Supreme Court judgment in Collector of Central Excise, Baroda v. Kosal Metal Product Ltd. 1988 (38) E.L.T. 573 (S.C.) squarely applies to the facts of the present case. The Court held that when any duty of excise has not been levied or paid or has been short levied or short paid, a demand for recovery of such amount must be made under Section 11A of the Central Excises & Salt Act and not by an entry on the RT 12 Returns which cannot be taken to be a proper show cause notice. The Court referred, with approval, to the judgment of the Kerala High Court in Good Shepherd Rubber Company, Palghat v. Inspector of Central Excise, Palghat & Ors. -1978 (2) E.L.T. (J 66). This judgment, which was of a Learned Single Judge, was confirmed by a Division Bench of the High Court and this judgment is reported in 1978 (2) E.L.T. (J 471). The view taken was that pointing out short levy on Assessment Returns with a direction to pay the amount would not be sufficient compliance with the requirements of Rule 10 which stipulated the issue of a proper show cause notice followed by proper adjudication proceedings before any short levied duty amount could be demanded and recovered.
7. The issue has come up before the Tribunal also on many occasions. In the case of Collector of Central Excise, Calcutta v. Indian Iron & Steel Co. -1988 (19) E.C.R. 465, the question arose as to whether if demands were raised on RT 12 Returns and show cause notice was issued subsequently beyond the period of limitation, the demands would be valid. The Tribunal held that if in such circumstance the show cause notice was issued after the period of limitation provided in Section 11A of the Central Excises & Salt Act, it would be barred by limitation and the fact that endorsements and demands were made on RT 12 Returns would not save limitation.
8. Faced with the weight of these authorities, Shri Naik sought to make out that as early as on 27-11-1978 the Superintendent had alerted the appellants to the position that the issue (of exclusion of the value of exempted goods from computation of rupees five lakhs in Notification 71/78) was under consideration of the higher authority and that till receipt of the latter's decision the value of exempted goods should be included in the limit of rupees five lakhs. It was only on 1-4-1979 that Notification 71/78 was amended by Notification 141/79 so as to specifically exclude from the computation the value of goods wholly exempted from duty in terms of other notifications. He further submitted that under the self removal procedure it was the duty of the assessee to correctly calculate the duty payable and make payments accordingly. The short payments were pointed out in the RT 12 Returns as also the letters of 17-10-1979 and 27-11-1979. Though no formal show cause notice was issued at the time of raising demands on the Assessment Returns, the letters referred to together with the subsequent show cause notice should be deemed to be sufficient compliance with the statutory requirements especially because the reasons for short levy were made known and the demands in RT 12 Returns were also made within the period of six months.
9. We have considered the submissions of both sides. In our view, the submissions made by Shri Naik are devoid of any substance in the light of the several authorities including pronouncements of the Supreme Court, cited by the Counsel for the appellants. The facts are not in dispute. The demands raised on the Assessment (RT12) Returns were not preceded by show cause notices. The show cause notice, when it was issued, was barred by limitation. The letters issued to the appellants might have served as an alert to the appellants but cannot by any stretch of imagination be deemed to be sufficient compliance with the requirement of a show cause notice because those letters only said that the issue was under consideration and awaiting decision of the higher authority. In this view of the matter, the demand raised against the appellants is not enforceable.
10. In the result, the impugned order is set aside and the appeal is allowed with consequential relief to the appellants.
11. Since we have allowed the appeal on the ground of limitation, we have not considered it necessary to go into the other contentions put forth by the Counsel for the appellants.