Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Bright Brothers Ltd. on 19 October, 1990
Equivalent citations: 1991ECR270(TRI.-DELHI), 1991(52)ELT385(TRI-DEL)
ORDER D.M. Vasavada, Member (J)
1. As subject matter of both these appeals is the same, we have heard them together and we dispose them of together by this common order.
2. Facts, stated briefly, are - assessee, M/s. Bright Brothers Ltd., manufacture articles of plastic (hereinafter referred to the 'said goods'). Prior to 1-3-1982, the said goods were classified under T.I. 15A(2) and during the period from 1-3-1982 to 10-5-1982, the said goods continued to be classifiable under T.I. 15A(2), but due to some mistake, the Excise Department asked the assessee to classify the goods under T.1.68 from 1-3-1982 and to pay excise duty accordingly. As a consequence thereof, the assessee did file the classification list in respect of the said goods under T.I. 68 and paid basic excise duty @ 8% ad valorem applicable under T.1.68 during the period 1-3-1982 to 22-4-1982. From 22-4-1982, the said goods were totally exempt from duty by virtue of Notification No. 149/82 dated 22-4-1982 which exemption was continued even after the passing of the Finance Bill on 10-5-1982 vide Notification No. 182/82 dated 11-5-1982. From 10-5-1982, the said goods were classified under T.1.68. During the period from 1-3-1982 to 22-4-1982, the said goods attracted central excise duty under T.I.15A(2) and were liable to pay basic excise duty @ 8% ad valorem and special excise duty @ 5% of BED. As the assessee had already paid BED @ 8% ad valorem, though under T.I.68, the department raised demand only for special excise duty, @ 5% on the said goods which the assessee paid. Then, the assessee submitted a refund claim for the duty paid on the said goods for the period from 1-3-1982 to 22-4-1982 under T.I.68. Show cause notice was issued and on adjudicating the show cause notice, the Assistant Collector rejected the claim holding that the goods should have been cleared on payment of BED @ 8% ad valorem and special excise duty @ 5% of BED under T.I.15A(2), but the assessee continued to pay the duty @ 8% ad valorem under T.I.68 only and on demand, special excise duty was paid by them. As they had not paid BED @ 8% under T.I.15A(2) and as the rate of BED under T.I.68 was also 8% ad valorem, the assessee kept silent about payment of BED under T.I.15A(2). They were not entitled to refund and so it was rejected.
3. The assessee preferred appeal before the Collector (Appeals) and by Order dated 30-4-1985, the,ld. Collector (Appeals), Bombay, allowed the appeal holding that the duty paid under T.I.68 cannot be adjusted against claim of duty under T.I.15A(2), and the department, while issuing demand for special excise duty should have raised demand for basic excise duty under T.I.15A(2) also. Aggrieved by the said order, the department has preferred Appeal No. E/2815/85-C. The assessee preferred cross objection No. E/Cross/669/85-C praying that the impugned order be upheld with consequential relief to the assessee.
4. Some part of the goods, on which duty was so paid, was manufactured before 28-2-1982 and as such it was pre-budget stock when sold. By virtue of Notification No. 68/71 dated 29-5-1971, the said goods were exempt from payment of whole of duty upto 28-2-1982. So, as a matter of precaution, the assessee filed the refund claim for a sum of Rs. 84,861.72, being the amount of duty paid on such particular pre-budget stock contending it was not dutiable. The assessee filed this appeal because if the refund claim, which is a subject matter of Appeal No. E/2815/85-C, in any case, would be rejected, then the assessee could at least get benefit of this much amount; otherwise this amount also form part of that earlier refund claim. This claim was also rejected by the Assistant Collector and in appeal, the Collector (Appeals) held that as the amount of claim stood covered by the earlier decision of the Collector (Appeals) in his order relating to refund claim (whereby the refund was allowed) and as the same amount was the subject matter of the present appeal, the question of considering it again had no basis and relevance. So, the assessee has filed this appeal No. E/434/87-C.
5. We have heard Sh. A.S. Sunder Rajan, ld. J.D.R. for the Revenue and Dr. P.V. Jois, ld. Advocate for the assessee.
6. Facts are not in dispute. The arguments were concluded on 25-8-1989 and on that day, time was granted to the parties to file some documents and judgements referred to by them during arguments. The assessee did file some documents, which we have perused.
7. L.A., Dr. Jois cited Bharat Commerce of Industries Ltd. v. Union of India and Others reported in 1979 (4) E.L.T. (J527) (Del.) wherein it has been held as under:
"If the levy and assessment of goods under one particular Tariff Item is held to be illegal, the department cannot refuse to refund the amount on the ground that duty could have been levied under any other Tariff Item because on that basis the department has to issue an appropriate demand within the time limit of Rule 10."
(ii) Western Bengal Coal Fields Ltd. v. UOI reported in 1989 (43) E.L.T. 21 (Bom.) wherein the same principle has been laid down.
8. The ld. D.R. submitted that decision of the Delhi High Court is per incuriam, but he could not show how it was so.
9. Admittedly, in the instant case, the Assistant Collector had sought to adjust BED paid by the assessee under T.I.68 against BED demandable under T.I.15A(2). It is also an admitted position that subsequently realising that the classification under T.I. 68 was not proper, department did raise a demand for special excise duty @ 5% of BED under T.I.15A(2). The Assistant Collector has observed that the assessee did not pay BED under T.I.15A(2), but the department never demanded it. As rightly submitted by L.A. Dr. Jois that BED demandable under both Tariff Items was @ 8% ad valorem and it was a coincidence, but the department should have raised demand for BED also under T.I.15A(2). So, the impugned order is quite legal and appeal of the Revenue requires to be rejected. By filing Cross Objections, the assessee has not prayed for any relief except that the impugned order be confirmed. So, no order is required to be made on Cross Objection.
10. In view of our above findings, appeal No. E/434/87-C becomes infructuous. So, it is not necessary to express any opinion regarding legal issue involved therein.
11. So, we pass the following final order:
(i) Appeal No. E/2815/85-C is dismissed with consequential relief to the respondent (assessee).
(ii) Appeal No. E/434/87-C is dismissed as infructuous.
S.K. Bhatnagar, Member (T) 11A. With due respects to the learned Member (Judicial), my views and orders are as follows.
12. I observe that the classification list (No. 1/82 dated 3-3-1982) was filed by the respondents showing Tariff Item 68 as the relevant item for their products and the duty was paid with reference to this list at the declared rate of 8%.
13. Subsequently, in September 1982, the Assistant Collector approved this list, after modifying the tariff item indicated therein and classifying the goods under TI 15(A) and indicating the period for which the duty (basic as well as special) was payable.
14. I also notice that according to both the sides, the effective basic duty was 8% under both TI 68 and TI 15(A) at that time; but under TI 15(A) in addition, 5% was required to be paid as the special duty.
15. In view of the above position, the department demanded and the respondents paid special duty, at the rate of 5%, over and above the amount already deposited by them (at the rate of 8%). Subsequently however the respondents filed the refund claim in question on the grounds that the amount paid by them as basic duty (at the rate of 8%) had been so paid under TI 68 whereas the goods were classifiable under Tariff Item 15(A) and therefore the duty paid with reference to TI 68 was refundable. A question arises whether such an argument was tenable. Evidently the respondents were required to pay the amount of basic duty at the rate of 8% therefore the amount had been correctly paid albeit under a different heading. In the circumstances to claim that the amount was refundable on a hyper-technical plea of having deposited it under an incorrect tariff heading is rather far-fetched. It is the primary duty of an assessee to pay the amount not only correctly but under the proper heading (and it is equally the duty of the departmental officers to collect the amount under the correct heading) but if by mistake or otherwise an incorrect heading is shown, the amount which is otherwise paid correctly, does not become refundable in my opinion.
16. Even in case of a show cause notice, where a charge is correctly framed and the language is clear enough to bring home the substance of the charge, a mere incorrect mention (or even non-mention) of a sub-section does not vitiate the proceedings; And it has been repeatedly held by this Tribunal that such minor errors or infractions are not required to be taken serious note of and if the matter is otherwise in order, the proceedings are not invalidated.
17. On the same analogy if the amount of basic duty was correctly payable at the rate of 8% and was so paid, the liability having been correctly discharged, no refund (or demand) arises; A mere technical error of indicating an incorrect heading or subheading notwithstanding.
18. It has also been urged before us that the officers are not authorised to collect the amount by adjustment. However I find that Section 11 permits realisation by way of adjustment from any amount under the control of the officers. In the instant case the effective rate of basic duty was admittedly 8% and the amount in question was worked out by applying this rate and paid in the normal course; As such the amount so collected was under the control of the officers and they could in terms of Section 11 adjust or ' realise the same towards outstanding Government dues. However one need not even go to the extent of invoking Section 11 as what was required here was not even realisation in any substantive sense but merely correction of a technical error made in respect of a tariff heading."
19. Further I note that the attention of the Bench had been drawn towards Notification No. 52/82 and 182/82. However if the products fell under Tariff Item 15(A) during the relevant period (as claimed by both the sides) then Notification 182/82 which has been issued with reference to T.I. 68 was not relevant. Even otherwise this notification came into force from 11-5-1982 and therefore did not relate to the period in question. This leaves only Notification No. 52/82 dated 28-2-1982 in the field for the items classifiable under T.I. 15(A) and this notification (read with No. 68/71) admittedly prescribed 8% ad valorem as the effective rate of duty. This goes to show that even going by their contentions the products were not wholly exempt during the relevant period and were chargeable to duty at the effective rate of duty actually applied. Hence no money was refundable.
20. Further a number of judgments and orders have been cited by Dr. Joseph to show that the taxable event was manufacture and therefore the rate of duty applicable would be the effective rate which was in force on the date of clearance. On the other hand the learned SDR has cited case law to show that it is the date of clearance which was relevant then the effective rate of duty will be the rate in force for clearance. A reading of the judgments and orders cited by both the sides show that there were obviously two schools of thought in this respect prevalent at that time.
21. The learned DR's contention that the judgments of the High Courts and the orders of the Tribunal cited by Dr. Joseph were all per incuriam is rather unusual and ' appears far-fetched. These judgments and orders were obviously passed in accordance with the position in law as understood at the time they were announced and a subsequent change in interpretation does not render previous judgments and orders per incuriam. It was of course open to the learned SDR to distinguish these cases or to show the latest position in law but such sweeping generalisation was hardly called for; And I am in full agreement with my learned brother Member (Judicial) in observing that the department has not succeeded in showing that these judgments and orders were per incuriam. At the same time it is true that the prevailing judicial opinion is in favour of considering the date of clearance as the relevant date for purpose of applying exemption notification and determining the effective rate of duty. Indeed the controversy has since been laid to rest by the latest judgement of the Supreme Court in the case of Wallace Flour Mills Limited v. CCE - 1989 (44) ELT 598 (SC). Hence following the same, it is the date of clearance which is required to be considered as relevant and therefore the effective date of duty would be the rate in force on such a date.
22. There is however yet another aspect of the matter which stares us in the eye and this relates to the fact that the classification list was filed in March 1982 but was finally approved only in September 1982 and the amount in question relates to the duty payable during this interrugnam.
23. In other words the amount was paid under the declared T.I. 68 as deemed duty in anticipation of the approval of the classification list; But the approval was not accorded to the declared tariff item; instead, the list was finally approved indicating Tariff Item 15(A) as the appropriate heading. Now the payment of any amount as deemed duty prior to approval by proper officer has a tentative character and could only be considered to be in the nature of a provisional payment; and such a payment was obviously adjustable in terms of the payment finally found due in terms of the Assistant Collector's approval and consequential assessment. In other words the amount already realised could even otherwise be adjusted by the Superintendent at the time of finalisation of RT 12 and completion of assessment in terms of Rule 173(I). As such the judgement of the Bombay High Court cited by the learned counsel for the respondent was distinguishable and not applicable in the facts and circumstances of this case. This also means that the officers had correctly taken into account the amount already paid on a tentative basis and were right in demanding only the additional amount due in terms of the approval finally accorded at the time of assessment.
24. As the amount collected at the rate of 8% was rightly due, therefore no question of refund arises.
25. Thus whichever way we may look at the matter, the respondents are not able to show that the amount in question was refundable to them and the department has succeeded in showing that the order of the learned Collector (Appeals) was required to be ijet aside. I therefore accept the appeal.
26. In view of the difference of opinion between Member (Judicial) and Member (Technical) the matter is submitted to the Hon'ble President for referring the matter to a third Member on the following point:
Whether in the facts and circumstances of the case the amount of basic excise duty paid at the rate of 8% ad valorem was correctly retained by the department or it was refundable.
G. Sankaran, President
27. The two Learned Members, who heard the subject matters in the first instance, could not agree on the manner of disposal of Appeal No. E/2815/85-C filed by the Collector of Central Excise, Bombay-II. The Member (Judicial) took the view that since the Department had not raised a legally valid demand for the basic excise duty leviable under Item No. 15A(2) of the Central Excise Tariff Schedule ('CET', for short) as in force at the material time, the duty paid, admittedly erroneously, under Item No. 68, CET, could not be adjusted against the duty leviable under Item No. 15A(2). In this view of the matter, he proposed an order dismissing the Collector's appeal. The Member (Technical), on the other hand, proposed an order allowing the appeal on the basis that the amount of duty collected under Item 68, CET, could be validly adjusted against the duty leviable under Item 15A(2). In view of this difference of opinion between the two Members, they formulated the following point for consideration by a Third Member:-
"Whether in the facts and circumstances of the case the amount of basic excise duty paid at the rate of 8% ad valorem was correctly retained by the Department or it was refundable".
28. I have heard Shri S. Chakraborti, Departmental Representative, for the appellant-Collector and Dr. P.V. Jois, Advocate, for the respondent M/s. Bright Brothers Ltd.
29. The facts of the case have been set out in the order of reference and are not therefore required to be re-stated. It is, however, an admitted position that the show cause notice issued by the Department was in respect of payment of only special excise duty at 5% of the basic excise duty of 8%. It appears that the Department was labouring under an erroneous belief that since the basic excise duty under Item No. 68 and Item No. 15A(2) CET (in so far as the present goods were concerned) was the same, namely, 8% ad valorem, it was not required to call upon the respondents (who shall be hereinafter called the 'assessee') to show cause why they should not be required to pay th&duty leviable on the goods under Item 15A(2). Shri Chakraborti's contention is that since the rate of basic excise duty under both items was the same at the material time and the goods admittedly fell under Item No. 15A(2), there would be nothing improper in adjusting the duty collected under Item No. 68 against the duty leviable under Item No. 15A(2), In this connection, he cited the Tribunal's decision in Hindustan Polymers v. Collector of Central Excise - 1986 (24) ELT 697. In that case, the Department sought to classify certain goods under Item No.'68, CET and demanded duty from the assessee accordingly. The assessee's contention was that Item 68 was not appropriate but that Item l5A(l)(ii) was. The Tribunal accepted this contention. It then considered the question whether whole or any part of the demand of duty raised against the assessee proposing classification under Item 68, CET could be enforced against the assessee by the Revenue consequent to classification under Item No. 15A(l)(ii); The Counsel for the assessee contended that the basis of the demand for duty being classification under Item 68, and that classification having been set aside, the demands, if any, consequent to reclassification of the goods could not now be made and adjusted from the amount of duty under Item No. 68, Observing that the main dispute between the parties was one of classification and the goods having been found to be classifiable under the item claimed by the appellants, the Tribunal stated that there was no good reason why the appellants should not be called upon to pay so much of the duty appropriately quantifiable under the item claimed by them subject, of course, to other procedural safeguards like limitation, demand not exceeding the one originally made etc. This was on the basis that Courts and Tribunals have full powers to mould the relief in a case according as the ends of justice require. Accordingly, the Tribunal held that the Department was entitled to recover duty payable under Item No. 15A(l)(ii) to the extent the demand notice (under Item 68) had been made within limitation subject to the amount recoverable in terms of the revised classification not exceeding the amount originally claimed under Item No. 68. Relying on this decision, Shri Chakraborti, DR, submitted that the view of the Learned Member (Technical) was the more appropriate one.
30. Shri Chakraborti also relied on the Tribunal's decision in Premier Tyres Ltd. v. Collector of Customs, Madras - 1984 (16) ELT 419 (para23 of the report). In that case, the Tribunal held that an amendment in a claim could be made even after expiry of limita tion if it was necessary for the purpose of determining the question in controversy and if it did not work injustice to the other side and in such a case amendment would take effect from the date of the original claim and not from the subsequent dates when it was allowed. It further held, in that case, that if the Department was allowed to retain any amount in excess of the duty that was correctly payable under the tariff item as held applicable to the goods in question that would have offended Article 265 of the Constitution which prohibited levy and collection of tax except by authority of law. It further held that, if on proper classification of the goods, refund of a larger amount than admissible under the heading or item originally claimed by the assessee becomes payable, such larger amount should be refunded to the assessee. The refund should not be limited to the amount admissible under the item or heading originally claimed.
31. Shri Chakraborti's contention, therefore, was that since it was common ground between the Department and the assessee that the proper classification of the goods was under Item l5A(2), CET, the Department would be justified in retaining the basic excise duty collected under Item 68, CET since, in the present case, that also happened to be the duty leviable under the correct Item 15A(2), CET.
32. Strongly opposing the above contentions, Dr. Jois, for the respondents, submitted that the question herein was one of legality of the Department's action. The goods were correctly classifiable under Item 15A(2), CET during the material period and, therefore, the payment of duty under Item 68 at the instance of the Department was not sanctioned by law and the retention of that amount by the Department would offend Article 265 of the Constitution. It was a matter of pure coincidence that the rate of duty under both items was the same. But that would not mean that the amount illegally collected without the authority of law under Item 68, CET, could be adjusted against the duty leviable under Item 15A(2) since no legally valid proceedings had been initiated by the Department for recovery of duty under the latter item by way of issue of a notice under Section 11A of the Central Excises & Salt Act and adjudication proceedings resulting in confirmation of the demand. Any adjustment as envisaged by the Department would be illegal. In this connection, he relied on the Delhi High Court's judgment in Bharat Commerce & Industries Ltd. v. UOI & Others - 1979 (4) ELT J 527. In that case, the Court had held that while it might be legitimate for the Revenue to adjust a refund payable to an assessee against other amounts of duty payable by him in accordance with law, it was certainly not open to it to make such an adjustment against a demand which had not been and which could not be made. The orders of the Appellate Collector and the revisional authority directing such appropriation by way of adjustment were declared to be wholly illegal and without jurisdiction. The Learned Counsel also relied on the Madras High Court judgment in The Maritime Collector of C. Ex., Madras, and Another v. The East Asiatic Co. (India) Ltd. - 1982 ECR 882. In that case, the Revenue had sought to adjust a demand, admittedly barred by limitation, against amounts with the Department due to be refunded to the respondent. The question before the Court was whether the time barred claim of the Revenue could be deducted from the money due to the respondent, under Section 11 of the Act. Relying on the Supreme Court's judgment in New Delhi Municipal Committee v. Kalu Ram and Another - AIR 1976 SC 1637, the Court held that the Revenue could not invoke Section 11 of the Act and deduct from any amount due to be paid to the assessee any demand which was barred by limitation.
33. It is seen that the Delhi High Court's judgment in Bharat Commerce & Industries Ltd. case and the Madras High Court's judgment in East Asiatic Company (India) Ltd. case were not cited before the Tribunal in the Hindustan Polymers case and the Premier Tyres case. When judgments of High Courts are brought to the notice of the Tribunal and no conflicting judgment is placed before it, it is but only proper and in keeping with judicial discipline that the Tribunal follows the judgments of the High Courts. In the present case, as noted already, the aforesaid two judgments in the cases of Bharat Commerce & Industries and East Asiatic Company were not placed before the Tribunal in the cases referred to earlier. Both decisions of the Tribunal are, therefore, of no assistance to the Department in the present case. Apart from this consideration, as explained in Hazarimal Kuthiala v.I.T.O. Special Circle, Ambala Cantt. - AIR 1957 Punjab 5, while levy of a tax is the unilateral act of superior legislative power, assessment is the official determination of liability of a person to pay the particular tax and collection is the power to gather in money for taxes, by enforced payment, if necessary. The levy of taxes, observed the Court, is generally a legislative function, assessment is a quasi-judicial function and collection as executive function. It is a truism to say that there can be no collection of tax without an assessment. In the present instance, as noted already, the admitted position is that the respondents were called upon to pay special excise duty as applicable to Item 15A(2), CET but they were not called upon to show cause why basic excise duty leviable under that item should not be demanded from them. Maybe this was on the erroneous belief that since the rate of duty under both items of the tariff was the same, there was no need for any separate proceedings for demand of basic excise duty under Item 15A. The fact, however, remains that no proper proceedings authorised by law was initiated under Section 11A to demand basic excise duty under Item 15A. There is, therefore, no amount of basic excise duty under that item which, in the eye of law, was recoverable from the assessee. If this be so, it follows that the amount of basic excise duty collected under the admittedly wrong Item 68, CET, cannot be retained by the Department because that would be retention of an amount of money purported to be tax basic excise duty under Item 15A - but retained without the authority of law.
34. The above view gains support from the Bombay High Court's judgment in Western Bengal Coal Fields Ltd. v. Union of India - 1989 (43) ELT 27. In that case, the Assistant Collector sought to recover by adjustment what he alleged was short levied duty. The Court observed that the only procedure for recovery of what had been short levied was that provided by Section 11A of the Act. There was no resort to the provisions of that section. Nor was there any determination that a certain sum of money had been short levied. The recovery or adjustment in the manner sought by the Department could not be made.
35. In Indian Plywood Manufacturing Co. Ltd. v. Collector of Central Excise, Bangalore - 1985 (22) ELT 144, the Tribunal held that in the absence of a proper demand under Section 11A of the Act, the Department's withholding of a part of the amount of refund due to the assessee by way of adjustment against the duty payable under Item 68, CET, was not valid. In coming to this view, the Tribunal followed the Delhi High Court's judgment in the case of Bharat Commerce of Industries Ltd. (supra).
36. In the light of the foregoing discussion, I am in agreement with the opinion of the learned Member Judicial, namely, that on the facts and in the circumstances of the present case, the Department was not correct in retaining the amount of basic excise duty paid at the rate of 8% ad valorem under Item 68, CET, by way of adjustment of the basic excise duty leviable under Item 15A, CET, at 8% ad valorem for which proper assessment proceedings sanctioned by law had not been initiated by the Department. As such, the amount in question is refundable to the assessee ORDER
37. In view of the majority opinion the department's appeal is rejected.
The cross objection also correspondingly stands disposed of in the above terms.
38. This appeal is dismissed as infructuous in view of the majority opinion as per order announced on 4-1-1990 in respect of Appeal Nos. E/2815/85-C with E/Cross/669/85-C.