Customs, Excise and Gold Tribunal - Delhi
Minakshi Castings vs Commissioner Of Central Excise on 15 January, 1999
Equivalent citations: 1999(112)ELT737(TRI-DEL)
ORDER G.A. Brahma Deva, Member (J)
1. These are two appeals filed by the appellants M/s. Minakshi Castings and M/s Inder Steels Pvt. Ltd. involving common issues and they are therefore taken together and are being disposed of by this common order.
2. These two matters are coming before the Tribunal for a second time. The issue relates to determination of annual capacity of production in terms of Section 3A of the Act. The appellants are engaged in the manufacture of M.S. Ingots of non-alloy steel falling under Tariff Heading 7206.90 of the Central Excise Tariff Act, 1985. These two matters were remanded by the Tribunal for de novo adjudication with the direction that the learned Commissioner will give an opportunity of hearing to the appellants to represent their case by furnishing figures of actual production and also for passing speaking order in accordance with law, since the parties have pleaded before the Tribunal that no opportunity was given before determining the annual capacity or production and actual production was not determined as envisaged under Sub-section (4) of Section 3A of the Central Excise Act, 1944. Sub-section (4) of Section 3A of the Central Excise Act is as under :-
"Where an assessee claims that the actual production of notified goods in his factory is lower than the production determined under Sub-section (2), the Commissioner of Central Excise shall after giving an opportunity to the assessee to produce evidence in support of his claim, determine the actual production and redetermine the amount of duty payable by the assessee with reference to such actual production at the rate specified in Sub-section (3)".
3. On remand the Commissioner in the impugned order of Appeal E/3229/98-NB filed by M/s. Minakshi Castings observed that, however, no figures of actual production have been supplied by the assessee in any of the submissions made by them. Even otherwise the assessee has opted for payment of duty under Rule 96ZO(3) and in terms of this Rule the party cannot avail of the benefit under Sub-section (4) of Section 3A. In the appeal filed by M/s. Inder Steels Pvt. Ltd. the Commissioner in the impugned order observed that the guidelines of remand in these de novo proceedings are as follows :-
1. The actual production of the party should be taken into consideration.
2. The copy of the verification report should be supplied to mem.
3. The party should be given an opportunity of being heard in person.
4. He observed that the party has opted to discharge their duty liability under Rule 96ZO(3) as mentioned in their declaration filed on 20-8-1997. The party has not deviated from this position nor have they challenged that such an option was given. He held that since there is a specific restriction under Rule 96ZO(3) for availment of the benefit under Section 3A(4), the duty liability of the party cannot be re-determined on the basis of their actual production.
5. Shri R. Santhanam, learned Advocate appearing for the appellants in both the cases assailed the respective impugned orders mainly on the following points :-
(a) The Commissioner should have confined to the direction of the Tribunal.
(b) Rule cannot over-ride Section and
(c) Determination of annual capacity is factually wrong.
6. He contended that the Commissioner ought to have followed the exemption and directions of the Tribunal without flouting the same and judicial discipline demands that he must comply with the orders of the higher authorities and failure to do so is a clear case of contempt. He was not expected to go beyond the direction of the Tribunal and issue with reference to the Sub-rule 3 of Rule 96ZO(3) was not an issue nor was alleged in the show cause notice and no such notice has been issued on remand. He referred to decisions of the Supreme Court in the case of Union of India v. Kamlakshi Finance Corporation Ltd. reported in 1991 (55) E.L.T. 433 (S.C.) wherein it was held that the Principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase. He also cited a decision in the case of Indichem v. Union of India reported in 1996 (88) E.L.T. 35 (Guj.). Circular issued by Central Board of Excise and Customs under Section 37B of Central Excise Act, 1944 being contrary to decision rendered by Tribunal, not valid and liable to be quashed. When the CBE & C does not agree with the decision of Tribunal matter can be taken in the appeal, but instead of filing the appeal Board cannot issue circular to make the order of the Tribunal nugatory. He also submitted that the Commissioner grossly erred in observing that no figures of actual production all have been supplied, but in fact the figures were very much before them and in this context he drew our attention to Annexure-10 page 66 of the paper book to show that the figures for determination of actual production in terms of Section 3A(4) of the Act was very much before the adjudicating authority.
7. He contended that Rule cannot over-ride section. He submitted that Rules are subordinate legislation having been framed under the Act and if there is conflict between Rule and Section to prevail and in support of his contention he referred to the following decisions :-
1. Fabril Gasosa v. U.O.I. -1997 (96) E.L.T. 241 (Bom.)
2. U.O.I, v. Somasundaram - AIR 1988-SC-2255 (Para 6)
3. 1992 (196) ITR Page 149 (S.C.)
4. 1985 STC Vol 60 - Page 213 and Pg.237 (S.C.)
5. Eyelite Optical Industries Pvt. Ltd. v. CCE - 1990 (28) ECC 359 (Kar.)
6. CCE v. Incab Industries -1990 (45) E.L.T. 342 (Tribunal)
7. CCE v. Zenith Dyes -1990 (31) ECR 680 (Tribunal)
8. Indian Ore v. CCE -1991 (54) E.L.T. 110 (Tribunal)
9. Atma Steel Pvt. Ltd. v. CCE -1984 (17) E.L.T 331 (Tribunal)
8. He submitted that Section does not provide any restriction and the Rules cannot be construed to curtail provision of main section relying upon the decision of the Supreme Court in the case of Commissioner of Income Tax, Bombay v. Minerva Maritime Corporation reported in 1985 (155) ITR 258 and the Bharat Hari Singhania and Ors. v. Commissioner of Wealth Tax and Ors. reported in 1994 (207) ITR 1 wherein it was held that Rules do not acquire status of statute and continue to be delegated legislation.
9. It was contended by him that determination of annual production capacity of the furnace as 24,576 MT in Appeal No. E/3229 and at 9728 MT in Appeal No. E/3230 is not based upon factual position and not in accordance with the provisions of induction furnace annual capacity determination Rules, 1997. He said that Rules relating to capacity determination in the case of induction furnace clearly provide that only if the original invoices from the supplier of the furnaces are not available, the question of resorting to measurements would arise to ascertain the capacity of production but not otherwise. The assessee has produced original invoices and in all the invoices it is clear that the total production capacity annually cannot exceed 19,200 MT in the first case. He argued that Commissioner was not just right in resorting to Rule 3(2) or Rule 3(3) since the invoice for purchase of the induction furnaces had been duly filed by the appellants. In support of his contention he referred to the decision of the Tribunal in the case of Arihant Steel v. CCE, Nezv Delhi reported in 1998 (28) RLT 232 where in it was observed that when the appellants had produced certificate from the manufacturer of the furnace as well as their Invoice which showed the capacity as 1 M.T. In addition to a certificate from the National Institute of Secondary Steel Technology which is established by the Ministry of Steel, Govt. of India showing the capacity as 1 M.T. there was no need for the Commissioner to ascertain the position by an alternate method provided under Sub-rule (2) of Rule 3. If the Commissioner was not for any reason satisfied with the certificate and other evidences brought before him by the applicants, he should have recorded the reasons for rejecting the same and for making a further enquiry as provided under Rule 3(2).
10. Shri Sanjeev Srivastava, learned JDR appearing for the Revenue attempted to convince us that the Commissioner has not flouted the directions of the Tribunal on remand. He said that matters were remanded for de novo consideration and to pass an order on following the Principles of natural justice and it was done accordingly. Irrespective of the fact that the figures were furnished for redetermination of actual production in terms of Section 3A(4), the Commissioner was Justified in holding that the benefit of Sub-section (4) of Section 3A cannot be extended to the party since the party has opted for payment of duty under Rule 96ZO(3). Rule 96ZO(3) is as under :-
"Notwithstanding anything contained elsewhere in these rules, if a manufacturer having a total furnace capacity of 3 metric tonnes installed in his factory so desires, he may, in the beginning or each month from 1st day of August, 1997 to the 31st day of March, 1998 or any other financial year, as the case may be and latest by the tenth of each month, pay a sum of rupees five lakhs and the amount so paid shall be deemed to be full and final discharge of his duty liability for the period from the 1st day of August, 1997 to the 31st day of March, 1998, or any other financial year, as the case may be, subject to the condition that the manufacturer shall not avail of the benefit, if any, under proviso to Sub-section (3) or under Sub-section (4) of the Section 3A of the Central Excise Act, 1944 (1 of 1944)."
11. He explained that Rule 96ZO relates to procedure to be followed by the manufacturer of ingots and billets. Rule 96ZO(1) refers to capacity and production and 96ZO(3) concerned with only capacity of machine. If the unit falling under 96ZO(3) and is discharging duty liability in terms of scheme prescribed under Sub-rule 1 of Rule 96ZO i.e. discharging the liability on consignment basis at Rs. 400/- or Rs. 750/- PMT as the case may be, such unit may approach the Commissioner for redetermination of duty liability based on actual production in terms of the provision of Sub-section 4 of Section 3A of Central Excise Act. The unit falling under 96ZO(3) having given declaration to that effect for discharging the duty with reference to capacity as envisaged under 96ZO(3) has to forego its option under Section 3A(4) of the Act. He submitted that it is not the case of the party that their unit fall under Rule 96ZO(1) and no evidence has been placed on record that Rule 96ZO(1) has been complied with in these two cases. He said that levy and collection of duty of excise on impugned goods is in accordance with the provisions of Section 3A of the Act and Rules determining the duty liability are part of the statute and both section and Rule are to be read together.
12. He said that Rule plays an important role in the scheme of Excise law and the status of the Rule is as that of Section in the statute. In support of his contention Rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were and all to be same effect as if contained in the Act. He referred to the following decisions :-
1. Saurashtra Cement and Chemical Inds. Limited v. Union of India 1995 (79) E.L.T. 367 (Guj.)
2. Engineering Systems (P) Ltd. v. Union of India 1992 (57) E.L.T. 12 (Kar.)
3. Twincity Glass Private Ltd. v. Union of India 1992 (61) E.L.T. 440 (Bom.)
4. Gwalior Rayon Mfg. (Wvg.) Co. v. Union of India and Ors. 1982 (10) E.L.T. 844 (M.P.) and Miscellaneous Order No. 128/98-B1, dated 8-10-1998 in Appeal No. E/2106/85-C & Appeal No. E/660/85-B1 in the case of Balaji Paper Board Pvt. Ltd. and Ors. He also justified the action of the Commissioner in determining the annual production capacity of furnace based upon the measurement of the furnace and technical data in terms of Induction Furnace Annual Determination Rule, 1997. He said that any interpretation to promote tax evasion is not permissible and statute should be so construed as to disfavour tax evading measure adopted by the assessee and Rule to be interpreted in such manner relying upon the ratio of the decision in the case of McDowell and Co. Ltd. v. Commercial Tax Officer reported in 1985 (3) SCC 230.
13. We have carefully considered the matter. As can be seen from the respective impugned orders, it is clear that the Commissioner has bypassed the directions of the Tribunal and proceeded to pass an order observing that the benefit of Sub-section (4) of Section 3A cannot be extended to the party since the assessee has opted for payment of duty under Rule 96ZO(3). We are not convinced with the arguments advanced on behalf of the Revenue that the matter was simply remanded for de novo consideration and not with reference to the Sub-section (4) of Section 3A of the Act. As can be seen from the Operative portion of the orders passed by the Tribunal it is clear that the Commissioner should give an opportunity of hearing the appellants to represent their case by furnishing figures of actual production and in other words there is a direction that he should take the actual production of the appellants into consideration before passing the order. This direction is in terms of Section 3A(4) of the Act. In fact the Commissioner has taken note of the fact that the party has pleaded application of Sub-section (4) of Section 3A of the Central Excise Act, 1944 before the Tribunal. Hence, it cannot be said that matter was remanded for de novo consideration and not to apply the provisions of Sub-section (4) of Section 3A. If the Commissioner was of the view that the order passed by the Tribunal was not in accordance with the provisions of the Act or the directions of the Tribunal could not be implemented due to wordings in the relevant Rule, the best course open to him was to file an appeal before the higher forum. Instead he has chosen to proceed to pass an order with the conception that benefit in terms of Section 3A(4) cannot be extended to the party. The action of the Commissioner is in defiance of law and against the principles of judicial discipline as the order of the Tribunal was binding on him unless the operation of the order of the Tribunal was suspended by competent Court. The mere fact that the order of the Tribunal is not acceptable to the department in itself is not a ground to take a different view without filing an appeal against the order of the Tribunal. The order of the Commissioner is not sustainable on this ground alone as it was rightly argued on behalf of the appellants. Further, we observe that Rule 96ZO(3) is in conflict with the Sub-section (4) of Section 3A of the Act. It is settled position now that whenever there is conflict in between section and the Rule, Rule never overrides the Section. The relief or right granted under the Section cannot be taken away by Rule. In the instant case Rule curtails the right provided in the Section. The case law cited by the DR did not give any ruling .that even conflict if any, in between section and Rule, "Rule" is to be preferred. None of the cases cited by him dealt with the issue in which there was a conflict in between "Section" and Rule. In fact in the case of Twincity Glass Pvt. Ltd. referred to above by the DR it was observed that Rules framed in exercise of statutory power become a part of the Act itself unless found to be in conflict with statutory Rules. This is a case where there is clear conflict in between Section and Rule. In a way Sub-section (4) of Section 3A acts as the Review in the limited sense with reference to the determination of annual capacity of production in Sub-section (2) of 3A. Subsection (2) of Section 3A provides the Commissioner of Central Excise to determine of the annual capacity of production after taking such factors relevant to the annual capacity of production. Subsequently if the assessee claims that the actual production is lower than the production determined under Sub-section (2), he may approach the Commissioner to determine the actual production and re-determining the amount of duty payable with reference to the actual production and the Commissioner has to pass an order accordingly (reviewing the position) after providing an opportunity to the appellants. According to department this right cannot be extended to the party in view of the wordings under Rule 96ZO(3). In our view the right so vested and the statutory right cannot be divested by Rule and in the facts and circumstances of the case and in view of the conflict between Section 3A(4) and Rule 96ZO(3) the benefit vested under Section 3A(4) cannot be denied on the ground that the party has opted for payment of duty under 96ZO(3). With these observations, we are remanding these two matters to the concerned Ax Commissioner for determination of the actual production and re-determine the amount of duty payable by the assessee with reference to such actual portion as envisaged under Sub-section (4) of Section 3A and to pass accordance with law after providing an opportunity to the these two appeals are allowed by way of remand.