Customs, Excise and Gold Tribunal - Delhi
Svadeshi Mills Co. Ltd. And Anr. vs Collector Of Central Excise And Anr. on 8 October, 1992
Equivalent citations: 1992(43)ECR629(TRI.-DELHI)
ORDER S.V. Maruthi, Member (J)
1. These two appeals arc disposed of by a common order.
2. The facts in brief are that the appellants manufacture cotton yarn falling under tariff item 18-A and also cotton fabrics falling under T.I. 19 of Central Excise Tariff. They were a composite mill and were paying compounded duty on cotton yarn under Rule 96(v) and 96(w) between the period 1.3.1974 to 30.5.1977. They were working under Chapter VII-A i.e., Self Removal Procedure. While so the Supdt. issued two show cause notices dated 17.7.1976 and 25.6.1977 proposing to recover a duty of Rs. 17,613 and 18,9008.75 for the period from 1.3.1974 to 15.3.1976,16.3.1976 to 30.5.1977 on the ground that the duty of cotton yarn has not been included in the value of cotton fabrics resulting in short levy of duty.
3. The Asstt. Collector on receipt of reply confirmed the demand. On appeal the Collector while confirming the demand on merits restricted the period of demand falling within the period of limitation prescribed under Rule 10 read with Rule 173-J of Central Excise Rules. The department has come up in appeal No. 1830/83-A against that part of the order restricting the demand to the period covered by Rule 10 read with Rule 173-J. Whereas the assessee has come up in Appeal No. 1263/83-A against that part of the order holding that appellants are liable to pay duty on yarn by including the same in the value of fabrics.
4. Taking up the appeal of the assessee, it is now settled that the duty on yarn is includible in the value of the fabrics. Therefore, there is no substance in the asses sees appeal and accordingly we dismiss the same.
5. Taking up the appeal filed by the department the main contention of the department is that under Rule 10 read with Rule 173-J, the period prescribed for recovery of duty short levied is one year. Therefore, the demand notice to that extent is not barred by limitation, whereas the counsel for the assessee contends that the period of limitation under Rule 10 is only three months. Therefore, the demands arc barred by limitation. He further contended that Rule 173-J is omitted and therefore, the proceedings under Rule 173-J cannot be continued and in support of the said contention, he relied on the judgement of Ajanta Paper Products v. Collector of Central Excise, Kanpur and Anr. reported in 1982 ELT 201 : 1982 ECR 173D (Allahabad) and Amit Processors v. UOI . He also submitted that Rule 173-J is not applicable to the present proceedings as they are working under Chapter VII-A which provides for SRP and Rule 173-J is applicable for violation of any of the provisions of Chapter VII-A. In the instant case, the charge is not that the assessee has violated any of the provisions of Chapter VII-A but they have violated Rule 49 and 52 of the Central Excise Rules. Therefore, Rule 173-J is not applicable. He also submitted that show cause notice does not indicate which provision of Chapter VII-A is violated. He also pointed out that the show cause notice does not indicate the ingredients of charge, in that there is no allegation of misstatement of value of goods. Therefore, Rule 10 is also not applicable. Consequently, the department cannot recover the duty alleged to be short levied.
6. Shri Satish Kumar, JDR appearing for the department brought to our notice an order of this Tribunal in Atma Steels Pvt. Ltd. v. CCE & C Chandigarh reported in 1984 (17) ELT 331 : 1984 ECR 1409 (Cegat SB-B) wherein it was held that the proceedings initiated with reference to a rule or provision subsisting at the time of initiation of proceedings can continue in spite of repeal or substitution of original provisions. Therefore, he submitted that the proceedings can be continued. He also submitted that Rule 173-J is applicable to a manufacturer who is working under SRP. As long as they are working under SRP Rule 173-J is applicable and the notice to show cause specifically refers to the charge against the assessee and therefore, there is substantial compliance with Rule 10 read with Rule 173-J.
7. The question therefore is whether the show cause notice is barred by limitation.
8. The show cause notices were issued on 17.7.1976 and 25.6.1977 for the periods from 1.3.1974 to 15.3.1976 and 16.3.1976 to 30.5.1977 respectively. The period of limitation provided under Rule 173-J is one year and which reads as follows:
Rule 173-J: The provisions of Rules 10 and 11 shall apply to the assessee as if for the expression three months, the expression 'one year' were substituted in those rules (Omitted on 6.8.1977)
9. We may also extract Rule 10 which is as follows:
Recovery of duties or charges short-levied, or erroneously refunded: (1) When duties or charges have been short-levied through inadvertence, error, collusion, or mis-construction on the part of an officer or through mis-statement as to the quantity, description or value of such goods on the part of the owner or when any such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded, the proper officer may, within three months from the date on which the duty or charge was paid or adjusted in the owner's account current if any, or from the date of making the refund, serve a notice on the person from whom such deficiency in duty or charge is or are recoverable requiring him to show cause to the Asstt. Collector of Central Excise why he should not pay the amount specified in the notice.
10. From a reading of Rule 10 as amended Rule 173-J it is clear that three months period of limitation is provided under Rule 10 has been enlarged by amending the same by Rule 173-J. If Rule 10 as amended by Rule 173-J is applicable then the demand from 1.3.1974 to 17.7.1975 is barred by limitation under the show cause notice dated 17.7.1976 and the demand from 16.3.1976 to 25.6.1976 is barred by limitation under the show cause notice dated 25.6.1977.
11. However, the arguments of Shri R.K. Kapoor, Advocate is that the proceedings cannot continue after the repeal of Rule 173-J. As pointed out by Shri Satish Kumar, the question was already decided by this Tribunal in Atma Steel and following the same we reject the arguments of Shri Kapoor for the assessee.
12. The next argument of Shri Kapoor is that Rule 173-J is applicable only to the violation of any rule under Chapter VII-A and since there is no violation of any rule under that Chapter VII-A Rule 173-J is not applicable.
13. We have already extracted Rule 173-J. It says for the expression three months, the expression one year should be substituted in Rule 10. It does not provide a different rule of limitation providing for situation not covered by Rule 10. Let us read Rule 10 as amended by Rule 173-J. When duties or charges have been short levied through inadvertence, error, collusion or mis-construction on the part of an officer or through mis-statement as to the quantity description or value of such goods on the part of the owner, or when any such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded the proper officer may, within one year from the date on which the duty of charge was paid or adjusted in the owner's account-current, if any, or from the date of making the refund, serve a notice on the person from whom such deficiency in duly or charges is or are recoverable requiring him to show cause to the Asstt. Collector of Central Excise why he should not pay the amount specified in the notice.
14. If we read the relevant portion of the rule for the purpose of the facts of this case it would read as follows:
short levied through mis-statement of value on the part of owner of the goods, the proper officer may within one year from the date on which the duty was paid or adjusted in the owner's account current serve a notice on the person from whom such deficiency in duty are charged is recoverable requiring him to show cause to the Asstt. Collector why he should not pay the amount.
15. From the facts narrated in the earlier paragraphs, it is clear that the assessee has not included the duty on yarn in the value of the fabrics. In other words, it is a mis-statement of the value of fabrics by owner. Therefore, it is a case covered by Rule 10 read with Rule 173-J. It appears from the above that there is no substance in the arguments of Shri Kapoor that Rule 173-J is not applicable to the facts of this case.
16. The Collector held that the demand is prima facie barred by limitation, however, he did not indicate the details. He has also not stated whether the demands falling beyond the period of three months arc barred or whether the demands falling beyond one year are barred by limitation.
17. We have now made it clear that the period of limitation applicable is one year. Therefore, the demands beyond the period of one year are barred by limitation. To this extent the order of the Collector is clarified.
18. The assessee's appeal is dismissed. The Department's appeal is disposed of accordingly.
Dt: 1.10.1992 Sd/- (S.V. Maruthi)
Judicial Member
19. Per Shri N.K. Bajpai.--While agreeing with the order proposed by learned sister, may I add a few lines to explain the procedure to be followed after issue of this order?
20. The effect of the conclusion recorded in paragraph-10 of the order is that the demands for part of the periods are time barred in both the cases. In view of this, the Assistant Collector is directed to re-calculate the liability for the period of one year in each case (as indicated in paragraph-10) giving the details of calculation and first communicate them to the appellants. In case the appellants dispute the amount, the Assistant Collector should provide them an opportunity of a hearing to explain their calculations to him. It is only after taking into account their examination that the Assistant Collector should finally quantify the amounts to be paid by the appellants in the two cases and ask them to pay up the same.