Customs, Excise and Gold Tribunal - Bangalore
Analog & Digital Systems vs Commissioner Of C. Ex., Bangalore on 5 February, 2002
Equivalent citations: 2002(80)ECC601, 2002(141)ELT711(TRI-BANG)
ORDER G.A. Brahma Deva, Member (J)
1. Collector of Central Excise Bangalore as per his Order dated 27-8-92 held that appellants M/s. Analog Digital System have contravened the Rules inasmuch as they have clandestinely cleared without payment of duty telephone call monitoring equipment and Uninterrupted Power Supply. Accordingly, he demanded duty amounting to Rs. 2,00,025/- under Rule 9(2) of Central Excise Rules, 1944 read with proviso to Section 11A of the Act. He also imposed penalty of Rs. 20,000/- under Rule 173Q of the Central Excise Rules.
2. On an appeal filed by the party, the Tribunal (South Zonal Bench at Chennai) as per Order No. 515/96, dated 18-4-96 dismissed the appeal upholding the Order passed by the Collector but reduced the penalty to Rs. 10,000/-.
3. Subsequently Misc application for rectification of mistake has been submitted against the final order of the Tribunal on the ground that the important points have not been considered. The Tribunal (South Zonal Bench at Chennai) as per its Misc. Order No. 896/99, dated 24-9-99 has rectified the Order to hear the following issues :
(a) The show cause notice was time-barred as had been submitted in para 9 of the grounds of appeal; and
(b) The show cause notice was issued by the Additional Collector who has no jurisdiction to issue show cause notice invoking the extended period under Section 11A, as during the relevant point of time only the Collector of Central Excise was competent to issue show cause notice.
4. Chennai Bench has transferred this file to Bangalore Bench and accordingly matter is posted for hearing on 23/24-1-2002. Appellants were represented by Shri Ravi Shankar learned Advocate and Deptt. was duly represented by Smt. Radha Arun, SDR.
5. At the first instance Shri Ravi Shankar proceeded to argue on all the issues as if it was an order of review and on pointing out by the Bench, Tribunal is not vested with the power of review and on going through the rectified order, he was convinced and confined to the above two issues.
6. Shri Ravi Shankar submitted that the demand was barred by time inasmuch as show cause notice has been issued on 8-1-92 that too after more than 9 months of the search and seizure of documents which took place on 27-3-91. He said that show cause notice was required to be issued within six months from relevant date as required under Section 11A of the Act. Hence the notice is barred by time under Section 110 of the Customs Act read with Section 12 of the Central Excise Act and therefore entire demand is barred by time having been issued beyond the period of six months. In support of his contention he referred to the decision of the M.P. High Court in the case of Vilayat Hussain v. U.O.I, reported in 1997 (95) E.L.T. 19 and the decision of the Tribunal in the case of Pioneer Alloy Castings Ltd. v. CCE, Hyderabad, 1997 (95) E.L.T. 72 and Amal Products Ltd. v. CCE, Vadodara, 2002 (139) E.L.T. 230 (T).
7. Further he said that the Central Excise Act did not define the word 'Collector'. The expression 'Addl. Collector' cannot be equated to that of 'Collector'. As regards jurisdiction he said that Addl. Collector was not competent to issue notice invoking larger period. Since the notice has been issued by him, notice as such is ab initio void. He said that show cause notice was required to be issued by the Collector for the relevant period i.e. prior to 14-5-92 and not by any other Officer, as it was held in the case of CCE v. ONGC, 1998 (103) E.L.T. pg 3. In that case it was clearly held that before the amendment to Section 111(A) (1992 amendment) under the proviso to that Section, the power to issue the show cause notice was required to be exercised by the Collector when the ingredients in that proviso were invoked in the notice. In support of his contention that when the intention of the legislature in the proviso to Section 11A was to confer a power on the Collector, the power had to be exercised only by him in the manner provided in the Act, he referred to the decision" of the Supreme Court in the case of A.K. Roy and Others v. State of Punjab, AIR 1976 S.C 2160 , Hukumchand Shyamlal v. U.O.I., AIR 1976 S.C. 789 and Raza Textiles Ltd., 1973 (87) ITR 539. He said that this principle has been enunciated even in the CBEC Circular, dated 14-5-92 in No. 3/92-CX. 6 in F. No. 208/26/92-C.EX. 6. Even after the amendment to Section 11A, it spells out that Additional Collectors also will not henceforth issue demands answerable to them under proviso to Section 11A involving allegation of fraud, suppression etc.
8. Smt. Radha Arun countering the first issue submitted that according to Section 110 of the Customs Act, the goods seized should be returned to the party if show cause notice is not issued within six months of seizure. Section 110 envisages return only of goods, and not of the documents and goods which can be seized in the course of a search under Section 105 of the Customs Act, and in this case only documents were seized. Referring to the judgment of the Supreme Court in the case of CC v. Charan Das Malhotra reported in 1983 (13) E.L.T. 1477 she said that investigation can continue even after return of the seized goods. In the instant case, since the goods were not seized, demand is not barred by time. She also said that the Larger Bench of the Tribunal in the case of Nizam Sugar reported in 1999 (114) E.L.T. 429 has clearly held that the date of knowledge of the Department is not relevant date under Section 11A for computing the period of limitation, which has to be determined in terms of Section 11A itself. It was contented that a period of six months from the date of seizure should be artificially construed and laid down as a period of limitation for issue of notice is not acceptable.
9. As regards jurisdiction, she submitted that 'Collector', includes 'Addl. Collector' as defined under the Central Excise Rules. The plea of the assessee that 'Collector' in Section 11A could not include 'Addl. Collector during the period of December, 89 to May, 1992, and notice alleging suppression of facts had to be issued only by the Collector in terms of Section 11A has been urged before the Tribunal in a series of cases, and Tribunal has been consistently taking the view that 'Collector' includes 'Addl. Collector' and Addl. Collector was competent to issue show cause notice under proviso to Section 11A for the relevant period and in support of her contention she referred to the following decisions.
(1) 1999 (107) E.L.T. 609, Blue Star v. CCE, Madurai (Para 3) (2) 1998 (102) E.L.T. 182 (Tri.-Delhi), Northern Mineral Pvt. Ltd. v. CCE, Delhi (3) 1998 (98) E.L.T. 375 (Tri.-Delhi), Shrift Chemicals v. CCE, Ahmedabad (Paras 11 and 12) (4) 1997 (95) E.L.T. 503 (Tri.-Delhi), Maharashtra Steel Industries v. CCE, Bombay (Para 8) (5) 1997 (93) E.L.T. 527 (Tri.-Madras), Gopi Engg Works v. CCE, Madras.
10. We have carefully considered the matter. Whether show cause notice dated 8-1-92 was barred by time and jurisdiction of Addl. Commissioner in issuing notice invoking larger period under Section 11A are the issues to be considered herein. It was the contention of the party that, show cause notice was barred by time since it was issued after nine months from the date of search and seizure. On the other hand it was submitted by the Department that date of knowledge of the Department is not relevant date under Section 11A for computing the period of limitation as it was held in the case of Nizam Sugar (supra) by the Larger Bench. It was urged on behalf of the assessee that even subsequent to the decision of the Tribunal in the case of Nizam Sugar, the Bench consisting of 5 members in the case of Dura Tex Laboratories v. CCE [2002 (139) E.L.T. 88 (T) = 2000 (37) RLT 632], have given the view that extended period is not available and demand should be within six months where information is already available with the department. Further in the case of Mutual Industries Ltd. v. CCE, 2000 (117) E.L.T. 578, again by a Bench of 5 members wherein it was held that Department had slept for years over the matter and accused assessee of suppression when information was known to the Department. We find that decision in the case of Dura Tex Laboratories Pvt. Ltd. rendered by the Tribunal is not of five members as urged by the appellant's Counsel but of three members that too due to difference of opinion between the two members, matter is referred to the third member. The view expressed by the two members was prior to Nizam Sugar and furthermore Nizam Sugar has not been considered at the time of passing the final Order. Similarly, the conclusion arrived at by the Tribunal in the case of Mutual Industries Ltd., was in a different context since the assessee has filed classification list and other documents and the said ratio of the decision is not applicable to the facts of this case. We take note of the fact that Nizam Sugar Mills rules the field, since it has not been reversed by the Apex Court nor view expressed contrary to the above decision by the Supreme Court subsequent to that decision. In view of the jurisdictional discipline, following the ratio of the decision of the Larger Bench of the Tribunal in the case of Nizam Sugar, we are unable to accept the plea of the party on the point at issue. Accordingly appellants fail on this issue.
11. Next, it was contended by the party that show cause notice for demand of duty under Section 11A can be issued only by the Collector concerned during the period and not by Addl. Collector- It was the contention of the Revenue that definition of the 'Collector' in the Central Excise Rules includes 'Addl. Collector' and there is no contrary definition of the 'Collector' in the Act.
12. During the relevant period, 'Collector' includes 'Addl. Collector' and the relevant definition under Rule 2 is as under :
"2. Definition.....
(i) .....
(ii) "Collector" means (A).....
(B).....
And includes an Additional Collector and any officer specially authorized under Rule 4 or Rule 5 to exercise throughout any State or any specified area therein all or any of the powers of a Collector under these rules:"
13. The question for consideration is as to whether the definition in the Rules can be extended to the Act particularly for the purpose of Section 11A of the Act. It was the contention of the party that the definition of 'Collector' in the Rules can be only for the purpose of the Rules and not for the Act, more so when the Parliament in its wisdom has chosen only the Collector to adjudicate cases between 27-12-1985 to 14-12-92 under proviso to Section 11A. The Counsel strongly relied upon the decision of the Supreme Court in the case of ONGC (supra) in support of his contention that only Collector was required to issue a notice under Section 11A. In that case it was held that show cause notice was required to be issued by the Collector under Section 11A and Superintendent is not competent authority since Superintendent has issued a notice in that case. Whether 'Collector' includes 'Addl. Collector' or not was not an issue nor considered in that case. Relying upon the various decisions, it was urged that rules cannot be framed which do not carry out the purpose of the Act and cannot be in conflict with the same and rule which is inconsistent with the Act, which is repugnant to the provisions of the Act would be void. Whether rule is in conflict with the provisions of the Act is a question to be considered herein. The contention herein is that definition in the rules if any is meant to remain only within the confines of the rules and cannot be stretched for construing the provisions of the Act and emphasis is on the status of the rules as a piece of supporting legislation and not being capable of equated with the statute itself. It was also argued that it was clarified by the Board by issuing Circular on 14-5-92 that in spite of the amendment, the Collector was required to issue show cause notice. Here we are not concerned with the said clarification since it was issued subsequent to the period in question and clarification is only prospective in nature.
14. We must say at the outset that any argument which has the effect of reaching that the rules as an exercise in delegated legislation cannot be accepted insofar as they according to the party go contrary to the provision of the Act, cannot be entertained. In fact we do not feel it necessary to dwell at length on this aspect because, the Tribunal being itself a creature of the statute, is not a forum where question such as legitimacy or vires of the rules can be raised nor we consider ourselves competent to go into these questions. However, the questions having been raised we thought it relevant to see as to whether there is really any inconsistency between the Act and the Rules or are the rules really repugnant to any of the provisions of the Act and on cumulative reading of the provisions of the Act and its scheme, we find there is none so far as the controversy before us is concerned.
15. It is settled proposition that statutory rules are always considered as part of an enactment, which provides for framing of the same, so much so that they have been given the status of 'law' by even the Constitution of India inasmuch as Article 366(10) defines 'existing law' to mean : "any law, ordinance, order, bye-law, rule or regulation passed or made before the commencement of this Constitution by any Legislature, authority or person having power to make such a law, ordinance, order, bye-law, rule or regulation". Article 13 further defines 'law' in Sub-section (3)(a) to include any 'ordinance, order, bye-law, rule, regulation, notification, custom or usage having in the territory of India the force of law'. The position is thus beyond the pale of any controversy that statutory rules have the status of a law, and are entitled to same consideration; the only reservation being that they should not be repugnant to or inconsistent with the statute. Finding no such inconsistency between the Act and the Rules which are now before us, we are unable to accept the argument that the rules cannot be read as part of the Act or cannot be accorded the same status, as the provision of the Act.
16. We further find that these time-honoured principles, regarding the position of the statutory rules, finds endorsement from (a) number of au-thorities of the Supreme Court, one of which is reported as AIR 1961 SC 751 in the case of State of U.P. and Ors. v. Babu Ram, wherein it has been laid down in unequivocal terms that rules made under a statute, must be treated for all purposes of construction or obligation, exactly as if they were in the Act, and are of the same effect as if contained in the Act.
17. To the same effect is the view of Madhya Pradesh High Court as expressed in the case of Gwalior Rayon Mfg (Wvg) Co. v. Union of India and Ors. reported in 1982 (10) E.L.T. 844, which was dealing with the Subject Act and the rules, and the principle laid down was that:
(a) " The rules framed under the Act, or a part thereof, has to be construed as such for all purposes, and therefore rules made under a statute must be treated as if they were in the Act itself, both for the purposes of construction and also for the purpose of obligation".
In that case, rules were held to be having an equal status, as of the provisions in the Act, so much so that when Rule 10 was omitted from the rules with effect from 17-11-1980, and was replaced by Section HA in the Act simultaneously, it was held that the same provisions continued and what was previously one part of the Act, had subsequently become another part of the same Act, and there has been complete continuity of the provisions. We, therefore, are unable to subscribe to the view that the definition in the rules will enjoy any inferior status, qua the provisions of the Act.
18. Under the rules, the Collector has been defined with reference to the territorial jurisdiction. Under Rule 2(ii) of the Rules, the definition of 'Collector' apart from defining what a Collector is also contains an inclusive clause. The inclusive part of the definition includes within the definition of Collector an Additional Collector. It also includes any Officer specially authorized under Rule 4 or 5 to exercise throughout any State or any specified area therein all or any of the powers of a Collector under those rules. The rules are to be read as part of the Act. As observed by the High Court of Delhi in the case of Duncan Agro Industries Ltd. v. Union of India [1989 (39) E.L.T. 211 (Del.)]/ rules made under a statute have to be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act. The Hon'ble High Court has further added in Para 24 of their judgment that every provision of a statute has to be given full effect to. The Court cannot place a construction on a provision which would tend to make it redundant. On the contrary, the Court's duty is to give effect to all portions of a statute. One of the principles for construction is that a statute ought to be so construed that if possible no word shall be superfluous, void or insignificant.
19. In the case of Bansal Industrial Gases (Bihar) Ltd. v. Collector of Central Excise, 1988 (37) E.L.T. 347 (Cal.) decided by the High Court at Calcutta, the question of law involved was whether the Additional Collector, Central Excise is an authority lower in rank to the Collector of Central Excise, or not. In that case the show cause notice had been issued by the Additional Collector of Central Excise, and the Adjudication Order had also been passed by the Additional Collector of Central Excise.
20. The Hon'ble High Court observed that when 'Collector' has been defined extensively, and when it was provided that the word 'Colleetor' includes Additional Collector it must be held that the words "Additional Collector" are included within the definition of the word "Collector'. It was added that in order to establish that the post of Additional Collector is subordinate in rank to the word "Collector', it must be shown from the Act and the rules framed thereunder that the Additional Collector had been conferred with some specific powers and/or under the provisions of the Act, it could be found out that the Additional Collector is inferior in rank and was to work under the control and supervision of the Collector. When the definition made it clear that the Collector includes Additional Collector and when other rules do not at all refer to the words 'Additional Collector' anywhere in the Act and the rules framed thereunder, it must be held that the meaning is clear and that word 'Collector' includes 'Additional Collector'. In the rules, reference is there to the expressions 'Collector', 'Deputy Collector', 'Assistant Collector', 'Inspector' but there was no reference to the words 'Additional Collector' inasmuch as the word 'Collector;' includes the 'Additional Collector'.
21. According to the Hon'ble High Court, the decision taken by the Additional Collector means a decision taken by the Collector for the purposes of appeal and the authority competent to hear the appeal against the Order of the Collector is only competent to hear and dispose of the appeal from the decision of the Additional Collector. The Hon'ble High Court clarified that the post of Additional Collector comes within the definition of the word 'Collector' and the Additional Collector had to discharge the power and function of a Collector and accordingly appeal would lie to the Appellate Tribunal under Section 35B of the Act.
22. At this stage, it may be mentioned that under the Central Excise (4th Amendment) Rules, 1992 [Notification No. 11/92-C.E. (NT), dated 14-5-1992]. Rule 2 of the Central Excise Rules have been amended and for the words "and includes an Additional Collector" carry after Clause (B) the words, letters and figures "and includes an Additional Collector except for the purposes of Chapter VIA of the Central Excises and Salt Act, 1944" have been substituted. Chapter VIA of the Act relates to appeals.
23. The purpose of this amendment is that now the appeal against the Order of the Additional Collector will lie to the Collector (Appeals) and not to the Tribunal.
24. The Hon'ble High Court of Karnataka in the case of Engineering Systems Pvt. Ltd. v. U.O.I. reported in 1992 (57) E.L.T. 12, observed that 'Additional Collector' is 'a Collector' under the rules and that he may exercise the power of a Collector notwithstanding any specific conferment of power by the Board in terms of Section 11A of the Act or any other provisions of the Act, regarding the duties and functions required to be performed by the Additional Collector, it was held that the Orders passed in terms of provisions of Section 11A of the Act by the Additional Collector were passed by an authority who had competent jurisdiction and, therefore, they did not suffer from want of jurisdiction. In that context it was also observed that the golden rule of construction construing the rules as it is and to give a proper meaning and to give effect to the provisions of the Act and the rules made thereunder.
25. The Tribunal has been consistently taking the view that 'Collector' includes 'Additional Collector' as per the definition under the Central Excise Rules and 'Additional Collector' was competent to issue show cause notice under proviso to Section 11A for the relevant period in the cases referred to and relied upon by the DR. This view has been expressed by the Larger Bench in the case of S. Kumar, 1983 (13) E.L.T. 1057 and this view has been affirmed in the subsequent cases. We find that definition of 'Collector' in the rules remained undisturbed in the statute. Neither it was deleted nor amended contrary to that either in the Act or in the respective rules.
26. The peculiar features of the Central Excise Act further strengthen the view that the setting of this Act, rules were meant to enjoy a very crucial and significant position. A reading of the Act reveals that it only provided a broad framework and almost all details, and very significant ones at that time were left to be filled up by the rules, came into force along with the Act, so much so that not only none of the officers were defined in the Act and their designations were left to be provided either by the Board or by means of an exercise of powers under the rules, but even the basic matter of levy and collection of duty as contemplated by the charging section, was to be determined, by the rules as indicated by Section 3.
27. It is therefore, difficult to comprehend that when rules have been given such immense scope and basic functions, how could they be even urged to be considered inferior or secondary to the Act. We have no hesitation in saying that apart from the general proposition that statutory rules are part of the Act, in the peculiar scheme of Central Excise Act, the rules are certainly supplementary as well as complimentary to the provisions of the Act and are to provide for saving which is not covered by the provisions of the Act and the definition of 'Collector' being one of such omissions, the one given in the rules is to prevail as having been supplied by them. The definition of the 'Collector' in the Central Excise Rules includes 'Addl. Collector' and there is no contrary definition of the Collector in the Act. Therefore the expression 'Collector' in Section 11A of the Act would also include the 'Addl. Collector'. Thus, the plea taken on behalf of the appellants that the Addl. Collector had no jurisdiction to issue show cause notice is hereby rejected. The party fails on this issue also.
Thus this appeal is disposed of in the above terms.