Customs, Excise and Gold Tribunal - Mumbai
Mafatlal Industries Ltd. vs Collector C. Ex. And Cus. on 27 December, 1989
Equivalent citations: 1991ECR65(TRI.-MUMBAI), 1990(49)ELT115(TRI-MUMBAI)
ORDER R. Jayaraman, Member (T)
1. The aforesaid appeals arise out of the orders of the Collector (Appeals) listed above against each. All these appeals arise out of the common issue excepting some minor variations which are discussed individually and hence they were heard together and we propose to dispose of through this common order. It is needless to elaborate the facts of the case in detail. The appellants manufacture cotton yarn, non-cellulosic spun yarn and cellulosic yarn and they consume these varieties of yarn captively in the manufacture of fabrics. They had been paying duty on these yarn captively consumed in the manufacture of fabrics till the Delhi High Court in its judgment dated 16-10-80 reported in 1981 ELT 887 allowed the Writ Petition challenging the levy of Central Excise duty on yarn captively consumed in the manufacture of fabrics. Thereafter, the appellants stopped paying duty on yarn captively consumed. The department have taken up the matter by way of SLP before the Supreme Court [It is reported to be still pending). The Government carried out an amendment in Rules 9 & 49 of the Central Excise Rules by way of Notfn. No. 20/82-C.E., dated 20-2-1982 to the effect that for the purpose of removal, goods removed for captive consumption should also be deemed to be removal. This Notification dated 20-2-1982 was given retrospective effect through Section 51 of the Finance Act, 1982, which received the President's assent on 11-5-82. The retrospective validity of Section 51 of the Finance Act was challenged before the Delhi High Court and later before the Supreme Court and both the Delhi High Court and the Supreme Court upheld the validity of Section 51 of the Finance Act but held it subject to the provisions of Section 11-A of the Central Excises & Salt Act, 1944. The Supreme Court judgment is reported in 1989 (23) ECR 178 (SC) in the case of M/s. J.K, Spinning & Wvg. Mills Ltd. Following the ratio of the judgment in M/s. J.K. Spinning & Wvg. Mills Ltd. the Supreme Court also vacated the interim stay and finally disposed of the writ petitions filed by these appellants with the directions that in cases where notices under Section 11-A of the Central Excises & Salt Act have been served and the claims do not cover for any period beyond six months from the respective dates of the notices, the department would be entitled to realise the dues. The Supreme Court also directed that, in cases of dispute as to whether the notices under Section 11-A had been issued or not, the Asstt. Collector will decide the issue. The Supreme Court's order was that in cases where notices are yet to be issued, the department would be entitled to do so but the same should not go beyond six months. The Supreme Court also directed for deciding this limited question by giving suitable opportunities to the appellants before passing the orders. In pursuance of this direction, the Asstt. Collector, after complying with the principles of natural justice passed orders confirming the demands issued on the basis of the show cause notices, against which appeals were filed before the Collector (Appeals). The Collector (Appeals) passed the aforesaid impugned orders rejecting the appeals and confirming the demands. The present appeals are against the aforesaid orders of the Collector (Appeals).
2. The major issue to be decided in all these appeals is whether the demands issued are valid and are within the time limit prescribed under Section 11-A. In all these cases, the undisputed facts are that notices have been issued before 20-2-1982 under Section 11-A within the period of six months, and only in the case of M/s. Rohit Mills, 3 show cause notices are contested as beyond six months for the month of June, 1982 involving a sum of Rs. 4,29,576, where the demand made for the month of June, '82 was beyond the period of six months from the date of show cause notice dated 5-1-1983. In all these three cases of the appellants M/s. Rohit Mills Ltd. (Appeal No. E/769/89) RT-12 returns were filed on 3-12-1982 and hence the demands for the month of June 1982 covered by the show cause notices dated 5-1-1983 are stated to be beyond the period of six months. In the case of appellants M/s. Ahmedabad Advance Mffls (A.No. E/366/89-Bom) and M/s. Maheshwari Mills Ltd. (A.No. E/367/89-Bom) contentions were raised that there were no regular notices under Section 11-A for covering certain periods, but endorsements were made on the RT-12 at the time of completion of the assessment pointing out the short-levy. The disputed amount in the case of M/s. Maheshwari Mills Ltd. is Rs. 7,49,357.22 and Rs. 8,23,180.60 in the case of M/s. Ahmedabad Advance Mills. Barring the cases in the aforesaid 3 appeals, where the demands during the disputed period are to be considered separately, in all the other cases, the admitted position is that the demands have been issued within a period of six months as laid down under Section 11-A.
3. All the aforesaid appellants moved the stay applications before this Bench on various dates. The Bench at that stage, dispensed with the pre-deposit and listed the appeals for hearing. When these appeals were listed for hearing, the learned advocate Shri S.I. Nanavati, on behalf of the appellants, admitted that he has gone through the judgment of the Special Bench 'D' of the Tribunal in the case of M/s. J.K. Spinning & Wvg. Mills Ltd. and agreed that the ratio of the said decision given by the three Members Bench would be binding on this Bench. However, he has come to know, that the aforesaid decision of the Special Bench 'D' has been challenged before the Supreme Court by M/s. J.K. Spinning & Wvg. Mills Ltd. and the matter regarding admission and stay is likely to come up in the near future. In view of this he requested for adjourning the final hearing of the appeals to the month of November 1989 by which time the position will be known. He also submitted that the appellants would be willing to make reasonable deposits. He indicated that in all the cases certain amounts are payable which relate to show cause notices issued after 20-2-1982, where there would not be any dispute and these amounts would be deposited and with regard to the balance, Bank Guarantee furnished would be continued. Based on his submission and after taking the concurrence of the Sr. Departmental Representatives, an interim order was passed by this Bench, directing the appellants to make the deposits ordered therein, and finally appeals were listed for hearing in the month of November '89. The appellants made a request for adjournment, which was also considered and-granted and the appeals were posted for final hearing on 12-12-1989.
4. In the case of M/s. Rohit Mills Ltd. the appellants moved a stay application along with their appeal on 12-12-1989. The said appeal was also heard waiving the pre-deposit, since the issue is identical. During the hearing on 12-12-1989, Shri Nanavati, the learned advocate along with Shri Bhatt appeared for hearing. Shri Nanavati submitted that the SLP filed by M/s. J.K. Spinning & Wvg. Mills against the decision of the Special Bench 'D' of the Tribunal at Delhi reported in 1989 (23) ECR 385, has been admitted by the Supreme Court and certain interim direction has been given. He, however, could not produce any copy of the interim direction nor could he categorically confirm about the direction given in that case. He also could not state whether the decision of the 'D' Bench has been stayed by the Hon'ble Supreme Court. He further pleaded that there are certain distinguishing features on facts in these appeals vis-a-vis the case decided by the 'D' Bench of the Tribunal. In view of the aforesaid position, we are of the view that there is no purpose in postponing the final hearing of these appeals and expressed that since he contends that the facts of these appeals are distinguishable from the facts, on the basis of which decision has been given by the 'D' Bench, the appeals are to be beared without any further adjournment. Thereupon, Shri Nanavati agreed to proceed with the arguments on the appeals.
5. Shri Nanavati, arguing on the merits of the appeals, made the following common arguments in regard to all the appeals. First he contended that in the case decided by the 'D' Bench of the Tribunal at Delhi cited supra, notices were issued by the Department on 4-5-1981 followed by 3 addenda dated 5-1-1981 under Section 11-A of the Central Excises Act demanding duty on yarn captively consumed, which were challenged before the Delhi High Court. The Delhi High Court by its interim order dated 12-8-1981 granted stay for further proceedings pursuant to the notices issued by the department dated 4-5-1981 followed by the addenda dated 5-1-1981. The department, after the enactment of the Finance Act, 1982, issued further notices invoking Section 51(2)(d) of the Finance Act, for the same periods as were covered by the notices dated 4-5-1981. In the absence of supersession of the earlier notice dated 4-5-1981, issued under Section 51 of the Finance Act, the 'D' Bench of the Tribunal held that the demands issued are sustainable and are valid within the purview of Section 11-A. In regard to the present appeals, the admitted position is that no notices invoking Section 51 of the Finance Act, 1982 have been issued. The Department had issued notices under Section 11-A of the Central Excises Act prior to 20-2-1982. Hence, the facts are distinguishable. He, however, stated that the appellants are not pressing for relief in respect of any demand for which show cause notices have been given on or after 20-2-1982 covering the period of six months from the date of such notices provided the said demand notices also covered the period after 20-2-1982. Elaborating on this point further, he stated that because the Supreme Court has upheld the validity of Section 51 amending Rules 9 & 49 retrospectively, he cannot press for any relief in respect of such demands issued on or after 20-2-1982 covering the period of six months from the date of such notices and the demand period also is in relation to the period after 20-2-1982. He, therefore, contended that his arguments are related only to the demands which have been issued prior to 20-2-1982, though purported to have been made under Section 11-A of the Central Excises Act.
6. Shri Nanavati also took, us in detail through the Supreme Court judgment in the case of M/s. J.K. Spinning & Wvg. Mills Ltd. particularly with reference to paras 30, 31, 32 and 33 thereof and argued that since the cause of action has arisen, even as per the legal concession made by the department through the Attorney General, is only on or after 20-2-1982, no valid demands could have been issued prior to the date 20-2-1982. All notices issued prior to that date covering the period prior to 20-2-1982 are ab initio void and they cannot be validated and the department has not taken any action by issuing further notices invoking Section 51 of the Finance Act to make them valid for purpose of recovery. In other words, he contended that soon after the enactment of the Finance Act, the department ought to have issued notices invoking Section 51 of the Finance Act to validate the notices already issued during the period prior to 20-2-1982. He also contended that prior to the amendment, the department cannot issue notices under Section 11-A because there was no removal of yarn as per the meaning of the unamended Rules 9 & 49, since no physical removal has taken place from the place of manufacture but such yarn has been captively consumed in the manufacture of fabrics. He also submitted that there were two criteria for levying duty prior to the amendment of Rules 9 & 49 :
(i) The product should be excisable;
(ii) There should have been a physical removal from the place of manufacture.
Shri Nanavati does not dispute the excisability of the yarn but the dispute was with regard to the physical removal of the goods in terms of the unamended Rules 9 & 49. The Supreme Court in the aforesaid case did not give a final verdict on the erstwhile Rules 9 & 49. The SLP filed against the Delhi High Court judgment on unamended Rules 9 & 49 is still to be decided. In the circumstances, it has to be held that the department had not legally issued any notice in terms of Section 11-A which also refers to removal. In view of this position, the notices issued prior to 20-2-1982, being ab initio void, cannot be enforced against them without a proper notice under Section 51(2)(d) of the Finance Act. He also contended that when such notices have been issued as per the Supreme Court's direction, they should be subject to the provisions of Section 11-A of the Central Excises Act and they could cover only a period of six months from the relevant date as laid down under Section 11-A. He also contended that since the Supreme Court was also of the same view as that expressed by the learned Attorney General with regard to the cause of action arising on or after 20-2-1982, they did not specifically comment on this, though they did not accept the contention of the learned Attorney General that the demands could be issued even for a period beyond six months. He also contended that the decision of the 'D' Bench of the Tribunal is a decision on the validity of the second notice issued invoking Section 51 of the Finance Act. In the case of these appellants, no such notice has been issued. Hence the 'D' Bench decision is not helpful for deciding these appeals.
7. Shri Nanavati also contended that the Karnataka High Court Judgment relied upon by the 'D' Bench reported in 1986 (24) ELT 507 is not appropriate because even there, the issue to be decided was Rules 9 & 49 after amendment. The Karnataka High Court has, no doubt, observed that Rules 9 & 49, even before amendment, contemplate levy of duty on removal of yarn captively consumed. The decision of the Karnataka High Court is not applicable to this case because they have specially gone by the judgment of the Delhi High Court and obtained a verdict in their favour. Hence in their case, the issue is to be decided only with reference to the Supreme Court judgment in M/s. J.K. Spinning & Wvg. Mills Ltd. case and also in the context of the directions given by the Supreme Court, while disposing of their writ petitions. He finally pleaded that unless a notice has been given within a period of six months under Section 11-A on or after 20-2-1982, demands are not enforceable. He also pleaded that with regard to 4 appeals (A. Nos. E/363/364, 368 and 369/89) of M/s. Mafatlal Industries Ltd.; 1 appeal of M/s. Ahmedabad Advance Mills (A. No. 366/89) and 1 appeal of M/s. Maheshwari Mills Ltd. (A. No. 367/89), the authorities while calculating the demands have not taken into account the export rebate, which they are entitled in respect of duty paid on yarn contained in the fabrics exported and to that extent the demand is required to be reduced. He also contended that in the case of M/s. Ahmedabad Advance Mills and M/s. Maheshwari Mills Ltd. (A. Nos. E/366/89 & E/367/89) there are no regular demands for certain periods. Only endorsements have been made on RT-12 returns. In the case of M/s. Ahmedabad Advance Mills for the period from 1-1-1983 to 15-3-1983, only RT-12 endorsements have been made pointing out non-recovery of duty to the extent of Rs. 8,23,180.60 in toto. In the case of M/s. Maheshwari Mills Ltd. (A. No. 367/89) it was submitted by him that for the period from 1-12-1982 to 15-3-1983 endorsements have been made on RT-12 in similar fashion covering a total duty amount of Rs. 7,14,998.40. He contended that the aforesaid endorsements on RT-12 returns without a valid notice issued under Section 11-A cannot be enforced against them. For any non-payment or short payment, Section 11-A is the only machinery provided. There is no provision either in the Act or in the Rules to recover the demands by the department. He, therefore, contended that mere endorsements on RT-12 cannot be said to be a valid notice tenable in law and this cannot be construed a demand as per Section 11-A. In this context he cited the judgment of the Supreme Court reported in 1988 (38) ELT 573 (SC) in the case of Kosan Metal Products Ltd. He also referred to the judgment of the 'D' Bench of the Tribunal in the case of M/s. J.K. Spinning & Wvg. Mills Ltd. in paras 68 to 70 thereof. He also made the citation reported in 1989 (39) ELT 617 (Tri), in the case of Indian Iron and Steel Co. and 1978 ELT (J 471) in the case of Good Shephered Rubber Co.
8. In the case of M/s. Rohit Mills Ltd. (A. No. E/769/89) he contended that 3 show cause notices were beyond six months in respect of the month of June. 1982. RT-12 for the month of June '82 have been filed on 3-12-1982, whereas the notices have been issued on 5-1-1983. Hence the demands for the month of June 1982 are barred by time and the total amount of Rs. 4,29,576 cannot therefore be enforced against them. He also contended that in the case of this appellant, they had paid duty on waste yarn, which has been cleared out of the factory and the demands confirmed against this appellant also include the duty element on such waste yarn. Hence, he sought for direction to exclude the duty paid on waste yarn.
9. Heard Shri Mondal. Before proceeding to advance his argument on behalf of the department, he summed up the contentions raised by the appellants as below:
(i) Show cause notices issued prior to 20-2-1982 are ab initio void. Hence, they are not to be taken into account;
(ii) These show cause notices issued prior to 20-2-82 are required to be validated by further show cause notices after amendment; and
(iii) Demand raised on RT-12 return is not a demand at all without a proper notice under Section 11-A.
10. Shri Mondal briefly described the background giving cause for amendment of Rules 9 & 49. He also took us through the relevant portion of the judgment of the Karnataka High Court reported in 1986 (7) ECR137 in the case of M/s. The Davangere Cotton Mills Ltd. wherein, the Karnataka High Court has held that Rules 9 & 49 even prior to the amendment contemplate levy and collection of duty on yarn captively consumed in the manufacture of fabrics. He also referred to para 47 of the aforesaid judgment to point out that the High Court had held that limitation is not applicable in such a case, where the parties have stayed the proceedings of collection by resorting into litigation. He also referred to the Supreme Court judgment in J.K. Spinning & Wvg. Mills Ltd., and submitted that the Supreme Court have upheld the retrospective amendment to Rules 9 & 49. He took us through the relevant portion of the Section 51 of the Finance Act and argued that the notices issued prior to 20-2-1982 are deemed to be valid as per the provisions of that Section. He also pointed out that the Supreme Court have not accepted the contentions of the Attorney General. He particularly referred to paras 30, 31, 32 and 33 of the judgment of the Supreme Court. He pointed out that in terms of the Supreme Court judgment the arguments of the learned Attorney General on the question of non-applicability of Section 11-A and that the cause of action has arisen only on or after 20-2-1982, have not been accepted by that Court. He, therefore argued that it is immaterial if the show cause notice is issued prior to or subsequent to 20-2-1982. According to the Supreme Court's judgment in J.K. Spinning & Wvg. Mills Ltd. case, the notices are to be issued under Section 11-A and they are to be validated within the time limit of six months from the relevant date as laid down under Section 11-A. He also contended that the distinction made out between the 'D' Bench of the Tribunal's decision and the present appeals is only imaginary and does not have any real basis. He also contended that even assuming that the notices issued prior to 20-2-1982 were void, they become automatically valid because of the deeming provisions made under Section 51 of the Finance Act, 1982. He also referred to paras 34 & 35 of the 'D' Bench of the Tribunal's judgment in J.K. Spinning & Wvg. Mills Ltd. case, which according to him will totally demolish the arguments of the appellants.
11. On the question of demands raised on RT-12 returns, Shri Mondal contended that any decision or order passed under the Central Excises Act or Rules exercising the quasi-judicial function is an adjudication order. It is a well settled law that the assessment on RT-12 returns is a quasi-judicial order and hence it is appealable. There is, therefore, no need to issue show cause notice under Section 11-A. The appellants could have gone in appeal against the assessment order before the competent authority. He also cited the judgment of the Bombay High Court in Swan Mills Ltd. reported in 1989 (25) ECR 18 (Bom) wherein, the Bombay High Court have clearly held that Section 11-A notices were redundant, where the amounts were stayed by the Court and the assessments have been made pointing out the duty recoverable and the endorsement of the short collection made under Rule 173(1). The facts of these appeals are more or less identical, where the amounts have been stayed by the orders of the Court and endorsements have been made by the proper officer, while completing the assessment pointing out the non-collection of the amounts on account of the orders of the High Court. He also pointed out that the Bombay High Court, in the facts and circumstances of the case, have distinguished the Supreme Court judgment in Kosan Metal Products cited by the other side.
12. Shri Arya, while adopting the arguments of Shri Mondal, also contended that no show cause notice is necessary under Section 11-A. In this context, he cited the decision of the Calcutta High Court reported in 1989 (42) ELT 462 and also 1989 (43) ELT 609 (Punjab and Haryana).
13. Shri Bhatt, the learned advocate on behalf of the appellants in reply maintained that the contention of the learned Attorney General about the cause of action has not been negatived by the Supreme Court specifically. He also maintained that the theory canvassed by the Attorney General is not contrary to the provisions of Section 11-A, since Section 11-A also talks of removal. He also maintained that Section 51(2) does not validate past action of the department automatically. Merely passing of a legislation does not vest the right. Some positive action on the part of the department is called for in pursuance to that legislation. He also contended that the Bombay High Court in Swan Mills Ltd. case cited by the other side has not properly distinguished the facts of the case before the Supreme Court in Kosan Metals Products. Hence, the Supreme Court's decision is to be followed, especially when that Court has finally directed the department to decide on the notices issued in the context of Section 11-A of the Central Excises Act in regard to these appeals.
14. After hearing the detailed arguments of Both sides, we propose to identify the following major issues to be decided in disposing of these appeals:
(i) Whether the notices issued under Section 11-A prior to 20-2-1982, can be held to be ab initio void and hence cannot be acted upon?
(ii) Even assuming that they are void, can Section 51(2) of the Finance Act, 1982 be construed to validate the notices automatically or whether further notices are required to be issued invoking Section 51(2)(d) of the Finance Act for acting upon the earlier notices?
(iii) Whether endorsements on RT-12 returns pointing out the amount of duty not collected because of the writ petitions filed by the appellants, could be construed to be the notices of demand for the purposes of Section 11-A of the Central Excise Act?
15. Regarding issue at Sr. No. (i) above, the argument of the learned advocate was that the cause of action has arisen only on and from 20-2-1982 - the date on which Rules 9 & 49 were amended. The learned Attorney General, while arguing the case of J.K. Spinning & Wvg. Mills Ltd. has also considered this position and contended that the cause of action for the excise authorities to demand excise duty in terms of the amended provision arose on that date viz. 20-2-1982. The Supreme Court has accepted this legal proposition. Hence the notices issued prior to 20-2-1982, are ab initio void and cannot be acted upon.
16. We have carefully considered this argument, but are unable to accept the same for the following reasons :
Firstly, the Supreme Court have not accepted the arguments of the learned Attorney General. The arguments of the learned Attorney General cannot be construed as conceding the legal position, which was accepted by the Supreme Court. Referring to the judgment of the Supreme Court, while dealing with the arguments of the learned Attorney General, the Supreme Court in para 33 thereof have observed as below:
"There is no provision in the Act or in the Rules enabling the Excise Authorities to make any demand beyond the periods mentioned in Section 11-A of the Act on the ground of the accrual of cause of action. The question that is really involved is whether in view of Section 51 of the Finance Act, 1982, Section 11-A should be ignored or not. In our view Section 51 does not, in any manner, affect the provision of Section 11-A, of the Act."
17. In para 31, the Supreme Court have observed thus :
"We are unable to accept the contention of the learned Attorney General that as Section 51 has made the amendments retrospective in operation since February 28, 1944, it should be held that it overrides the provision of Section 11-A."
18. From the aforesaid two observations, it is abundantly clear that the arguments of the learned Attorney General, either on the ground of accrual of cause of action or on the question that Section 51 of the Finance Act overrides the Section 11-A, were not found acceptance by the Supreme Court. We are also unable to find anywhere in the judgment that the Supreme Court has taken it as a point of law conceded by the learned Attorney and accepted by that Court.
19. Now coming to the question whether the notices under Section 11-A could be issued prior to 20-2-1982 even otherwise, we observe that it is not disputed by the appellants that Central Excise duty on yarn captively consumed was paid for a number of years till 16-10-1980, but for the intervention by the Delhi High Court judgment on the interpretation of Rules 9 & 49, as they stood then. This judgment was also not accepted by the department and SLP has been filed which is reportedly pending. On the very same issue, there is also another judgment of the Karnataka High Court reported in 1986 (7) ECR 137 (Karnataka), wherein that High Court have held that even before the amendment of Rules 9 & 49, duty is leviable on yarn captively consumed and the amendment only made the position explicit what is otherwise implicit in Section 3(1) and the original Rules 9 and 49. We, no doubt, recognise the fact that there is no authoritative pronouncement of the Supreme Court oh the validity of pre-amended Rules 9 and 49 for collecting duty on captively consumed yarn in as much the SLP is yet to be decided. All the same, having regard to the aforesaid factors, which are not disputed viz. duty on yarn captively consumed was paid for a number of years in the past by the appellants themselves and there is another High Court judgment in favour of the revenue and the decision of the Delhi High Court was not accepted by the department, it was incumbent on the revenue to safeguard the revenue interest by issuing notices so as to be well within the time limit. It may be that the department have not resorted to the enforcement of these notices till the Delhi High Court judgment was overruled by the Supreme Court on the Original Rules 9 & 49 or till the appropriate legislative remedy is evolved to overcome the effect of the Delhi High Court judgment. We observe that the revenue, by issuing notices within the period of limitation prescribed under Section 11-A during the period prior to 20-2-1982 kept them without enforcing, till the Rules 9 and 49 were amended and the amendments were given retrospective effect by Section 51 of the Finance Act. In the circumstances, such notices in our view, cannot become ab initio void. It may be that because of the judgment of the Delhi High Court in favour of these appellants, these notices could not be enforced. Even the judgment of the Supreme Court in J.K. Spinning & Wvg. Mills case does not lay down the legal position as made out by the appellants that notices can be only on or after 20-2-1982. The Supreme Court judgment only contemplates that Section 51 of the Finance Act does not have over-riding effect of Section 11-A of the Central Excises Act and when the amended rules are retrospectively applied they are subject to the provisions of Section 11-A. In the wordings of the Supreme Court vide para 33 of the judgment, the position is made clear as below:
"In the absence of any specific provision overiding Section 11-A, it will be consistent with rules of harmonious construction to hold that Section 51 of the Finance Act, 1982 in so far as it gives retrospective effect to the amendments made to Rules 9 and 49 of the Central Excise Rules, is subject to the provision of Section 11-A."
20. From the above it is abundantly clear that where the amendments to Rules 9 & 49 are sought to be applied retrospectively prior to 20-2-1982, they are subject to the provisions of Section 11-A and only where such notices have been issued in terms of Section 11-A they can be acted upon. The Supreme Court, have, nowhere stated that such notices should be issued only on or after 20-2-1982. Even while disposing of the writ petitions, in regard to these appellants, the direction given by the Supreme Court was as below:
"In the light of the observations in J.K. Spinning & Wvg. Mills Ltd. and Anr. v. Union of India it would be appropriate to direct that in cases where notices under Section 11-A of the Central Excises & Salt Act have been served and the claims do not cover for any period beyond six months from the respective date of the notices, the respondent could be entitled to realise the dues".
(Emphasis supplied by us).
21. From the above, it is clear that the requirement ordered by the Supreme Court was that wherever Section 11-A notices have been served and the claims do not cover the period beyond six months from the respective dates of the notices, the department is entitled to realise the dues. Even from this direction, we are unable to accept the contentions raised by the learned advocate that the notices are required to be issued only on or after 20-2-1982 and that too covering a period of six months after that date. The observations do not make a distinction between the notices issued prior to or posterior to 20-2-1982, We, therefore, answer the first question in favour of the revenue and dismiss the contention of the appellants that the notices issued prior to 20-2-1982 are ab initio void and cannot be acted upon without issue of another notice.
22. Relatively, more important issue is the second issue. Even for the purpose of argument, conceding the position that the notices are void, whether they can be said to be validated automatically by virtue of Section 51(2) of the Finance Act, 1982. For this purpose, it is necessary for us to set out Section 52(2) of the Finance Act, 1982:
"Section 52(2). Any action or thing taken or done or purporting to have been taken or done before the 20th day of Feb., 1982 under the Central Excises Act and the Central Excise Rules, 1944, shall be deemed to be, and to have always been for all purposes, as validly and effectively taken or done as if the amendments referred to in Sub-section (1) had been in force at all material times and accordingly, notwithstanding anything contained in any judgment, decree or order of any Court, Tribunal or other authority."
23. From the above, it is clear that any action or thing taken or done or purported to have been taken or done before the 20th day of Feb., 1982, under the Central Excises Act and Central Excise Rules, 1944, shall be deemed to be and to have always been, for all purposes as validity and effectively taken. It is not disputed that these demands have been issued under Section 11-A of the Central Excises Act in respect of duty payable on cotton yarn captively consumed, in respect of which the amendments made in Rules 9 and 49 are applicable and shall be deemed to have always the effect. Such demand issued under the Central Excises Act is the action taken by the department but could not be enforced because of the Delhi High Court judgment and such a demand shall be deemed to be and to have always been validly and effectively for all purposes taken, notwithstanding anything contained in any judgment, decree or order of any Court, Tribunal or other authority. Hence, in our view even if the demand has been nullified by the Court judgment, because of the specific deeming provisions laid down in Section 51(2) of the Finance Act, it should be deemed to have been for all purposes as validly and effectively taken. Hence, such a demand issued even prior to 20-2-1982 gets automatically validated, notwithstanding the Delhi High Court's judgment against the revenue. Hence, in our view, issue of a further notice under Section 51(2)(d) of the Finance Act for being acted upon is redundant. Even without such a notice so long as there are notices issued under Section 11-A on the very same issue they get validated because of the specific provisions under Section 51(2) of the Finance Act. On this issue, we observe that even the 'D' Bench of the Tribunal in J.K. Spinning & Wvg. Mills Ltd. has held the same view, which we would like to reproduce:
"Now Section 51(1) of the Finance Act, 1982, clearly provides that the amendments to Rules 9 and 49 by Notification dated 20-2-1982 shall be deemed to have, and to have always had effect on and from the date on which the Central Excise Rules, 1944, came into force. Further Sub-section (2) provides that any action or thing taken or done or purporting to have been taken or done before 20-2-1982 under the Central Excises Act and the Central Excise, Rules, shall be deemed to be, and to have always been, for all purposes, as validly and effectively taken or done, as if the amendments referred to in Sub-section (1) had been in force at all material times. The notices of 4-5-1981 were for duty in respect of excisable goods captively consumed. The demands were made under Section 11-A of the Central Excises Act and for a period within the prescribed limitation. The retrospective amendment of the Rules has been upheld by the Supreme Court. The notices must, in the circumstances, be deemed to have been as validly and effectively issued as if the amendments brought about by Section 51 of the Finance Act, 1982, read with the notification dated 20-2-1982, were in force during the period material to the notices. In this view of the matter, we do not think there is any substance in the Counsel's submission that Section 51(2)(d) of the Finance Act did not have the effect of saving the notices of 4-5-1981 which were pending on the date of the amendment. This is for the reason that these notices were not notices in terms of Section 51(2)(d) of the Finance Act, 1982 but in terms of Section 11-A of the Central Excises Act and had been made for duty which was payable in law (even prior to the amendment) as held by the Karnataka High Court in the Davangere Cotton Mills case (supra) [1986 (7) ECR 137] and demanded in time. Indeed, the question of considering whether the demands were saved by Section 51(2)(d) of the Finance Act or not does not, in our view, arise."
24. We, therefore, hold that even if these notices are construed to be void or invalid in the case of these appellants, because of the Delhi High Court's judgment by virtue of Section 51(2) of the Finance Act, 1982, they get automatically validated and stand revived and become legally valid for being acted upon. In terms of the Supreme Court judgment in J.K. Spinning & Wvg. Mills case, the concerned authority viz. the Asstt. Collector is to consider whether such notices have been issued and if so issued whether they are within the time limit prescribed under Section 11-A and thereupon proceed to confirm the demands and recover the dues. If there is any dispute regarding the validity of these notices, the Asstt. Collector has been directed to decide on this issue. In the appeals before us, this is the action, which has been taken by the authorities below, commencing from the Asstt. Collr. We, therefore, do not find any merits in the arguments of the learned advocate that further notices are required to be issued after amendment, invoking Section 51(2)(d) of the Finance Act. Accordingly, we decide the point in favour of the revenue and reject the contention of the appellants on this score.
25. Regarding the 3rd issue, though this is not a major issue, it has been raised only with regard to certain endorsements made on RT-12 returns not being followed by the issue of notices. The contention of the learned advocate is that such short endorsement on the RT-12 returns cannot be said to construe notices issued under Section 11A, whereas the learned departmental representative contended that in this case because of the writ petitions and stay orders granted by the High Court of New Delhi, the amount not paid has been pointed out while assessing the RT-12 returns pointing out their liability to pay the duty as indicated therein. The assessment order is a quasi-judicial order, which has been passed by the proper officer. The appellants have accepted this order without any questioning. They have not chosen to go in appeal against the said assessment orders. In the circumstances, when the writ petitions are finally decided and stay is vacated, they become automatically recoverable and they should be construed to be valid notices on that ground. He also stated that notwithstanding this position, the Asstt. Collector has also given an opportunity to the appellants for making their representations against the demands made on RT-12 returns and thereafter only confirmed the same. He also relied on the judgment of the Bombay High Court reported in 1989 (25) ECR 18 (Bom), wherein, the judgment of the Supreme Court in Kosan Metal Products was also taken into account by the Bombay High Court and which finally held that where assessment has been finalised under Rule 173(1), Section 11-A proceedings are unnecessary and irrelevant. In view of this judgment of the Bombay High Court, where also the issue is more or less the same, and where the revenue was not collected because of the interim orders of the High Court, the same view should be adopted in the present appeals as well. The learned SDR also referred to the decision of the Tribunal in the case of Karnataka Scooters Ltd. reported in 1983 ECR 745 (D) CEGAT Madras. The learned advocate on the other hand cited the decision of the Supreme Court in Kosan Metal Products Ltd. reported in 1989 (20) ECR 30 (SC).
25A. We have carefully considered both the submissions. The facts of the case in Kosan Metal Products decided by the Supreme Court can be briefly stated as below:
The Assessee have produced LPGF valves and regulators classifiable under T.I. 68 of the Central Excise Tariff. They were receiving brass rods and availed set-off of duty under Notification No. 178/77. The brass rods were assessed under T.I. 68 during the period from 24-7-1978 to 31-3-1979. With effect from 1-4-1979 brass rods were assessed under T.I. 26A(1)(a) in respect of which Tariff Item, set-off was not available. The short levy was pointed out while making endorsement on RT-12 returns. A show cause notice dated 19-1-1980 was issued to the assessee by the Supdt. of Central Excise, Surat under Rule 10 of the Central Excise Rules. In reply to the notice the assessee contended that the said notice under Rule 10 had not been issued to him within the time limit. The department contended that the set-off was wrongly availed of and the Range Supdt. pointed out short payment on RT-12 returns for the months of April, 1979 to August, 1979. The question before the Supreme Court was whether such short payment pointed out on RT-12 returns could be construed as proper notice issued under Rule 10. The Supreme Court have held that where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, a notice has to be served on the concerned person within a period of six months. The Supreme Court have also held that in the facts of the instant case before it, Section 11-A clearly applies. We reproduce the relevant extracts of the Supreme Court judgment in the case of Kosan Metal Products:
"We have considered the contentions urged and do not find any ground which supports the allegation that there had been fraud, collusion or any wilful mis-statement or suppression of facts on the part of the respondent. Therefore, Section 11-A clearly applies to the facts of the instant case. In that view of the matter, the appeals were correctly allowed by the Tribunal. On careful examination of the facts of the case and the contentions raised, we are of the opinion that there is no merit in the appeals before us. The appeals, therefore, fail and are accordingly dismissed. However, in view of the facts and the circumstances of the case, there will be no order as to costs."
26. From the aforesaid position, it is observed that the Supreme Court held that in the context of the facts of the instant case, Section 11-A clearly applies and rejected the contention of the department that the endorsement made on the RT-12 returns cannot be said to be valid notices.
27. In the case of Swan Mills Ltd. decided by the Bombay High Court, though this is not a final judgment and the views expressed by the Bombay High Court are prima facie views, we observe that it has been specifically taken into account in the judgment of the Supreme Court in Kosan Metal Products case and has concluded that they are not applicable to the facts of that case before the Bombay High Court. In the case decided by the Bombay High Court, it is also observed that the recoveries were stayed by an interim order of the High Court and when the writ petition was finally dismissed by the Supreme Court and the appeals preferred by the department were allowed with the observations that the authorities are entitled to recover the amounts due by way of arrears of excise duty, issue of further notices under Section 11-A was held to be redundant. Hence the argument of the learned SDK that the facts of these appeals are more or less similar, has considerable force. All the same, we are unable to accept that this proposition, because the judgment of the Bombay High Court itself clearly states that the views expressed are "prima facie" views in the matter and expressed only for the disposal of the appeals against the interlocatory order. The other case law cited by the learned SDR is that of the Tribunal, which was passed before the Supreme Court judgment in the case of Kosan Metal Products. Particularly with regard to this appeal, the Supreme Court have specifically directed that there should have been valid notices issued and the validity of these notices is required to be adjudicted upon by the Asstt. Collector. In view of the specific direction from the Supreme Court, we are unable to accept the learned SDK's contention that the endorsements on RT-12 returns are to be construed as valid notices under Section 11-A, which are required to be considered and adjudicated upon as per the direction of the Supreme Court. In this view of the matter, we hold that the endorsements made on RT-12 returns do not come squarely within the four corners of the Supreme Court directions and accordingly hold the issue against the revenue.
28. We, therefore, hold that in the case of the appellants M/s. Ahmedabad Advance Mills Ltd., the demand raised on RT-12 returns for the period from 1-1-1983 to 15-3-1983 for a sum of Rs. 8,23,180.60 is not enforceable and accordingly this sum is to be deducted from the total demands confirmed by the authorities below. Likewise, in the case of M/s. Maheshwari Mills Ltd. an amount of Rs. 7,14,998.40 being the demand raised on RT-12 returns for the period from 1-12-1982 to 15-3-1983 is not enforceable and accordingly this amount is required to be deducted from the demand confirmed by the authorities below.
29. Now coming to the minor issues raised, it was contended that in the case of M/s. Rohit Mills Ltd., the 3 show cause notices issued traversed beyond a period of six months particularly for the month of June, 1982. RT-12 returns for the month of June 1982, are reported to have been filed on 3-12-1982 and hence an amount of Rs. 4,29,576 in respect of the demand for the month of June, 1982 is time-barred. Since this appeal was taken up along with the other appeals, Shri Mondal pleaded that he could not check up the facts regarding the date of filing of the RT-12 returns and also whether the demand for June, 1982 is beyond the period of six months or otherwise. We hold that if the facts stated by the appellants are correct, then the demand for the month of June, '82 covering a total amount of Rs. 4,29,576.00 is hit by time-bar and cannot be enforced and would be required to be deducted from the total amount. We, however, give liberty to the department to check up the facts regarding the date of submission of RT-12 returns and if the demand for the month of June, 1982 is within the time limit, the department is entitled to recover this amount after observing the principles of natural justice and in accordance with law.
30. A minor issue was also raised that the export rebate in respect of yarn contained in fabrics has not been given in the case of six appeals - A. Nos. E/363/89, E/364/89, E/368/89 of M/s. Mafatlal Industries Ltd., E/366/89 of M/s. Ahmedabad Advance Mills and A. No. E/367/89 of M/s. Maheshwari Mills Ltd. It is admitted that the duty on yarn is not paid by the appellants during the period. It is also stated by the learned advocate that the amounts paid are only as deposits. The question of granting of rebate will arise only when the duty on yarn is paid and only when the duty is paid, they are to claim the rebate in respect of the duty paid on yarn contained in fabrics exported and their claim, no doubt will be considered by the department in accordance with law.
31. Another minor issue raised was that in the case of M/s. Rohit Mills, demands include the duty on waste yarn cleared out of the factory. This amounts to double duty. We, however, do not have factual details on this. Moreover, this is not the issue before us. If, however, the duty on some yarn has already been paid and the demands include the same, the appellants are at liberty to claim the refund thereof after discharging the duty liability arising out of these appeals, which claim will no doubt be considered, by the departmental authorities in accordance with law.
32. In finally summing up, only in the case of M/s. Ahmedabad Advance Mills (A. No. E/366/89) and in the case of M/s. Maheshwari Mills Ltd. (A. No. 367/89) we hold that part of the demands based on the RT-12 returns (Rs. 8,23,180.60 in the case of M/s. Ahmedabad Advance Mills and Rs. 7,14,998.40 in the case of M/s. Maheshwari Mills Ltd.) are not enforceable and are required to be deducted from the demands confirmed by the authorities below. In the case of Rohit Mills, the Department can recover the duty demanded, subject to the observations made by us in para 29 above with regard to demand for June, 82. But for these modifications the appeals filed are otherwise rejected