Customs, Excise and Gold Tribunal - Tamil Nadu
Collector Of Central Excise vs Southern Magnetics (P) Ltd. on 3 September, 1987
Equivalent citations: 1987(13)ECR1092(TRI.-CHENNAI)
ORDER
K.S. Venkataramani, Member
1. This appeal has been filed by the Collector of Central Excise, Madras in terms of Section 35B(2) of the Central Excises and Salt Act, 1944 against the order dated 30.1.1987 passed by the Collector of Central Excise (Appeals), Madras by which the Collector (Appeals) had allowed the appeal filed by the respondents and set aside the order of the Assistant Collector of Central Excise, Madras IV Division dated 16.9.1986.
2. The facts in brief are that the assessee had claimed exemption for small scale units available in Notification No. 83/83 for the financial year 1983-84 and the Department held that they were not eligible for the exemption under the notification as the total value of clearances of all excisable goods for the preceding financial year 1982-83 exceeded Rs. 25 lakhs. The Department's case is that the respondents were informed of this position vide Supdt's letter dated 23.5.1983 about their non-eligibility and they were asked to discharge their duty liability. When their refund claim was turned down by the Asstt. Collector, they went up in appeal before the Collector (Appeals). The Collector (Appeals) held that the short point for consideration in the case was whether the letter issued by the Supdt. can be stated to be a valid show cause notice and held that the letter cannot be accepted as a valid show cause notice for the purposes of Section 11A of the Central Excises and Salt Act, 1944 and also that the letter had not quantified the duty to be demanded. In view of this the Collector (Appeals) held that the demand was time-barred and allowed the appeal.
3. Appearing for the appellant-Collector the learned departmental representative Shri Vadivelu pointed out that the Supdt's. letter clearly puts them on notice only about their duty liability and they should have started paying duty immediately. He cited the case law reported in the case of 'Devi Dayal Rolling and Refineries P. Ltd. v. Supdt. of Central Excise and Ors. 1983 ELT 338 (Bom) and Madhya Pradesh High Court Judgment in the case of 'Gwalior Rayon Manufacturing (Weaving) Co. v. Union of India' reported in 1982 ELT 844 (MP) : 1982 ECR 722D in support of the argument that the letter issued by the Supdt. could be taken as a valid show cause notice which was issued within the period of six months in the instant case and hence the demand is not time-barred. It was only in order to adhere to the principles of natural justice that a proper show cause notice was issued on 4.9.1984, exactly quantifying the amount of demand of duty to be paid. It was in furtherance of Supdt's. letter dated 23.5.1983 advising the party to pay the duty.
4. Appearing for the respondents Shri Krishnaswamy, the learned Counsel cited case law reported in 1983 ECR 793 in respect of the argument that the letter asking for duty payment is illegal and that a notice is a condition precedent to a demand for duty. He further stated that on receipt of Supdt's. letter dated 23.5.1983 the respondents had replied thereto in their letter dated 21.7.1.983 challenging the contents thereof. Shri Vadivelu, the learned D.R. in his reply pointed out that by the time the respondents replied to the Supdt. on 21.7.1983 the classification question had already been decided by the Asst. Collector which was the basis of their reply to the Supdt. and even though the respondents have taken up this issue of classification in a further appeal, so long as the issue has not been decided by the higher authorities, the Supdt. and the Assistant Collector were correct in following the decision on classification as existing then.
5. The submissions made by both the sides have been carefully considered. The issue is whether the letter of the Supdt. dated 23.5.1983 could be considered to be a valid notice of demand which would save the demand for duty issued by the Department from being hit by limitation. A perusal of the Supdt's. letter shows that it was written with reference to their classification list No. 1/83 submitted by the respondents and which intimated that they had exceeded the Rs. 25 lakhs limit under the notification and therefore, were liable to pay duty and he was also asking for further information of past clearances. The formal show cause notice demanding duty was issued only on 4.9.1984 and the department's contention that this letter which is the demand notice was issued only to adhere to the principles of natural justice and it was in furtherance of the Supdt.'s letter dated 23.5.1983. But a perusal of the show cause notice dated 4.9.1984 shows that there is no reference therein to the Supdt's. letter of 23.5.1983 and the demand notice of 4.9.1984 indicates the amount of demand for duty on the decision by the Asst. Collector in his order dated 24.5.1983 on the classification of the display boards manufactured by the respondents under Item 33DD of the Central Excise Tariff which aspect is absent from the letter of the Supdt.'s letter dated 23.5.1983 in which though the value of the display boards is indicated, its classification has not been indicated at all. It is also seen that the reliance placed by the Department on the decision of Bombay High Court Judgment in the case of 'Devi Dayal Rolling and Refineries' (1983 ELT 338) is not well-placed because the duty in that case was demanded under Rule 9(2) whereas the demand herein invoked Section 11A of the Act. Further in that case a letter similar to the one of the Supdt. in this case dated 23.5.1983 had been issued in March 1972 and subsequent to that the Range Supdt. in that case also issued a demand notice under Rule 9(2) on 22.4.1972. It is in these circumstances that the Bombay High Court had held that the demand notice was in order. In such a situation in the case of the appellant herein the decision of the Supreme Court in the case of 'Gokak Patel Volkart Ltd. v. Collector of Central Excise, Belgaum,' reported in 1987 (11) ECR 363 (SC), cited by the appellant would be acceptable to their case wherein the Supreme Court had observed:
The provisions of Section 11A(1) and (2) make it clear that the statutory scheme is that in the situations covered by the Sub-section (1), a notice of show cause has to be issued and Sub-section (2) requires that the cause shown by way of representation has to be considered by the prescribed authority and then only the amount has to be determined. The scheme is in consonance with the rules of natural justice....Notice is thus a condition precedent to a demand under Sub-section (2).
In this case it is not borne out of the materials on record that the demand notice dated 4.9.1984 is in furtherance of the Supdt's. letter dated 23.5.1983 and in view of the case laws discussed above, it has to be held that there is lot of force in the contention of the respondents herein and in this view of the matter, there is no reason to interfere with the order passed by the Collector (Appeals) which is accordingly confirmed.