Customs, Excise and Gold Tribunal - Mumbai
Victoria Mills Ltd. vs Cce on 26 August, 1999
Equivalent citations: 2000(89)ECR409(TRI.-MUMBAI)
ORDER J.H. Joglekar, Member (T)
1. The appellants manufactured textiles. Annual stock taking was being conducted in their premises in terms of Rule 223A of the Central Excise Rules, 1944. Seven show cause notices were issued for recovery of duty and imposition of penalty on the shortage noticed in such stock takings conducted in 1977, 1978, 1981, 1983, 1984, 1985 and 1986. The Additional Collector held that six show cause notices for the period 1977 to 1985 are barred by limitation. In the seventh case the percentage of shortage was 0.76. He observed that loss of 1% was condonable and condoned the loss. However he imposed penalty of Rs. 30,000/- in terms of the said rule. The assessees went in appeal before the Collector (Appeals). They submitted that the rule permits imposition of penalty of Rs. 2,000/-. Therefore the maximum penalty leviable could be Rs. 2,000/- in each case and sought remission in the penalty imposed of Rs. 30,000/-. The Collector (Appeals) however found fault with the Additional Collector's findings that six show cause notices were barred by limitation. He therefore set aside the Additional Collector's order and remitted the proceedings back to him. Against this order the assessees are in appeal.
2. Heard Shri M.H. Patil, advocate for the assessees and Shri A. Ashokan, JDR for the Revenue.
3. The Additional Collector had given relief to the assessees in the case of six show cause notices which relief was taken away by the Collector. Proviso (2) to Section 35A(3) permits the Collector (Appeals) to do so but requires that a notice be given to the appellant within the time limit specified in Section 11A. There is no intimation in the impugned order of such step having been taken by the Collector. Shri Patil relies upon the Tribunal's judgment in the case of CCE, Bombay v. Vishal S. Chhabria in which it has been held that the appellate authority could not take away the partial benefit granted to the appellate by the original authority. The Tribunal in that case restored to the assessee the relief given by the original authority. In this situation I find that the Collector (Appeals) should have confined himself only to the case pertaining to the show cause notice dated 27.3.1986.
4. With reference to that case the learned Collector (Appeals) has not made any observations. He found fault with the Additional Collector's orders which pertain to the earlier six show cause notices which were barred by limitation. It has therefore to be held that he has upheld the Additional Collector's order with regard to this show cause notice. Since in regard to this show cause notice no contravention has been established, there is no question of imposition of penalty at all.
5. Two relevant judgments are before me in the case of Shree Hanutnan Jute Mills Ltd. v. CCE, Calcutta , the single member bench held that even though no time frame was fixed under Rule 223A, provisions of Section 11A should apply. This is the direct departure from the judgment of the Allahabad High Court on which the learned Collector has based his observation. In doing so the Tribunal relied upon the Supreme Court judgment in the case of J.K. Spinning and Weaving Mills Ltd. v. UOI 1987 (13) ECR 1280 (SC) : ECR C 1138 SC as also in the judgment in the case of GOI v. Citadel Fine Pharmaceuticals . I find that even in the case of Rule 57I where no time limit was prescribed, it has been held by all appellate bodies and also the Bombay High Court in that the reasonable time limit of six months should apply. Based on the judgment, action of the Additional Collector of holding six demands as time barred has to be upheld.
6. The Allahabad High Court in their judgment in the case of H. Guru Investment (North India) Pvt. Ltd. v. CEGAT, New Delhi held that where the demand of duty did not sustain, on limitation, there was no cause for imposition or upholding of the penalty. Applying the ratio of this judgment I find that the order of the Collector (Appeals) does not sustain.
7. Shri Ashokan submits that what is required in the absence of time limit prescribed in the said rule is the application of reasonable time limit. It is his contention that shortages in stock taking reflect clandestine removal with intent and therefore the longer period should apply. For extended period to be invoked a firm averment has to be made in the show cause notice to the effect that the extended period is being invoked on account of fraud, mis-representation etc. made by the assessee. Where the specific wording is not there, the demands made have been found not to sustain (CCE v. HMM Limited ). The show cause notices shown to me do not contain such averment at all. On this ground the plea of limitation has to be upheld.
8. With these observations I set aside the order of the Collector (Appeals) insofar as it relates to revival of the six show cause notices correctly held as barred by limitation by the Additional Collector and remit the proceedings back to the Collector (Appeals) for the limited purpose of deciding, in the face of the judgments cited, the submissions of the appellants on the aspect of penalty.
(Dictated in court).