Customs, Excise and Gold Tribunal - Mumbai
Asian Paints (India) Ltd. vs Collector Of C. Ex. on 19 June, 1989
Equivalent citations: 1990ECR179(TRI.-MUMBAI), 1990(45)ELT185(TRI-MUMBAI)
ORDER R. Jayaraman, Member (T)
1. For hearing the applicants' appeal on merits, they are required to deposit a sum of Rs. 1,60,78,525.84/-.
2. Shri Seervai, the learned senior advocate, on behalf of the applicants stated that during the period from 1978-83 covered by the demand, they were paying duty declared on the basis of the manufacturing cost plus manufacturing profit as per the verdict of the various High Courts. The assessments were provisional during the material periods. Subsequently, on the pronouncement of the decision of the Hon'ble Supreme Court in the case of Bombay Tyre International, proceedings were initiated for finalisation of the provisional assessments. The initial order passed by the Asstt. Collector was set aside by the Collector (Appeals) who remanded the matter for de novo consideration, whereupon the Asstt. Collector issued a notice for de novo adjudication on 6-4-1984 and by his order dated 15-10-1984, the Asstt. Collector allowed 7 items of deductions as admissible discounts but disallowed 3 items. In pursuance of this order, the Asstt. Collector also confirmed a demand for an amount of Rs. 5.90 crores. This amount was paid under protest on 31-3-1985. The Department also had issued a certificate of payment vide their letter dated 11-7-1985. The applicants went in appeal before the Collector (Appeals) challenging the disallowance of 2 items of deductions by the Asstt. Collector. This appeal was filed by them on 7-1-1985. However, on 11-10-1985, the Collector of Central Excise, Bombay-Ill, in exercise of powers conferred under Section 35-E, directed for review of the order of the Asstt. Collector dated 15-10-1984 and in pursuance of this order of the Collector, an appeal by the department came to be filed on 2-12-1985 seeking for setting aside the order of the Asstt. Collr. and for holding that certain deduction allowed by the Asstt. Collr. are not legally correct. In their cross objections to the appeal by the department, the applicants raised a preliminary objection stating that the appeal was hit by time bar inasmuch as no demand for the short levy alleged had been issued within the period of six months from the relevant date, which is the mandatory requirement as per the second proviso to Section 35A(3) of the Central Excises & Salt Act. However, this preliminary objection has not been considered by the Collector (Appeals) and he has not taken it as one of the points required to be considered. The learned Sr. advocate also contended that even as per the Section 35-A (4), the points for determination ought to be set out and the Collector (Appeals) was required to give a decision thereon. He also contended that wherever there is a case of short levy or erroneous refund, proceedings initiated under Section 35-E are required to adopt the procedure envisaged under Section 35-A. because as a result of the review done under Section 35-E, an appeal comes to be filed before the Collector (Appeals). Shri Seervai also contended that he does not have any dispute in this case with regard to the fact that the appeal has been filed within the time of one year prescribed under Section 35-E. His only point is that this is an appeal filed by the department and when considering this appeal the Collector (Appeals) is required to dispose it of in a manner prescribed under Section 35-A, which contemplates that in the case of short levy or erroneous refund, a notice within the time limit prescribed under Section 11-A is required to be issued. He contended that when the order of the Asstt. Collector finalising the provisional assessment and confirming the demand to the extent of Rs. 5.90 crores, was made on 15-10-1984, the applicants have paid this amount in instalments and finally cleared on 31-3-1985. Hence, if there had been any short payment, a notice should have been issued within a period of six months from 31-3-1985. Even taking the certificate of payment issued by the department, which is dated 11-7-1985 as the relevant date, the notice should have been issued within six months from that date. He also contended that even after the issue of order-in-appeal passed by the Collector disallowing certain deductions originally allowed by the Asstt. Collector. No demand has been issued by the department, till they filed the appeal before the Tribunal on 10-6-1988 and that was the reason they did not file the stay application. The demands came to be served on them only on 5-10-1988 and only thereafter, they filed the stay application. He, therefore, argued that even if the order of the Collector (Appeals) is taken as the relevant date, no demand has been issued within a period of six months from the date of the order of the Collector (Appeals) being 28-3-1988. Shri Seervai finally submitted that this is not a case where the applicants have dodged the payment. They have complied with the demand made by the department to the extent of Rs. 5.9 crores, when the assessment was finalised. They have also complied with another demand amounting to Rs. 1.40 crores arising out of the disallowance of certain deductions by the Collector (Appeals) since in that case the demand was within the time limit of Section 11A. In this case, the period covering from 1978-83 where provisional assessment was finalised on 15-10-1984 by an order and it is sought to be disturbed and short levy demanded, that could be done only by issue of the show cause notice within the time limit prescribed under Section 11A. He, therefore, contended that prima facie the demand is time barred requiring the grant of stay. He also made the following citations :
1988 (12) ETR 408 (Tri.);
Corn Products Co. v. Union of India -1984 (16) E.L.T. 177 (Bom.);
Military Dairy Farm v. Collector -1985 (19) E.L.T. 148 (Tri.); and He also argued that the appellate authority viz. Collector (Appeals) has not considered their objection regarding maintainability of the appeal filed by the department on the ground of time bar. In that context he cited the judgment of the Allahabad High Court reported in Central Dislittary and Chemical Works v. Inspector of C. Ex. -1978 (2) E.L.T. (J 194) (All).
3. Heard Shri Mondal. He pointed out that all the assessments were provisional when the duty was paid on a value excluding the post manufacturing expenses. He referred to the provisions of Rule 9-B particularly Sub-rule (5) thereof. He contended that according to Sub-rule (5) of Rule 9-B, when the duty leviable on the goods is assessed finally, the duty provisionally assessed shall be adjusted against the duty finally assessed, and if the duty provisionally assessed falls short of, or is in excess of the duty finally assessed, the assessee shall pay the deficiency or be entitled to a refund, as the case may be. He also referred to the provisions of Section 11A of the Central Excise Act and contended that in a case where the duty of excise is provisionally assessed under the Act or Rules the relevant date is the date of adjustment of duty after the final assessment. He contended that the assessment is still provisional and hence the plea of time bar cannot be raised in this case. He also contended that the duty has not been adjusted till the date because the department has not accepted the Asstt. Collector's order as final but have preferred an appeal against the same. He also pointed out that even the applicants have not accepted the finality of the Asstt. Collrs' order because of the fact that they have made the payment of Rs. 5.9 crores under protest and preferred an appeal against the dis-allowance of certain deductions by the Asstt. Collr. He, therefore, vehemently argued that there had been no finalisation of the assessment and hence there had been no final adjustment. In this context he cited the judgment reported in ECR (18) p. 614 (Tri.) to point out that the date of adjustment after finalisation of provisional assessment is the criterian for determination of the time limit- He also contended that the demand for Rs. 1.60 crores has been issued in pursuance of the order of the Collector (Appeals). There is no law provided for issuing such a demand. The applicants themselves are required to make the payment in pursuance of the order of the Collector (Appeals). No limit has been prescribed for issue of such a demand even under the law, just as in the case of refund arising out of the order of the Collector (Appeals), no time limit has been prescribed for claiming such a refund.
4. Shri Seervai replied that in this case, the assessment has already been finalised by the Asstt. Collector, whereupon he confirmed the demand to the extent of Rs. 5.9 crores. He also stated that on payment of this demand, even the B-13 bond has been discharged. He thus refuted the contention of Shri Mondal that the assessment is still provisional. Shri Seervai also submitted that because the demand is prima facie time barred he is not pleading financial hardship.
5. After hearing both the sides and after perusing the essential records for such a prima facie consideration, we observe that the main prima facie issue is linked to the question of time bar. Before going into the legal aspects, it is necessary to set out the factual position as is evident from the records. The Asstt. Collector's order dated 15-10-1984 after discussing the merits and de-merits of the plaitns for deduction on account of various discounts, finally concludes as below:
"In view of the above, I order that claims on account of;
(1) Additional trade discount;
(2) Regular prompt payment discount;
(3) Cash discount to the extent of actual allowance made;
(4) Discounts on account of 'Scheme' such as product rebate and bulk pack discount;
(5) Town/Overriding commission;
(6) 'Special Deals and Special Discounts';
(7) Turnover tax, Octroi and Transit Insurance; are admissible and claims on account of;
(1) The extent of Cash discount not actually passed on;
(2) Dealer Bonus;
(3) Agency Commission; are rejected.
On the basis of this order total duty liability on the company comes to Rs. 5,89,92,279.37 the details of which are given in work-sheet (Annexure A Part-I&II.)"
Thus from the Asstt. Collector's order dated 15-10-1988, he has not only decided on the admissibility or otherwise of the deductions but also quantified the duty arising out of his order and confirmed the demand to the extent of Rs. 5,89,92,279.37, It is also evident from the certificate dated 11-7-1985 issued by the Supdt. of Central Excise that the applicants have discharged this entire amount of duty confirmed, by the Asstt. Collector's order dated 15-10-1984. In the context of the aforesaid factual position, the submissions made by either sides are required to be considered. Shri Mondal vehemently contended that the assessment is still open and not acquired finality. It is not a question as to whether an order gets finality or otherwise. Provisional assessment has got a distinct legal connotation assigned to it in the Central Excises Act and Rules. Under Rule 9B of the Central Excise Rules, provisional assessment may be ordered either on a written request made by the assessee or on the officer's own accord. The assessee has to execute a bond ill the proper form binding himself for payment of the difference between the amount of duty as provisionally assessed and as finally assessed. When the duty leviable on the goods is finally assessed, the duty provisionally assessed and paid shall be adjusted against the duty finally assessed and if there is short payment, the deficiency shall be paid and if there is any excess payment, difference shall be refunded. This is the system envisaged under the rules for provisional assessment of the duty. For purpose of making a demand in respect of short levy or in a case where it has not been levied, a demand is required to be issued within a period of six months from the relevant date as per the provisions of Section HA of the C. Ex. Act. The relevant date in the case of provisional assessment is the date of adjustment of duty after the final assessment thereof,
6. The question to be considered is, when the provisional assessment in this case is said to have been finalised? Whether it is on the order passed by the Asstt. Collector dated 15-10-1984 or on 5-10-1988, the date on which the demand has been issued in pursuance Of the order of the Collector (Appeals)? The citations made by the learned Sr. advocate are not seriously contested by Shri Mondal because his main plank of defence is that the assessment is still provisional till the date of demand dated 5-10-1988. We are unable to appreciate this argument of Shri Mondal for the following reasons :
Even the order of the Collector (Appeals) cannot be said to have reached the finality because against that order the applicants have come in appeal before the Tribunal. Merely because an order finalising the provisional assessment passed by the Asstt. Collector has not been accepted by both sides and the matter was taken up before the Collector (Appeals), it does not cease to be a finalisaion of the proceedings initiated under Rule 9-B of the Central Excise Rules. It is an order passed by a competent and proper officer finalising the assessment and demanding a specified amount being short payment as a result of finalisation of the assessment. When once, in pursuance of such an order, payment has been made fully on 31-3-1988, for purpose of Section 11A, that date becomes the date of adjustment of duty after the final assessment. It is not relevant for us to go to any other dates, once it is admitted that the confirmed demand of finalisation of provisional assessment has been paid, which for all purposes stand adjusted on that date. It may be that the applicants are not happy with this payment and they have paid the demand under protest to avert being hit by the limitation of time for claiming refund. On account of these factors, it cannot be said that the order of the Asstt. Collector dated 15-10-1984, is not the one passed on finalising the assessment done under Rule 9B. Hence, if the department feels that there is a short levy or short payment, they should have issued a notice within a period of six months from the date of final adjustment, which admittedly has not been done.
7. Shri Mondal's contention that there is no time limit prescribed for issuing a demand in pursuance of the order of the Collector (Appeals) is not relevant because of the fact that the other side has rightly contended that a demand within a period of time limit prescribed under Section 11A should have been issued as per the provisions of Section 35A (3). We have no dispute with the citation made by Shri Mondal since we are not disputing the conclusion that in the case of provisional assessment the date of adjustment after finalisation of provisional assessment is the criterian. However, we are of the prima facie view that provisional assessment has already been finalised by the Asstt. Collector's order dated 15-10-1984, wherein the Asstt. Collector has also confirmed a specified demand as a result of finalisation which has also been adjusted by way of payment in the month of March, 1985. It is not the case of the department that after the order dated 15-10-1984 passed by the Asstt. Collector, the applicants have not paid the short levy confirmed and the amount still remains unadjusted till date leaving the provisional assessment open. On the contrary, facts undisputed are that the amount confirmed has been finally adjusted in March, 1985.
8. Viewing this issue from yet another angle, we notice certain salient features, which cannot be over looked -
(a) By the order dated 15-10-1984, the Asstt. Collector, adjudicated the issue, and finalised the provisional assessment and demanded a specific amount which according to him was short paid. The amount demanded has also been paid in March, 1988;
(b) The applicants preferred an appeal with regard to some of the deductions disallowed;
(c) The department did not issue a demand under Section 11A alleging short payment in the final adjustment; and
(d) It was only after the Collector invoking his powers under Section 35-E, ordered filing of the appeal, that an appeal came to be filed and that too not for setting aside the whole of the Asstt. Collector's order restoring the original show cause notice issued prior to finalisation of provisional assessment but only part thereof, challenging certain deductions allowed by the Asstt. Collector, as not acceptable to the department.
9. It is duly provided in Section 35E(4) that the appeal so filed shall be heard in compliance with the provisions of the Acts regarding appeal. Section 35A lays down the procedure to be followed in disposing of appeal before the Collector (Appeals). Second proviso to Sub-section (3) of Section 35-A provides that the Collector (Appeals) shall not pass any order demanding the duty not levied or paid, short levied or short paid or erroneously refunded, unless the applicant is given notice within the time limit specified under Section 11-A.
10. This being the specific provision incorporated, has to be considered as having some special significance. The straight meaning that can be given is that when the Collector (Appeals) desires to differ from the view taken by the subordinate authority and wants to make a demand, which has not been made or when the authority below has held that the assessee is not liable to pay, he has to issue a notice which should comply with the requirement of Section 11-A and if that is not done, of if the demand made is beyond the period stipulated under Section 11-A, then the order may be held as bad in law.
11. This being precisely the case here, prima facie, the order of the Collector (Appeals) appears to be not sustainable. Moreover, we also find that the applicants in pursuance of fmalisation of provisional assessment had deposited a sum of Rs. 5.9 crores, though they are still contesting their eligibility for some deductions. Since the additional demand now made prima facie appears to be time barred, we grant the prayer for unconditional stay of the duty demanded.