J.K. Cotton Spinning And Weaving Mills ... vs Collector Of Central Excise on 31 January, 1989

[Cites 63, Cited by 7]

Customs, Excise and Gold Tribunal - Delhi

J.K. Cotton Spinning And Weaving Mills ... vs Collector Of Central Excise on 31 January, 1989

Equivalent citations: 1989(23)ECR385(TRI.-DELHI)

ORDER

G. Sankaran, Sr. Vice-President

1. The merits of the dispute involved in the above-mentioned 4 appeals are admittedly not in issue before us in these proceedings in view of the judgment of the Supreme Court in J.K Spinning & Weaving Mills Lid. and Anr. v. Union of India A Others . The only issue which requires to be determined by us is that of limitation in respect of the demands in dispute.

2. By its judgment in the J.K. Spinning A Weaving Mills Ltd. case, the Supreme Court upheld the retrospective amendment to Central Excise Rules 9 and 49 (the Central Excise Rules are hereinafter referred to as the Rules) which had the effect, inter alia, of making excisable goods removed from the place of their manufacture for manufacture of any other commodity within the said place or factory, liable to payment of Central Excise duty. The Court further held that Section 51 of the Finance Act, 1982, (which legislated the retrospective amendment) was subject to the provisions of Section HA of the Central Excises and Salt Act (hereinafter referred to as the Central Excises Act) which dealt with limitation in respect of demands for duty.

3. The appellants are manufacturers of cotton yarn, cellulosic yarn and non-cellulosic yarn which they captively consume within their factory for production of fabrics. The appellants challenged the levy of Central Excise duty on yarn captively consumed in the manufacture of fabrics in their composite mill by way of a writ petition No. 664/79 before the Delhi High Court. The High Court allowed the petition by its judgment dated 16.10.1980 reported in 1981 ELT 887. The Court held that no excise duty could be levied on yarn captively consumed in the manufacture of fabric. Following the judgment, the appellants stopped paying excise duty with effect from 6.11.1980 on yarn so consumed captively. The Department thereupon filed a SLP against the High Court judgment (SLP No. 57/81). This SLP is stated to be still pending admission in the Supreme Court. In the meanwhile, three show cause notices were issued by the Department, all dated 4 5.1981, followed by three addenda all dated 5.5.1981, under Section 11A of the Central Excises Act demanding duty on yarn captively consumed during the period from 6.11.1980 to 31.3.1981 for a total sum of Rs. 94,87872.20P. The appellants challenged the validity of these notices before the Delhi High Court by another writ petition (No. 1858/81). By its interim order dated 12.8.1981, the High Court granted a stay in terms of prayer (a) in the petition which read as follows:

It is, therefore, most respectfully prayed that this Hon'ble Court may be pleased to:

(a) grant of stay permitting the petitioners forthwith to further process yarn, in its composite mill in the manufacture of fabrics at nil rate of duty and to clear cotton fabrics only (without payment of duty on cotton yarn) and to restrain the respondents 4 to 6 from taking any action or proceedings pursuant to and/or on the same basis as the contents of the directive of the Board, respondent No. 2, and to stay further proceedings pursuant to notices dated 4.5.1981 and addenda dated 5.5.1981.

During the pendency of the writ petition, the Central Government, by Notification No. 20/82-CE dated 20.2.1982, amended Rules 9 and 49 providing inter alia for levy of excise duty on excisable goods manufactured and captively consumed within the factory of production for manufacture of other goods. Thereafter, by Section 51 of the Finance Act, 1982, retrospective effect was given to the aforesaid amendments to Rules 9 and 49 from 28.2.1944. On the Finance Act receiving the President's assent on 11.5.1982, the appellants amended on 20.5.1982, the writ petition No. 1858/81 challenging the retrospective amendment of Rules 9 and 49. The next event in the chain of events took place on 5.6.1982 when, invoking Section 51(2)(d) of the Finance Act, 1982, the Department issued a notice to the appellants demanding duty on yarn captively consumed during the period from 6.11.1980 to 19.2.1982. On 11.1.1983, the High Court delivered judgment in Writ Petition No. 1858/81 upholding the validity of Section 51 of the Finance Act and further holding that the limitation imposed under Section 11A of the Central Excises Act would apply this judgment is . The appellants challenged the High Court's order by way of S.L.P. The Supreme Court, Jn its interim order dated 15.3.1983, stated as follows:

In respect of future payments of excise duty there will be no stay Insofar as past dues are concerned, 50% of the dues shall be paid to the authority concerned within a period of three months from today In regard to the balance of 50%, the appellants shall give bank guarantee to the satisfaction of the Registrar of this Court within the same period. It the bank guarantee has already been given in any case, in pursuance of direction of the High Court, it will continue in operation and shall be kept alive from time to time.

The matter was finally disposed of by the Supreme Court by its judgment dated 10.10.1987 As noted earlier, the Court upheld the validity of the retrospective amend meant to Rules 9 and 49 but held that the provisions of Section HA of the Central Excises Act would apply to recoveries of duty.

4. By its order dated 5.12.1988 in Civil Miscellaneous Petition No 21824/88 (in C.A. No. 297/83), the Supreme Court directed the Tribunal to dispose of the present 4 appeals within 2 weeks. By its further order dated 16.12.198U, the Court was pleased to extend the time for disposal of the appeals till 12.1.1999 and. later, to 31.1.1989. Hence, we have taken these appeals out of turn for hearing. We have heard Shri Ravinder Narain Advocate, for the appellants and Shri G.V. Naik, i Joint CDR for the respondent Collector.

5. We shall now take up each of the 4 appeals separately against the background set out in the preceding paragraphs.

Appeal No. E/2353/88-D

6. As already noted, three show cause notices were issued to the appellants by the Superintendent of Central Excise on 4.5.1981 One was in respect of non-cellulosic spun yarn, another in respect of cellulosic spun yarn and the third was in respect of cotton yarn. The three notices which were more or less similarly worded called upon the appellants to show cause why Central Excise duty, as set out in the notices, should not be demanded from them under Section HA of the Central Excises Act in respect of the three varieties of yarns on which duty should have been paid at the appropriate rate but had not been paid. The period covered by these notices was from 6.11.1980 upto and including March 1981. On 5.5.81 three addenda were issued by the Superintendent to the three show cause notices. These addenda set out briefly the history of the litigation in the matter before the Delhi High Court and also the ground for making the demands, namely that the appellants were manufacturing the yarns in question and using them captively for manufacture of fabrics. One of the addenda also stated clearly that it was being issued without prejudice to the decision that might be taken by the Supreme Court in regard to the SLP filed by the Department and that no action to determine the demand for the amount and for the period Specified in the notice would be taken till the decision of the Supreme Court On 5.6.1982, i.e., after Rules 9 and 49 were amended with retrospective effect by Section 51 of the Finance Act, 1982. the Superintendent issued a consolidated show cause notice dated 5.6.1982 covering cotton yarn, cellulosic Spun yarn and non-cellulosic spun yarn the period being from 6 11 1980 to 19.2.1982 and the demand being for a total of Rs. 3,13 10 077 47P The period covered by this notice thus included also the period covered by the earlier show cause notices dated 4.5.1981 and addenda dated 5.5.1981 The reason given in the show cause notice was, as before, that the appellants were manufacturing the three types of yarns in question and were consuming them captively for manufacture of fabrics without paying duty on the yarns. It further referred to the issue of the earlier show cause notices for the period from 6.11.1980 to 31.3.1981. It also stated that the Delhi High Court had granted a stay order "restraining the Department from levying and collection of duty on the yarn captively consumed". It also referred to the amendment of Rules 9 and 49 and Section 51 of the Finance Act, 1982. The demand was made in terms of Section 51(2)(d) of the Finance Act.

7. It is the submission of Shri Ravinder Narain, the learned Counsel for the appellants, that the effect of Section 51 of the Finance Act was that, while it protected all assessments and collection of duty prior to the Delhi High Court's judgment, in a case such as the present one, where there was Court judgment in the appellants favour, the right for the Department to recover dues not paid flowed only from Section 51(2)(d). This right accrued to the Department only with effect from the date of the amendment and was subject to the limitation in Section 11A as held by the Supreme Court. Apart from Section 51(2)(d) of the Finance Act, there was no provision enabling the Department to recover past dues of duties not paid. The fact that the show cause notices dt. 4.5.1981 and addenda dt. 5.5.1981 were pending as on the date of the amendment would not save them. That was the Implication of Section 51. In this connection, Shri Ravinder Narain referred to the Supreme Court's order dated 28.4.1988 in CMP. Nos. 8869 etc. in C.As Nos. 323 etc., Rohit Mills Ltd. etc. v. Union of India and Ors. 1988 (18) ECR 17. The Department's own conduct in relying on Section 51(2)(d) of the Finance Act in demanding past dues would show that it was aware that the previous show cause notices dated 4.5.1981 and addenda dated 5.5.1981 would not be of any avail for the prior periods. What was saved by Section 51(2)(d) was only duty which had been levied, assessed or collected. In this context, Shri Ravinder Narain also drew our attention to Finance Ministry's circular No. 18A-/82-X dated 13.5.1982 to all Collectors of Central Excise following the enactment of the Finance Bill 1982. This circular directed the Collectors to reopen past assessments for determination of duty liability and demand thereof. It further stated that demand notices for recovery of such dues should be issued under Section 51(2)(d) of the Finance Act and not under Section 11A of the Central Excises and Salt Act. It added that the time limit laid down in Section 11A of the Central Excises Act would not be applicable to such demands and that Section 51(2)(d) of the Finance Act did not lay down any time limit for raising demands for the past period. The Counsel further drew our attention to paras 32 and 33 of the Supreme Court judgment in wherein the learned Authority General had made similar submissions which were rejected by the Court. In short, the Counsel's submission was that the Department acquired the right to recover past dues only with the amendment to Rules 9 and 49 and any notice of demand issued prior to the amendment would not serve the purpose. The Counsel further submitted that the notices of 4.5.1981 lapsed with the issue of the notice of 5.6.1982 since the later was a comprehensive one covering also the period for which the 4.5.1981 notices had earlier been issued. In this context, he relied on the Tribunal's observations in the case of Bramac Suri (P) Ltd. Delhi v. Collector of Central Excise, Kanpur 1985 ECR 1880 (CEGAT) (para 6).

8. Replying to the above submissions, G.V. Naik, Learned Departmental Representative, submitted at the outset that in these four appeals the extended time limit of 5 years in terms of the proviso to Section 11A(1) of the Central Excises Act was not in issue, since the Department had not sought to invoke the said proviso. The issue was one of determining whether the demands were covered by the normal period of limitation In this context, he drew our attention to the Explanation to Section 11A(1) which reads as follows:

Where the service of the notice is stayed by an order of a Court, the period of such stay shall be excluded in computing the aforesaid period of six months or five years, as the case may be.

It was his submission that in view of the Delhi High Court's stay order dated 12.8.1981, the Department was restrained from taking any action in the matter. (This point will be elaborated a little later).

9. With regard to appeal No. 2353/88-D, Shri Naik submitted that show cause notices dated 4.5.1981 and the addenda dated 5.5.1981, covering the period from 6.11.1980 to 31.3.1981, were dealt with by the Assistant Collector in Order-in-Original No. l9/Demand/87 dated 29.12.1987. These show cause notices were not rescinded, withdrawn or superseded by the later show cause notice of 5.6.1982, nor did they lapse with the issue of the later notice. On the Counsel's submission that the notices of 4.5.1981 lapsed with the issue of the 5.6.1982 notice, the learned Jt. CDR contended to the contrary relying on the Tribunal's decision in the case of Collector of Central Excise, Meerut v. Star Paper Mills Ltd. .

10. Shri Naik next submitted that, even prior to the amendment of Rules 9 and 49, duty on captively consumed excisable goods was chargeable. In this connection, he cited the Karnataka High Court judgment in the case of Devangeie Cotton Mills Ltd. v. Union of India and Ors. in which the Court had observed that the said liability was implicit in Rules 9 and 49 and the newly inserted explanations had only made the liability explicit; they did not introduce any new concept but only clarified the earlier rules. In this judgment, the Karnataka High Court had taken note of the Delhi High Court judgment (paras 18,36). He also relied upon para 11 of the Tribunal's decision in the case of Orient Paper Mills v. Collector of Central Excise, Calcutta 1983 ELT 1813 : 1983 ECR 1512D which was on the explanation to Rule 56A. Shri Naik submitted that the Department had always the right to recover duty on the captively consumed goods but was stopped from proceeding with the recovery in view of the Delhi High Court's intervention.

11. Shri Naik further submitted that the provisions of Section 11A were not relevant to the present dispute. In this context, he relied upon the Rajasthan High Court's judgment in the case of Modern Suitings v. Union of India and Ors. Civil Writ Petition No. 4441/88.

12. In his rejoinder reply, Shri Ravinder Narain submitted that in view of the Delhi High Court's judgment of 16 10.1980 1981 ELT 867 in the appellants favour, the show cause notices dated 4.5.1981 could at best be called protective notices though the concept of protective assessment was nonexistent in Central Excise Law. The said judgment was under challenge by the Department in SLP before the Supreme Court and the Court had neither admitted the petition yet nor granted a stay. The show cause notices had stated that they would not be proceeded with till the SLP was disposed of by the Supreme Court. Therefore, these notices could be adjudicated upon and proceeded with, if at all, only after the disposal of the SLP by the Supreme Court. The Department had, however, proceeded on the footing that Section 51(2)(d) of the Finance Act 1982, provided the requisite authority for demanding duty for the past period. It was on this basis that the show cause notice of 5.6.1982 covered the period from 6.11.1980 to 31.3.1981 as well, which was the period also covered by the earlier show cause notices of 4.5.1981. It was the Department's own contention before the Supreme Court that the right to recover duty accrued only with the amendment and, in terms of the Supreme Court's judgment, the demand could be made only for a back period of 6 months. That the understanding of the Department was that the right to recover past dues accrued only with the amendment was borne out also by the Board's circular. In these circumstances, the Counsel contended, only the show cause notice of 5.6.1982 which was the one adjudicated by the Department and which was under Section 51(2)(d) of the Finance Act, was relevant for the purpose. The earlier notices must, in the circumstances, be deemed to have lapsed. In this context, he relied upon the Tribunal's decision in the case of Anna Saheb Babu Bagate v. Collector of Central Excise, Bombay which, according to him, was on all fours with the present case.

13. On the Karnataka High Court judgment in the case of Devanagere Cotton Mills (supra) 1986 (7) ECR 137 relied upon by Shri Naik, the Counsel submitted that that judgment could not have any effect on the appellants' case in view of the Delhi High Court judgment in the appellants favour. On the Tribunal's decision in the case of Star Paper Mills , it was submitted that in that case, the question was whether the first show cause notice was illegal because it was defective and not whether it had lapsed on the issue of the second show cause notice. The decision was not applicable to the present case. He also submitted that in para 26 of the Supreme Court's judgment in the Court had held that it was not concerned with the unamended rules and had not expressed any opinion on whether the Department could recover duty on captively consumed goods under the unamended rules.

14. Appeal No. 2354/88-D This appeal relates to the period from 1.4.1981 to 5.12.1981 the remaining part of the period upto 19.2.1982 being not in dispute insofar as the liability to payment of duty during this period is concerned. Shri Ravinder Narain submitted that there was no basis for the Department's stand that the assessments during this period were provisional and that, in fact, there was no order of the Department calling upon the appellants to resort to provisional assessment or to execute a bond in terms of Rule 9B nor was any such bond executed. Some endorsements on the RT 12 returns would not make past assessments provisional. Order for provisional assessment could be made only prior to the clearance of goods and not later.

15. Continuing, the Learned Counsel submitted, the Delhi High Court stay order dated 12.8 1981 in terms of the prayer of the appellants did not amount to, nor had the effect of, restraining the Department from issuing demand notices in order to avoid the time-barring provisions of Section HA of the Central Excises Act. The thrust of the Board's circular was on the need for the Collectors and other proper officers to specify the places of manufacture and places of storage on the ground plans and it was this directive of the Board that was sought to be stayed by the appellants and was actually stayed by the High Court. The Department could have issued notices of demand as they had done on 4 5.1981 but it did not. If the Department wanted to have the benefit of the Explanation to Section 11A(1) of the Central Excises Act, it must show that it was, in fact, prevented by an order of the Court from serving any demand notice on the appellants.

16. Shri Ravinder Narain then submitted that even if it was held that the Department was indeed restrained by the Court from issuing demand notices, the show cause notice of 5.6.1982 must be considered to be invalid because a notice must be preceded by assessments occasioning short levies but, in the present case, there were no assessments. Reading the relevant paras of the Order-in-Original, Shri Ravinder Narain submitted that the Assistant Collector had stated that the assessments were provisional because the matter was sub judice. To say that the matter was sub judice and the assessments were, therefore, provisional would not be correct since there were specific provisions in the law for making assessments provisional and these provisions had neither been invoiced nor complied with. Further, it was clear from Section 11 A(3)(ii)(b) of Central Excises Act that there should be a valid order of provisional assessment under the Act or the rules, which was not there in the present case. The show cause notice of 5.6.1982 also did not talk of provisional assessments. It proceeded on the basis, though unstated, of the Board's circular and had invoked the provisions of Section 51(2)(d) of the Finance Act, 1982. The show cause notice did not also invoke the provisions of the Explanation to Section 11A(1) of the Central Excises Act to the effect that the Department was prevented from serving notices of demand. Referring to the Order-in-Appeal, the Counsel submitted that it did not at all discuss the period from 1.4.1981 to 5.12.1981.

17. The Counsel then referred to the Supreme Court's judgment in the case of Sir-aj-ul Haq v. Sunni Central Waqf Board and submitted that there should be a specific order of the Court preventing the service of the show cause notice and such service would be a contempt of Court. This was the test for ascertaining whether the authority was restrained from serving notice on the appellants. This test was not satisfied in the present case.

18. In his reply, Shri Naik, Jt. CDR, submitted that though there was no specific order of the proper officer directing provisional assessment, the endorsements on the RT 12 returns together with the covering letters of 7.2.1985 would show that the assessments were provisional. In this context, he read out the endorsement in the assessment memorandum of a typical RT 12 return for October, 1981. It read"duty on goods cleared on gate passes....assessed under Rule 9B", the endorsement being of the year 1985. Questioned by the Bench as to whether the 1985 endorsement, made very much subsequent to the period in question, would have the effect of making the assessments provisional, Shri Naik submitted that there were already show cause notices of 4.5.1981 and in view of the High Court's stay order, the Department was prevented from serving notices on the appellants. In view of this, the show cause notice of 5.6.1982 was within time within the meaning of Explanation-I to Section 11A(1) of the Central Excises Act. As pointed out by the Collector (Appeals), the Supreme Court's judgment in the case of Union of India and Ors. v. Madhu Milan Syntex (P) Ltd. had no relevance to the present case. It pertained to a case where no hearing had been given, which was not the case here. For the rest, Shri Naik reiterated the contents of the impugned order in opposing this appeal.

19. In his rejoinder reply, Shri Ravinder Narain submitted that in respect of the period 1.4.1981 to 5.12.1981, the only show cause notice was] of 5.6.1982 which, in terms, had invoked Section 51 (2)(d) of the Finance Act, 1982, and not the proviso or the Explanation-I to Section 11A(1) of the Central Excises Act. The ingredients required for invoking the Explanation had not been alleged in the notice nor was the Explanation, In terms, invoked. He reiterated that the fact of the subject matter being sub Judice would not have the effect of making the assessments provisional. It only meant that the dispute was pending before the Court. It would not have the effect of restraining the Department from serving demand notices unless there was a specific stay order to that effect. The Superintendent, in his order dated 18.12.1987, had purported to finalize the so called provisional assessments and the Assistant Collector's order and Collector's order were consequent to the Superintendent's order. If the assessments were not provisional, the Superintendent's order would be without basis and the Assistant Collector's and Collector's order would consequently fall to the ground. The Counsel referred to the Supreme Court's judgment in Superintendent of Taxes, Dhubri and Ors. v. Onkarmal Nathmal Trust and Ors. (ATR) 1975 SC 2065 (paras 17 and 65) holding that the State must be alert and seek such orders from the Court as were needed for protecting its interests. If the Department was in doubt as to whether demand notices could be served on the appellants, it could have easily approached the High Court for appropriate clarification or direction.

20. On what constitutes "provisional assessment", the Counsel referred to the Tribunal's decisions in the case of Indian Oil Corporation Ltd. v. Collector of Customs, Calcutta and in the case of Usha Martin Industries Ltd. v. Collector of Central Excise, Patna . The assessments should be provisional not in the larger sense of the word but in the statutory sense as understood in Central Excise law. An assessment could be provisional only prior to clearance of goods and not subsequently and the rules of limitation had to be strictly construed. The impugned order contained no discussion regarding the period 1.4.1981 to 5.12.1981. The order was erroneous when it referred to "raised demands" since, in fact, no demands had been raised for this period. The Counsel submitted that the Department's attempt to invoke the provisions of the Explanation to Section 11 A(1) of the Central Excises Act at this stage should not be permitted.

21. Appeal No. 2355/88-D Shri Ravinder Narain submitted that, in this appeal, the demand referred to the period subsequent to the period in Appeal No. 2354/88-D. The liability was not disputed but the appellants' grievance was against the adjustments sought to be made of the amounts paid in respect of this period against the time-barred demands and in raising demands for the amounts so adjusted. Shri Naik submitted that the adjustments made by the lower authorities were only of a consequential nature and were in order.

22. Appeal No. 2356/88-D This covers the period from February '81 to March '83. The Learned Counsel submitted that the Superintendent, by his order dt. 19.12.1987, had purported to finalize the so called provisional assessments. The submissions of the appellants had not been dealt with in the impugned order by the Collector (Appeals). Before finalizing the so called provisional assessments, the Superintendent had not issued a show cause notice. Under Section 11 A, opportunity should be afforded prior to the order calling upon the assessee to pay duty and not afterwards In short, the submission was that before the finalization of the so called provisional assessments, a show cause notice was imperative although the rule might be silent on the point. In this context, the Supreme Court's judgment in the case of Madhu Milan Syntex (supra) was relied upon.

23. In his reply, Shri Naik, Learned Jt. CDR, submitted that the Superintendent's order finalising the provisional assessments was consequent to the Supreme Court's judgment in the appellants' case. The Superintendent's order should be treated as an interim order in the context of the Assistant Collector's order-in-original in which he had referred to the Superintendent's order and passed an order confirming the demand covering the same period after giving hearing to the appellant.

24. Shri Naik cited para 9 of the Supreme Court's judgment in Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd. (1978 ELT J 416 : ECR C 398) holding that even if there was no formal provisional assessment, Rule 10A could be resorted to for recovery of duty. By analogy, the provisions of Section 11A of the Central Excises Act could also be invoked. This would be so in view of the peculiar circumstances of the present case. Though there was no formal order of provisional assessment, the Department was competent to reopen and complete assessments in view of the peculiar circumstances of the present case, especially in view of the first show cause notices, stay order passed by the High Court, the subsequent amendments to Rules 9 and 49 and the Supreme Court's judgment. Shri Naik referred to the Tribunal's order in Khaitan Tibrewala Electricals (P) Ltd. v. Collector of Central Excise, Hyderabad and submitted that though there were no endorsements on RT 12 returns, it was held that, in the circumstances of the case, the assessments must be deemed to be provisional. It was substantive and not literal compliance with the provisions relating to provisional assessments which mattered. He also referred in this context to the last para of the Bombay High Court Judgment in D.R. Kohli v. Krishna Silicate and Glass Works and Anr. 1983 ELT 216 and submitted that officers must take necessary steps for completing the assessments which was what the officers did in the present case. He also referred to certain decisions on the subject of "protective assessments" in the field of Income Tax. Referring to the Madras High Court judgment in the case of Light Roofings Ltd. v. Superintendent of Central Excise [1981 ELT 738 (paras 11 and 12)], it was submitted that the issue of show cause notices after the Delhi High Court's stay order would have amounted to contempt.

25. In his rejoinder reply, Shri Ravinder Narain submitted that the Superintendent's order was bad on 3 counts. Firstly, he had no jurisdiction to demand duty. The jurisdiction was with the Assistant Collector. Secondly, no opportunity was given to the appellants and the order was passed in breach of the principles of natural justice. Thirdly, there were no provisional assessments and, therefore, there was no question of finalising the so called provisional assessments.

26. We have carefully considered the submissions of both sides and perused the records. We shall deal with each appeal separately.

27. Appeal No. 2353/88-D This deals with the period from 6.11.1980 to 31.3.1981. The three show cause notices dated 4.5.1981 and their addenda dated 5.5.1981 refer. Purely going by arithmetical computation, these notices are not barred by limitation under Section 11A of the Central Excises Act. They are within time. The Counsel's contention is that these notices lapsed on the issue of the show cause notice of 5.6.1982 which, inter alia, covered also the period specified in the three notices. According to the Counsel, the notice of 5.6.1982 rightly invokes Section 51(2)(d) of the Finance Act, 1982, because the Department acquired the right to demand past dues only with the amendments especially in the appellants' case in view of the Delhi High Court's judgment in their favour which is under challenge in SLP before the Supreme Court. It is the further contention that the pending notices of 4.5.1981 are not saved by Section 51 of the Finance Act in the present case.

28. We are unable to agree with the Counsel's contentions. The 4.5.1981 notices were not specifically cancelled, superseded or withdrawn by the 5.6.1982 notice. This latter notice refers to the show cause notices (does not mention them by date but this is not material) issued for demand of duty for the period from 6.11.1980 to 31.3.1981. It no doubt refers to the retrospective amendment of Rules 9 and 49 and asks the appellants to show cause why the amount of Rs. 3,13,10,077.47 on the yarn captively consumed during the period from 6.11.1980 to 19.2.1982 (which includes the period covered by the 4.5.1981 notices) should not be demanded from the appellants under Section 51(2)(d) of the Finance Act, 1982. This would not, in our view, mean that the show cause notices of 4.5.1981 were cancelled, superseded or withdrawn. In fact, the Order-in-Original of the Assistant Collector No. 19/Demand/87 dated 29.12.1987 pertains to these very three notices. It is also relevant to note that the Assistant Collector in his order No 20/Demand/87 dated 29.12.1987 (Appeal No. 2354/88-D) has separately adjudicated the 5.6.1982 notice specifically noting that the three demands dated 4.5.1981 had been confirmed fide order No. 19/Demand/87 dated 29.12.1987.

29. The questions that arise are

(a) whether the show cause notices of 4.5.1981 should be deemed to have lapsed with the issue of the 5.6.1982 notice as contended by the appellants;

(b) if it is held that they had not lapsed, would they be authority for demanding duty in view of the submission that the Department acquired the right to recover past dues only with the amendments to Rules 9 and 49 in terms of Section 51 of the Finance Act, 1982: and

(c) whether the notices dated 4.5.1981 are saved in the present case in view of the favourable judgment in the appellants' own case by the Delhi High Court, the Department's SLP against which is reported to be pending before the Supreme Court.

30. On the question of lapsing of the show cause notices of 4.5.1981, we have noted that these notices were not, in terms, cancelled, superseded or withdrawn by the later notice. Indeed, they were separately adjudicated upon The Counsel has relied on the observations of the Tribunal in the case of Bramac Suri 1985 ECR 1880 (para 9). In this case, the Tribunal expressed its unhappiness and concern that in vital matters like issue of show cause notices, the authorities were not able to make up their mind. The lower authorities had superseded the show cause notice already issued on more than one occasion and modified one show cause notice even on the very date of its issue. It was, therefore, that the Tribunal accepted the appellants contention that for the purpose of limitation, should the need arise, the relevant date would be the date on which the final show cause notice was issued to the appellants. In the present case, the show cause notices of 4.5.1981 and the addenda of 5.5.1981 were not superseded, withdrawn or cancelled. The comprehensive show cause notice of 5.6.1982 no doubt included also the period covered by the previous notices of 4.5.1981 but the latter notices were separately adjudicated upon. The facts and circumstances not being analogous to those in the Bramac Suri case, the Tribunal's decision cited by the Counsel has no application to the present dispute and the 4.5.1981 notices cannot be said to have lapsed with the issue of the 5.6.1982 notice. In view of this finding, we do not propose to discuss the Tribunal's decision in Collector of Central Excise. Meerut v. Sitar Mills Ltd. cited by the Learned Jt. CDR.

31. Shri Ravinder Narain has cited the Tribunal's decision in Anna Saheb Bapu Bagate v. Collector of Central Excise. Bombay H . In this cause a show cause notice was initially issued in 1979 for six months. Subsequently, the said show cause notice was replaced by a fresh one on 9.5.1980 demanding duty for the entire period from 4.11.1975 to 30.7.1979. The Tribunal held that the show cause notice issued in 1980 was not byway of a mere amendment to the earlier notice but in the place, and in substitution, of the earlier notice That would mean that the effective show cause notice for the adjudication was the one dated 9.5.1980. It was further held that the duty could be demanded only for six months prior to this show cause notice. (In actuality however since the period was wholly beyond the limitation of six months, the Tribunal held that no duty could be recovered). This decision, in our view has no application to the facts of the present case. In the cited case the Tribunal found that the second show cause notice replaced and substituted the first show cause notice which is not the case in the matter before us.

32. Turning to the right of the Department to recover past dues we have to note that the amendment to Rules 9 and 49 with retrospective effect by Section 51 of the Finance Act 1982, has been upheld by the Supreme Court. It would not, therefore, be correct, in our view, to say that the authorities could not recover the dues for the pre-amendment periods on he footing that the right to recover past dues accrued to the authorities only with the amendment. Though the Board's circular No. 18-A/82-CX dated 13.5.1982, following the Finance Act, 1982. says that demands for the PS amendment periods have to be made under Section 51(2)(d) of the Finance Act and not under Section 11A of the Central Excises Act (on he Board's understanding-mistaken as it turned out to be-that Section 11A did not apply to such demands) we have to see whether the Department acquired the right to make such demands only with the amendment. It is noteworthy that the Supreme Court has not ruled that the authorities acquired the right only with the amendment and that they had no such right prior to the amendment. At this stage, it is necessary to set out paras 32 and 33 of the Supreme Court's judgment.

32. It is. however, contended by the learned Attorney General that as the law was amended for the first time on February- 20, 1982 the cause of action for the Excise authorities to demand Excise duty in terms of the amended provision, arose on that day', that is on February 20, 1982 and. accordingly, the authorities ire en tilted to make such demand with retrospective effect beyond the period of six months. But such demand, though it may include within it demand for more than six months, must be made within a period of six months from the date of the amendment.

33. There is no provision in the Act or in the Rules enabling the Excise authorities to make any demand beyond the periods mention in Section 11A 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 11A should be ignored or not. In our view Section 51 does not, in any manner affect the vision of Section 11A of the Act. In the absence of any specific provision overriding Section 11 A, it will be consistent with rule? of harmonious construction to hold that Section 51 of the Finance An/ 1982 in so far as it gives retrospective effect to the amendments made to Rules 9 and 49 of the Rules, is subject to the provision of Section 11 A. It may be seen that the submission before the Court was not that the Department could not recover duty on captively consumed goods during the pre-amendment period. The submission was that as the law was amended for the first time on 20.2.1982 the cause of action for the excise authorities to demand excise duty in terms of the amended provisions (emphasis added), arose on that day, that is, 20.2.1982 and, accordingly, the authorities are entitled to make such demands with retrospective effect for any length of time (not limited to six months) provided the demands were made within six months from the date of the amendment. What the Supreme Court ruled was that Section SI of the Finance Act in so far as it gives retrospective effect to the amendments to Rules 9 and 49, is subject to the provisions of Section 11A of the Central Excises Act [we may note at this stage that while the show cause notice of 5.6.1982 was made in terms of Section 51(2)(d) of the Finance Act, 1982, the 4.5.1981 notices were in terms of Section 11A of the Central Excises Act.] As pointed out by Shri Naik, the Karnataka High Court in para 17 of its judgment in the Davangere Cotton Mills case has clearly held that the Explanation added to Rules 9 and 49 with the object of overcoming the effect of that rulings of Delhi and other High Courts was introduced by way of abundane caution. It was held that, even without the amendments, the legal position was that intermediate goods like yarn manufactured in a factory which were ultimately consumed in the manufacture of end products were liable to duty whether removed from the factory premises or otherwise (para 17). It was further held in para 18 of the Report that the Explanation to Rules 9 and 49 made explicit what was implicit in Section 3(1) of the Central Excises Act and the original Rules 9 and 49. The Explanation did not introduce any new concept but only clarified the earlier rules.

33. At this stage, it is necessary to set out Section 51 of the Finance Act, 1982:

51. Retrospective effect for certain amendments to Central Excise Rules and validation. - (1) The amendments made in Rules 9 and 49 of the Central Excise Rules, 1944, by notification of the Government of India in the Ministry of Finance (Department of Revenue) No. G.S.R. 74(E) dated the 20th day of February. 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.

(2) Any action or thing taken or done or purporting to have been taken or done before the 20th day of February, 1982, under the Central Excises Act and the Central Excise Rules, 1944, shall he deemed to be, and to have always been, for all purposes, as validily 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

(a) all duties of excise levied, assessed or collected or purporting to have been levied, assessed or collected before the 20th day of February, 1982, on any excisable goods under the Central Excises Act, shall be deemed to be, and shall be deemed to have always been, as validly levied, assessed or collected as if the amendments referred to in Sub-section (1) had been in force at all material times;

(b) no suit or other proceeding shall be maintained or continued in any court for the refund of, and no enforcement shall be made by any court of any decree or order directing the refund of, any such duties of excise which have been collected and which would have been validly collected if the amendments referred to in Sub-section (1) had been in force at all material times;

(c) refund shall be made of all such duties of excise which have been collected but which would not have been so collected if the amendments referred to in Sub-section (I) had been in force at all material times ;

(d) recovery shall be made of all such duties of excise which have not been collected or, as the case may be, which have been refunded but which would have been collected or, as the case may be, would not have been refunded, if the amendments referred to in Sub-section (I) had been in force at all material times.

Explanation.For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force.

Shri Ravinder Narain contends that it is only the levies, assessments and collections prior to the amendment that are declared to be valid and are saved. However, the provision does not save a case as the present one, where there is a Court decision in favour of the assessee. The recourse for the Department is in terms of Section 51(2)(d) only. The right to make demands in terms of this provision accrued only with effect from the amendment subject, of course, to the limitations contained in Section 11A of the Central Excises Act. Even pending notices are not saved by Section 51(2)(d). In this connection, the Learned Counsel referred to the Supreme Court's order dated 28.4.1988 in C.M.P. No. 8869 in Civil Appeal Nos. 323 etc. Rohit Mills Ltd. v. Union of India and Ors.) 1988 (18) ECR 17 The Court, in its order, has stated that in the light of the Court's observation in the J.K. Cotton Spinning & Weaving Mills (supra) it would be proper to direct that in cases where notices under Section 11A have been served and the claims do not cover any period beyond six months from the respective dates of the notice, the respondents would be entitled to realise the dues. We do not see how this order advances the appellants' case. We have noted that in accordance with the Karnataka High Court's judgment in the Davangere Cotton Mills ease (supra). 1986 (7) ECR 137 the Department had the right to claim past dues even prior to the amendment. This is what the show cause notices of 4.5.1981 sought to do. Those notices did not lapse and have been adjudicated upon. Also, those notices were well within the time limit laid down in Section 11A of the Central Excises Act. They were not under Section 51(2)(d) of the Finance Act. 1982. Only in the event of it being held that the Department acquired the right to claim past dues only with effect from the date of the amendments would the Counsel's submission be relevant. But we have seen that the Karnataka High Court has held otherwise.

34. 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 11A 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 valldly 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 those notices were not notices in terms of Section 51(2)(d) of the Finance Act, 1982 but in terms of Section 11A 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.

35. In terms of Section 51(2)(a) of the Finance Act, 1982 all duties of excise levied or assessed or purporting to have been levied or assessed before 20.2.1982 on any excisable goods (captively consumed) shall be deemed to have been, and shall be deemed to have always been, as validly levied or assessed as if the amendments referred to in Section 51(1) had been in force at all material times. The notices of 4.5.1981 in the present case have purported to levy or assess duty on yarn captively consumed by the appellants without payment of duty. Again, in terms of Section 51 (2)(d), the Department is entitled to recover duties (on excisable goods captively consumed) which have not been collected because the amendment in question under Section 51(1) is deemed to have been in force at all material times. This is notwithstanding anything contained in any judgment, decree or order of any Court, tribunal or other authority. Such recoveries must, of course, be within the confines of Section 11A of the Central Excises Act. In this view of the matter, we do not find anything wrong in the Department seeking to recover past dues in terms of the 4.5.1981 notices. We do not find substance in the counsel's submission that the department is restrained from recovering the duty in view of the pendency in the Supreme Court of the Department's SLP No. 57/81 against the High Court's judgment in Writ Petition No. 664/81 in the appellants' favour. No stay order of the Supreme Court has been placed before us. Besides, the very issue of dutiability of the yarn captively consumed by the appellants themselves, came up before the Supreme Court in C. A No. 297 of 1983, disposed of by the judgment re-ported in 1987 (32) ELT 234 (SO, and the ratio of the Court's judgment has already been noted earlier. Of course, it goes without saying that any order we pass in the present appeals will be subject to such directions or orders as the Supreme Court may be pleased to give in future.

36. In the result, we hold that the demands made in the notices of 4.5.1981, read with the addenda dated 5.5.1981, have been correctly confirmed. We dismiss the present appeal.

Appeal No. 2354/88 D

37. The period involved in this appeal is from 6.11.1980 to 19.2.1982, the show cause notice being dated 5.6.1982. Of this period, the part from 6.11.1980 to 31.3.1981 was the subject of adjudication in the Assistant Collector's order No. 19/Demand/87 dated 29.12.1987 which has been dealt with in Appeal No. 2353/88-D. The period from 6.12.1981 to 19.2.1982, being within the stipulated period of limitation of six months, is not in dispute in this appeal as stated before us by the Learned Counsel for the appellants It is the Counsel's contention that the demand for duty on yarn captively consumed during the period from 1.4.1981 to 5.12.1981 is not covered by a valid show cause notice, the 5.6.1982 notice being barred by limitation in respect of this period under Section 11A of the Central Excises Act. Further, it is contended that the assessments during this period were not provisional. The Delhi High Court's interim order of 12.8.1981 did not restrain the Department from issuing notices of demand but only from directing the appellants to specify the places of manufacture and storage of the yarn in the ground plan in terms of the Board's circular. The show cause notice of 5.6.1982 was, therefore, not saved by the Explanation to Section 11A(1) of the Central Excises Act in respect of this period. In any event, the Counsel submits, the show cause notice was invalid because it was not preceded by assessments and a notice of demand could be issued only for short-levies and non-levies arising out of assessments. On the other hand, the Department's contention is that the High Court had stayed service of notice of demand on the appellants and that the assessments were provisional Therefore, the notice dated 5.6.1982 was not barred by limitation in regard to the period in dispute.

38. We have to note several circumstances in this connection The demand for duty for the period 1.4.1981 to 5.12.1981 would prima fade be hit by the limitation in Section 11A(1) of the Central Excises Act, the period of the demand being beyond six months from the date of the notice, that is 5.6.1982, unless, of course, the Department shows that the bar of limitation did not apply either because the assessments were provisional and the notice was within six months from the date of finalisation of the provisional assessments or that the service of notice was stayed by an order of a Court Taking up the second aspect first, we have already noticed the prayer of the petitioners (present appellants) before the Delhi High Court and the Court's order. The show cause notice of 5.6.1982 says that the appellants filed writ petition No 1858/81 in the Delhi High Court on the issue of the show cause notices of 4.5.1981 and obtained a stay order of 12.8.1981 restraining the Department from levying and collecting duty on the yarn captively consumed The Assistant Collector's order in original (No. 20/Demand/87 dt 29 12 1987i which is the order relevant to this appeal states that pending the decision of the Supreme Court in the S.L.P. filed by the Department, the assessments for the period from April 1V81 to February 1982 were made provisional It says since the matter was sub judice all the assessments for the period April 1981 to 15.3.1983 were, therefore, made provisional" The Supreme Court's judgment of 30.10.1987 made the appellants liable for payment of duty on yarn captively consumed in their composite mills Then the notice says: Accordingly the provisional assessments for the period April 1981 to 15.3.1983 were made final by the Superintendent by his order dated 18.12.1987 (this order is relevant to Appeal No. 2356/88-D directing the appellants to deposit the duty after adjusting the amount already paid

39. The Delhi High Court, by its interim order of 12.8.1981 allowed the prayer of the petitioners which we have earlier extracted. The prayer

(i) to grant stay permitting the petitioners to further process yarn in its composite mill in the manufacture of fabrics at nil rate of duty and to clear cotton fabrics only (without payment of duty on cotton yarn);

(ii) to restrain the respondents from taking any action or proceedings pursuant to and/or on the same basis as the contents of the direction of the Board ; and

(iii) to stay further proceedings pursuant to notices dated 4.5.1981 and addenda dated 5.5.1981.

40. The Court's order in so far as it relates to the interim relief in terms of (i) above, does not, in our view, amount to restraining the Department from issuing notices of demand, of course, with a clause as in the case of show cause notices of 4.5 1981 that the notices will not be proceeded with till the decision of the Court. Point (Hi) above is not relevant for the present purpose. In so far as point at (ii) is concerned, we note that the Board's circular of 24.9.1980 not only directed Collectors to take necessary action in respect of specification of places in terms of Rules 9 and 49 in the ground plans but also, in paras B1 and B2, sets out that duty becomes leviable if excisable goods manufactured in the factory are used for the manufacture of any other commodity. The circular goes on to say that the use of the goods in the manufacture of another commodity even within the specified places or premises of manufacture will attract duty under Rule 9. It also says that such goods removed from the store room or place of storage for further manufacture would also attract duty under Rule 49 even if they are used for manufacture within the factory. Finally, it directs the supervisory officers of Excise to ensure proper implementation of the directions. The question would be whether the Court's order amounts to restraining the Department from issuing notices of demand.

41. It was Shri Naik's submission that the implication of the Court's order was that the Department could not issue any demand for duty which the Department could have otherwise issued for demanding duty on goods captively consumed, in terms of the above 2 paras of the Board's letter which envisaged charging duty on such goods. Since no show cause notice could be issued after the order of the High Court, the Department was in a position to issue a show cause notice only with the amendment of the Rules on 20 2 1982 which was given retrospective effect by the Finance Act. The Court's order thus amounted to stay of service of notice by an order of a Court as required in the Explanation to Section 11 A(I) of the Central Excises Act and, therefore, the period upto the date of amendment should be excluded in computing the period of 6 months for demanding the dues not paid.

42 In our considered view, the High Court's order amounts to restraining the Department from serving notices of demand on the appellants. We have noted the prayer of the petitioners (the present appellants) before the Court and the Court's order. The effect of the Court's order is to-

(a) permit the petitioners to further process yarn in their composite mill in the manufacture of fabrics at nil rate of duty and to clear cotton fabrics only (without payment of duty on cotton yarn);

(b) restain the Department from taking any action or proceedings pursuant to and I or on the same basis as the contents of the directive of the Board; and

(emphasis added) The Board's directive referred to its circular letter dated 24.9.1980 to all Collectors issued in consultation with the Ministry of Law, on various issues involving interpretation of Central Excise Rules 9 and 49, in relation to levy of duty with Particular reference to the case of captive consumption. The directives, inter alia, were

(a) immediate steps should be taken to ensure approval of the place of production etc. and if necessary, the premises appurtenant thereto. The Collector's powers under Rule 9(1) should be delegated to the licensing authorities ;

(b) duty becomes leviable where goods are used in the factory for the manufacture of any other commodity whether such use occurs within the place or premises specified in this behalf by the Central Excise Officer or cleared from the store room or place of storage and used in such manufacture inside the factory ; and

The High Court had delivered its judgment on 16.10.1980 in favour of the petitioners 1981 ELT 887. The implementation of the Boards directive would have caused prejudice to the appellants. They, therefore, approached the Court and the Court passed the interim order as already noted The Court, inter alia, restrained the Department from taking any action or Proceedings pursuant to another on the same basis as the contents of the Board's directive. As noted earlier, the Board had held that duty was attracted in the case of captive consumption of excisable goods for manufacture of an-other commodity. Implementation of the Board's directive would necessarily imply levy and collection of duty in such cases and initiation of proceedings for levy and collection in past cases where duty had not been levied and collected. Levy of duty which, in the above context would mean assessment, being quasi-judicial proceedings, would have necessarily involved service of notices under Section 11A of the Central Excises Act on asses-sees giving them due opportunity and passing appropriate orders So when the Delhi High Court granted the prayer of the petitioners (the present appellants) restraining the Department from taking any action or proceedings pursuant to and/or on the same basis as the contents of the Boards directive, it follows that the Court was in effect, though not spelt out in so many words, restraining the Department, inter alia, from serving notices on the appellants under Section 11A of the Central Excises Act

43. Shri Ravindra Narain has. in support of his contention that the Department should produce an order of the Court staying issue of notices of demand before it can claim the Protection of the Explanation to Section 11A(1) of the Central Excises Act, relied on the Supreme Court's Judgment in SiraJ-ul-Haq Khan and Ors. v. The Sunni Central board of Waqf U.P. and Ors. . This judgment is with respect to Section 15 of the Limitation Act which provides for "the exclusion of time during which proceedings are suspended". It lays down : :In computing the period of limitation prescribed for any suit or application for the execution of a decree, the institution or execution of which has been staved by injunction or order the time of the continuance of the injection or order, the day on which it was issued or made and the day on which it withdrawn shall be excluded". The Court has held that for exclusion the time under this section, it must be shown that the institution of the suit in question had been stayed by an injunction or order; to other words the section requires an order or an injunction which stays the institution of the suit. And so any case falling under Section 15 the party instituting the suit would by such institution be in contempt of Court. However, it is observed that in a later judgment in the case of Anandilal v. Ram Narain the Supreme Court has held that there is no justification for placing a rigid construction on a beneficient provision like Section 15 although it is true that in construing statutes of limitation, considerations of hardship and anomaly are out of place. Nevertheless, it is permissible to adopt a beneficient construction of a rule of limitation if alternative constructions are possible. It is also seen that in an other judgment in the case of A.S.K. Krishnappa v. S.V.V. Somaiah the Supreme Court has held that rules of procedure, whatever they may be, are to be applied only to matters to which they are made applicable by the Legislature expressly or by necessary implication. They cannot be extended by analogy or reference to proceedings to which they do not expressly apply or could be said to apply by necessary implication. It would, therefore, not be correct to apply any of the provisions of the Limitation Act to matters which do not strictly fall within the purview of those provisions. It is thus clear that the proceedings under Section 11A of the Central Excises Act are not governed by the provisions of the Limitation Act, 1963. This is because of the existence of a specific provision by way of the Explanation to Section HA and the observations of the Supreme Court just referred to.

44. In this connection, it has also to be noted that the Department has contended that because of the Court's order directing the petitioners (the present appellants) to execute bank guarantees to secure the amount of duty, it should be held that there was, in fact, an order of stay. In dealing with this contention, we must note that the Delhi High Court's interim orders dated 12.8.1981, 3.9.1981 and 2.11.1981 did not direct the petitioners to execute bank guarantees to cover duty amounts. The petitioners were directed, for the first time, to execute bank guarantees by the Supreme Court's interim order dated 15.3.1983. Though the Court's order for execution of bank guarantees and for payment of 50% of the dues was in respect of past dues, we have to note that during the period material to the present dispute, that is, the period till 19.2.1982, there was no order of any Court directing the petitioners to execute bank guarantees. The Supreme Court's interim order of 15.3.1983 cannot evidently have the effect of having stayed service of notice on the appellants during the material period which was prior to the date of the order.

45. In support of his contention that the period covered by the Delhi High Court's interim order should be excluded for the purpose of computation of limitation, Shri Naik relied on the Supreme Court's judgment in Grindlays Bank v. Income Tax Officer, Calcutta and Ors. . The Supreme Court has observed that the interests of justice require that any under served or unfair advantage gained by a party invoking the jurisdiction of the Court, by the circumstance that it has initiated proceedings in the Court, must be neturalised. The simple fact of institution of litigation by itself should not be permitted to confer an advantage on the party responsible for it. In the case before the Supreme Court, a single Judge of the Calcutta High Court had passed an interim order restraining the Income Tax Officer from proceeding with the assessment during the pendency of the petition. In due course, the Income Tax Officer made the assessment which, on appeal, was quashed by the Division Bench which directed the Income Tax Officer to make a fresh assessment. This order was challenged on the ground that the direction to make a fresh assessment was not correct because the assessment bad already become time-barred. This plea was not accepted by the Supreme Court. The Supreme Court's judgment has, in our opinion, no application to the present case, especially in the context of the position that there is a specific Explanation to Section 11A(1) of the Central Excises Act which, in our view, has been shown to have been satisfied.

46. Shri Ravindra Narain has cited the SC judgment in Superintendent of Taxes Dhubri and Ors. v. Onkarmal Trust and Ors. in support of his contention that the Deptt. Should have been alert and sought such orders from the court as were necessary for protecting its interests. In this judgement, the Court has observed that although the assessees obtained injunction restraining the state from taking proceeding under the act [Assam Taxation On Goods carried by Road or lnland water ways act (10 of 1961)], the state did not ask for variation or modification of the injunction order and as such it could not take advantage of its own wrong and lack of diligence. The court observed :it is well known that if it is brought to the notice of a court that proceeding are likely to be barred by time by reason of injunction or stay, the court passes such suitable or appropriate orders as will protect the interest of the parties and will not prejudice either party....the order of injunction is not to be equated with an Act of god or an action of the enemy of state or a general strike. This judgment, in our view, has no application to the facts of the present case. We have already discussed the implication of the interim order of the Delhi High Court and have concluded that the Courts order had the effect of restraining the Department from serving notice of demand on the appellants. In this context it is relevant to note 2 judgments of the Supreme Court. One was in the case of East India Commercial Co. Ltd. Calcutta v. Collector of Customs, Calcutta 1983 ELT 1342 (SC) : 1984 ECR 138. In para 29 of the report the Court has observed as follows:

We, therefore, hold that the law declared by the highest Court in the State is binding on authorities or Tribunals under and they cannot ignore it either in initiating a proceeding or deciding on the rights involved in such a proceeding If that be so, the notice issued by the authority signifying the launching of proceeding contrary to the law laid down by the High Court would be invalid and the proceedings themselves would be without jurisdiction.

This judgment was delivered in 1962. These observations were reiterated by the Supreme Court in Shri Baradakanta Mishra v. Bhimsen Dixit . It may thus be seen that the Department could not have issued any notice of demand to the appellants until and unless the Delhi High Court's order was stayed or reversed by the Supreme Court. In this particular case, as it happens, Delhi High Court had passed an interim order which had the effect, inter alia, of retraining the Department from serving notice of demand on the appellants.

47. The Supreme Court judgment in Gotak Patel Volkar Ltd. v. Collector of Central Excise, Belgaum was also referred to at the Bar. In this case, the order passed by the Karnataka High Court had only stayed the collection of excise duty from the petitioners. There was no interim direction of the High Court in the matter of issue of notice for the purpose of levy of duty. The order read as Follows: Pending disposal of the aforesaid Writ Petition, it is ordered by this Court that collection of excise duty as a fabric be the same is hereby stayed. It is further ordered that the petitioners shall, however, continue to pay excise duty as yarn and shall further maintain an account in square metres for further clearance. The Supreme Court held that the High Court having directed stay of collection had, therefore, not given any interim direction in the matter of issue of notice for levy of duty. The Explanation to Section 11A(1) of Central Excises Act in clear terms refers to stay of service of notice. The order of the High Court did not at all refer to service of notice. Therefore, held the Supreme Court, there was force in the submission of the appellant that the benefit of the Explanation was not available in the facts of the case. The present case is distinguishable. As already noted, the Delhi High Court in its interim order had granted prayer (a) of the appellants. We have earlier analysed the implications of this order and concluded that the order had the effect, inter alia, of restraining the Department from serving notice of demand on the appellants.

48. The Supreme Court in disposing of a batch of Civil Miscellaneous petitions filed by Bhilwara Processors Ltd. and Ors. following the Court's judgment in Ujgar Prints etc. v. Union of India (Writ Petition No. 12183 of 1985) [1987 (10) ECR 640] observed : "The difficulties placed before us by Learned Counsel for the petitioners may be placed by the petitioners before the Govt. and it is open to the Govt. to consider whether and if so, in what terms, and in which case, relief may be granted". In the Civil Miscellaneous Petitions, the petitioners had contested demands for duty served on them by the Excise Authorities following the Supreme Court judgment in the Ujgar Prints case, alleging that the authorities had not followed the procedure prescribed in Section 11A of the Central Excises Act. The above quoted order was passed on these petitions. The significance of the Departmental Representative's reliance on this order is not clear. It may be seen that the Supreme Court did not rule on the specific point raised in the petitions but left it to the Govt. to consider. The Departmental Representative has also referred to the Rajasthan High Court's judgment in a matter (Civil Writ Petition No. 4441/88 Modern Suitings v. Union of India and Ors. similar to that before the Supreme Court in the Civil Miscellaneous petitions referred to earlier. It is seen from the order that the High Court has stated that they need not go into the question whether Section 11A of the Central Excises Act is or is not attracted. The Court has, however, said it would not be proper nor equitable for it to do so or make an order that the bank guarantee executed by the petitioners in pursuance of the stay order should not be encashed. The Court had not gone into the question of applicability of Section 11A of the Central Excises Act. In the present case, we have to consider the question of limitation. And, we have recorded our views earlier.

49. In so far as the aspect of provisional assessment is concerned, the Department's stand is that since the matter was sub judice before the High Court, the assessments became provisional. We are unable to accept this contention. For any assessment to be provisional, there should be an order of the proper officer directing the assessee to resort to provisional assessment in terms of Rule 9B. It is an admitted position that in the present instance there was no such order Rule 9B envisages provisional assessment in the following circumstances

(a) Where the proper officer is satisfied that an assessee is unable to produce any document or furnish any information necessary for assessments of duty on any excisable goods.

Evidently, this circumstance does not exist in the present case.

(b) Where the proper officer deems it necessary to subject the excisable goods to any chemical or any other test for the purpose of assessment of duty thereon.

This circumstance also does not exist in the present case,

(c) Where an assessee has produced all the necessary documents and furnished full information for the assessment of duty, but the proper officer deems it necessary to make further enquiry (including the inquiry to satisfy himself about the due observance of the conditions imposed in respect of the goods after their removal) for assessing the duty.

This circumstance too is absent in the present case. In the absence of any of these circumstances, the proper officer could not have passed an order for provisional assessment of duty on the goods. Indeed, as earlier noted, it is as admitted position that there was no such order for provisional assessment. It is also an admitted position that the appellants did not execute a bond as envisaged in Rule 9B.

50. It is relevant to note here that the show cause notice of 5 6 1882 does not talk of provisional assessment or realisation of provisional assessment nor to the exclusion of any period covered by the notice in terms of Explanation 1 to Section 11A(1) of the Central Excises Act What invokes is the provisions of Section 51 (d) of the Act. It is only the Assistant Collectors order-m-original that talks of the matter being sub judice and, therefore of the assessments being provisional. The order also does not talk of any portion of the period covered by the show cause notice being saved by Explanation I to Section 11A(1) of the Central Excises Act. This is understandable in view of the contents of the Board's circular dated 13.5.1982 which states that demands for duty in respect of excisable goods captively consumed for the manufacture of other goods would not attract the mis chief of the limitation in Section 11A of the Central Excises Act in view of the provisions of Section 51(2)(d) of the Finance Act, 1082 We him already noted that the Supreme Court has expressly negatived the contention of the Revenue that the demands would not be subject to he Section in Section 11A of the Central Excises Act.

51. Shri Ravindra Narain cited the Madras High Court judgment in Light Roofing Ltd. v. Superintendent of Central Excise 1981 ELT 738 and the Tribunal's order in Jay Engineering Works. Calcutta v. Collector of Central Excise, Calcutta that it is necessary to allege and prove the ingredients laid down in Section 11A of Central Excises Act, to invoke the extended limit of 5 years The Department admittedly is not invoking in these proceedings the extended period of 5 years. These decisions are. therefore, of no relevance

52. The endorsements on the RT 12 Returns regarding i cause notices of 4.5.1981 do not, in our opinion, make the provisional nor do the later endorsements of 1985 'to the endorsements were provisional. We agree with the Counsel's contention assessments have to acquire the character of provisionality before the goods are removed on payment of duty provisionally assessed on an or proper officer directing provisional assessment. A post facto and that too after a long lapse of time, does not make of past provisional. Shri Naik contends that even if there was no formal provisional assessment, Rule 10A could be resorted to for recovery of duty in terms of the ratio of the Supreme Court's judgment in Assistant Collr. of CE, Calcutta v. National Tobacco Co. of India Ltd 1978 ELT J 416 (Para 9) : ECRC 398 He submits that likewise, duty could be recovered in the present instant it under the provisions of Section 11A of the Central Excises Act Rule in a when it existed, covered the residuary powers for recovery of sums due to the Government. It was attracted when the rules did not make any specific provision for the collection of any duty, or of any deficiency in duty had for any reason been short-levied, or of any other sum of any kind payable to the Central Government under the act or the Rules. During the period material to the present dispute. Rule 10A was not in force, having been deleted in August, 1977 and there has been no provision in the Act or the Rules corresponding to the erstwhile Rule 10A since its deletion. The demands have, therefore, necessarily to be viewed in the light of the limitation set out in Section HA of the Central Excises Act. In the National Tobacco Co. case (supra) ECR C 398 before the Supreme Court, the position was that there was no order of the proper officer directing provisional assessment nor was a bond executed. However, the learned Single Judge and the Division Bench of Calcutta High Court had found that the practice of provisionally approving the price lists supplied by the company, pending acceptance of their correctness after due verification, had been established as a matter of fact. The Department's submission was that this was substantially a "provisional assessment" covered by Rule 10B (the rule as it existed then) though not conforming to the technical procedural requirements of such an assessment. The Court held that even if the making of debit entries in the P.L.A. could, on the facts of the case, be held to be merely provisional, what took place could not be held to be a provisional assessment within the meaning of Rule 10B, which contemplated the making of an order directing such assessments after application of mind. The Court further held that from the provisions Section 4 of the Central Excises Act read with Rule 10A, an implied power to carry out or complete an assessment, not specifically provided for by the rules, could be inferred. During the period material to the present case, Rule 10A did not exist. The ratio of the judgment is not applicable.

53. Shri Naik relied also on the Bombay High Court's judgment in D.R. Kohli v. Krishna Silicate and Glass Works and Anr. 1983 ELT 216. Explaining the scope of Rule 10A, the Court held that the Rule dealt with only collection and not with ascertainment of any deficiency in duty or its cause by a quasi judicial procedure. It was further held that if the facts showed that it was a case of incomplete assessment which was sought to be completed according to law, such a case was covered by the residuary Rule 10A and Rule 10 had no application. In the present instance, Rule 10A was not available to the Department, it having been deleted in 1977. Section 11A is self-contained provision and there is no other provision (apart from Section 51 of the Finance Act, 1982 for recovery of short-levies in the circumstances of the present case. We have already seen that there was in fact no provisional assessment in the present instance. The two judgments referred to by Shri Naik were rendered in the peculiar facts and circumstances of those cases and have no application to the present case.

54 Shri Naik then referred to the Tribunal's decision in Khaitan Tibrewala Electricals (P) Ltd. v. Collector of Central Excise, Hyderabad . The facts in that case were peculiar. The Department took a long time for approval of the price list submitted by the manufacturer which showed a lower price than in the previously approved list. The assessee was in the meanwhile asked to pay duty on the higher value. The assessee wrote to the Department to the effect that as soon as the matter was settled they would be entitled to refund of the excess duty paid. That, according to the assessee, was what they were given to understand by the Central Excise Officers. The refund claim submitted by the assessee on the approval of the later price list was returned to the assessee with the advise that it should be resubmitted after approval of the price-list. It was in these peculiar circumstances that the Tribunal held that despite there being no endorsements on the gate passes or the RT12 Returns, the assessments had been done provisionally because of the inability or delay on the Department's part to finalise the later price list and giving an impression to the assessee that, till finalisation of the price list, they need not bother about filing a claim.

55. In the above view of the matter, it is not possible to accept Shri Naik's submission with reference to the Supreme Court's judgment in the National Tobacco Co. case that it supports the Department's stand that though there were no formal provisional assessment in the present instance, the Department was competent to complete the assessments as though the assessments were provisional.

56. It is Shri Naik's further contention that though there were no endorsements on the RT 12 Returns at the relevant time as regards the pro-visionality of the assessments, in the circumstances of the case, the assessments must be held to have been provisional. He submits that the facts and circumstances of the case warrant a liberal and not a literal construction of the provisions relating to provisional assessment in Rule 9B. In our opinion, it is not the endorsements on the RT 12 Returns (none existed at the material time) that make the assessments provisional but a substantive if not a literal compliance with the provisions of Rule 9B. For invoking Rule 9B, an order of the proper officer directing the assessments to be provisional is necessary. None, as already noted, existed in the present instance.

57. Shri G.V. Naik has cited the Bombay High Court's judgment in Premier Automobiles v. Union of India and Ors. in support of his contention that though the assessments might not be provisional but final, it was open to the Department to reopen the assessments. We are unable to accept this contention. The circumstances in the Premier Automobiles case were peculiar, necessitated by the issue of a statutory price control order by Government, on the sale price of motor vehicles. The assessments at the time of clearance of the motor cars were admittedly final and not provisional. The Department's submission was that though the assessments were final, it was permissible for the Department to demand additional duty as soon as the company, in terms of the Supreme Court's judgment, was entitled to recover additional price on the cars already sold during the relevant period. The Court agreed that they were entitled to recover additional duty on the additional prices. The Court observed that merely because final assessments were made at the time of clearance of the goods, the Department would not be prevented from claiming additional duty. The rule invoked was 10A which covered short-levies not provided for by Rule 10, that is, short-levies due to causes other than error, collusion or mis-construction on the part of the officer Rule 10A had no limitation built into it. The Court held that it was not a case of short-levy under Rule 10 but one under Rule 10A. In the present case, Section 11A of the Central Excises Act is relevant, it is a self-contained Section and does not contain a provision analogous to the erstwhile Rule 10A. The judgment cited by Shri Naik has no application to the present case.

58. Next, Shri Naik cited the Tribunal's order in Castro Limited v. Collector of Central Excise, Calcutta . In that case, the Tribunal had found as a fact from the endorsements in the RT 12 Returns that the assessments were provisional. The Departmental Representative had also, on perusal of the RT 12 Returns, agreed that the assessments were provisional. It was on the basis of this concession and that fact found by the Tribunal that the final order was based. In the present case, the Department has not shown that there was an order of provisional assessment or that the provisions of Rule 9B had been complied with. The appellants are vigorously disputing that there was provisional assessment. The cited decision is, therefore, of no help to the Department.

59. Shri Naik has placed reliance on the following decisions on the Income-tax Act in support of his contention that the endorsements made on the RT 12 Returns should be deemed to be "protective assessments".

P.K. Trading Co. v. Income Tax Officer . Commissioner of Income-tax v. Cochin Co. (P) Ltd. .

Mahamaya Desai v. Commissioner of Income-Tax .

The concept of "protective assessment" appears to have gained currency and judicial recognition in circumstances where the identity of the assessee in respect of a particular income is in doubt. Here, no such circumstance existed. Mere endorsements on RT 12 Returns at a subsequent date do not amount to "protective assessments". The procedure laid down in Rule 9B (which verily partakes the character of "protective assessments" in the circumstances set out therein) has to be followed. It seems to us that the decisions cited are of no help to the Department.

60. We are unable to accept the contention of the Counsel for the appellants that the Department could not issue notices for demanding duty) since there was no assessment. The contention is that only in the event of] non-levy or short-levy following an assessment made, could a notice demanding duty non-levied or short-levied be issued. In the present case, duty was not levied and collected following the Delhi High Court's judgment. Further the Department was restrained from initiating proceedings for levy of duty. When Section 51 of the Finance Act came into force, the Department invoked Sub-section 2(d) thereof to recover dues which had not been collected but which would have been collected If the amendments referred to in Sub-section (1) had been in force at all material times. It is in pursuance of Section 51(2)(d) of the Finance Act that the notice dated 5.6.19821 had been issued. We, therefore, do not find any merit in the Counsel's sub-mission.

61. In the light of the foregoing discussion we hold that the show cause notice dated 5.6.1982 was not barred by limitation under Section 11A of the Central Excises Act insofar as the period from 1.4.1981 to 5.12.1981 (which is in dispute before us) was concerned. The Department is, therefore, entitled to recover duty from the appellants for this period also. The appeal is, therefore, dismissed.

Appeal No. 2355/88-D

62. The Order-in-Original relevant to this appeal is the one passed by the Assistant Collector of Central Excise on 30.12.1987, bearing No. 21/ Demand/87. This order is in respect of 4 show cause notices, the particulars of which are given below :

______________________________________________________________________________ Demand for the Show cause notice No. and Amount of demand (Rs.) period. date _______________________________________________________________________________ 20.2.1982 to JKCM/Assessment of Yarn/ 31.5 1982. NES/79/509 dt. 6.7.1982 57,23,252.93 1 6.1982 to MOR-II/Assessment of 31.8.1982. Yarn/NES/79/456 dated 16.9.1982 47,66,063.85 1.9.1982 to MOR-II/Assessment of 31.12.1982. Yarn/NES/79/58 dated 64,07,372.08 27.1.1983 1.1.1983 to MOR-II/Assessment of 15.3.1983. Yarn/NES/79/308 dated 39,43,72649 21.3.1983.

________________________________________________________________________________ TOTAL 2,08,40,415.35 ________________________________________________________________________________ These notices, issued under Section 11A of the Central Excises Act, were evidently within time. This is also the undisputed position. In fact, the appellants in their reply dated 11.12.1987 to these notices, accepted that the notices were within time and stated that the demands might be confirmed. They, however, stated that, as against these demands, a sum of Rs. 2,63,40,104.92 i.e., the amount covered by these 4 demand notices plus the amount payable for the period 6.12.1981 to 19.2.1982 (part of the period covered by Appeal No. 2354/88-D) had been paid which the appellants also agreed was not barred by limitation. They had already paid Rs. 2,61,51,000/-following the Supreme Court's interim order of 15.3.1983 and enclosed a Treasury chalan for the balance amount of Rs. 1,89,104.92. They further submitted that the demand for the balance of the period covered by the show cause notice of 5.6.1982 (Appeal No. 2354/88-D) was barred by time. After hearing the appellants, the Assistant Collector passed an order on 30.12.1987 asking them to deposit the amount of Rs. 2,08,40,415.35 within ten days of the receipt of the order. In the order, the Assistant Collector noted that the demand for the period from 6.11.1980 to 31.3.198 |-(Rs, 94,87,872.20) had been confirmed by order No. 19/Demand/87 dated 29.2.1987 and that for the period from 1.4.1981 to 19.2.1982 (Rs. 2,18,22,205.27) by order No. 20/ Demand/87 of the same date. Aggrieved by this order, the appellants took up the matter in appeal before the Collector (Appeals) praying that the order should be set aside insofar as it directed payment of the amount since the amount had already been paid. In his order-in-appeal, the Collector (Appeals) has observed that the Assistant Collector and the Superintendent were justified in apportioning the amount deposited by the appellants to the demands raised by the Department earlier and which were finalised in the respective R.T. 12 returns as required under the provisions of Rule 9B and 173-1.

63. Shri Ravinder Narain contends that while the appellants do not dispute their liability to pay duty on the yarn captively consumed during the period from 20.2.1982 to 15.3.1983 and had also paid the amount, their grievance is against the arbitrary adjustment of the payments so made against the "time-barred" and disputed demands. Their further grievance is that the Department, after having made the arbitrary adjustments, had raised further demands for payment of duty for the same period for which they had already made payments. In his reply, Shri Naik submitted that the Department was within its rights to adjust the amounts paid by the appellants as duty for a particular period against outstanding demands ing to an earlier period.

64. We have carefully considered the submissions of both sides. The department has not denied that the appellants had, as averred by them, paid the duty due for the period from 20.2.1982 to 15.3.1983, the liability for which payments, following the Supreme Court's judgment, is not in dispute. The amounts paid correctly and properly in discharge of duty due during this period cannot, in our considered opinion, be adjusted against dues for an earlier period. This is for' the reason that the duty due and correctly paid for a particular period is not in the nature of "any money owing to the person from whom such sums may be recoverable or due which may be in his (the proper officer's) hands or under his disposal or control from which the sums recoverable or due may be deducted as laid down in Section 11 ("Recovery of sums due to Government") of the Central Excises Act. In short, the adjustment effected by the lower authorities is arbitrary and without the authority of law and is set aside. The result will be that the orders of the Collector (Appeals) and the Assistant Collector are quashed in so far as they direct that the payment of Rs. 2,08,40,415.35 made by the appellants for the period 20.2.1982 to 15.3.1983 to be apportioned to dues for the earlier periods. This amount will payments for the period 20.2.1982 to 15.3.1983.

Appeal No. 2356/88-D

65. The Superintendent of Central Excise, by his letter C. No. R. 11/ Assessment of Yarn/NES/79 Pt/1974 dated 18.12.1987, finalised the provisional assessments of RT 12s (Assessment Returns) for the periods and amounts indicated therein in respect of each different type of yarn and asked the appellants to deposit the amounts in ten days.

__________________________________________________________________________ Description Period __________________________________________________________________________ Non-cellulosic spun February 81 to [Rs. 6,63,574.50(paid in march) yarn. March 83. 83). According to the letter, the appellants were entitled to get adjustment of this amount against the payments due].

       Cellulosic spun yarn.  April 81 to           [Rs. 1,29,281.01 (paid in March
                              March 83.              83). According to the letter,
                                                    the above amount was available
                                                    for adjustment against the
                                                    payments due].
       Cotton yarn.           January 81 to         [Rs. 11,106.90 (paid in March
                              March 83.             83). According to the letter,
                                                    this amount was available for
                                                    adjustment against the payments
                                                    due].

______________________________________________________________________________ The letter further states that the dues already paid may be deducted from the demand made. By their letter dated 30.12.1987, the appellants protested and stated that the show cause notice dated 56.1982 covering the period from 1.4.1981 to 19.2.1982 was barred by limitation in respect of the period upto 5.12.1981. The appellants also contended that after issue of the show cause notice of 5.6.1982, the authorities could not make any provisional assessments or purport to finalise any provisional assessments. in appeal, the Collector (Appeals) held that the appellants plea that they should have been issued, show cause notice and given an opportunity to put forth their case before finalisation of the purported provisional assessments, did not hold good "since there was independence(sic) or separate order in this case passed but the appellants were only apprise of the position of the issue for which adjudication proceedings were held.

66. Before us, Shri Ravindera Narain contends that the Collector (Appeals) had not dealt with the material submission made by the appellants in their memorandum of appeal. In short their submission is that there was no order of provisional assessment prior to the clearance of the goods and that the procedure laid down in Rule 9B not having been fallowed there could have been no provisional assessment and therefore no question of finalisation of the purported provisional context, Shri Ravindera Narain places reliance on the Supreme courts judgement in Union of India v. Madhu Milan Syntex according to which a show cause notice and opportunity are a must for finalisation of proceedings under Section 11A of the Central Excises Act. Likewise, the Counsel submits, the finalisation of provisional assessments under Rule 9B also requires issue of a show cause notice and grant.

67. In his reply, Shri Naik submits that the Superintendent's order of 18.12.1987 was only in pursuance of the Supreme Court's judgment. It should be deemed to be an interim order in the context of the Order-in-Original dated 30.12.1987 passed by the Assistant Collector in which he refers to the Superintendent's order and covers the same period. Before passing this order, the Assistant Collector had given due opportunity to the appellants. There has thus been no breach of the principles of natural justice.

68. We have carefully considered the submissions of both sides. It is not disputed by the department that no show cause notice was served on, or opportunity extended to, the appellants to put forth their case before the Superintendent who passed his order finalising the provisional assessments. In the first place, we have already held that, in the facts and circumstances of the case, there were, in fact, no provisional assessments. That apart, as held by the Supreme Court in the Madhu Milan Syntex case, "there can be no demand without a prior show cause notice and opportunity to the affected party." All the more so, in this case, because the very provisionality of the assessment was being strenuously disputed by the appellants. We also note that the Supreme Court, in its judgment in Raghunath Thakur v. Stale of Bihar and Ors. 1988 Scale 1326, has held that even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have the right to be heard and make representation against the order. The Court has further held that it is an implied principle of the rule of law that any order having civil consequences should be passed only after following the principles of natural justice.

69. The Departments submission is that these authorities have no bearing on the present case because the assessments on RT 12 returns were made by the Superintendent after the issue of show cause notice on 4.5.1881 and further he had made remarks on the relative RT 12s to the effect that show cause notices had been issued. AH he had done was to work out the liability in each month as per the RT 12 returns submitted by the assessees.

70. We do not agree with the Department's contention. In accordance with the pronouncements of the Supreme Court, it was necessary that the Superintendent should have, prior to passing the order of finalisation of assessments, issued a notice and given due opportunity to the assessee to make its submissions.

71. We do not also agree with the Department's submission that the Assistant Collector had made good the defect, if any, in the procedure followed by the Superintendent. The appeal against the Assistant Collector's order in question has already been dealt with. In so far as the present anneal is concerned, we have to hold that the Superintendent's order was vitiated by lack of compliance with the principles of natural justice.

72 In the result, we set aside the order dated 18.12.1987 of the Superintendent and modify the order of the Collector (Appeals) to this extent We make it clear, however, that the Department will be at liberty to hold proceedings against the appellants in accordance with law, in respect of dues, if any, from them for any period covered by the Superintendent's order' but not covered by our orders in respect of the appeal Nos. 2353. 2354 and 2355 of 1988.

73. To sum up:

(a) Appeal No. 2353/88-D We hold that the demands made in the notices of 4.5.1981, read with addenda dated 5.5.1981, have been correctly confirmed by the lower authorities. We dismiss the appeal.

(b) Appeal No. 2354/88-D We hold that the show cause notice dated 5.6.1982 was not barred by limitation under Section 11A of the Central Excises Act in so far as the period from 1.4.1981 to 5.12.1981 was concerned. The Department is, therefore, entitled to recover duty from the appellants for this period also. The appeal is, therefore, dismissed.

(c) Appeal No. 2355/88-D The orders of the lower authorities are quashed in so far as they direct that the payment of Rs. 2,08,40,415.35 made by the appellants for the period 20.2.1982 to 15.3.1983 be apportioned to dues for the earlier Periods. This amount will be treated as duty payments for the period 20.2.1982 to 15.3.1983

(d) Appeal No. 2 356/88-D We set aside the order dated 18.12.1987 of the Superintendent and modify the order of the Collector (Appeals) to this extent. We made it clear, however, that the Department will be at liberty to hold proceedings against the appellants in accordance with the law, in respect of the dues, if any, from them for any period covered by the Superintendents orders but not covered by our order in Appeal Nos. 2353, 2354 and 2355/88-D. Sd/- (P.G. Jain) Sd/- (G. Sankaran) Member (Technical) Senior Vice-President Dated 18.1.1989 Per Shri G.P. Agarwal, Judicial Member :

74. 1 have had the advantage to read and re-read the very erudite judgment recorded by the Hon'ble Sr. Vice President and would like to record my separate orders as follows-

Appeal No. E/2353/88-D

75. I agree with the opinion of the Hon'ble Sr. Vice President that the demands made in the Notices of 4.5.1981 read with addenda dated 5 5.1981 were correctly confirmed by the lower authorities and. therefore the appeal deserves to be dismissed.

76. However, I would like to add that in this appeal it was also argued by the learned Counsel for the appellants that the appropriation of Rs. 45,17,899.65 made by the Adjudicating Authority against payment of Rs. 2,63,40,104.92 is illegal and ought to be appropriated towards the demand for the period from 20.2.1982 to 15.3.1983 as set out in the appellants letter dated 11.12.1987. I have considered this contention while dealing with Appeal No. E/2355/88-D and rejected the said contention for the reasons recorded therein. (In A. No. E/2355/88-D).

77. In the result the appeal is dismissed.

Appeal No. 2354/88-D

78. While agreeing with the conclusion recorded by the Hon'ble Sr. Vice- President that the Show Cause Notice dated 5.6.1982 was not barred by limitation under Section 11A of the Central Excises & Salt Act 1944 even for the period from 1.4.1981 to 5.12.1981 (as was contended by the learned Counsel for the appellants) I would like to state that I do not agree that the two judgments of the Hon'ble Supreme Court recorded in the case of East India Commercial Co. Ltd. Calcutta v. Collr. of Cus., 1983 ELT 1342 : 1984 ECR 138 and Shri Baradakanta Mishra v. Bhim Sain Dixit are relevant as recorded by him in para 46 of his judgment as in my opinion the said cases have no relevancy to the issue in question as they deal with a different situation and would further like to record my own reasons as under.

79. The short question involved in this appeal is whether the demand of duty from 1.4.1981 to 5.12.1981 made in the Show Cause Notice dated 5.6.1982 was within time. It was contended by the learned Counsel for the appellants that the said demand being beyond the stipulated period of limitation of six months as provided in Section UA(1) of the Central Excises and Salt Act, 1944 is time barred. Elaborating on his argument he submitted that in the present case neither there was any stay order of a Court preventing the department from serving the notice of demand nor there was any provisional assessment. Consequently both the authorities below went wrong in holding that the demand was not time barred. Jn reply it was contended by Shri Naik, the learned Jt. CDR that during the relevant period the stay order passed by Delhi High Court in the Writ Petition No. 1858/81 filed by the appellants was in force and that the assessment made during the said period i.e. to say from 1.4.1981 to 5.12.1981 was provisional.

80. In order to appreciate the controversy in hand it would be necessary to state the chequered history of the case in brief. The appellant company is carrying on the business of spinning yarn and also manufacture fabrics. There is a composite Mill where they manufacture blended non-cellulosic spun yarn on which excise duty is payable and utilises the yarn within their own factory for the purposes of making man-made fabric. Earlier there was a demand of duty of Central Excise on yarn captively consumed in the manufacture of fabrics in their composite Mill by the department. This demand was challenged by the appellants vide their Writ Petition No. 664/79 before the Delhi High Court. This Writ Petition was allowed by Delhi High Court by its judgment dt. 16.10.1980 (since reported in 1981 ELT 887) : i 980 Cen-Cus. 635D) whereby it was held that no excise duty could be levied on yarn captively consumed in the manufacture of fabrics. Other High Courts in India also took similar view and held that intermediary product obtained in a composite Mill could not be subject to levy of excise duty unless the said product was utilised or consumed by itself. The result of these decisions was that the factories which had generally been paying excise duty even on such intermediary product stopped paying the duty and even claimed refund where duty had earlier been paid on an incorrect impression of law. The appellants also following the said judgment of the Delhi High Court delivered in their own case stopped paying the excise duty w.e.f. 6.11.1980 on yarn so consumed captively. The revenue naturally suffered. In many cases, the Government filed appeals in the Hon'ble Supreme Court for grant of special leave to appeal. In the instant case the Government also filed a Special Leave Petition against the said judgment of the High Court (S.L.P. No. 57/81). This S.L.P. is stated to be still pending admission in the SC-a fact admitted by both the parties. It appears that after filing the S.L.P. against the said judgment passed by the Delhi High Court dated 16.10.1980 as aforesaid, the department issued a demand-cum-show cause notice dated 4.5.1981 demanding duty for a period from 6.11.1980 to March 1981. On the next date an addendum to the said show cause notice was issued. In that show cause notice it was mentioned that the same is being issued without prejudice to the decision of Hon'ble Supreme Court that may be taken in regard to S.L.P. filed by the department and no action to determine the demand for the amount and for the period covered in the show cause notice will be taken till such time the decision is taken by the Hon'ble Supreme Court. After the service of this notice the appellants filed their Writ Petition No. 1858/81 challenging the said demand made by show cause notice dated 4.S. 1981 as amended by addendum dated 5 5.1981 in the Delhi High Court. Along with the Writ Petition an application for interim stay was also filed and interim stay was granted by the Hon'ble High Court on 12.8.1981 which continued till the disposal of the writ petition on 11.1.1983 (since reported in 1983 ELT 239) 1983 ECR 117Oand also for another three months for filing the S.L.P. before the Hon'ble Supreme Court by the appellants. It appears that after the filing of the S.L.P. against the said judgment of the Delhi High Court dated 16.10.1980 in the Supreme Court and also other appeals against the other decisions of the various High Courts in the Country holding that an intermediary product obtained in a composite Mill could not be subject to levy of excise duty unless the said product was utilised or consumed by itself were not going to be decided by the Supreme Court expeditiously in view of large pendency the Central Government decided to amend the law. Accordingly, while enacting the Finance Act, 1982 the Parliament enacted Section 51 giving retrospective effect to the amendments made in Rules 9 and 49 of the Central Excise Rules, 1944 by Notification No. 20/82-CE. Thereafter the department issued another show cause notice dated 5.6.1982 on the strength of the said Section 51 of the Finance Act, 1982 demanding duty from 6.11.1980 to 19.2.1982 detailing out the chequered history of the litigation and the various interim orders passed by the Courts. The appellants also after the said enactment amended their writ petition No. 1858/81 which was pending in the Delhi High Court and challenged the legality and validity of the said Section 51 of the Finance Act, 1982. But the Delhi High Court upheld the validity of the said Section 51 of the Finance Act, 1982 by its judgment dated 11.1.1983 (since reported in 1983 ELT 239). Against this judgment of the Delhi High Court the appellants filed their writ petition in the Supreme Court along with an application for ad-interim stay. On this stay application the Supreme Court passed the following interim order on 15.3.1983 which continued till the final disposal of the writ petition on 30.10.1987 ORDER:

In respect of future payment of excise duty there will be no Stay. In so far as past dues are concerned 50 per cent of the dues shall be paid to the authority concerned within a period of three months from today. In regard to the balance of the 50 per cent, the appellants shall give Bank Guarantee to the satisfaction of the Registrar of this Court within the same period. If the Bank Guarantee has already been given in any case in pursuance of the directions of the High Court, it will continue in operation and shall be kept alive from time to time.....

81. Ultimately the Supreme Court by its judgment dated 30.10.1987 (since reported in 1987 (32) ELT 234) rejected the said writ petition of the appellants and confirmed the Judgment of the Delhi High Court wherein it was held that the retrospective effect given by Section 51 of the Finance Act, 1982 to amendments made in Rules 9 and 49 by Notification No. 20/82-CE is valid and constitutional, but the demand is subject to the provisions of Section 11A of the Central Excises and Salt Act. It is said that after the dismissal of the said writ petition by the Hon'ble Supreme Court on 30.10.1987 the department has moved a Miscellaneous Application for realisation of Bank Guarantee which was furnished by the appellants in pursuance of the said stay order passed by the Hon'ble Supreme Court on 12.8.1981. In these premises it was argued by Shri Ravinder Narayan, the learned Counsel for the appellants that since the Supreme Court has held in 1987 (32) ELT 234 that though Section 51 of the Finance Act, 1982 giving retrospective effect to the amendments of Rules 9 and 49 of the CE Rules, 1944 by Notification No. 20/82-CE is valid but the demand is subject to the limitation provided under Section 11A of the Central Excises and Salt Act, 1944 i e. to say in the instant case six months and the stay order passed by the Delhi High Court in the Writ Petition No. 1858/81 does not save limitation under Explanation to Section 11 A(1) of the Central Excises and Salt Act as the service of the notice was not stayed by the aforesaid stay order/orders by the Delhi High Court. In support of his contention he cited the case of Siraj-ul-Haq v. S.C. Board of Waqf to show that for excluding the time under Explanation to Section 11A(1) ibid, it must be shown that by issuing the demand-cum-show cause notice the department would have invited the contempt of Court. He also submitted that if the department was in doubt about the meaning or effect of the said stay order passed by the Delhi High Court it should have sought the clarification by the Court itself or would have asked for variation or modification a course suggested by the Hon'ble Supreme Court in the case of Supdt. of Taxes v. O.N. Trust . The said contentions were countered by Shri Naik, the learned Jt. CDR as aforesaid.

82. Thus, the question for determination before us is as to whether the service of the notice was stayed by any Order of a Court or the demand-cum-show cause notice dated 5.6.1982 so far as relates to the demand for the period from 1.4.1981 to 5.12.1981 is saved by virtue of the Explanation to 11A(1) of the Central Excises and Salt Act, 1944.

83. In order to appreciate the controversy and to decide the question in hand it would be useful to state the legal position. Sub-section (1) of Section 11 A, ibid in so far as relevant provides that when any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person concerned, requiring him to show cause why he should not pay the amount specified in the notice. Explanation to the said sub-section provides that where the service of the notice is stayed by an order of a Court, the period of such stay shall be excluded in computing the aforesaid period of six months.

84. The said provision in the Explanation incorporates a well-known principle of law and is intended to prevent the accrual of any injury to the person who was interdicted by any injunction or stay order passed by the Court from exercising a right of suitor of any proceedings according to law. Sub-section (1) of Section 15 of the Limitation Act, 1963 also incorporates the same principle and provides that "In computing the period of limitation for any suit or application for the execution of a decree, the institution or execution of which has been stayed by injunction or order, the time of the continuance of the injunction or order, the day on which it was issued or made, and the day on which it was withdrawn, shall be excluded." In Narayan Patil v. Puttabai AIR 1945 PC 5 it was held that "the question whether in a particular case a party has been restrained by an injunction or order from instituting a suit must always depend for its decision upon the order, or the decree, made in the case". The Supreme Court had also an occasion to deal with such a situation while dealing with the question of interpretation of Section 15 of the Limitation Act. 1908 (which corresponds to Section 15(1) of the present Limitation Act, 1963). While doing so it held that, for excluding the time under Section 15 it must be shown that the institution of the suit in question had been stayed by an injunction or order; in other words, the section requires an order or an injunction which stays the institution of the suit. And so in cases falling under Section 15, the party instituting the suit would by such institution be in contempt of Courtthe same view was reiterated by the Court in the case of Gokak Patel Volkart Ltd., v. Collector of Central Excise, Belgaon .

85. Thus, if an express order or injunction is produced by a party that clearly meets the requirement of Section 15 of the Limitation Act 1963 or the Explanation to Sub-section (1) of Section 11A of the Central Excises and Salt Act. But the difficulty arises where a question arises as to whether the requirement of explanation to Sub-section (1) of Section 11 A, would be satisfied by the production of an order passed by a Court which by necessary implication stays the service of the notice ? In the case of Narayan Patil v. Puttabai the Privy Council was also faced with the same situation. In that case also it was contended that the injunction or the order staying the institution to be effective should contain an express prohibition. But their Lordships did not think it necessary to consider whether the prohibition required by Sec 15 of the Limitation Act must be express or can even be implied It is significant to note that this question was also agitated before the Hon'ble Supreme Court in the case of Siraj-ul-Haq v. S.C. Board of Waqf supra ECR C 609. While disposing of the said contention, their Lordships observed as follows-

....Whether the requirements of Section 15 would be satisfied by the production of an order or injunction which by necessary implication stays the institution of the suit is open to argument. We are however prepared to assume in the present case that Section 15 would apply even to cases where the institution of a suit is stayed by necessary implication of the order passed or injunction issued in the previous litigation But in our opinion, there would be no justification for extending the application of Section 15 on the ground that the institution of the subsequent suit would be inconsistent with the spirit or substance of the order passed in the previous litigation. It is true that rules of limitation are to some extent arbitrary and may frequently lead to hardship- but there can be no doubt that, in construing provisions of limitation equitable considerations are immaterial and irrelevant, and in applying them effect must be given to the strict grammatical meaning of the words used by them : Nagendra Nath Dey v. Suresh Chandra Dev 34 Bom. LR 1065 : AIR 1932 PC 165.

86. However, in a recent judgment in the case of Anandilal v. Ram Narain the Supreme Court while interpreting Sec ' 15m of the Limitation Act, 1963 held that it is true that in construing statutes of limitation considerations of hardship and anomaly are out of place Nevertheless, it is permissible to adopt a beneficent construction of a rule of limit action if alternative constructions are possible. In that case while resolving the controversy as to whether a partial stay is within the meaning of Section 15(1) of the Limitation Act, 1963 their Lordships held that

10. We feel that there is no justification for placing a rigid construction on a beneficent provision like Section 15(1) of the Limitation Act. It is not necessary for us to go into the history of the legislation which has been dealt with at length in many of the decisions laving down that Section 48 of the Code is controlled by Section 15(1) of the Limitation Act. All that we need say is that both the enactments have throughout been treated as supplementary to each other and concern with procedural law. It is also true that in construing statutes of limitation considerations of hardship and anomaly are out of place. Nevertheless, it is, we think, permissible to adopt a beneficent construction of a rule of limitation if alternative constructions are possible. It is plain on the terms of Section 15(1) that the word "execution" appearing in the collocation of words "the execution of which has been stayed" must be construed in a liberal and broad sense. As observed by the Calcutta High Court in Sreenath Roy's case (1883) 1LR 9 Cal 773 (supra), (the words "execution of the decree" mean the enforcement of the decree by what is known as "process of execution.

87. In the light of the aforesaid legal position now I advert to the facts of the case. In the instant case on the stay petition (CM. 3553/81) the Delhi High Court passed the following stay order on August 12, 1981 which is the subject matter before us Notice for September 3, 1981. In the meanwhile, interim orders in terms of prayer a' Dasti.

88. The said prayer made by the appellants in the application for stay was in the following terms PRAYER It is, therefore, most respectfully prayed that this Hon'ble Court may be pleased to:

(a) grant of stay permitting the petitioners forthwith to further process yarn, in its composite mill in the manufacture of fabrics at nil rate of duty and to clear cotton fabrics forthwith upon payment of duty in respect of cotton fabric only (without/payment of duty on cotton yarn) and to restrain respondents 4 to 6 from taking any action or proceedings pursuant to and/or on the same basis as the contents of the directive of the Board, Respondent No. 2 (Annexure A to the writ petition) and to stay further proceedings pursuant to the Notices dated 4th May 1981 and addends thereto dated 5th May, 1981 (Annexures C to H to the writ petition);

89. The said prayer was made on the following averments which are reproduced for ready reference and proper appreciation of the controversy in hand in extenso SHEWETH:

1. The Petitioner has filed the accompanying writ petition, inter alia challenging the legality of the respondents action in purporting to' collect duty of excise in respect of cotton yarn and man made yarn further processed within the Petitioner's composite mill in the manufacture of cotton fabrics and man made fabrics respectively It is the petitioner's contention that since there is no removal of the said yarn within the meaning of Rules 9 and 49 of the Central Excise Rules no duty of excise can be levied and collected in respect thereof.

2. This Hon'ble Court had, in the Petitioner's own case being Civil Writ Petition No. 664 of 1979 by Judgment dated 16th October, 1980 held that no duty was payable in respect of yarn which is further processed by the Petitioner within its composite, Mill in the manufacture of fabric. Inspite of the fact that the issue has been decided the Petitioner own case contrary to and in violation of the directions of this Hon'ble Court, the Respondents are now seeking to take act on against the Petitioner for levying and collecting duty of excise in respect of the said yarn which is further processed within the factory in the manufacture of fabrics. The respondents have also issued notices for recovery of past demand inspite of the fact that this Hon'ble Court has specifically decided the issue in favour of the petitioner. This patently illegal action is being taken by the Repondents on the basis of a circular and directive issued by the Central Board of Excise, Respondent No. 2 which has been impugned in the accompanying writ petition.

3. The balance of convenience is entirely in favour of the petitioners. Although the said issue is already covered and settled by the aforesaid decision in the case of the Petitioner's own case, the Respondents are acting illegally and are insisting upon collection of duty in respect of such yarn processed within the composite mills in the manufacture of fabrics. No duty of excise in respect of such yarn could be charged and the petitioners are entitled to claim refund in respect of duty illegally collected in the past in respect thereof. No prejudice would be caused to the respondents if the Petitioners are permitted to process the yarn within the composite mill in the manufacture of fabric in accordance with the judgment of this Hon'ble Court. Grave hardships and irreparable loss will be caused to the petitioners if duty of excise is illegally recovered from the petitioners contrary to the decisions of this Hon'ble Court. It would be in the interest of justice to direct the respondents not to persist in recovering the duty of excise in respect of the aforesaid yarn illegally from the Petitioners.

90. The said directive issued by the Central Board of Excise which was impugned in the said writ petition (Annexure 'A' to the writ petition) and of which stay was sought in the application for stay as reproduced above, insofar as material runs thus "Annexure 'A' Circular No. 43/80-CX. 6.

F. No. 215/5/79-CX. 6

GOVERNMENT OF INDIA CENTRAL BOARD OF EXCISE AND CUSTOMS New Delhi, the 24th Sept. 1980 To All Collectors of Central Excise Subject: Central ExcisesLevy of duty in the case of captive consumptionScope of Rules 9 and 49 of the Central Excise Rules, 1944.

Sir, I am directed to say that the Board had recent occasion to examine, in consultation with the Ministry of Law, the various issues involving interpretation of Rules 9 and 49 of the Central Excise Rules, 1944, in relation to levy of duty with particular reference to the case of captive consumption. The position is clarified as under:

           A. 1(i)    x        x        x          x        x          x
            (ii)    x        x        x          x        x          x
            (iii)   x        x        x          x        x          x

A. 2. Consequently immediate steps should be taken by you to ensure approval of the place of production etc. and if necessary, the premises appurtenant there to as referred to above. Powers of the Collector, under Rule 9(1), should be delegated immediately to the licensing authorities for this purpose, if not already done so.

              (ii)   x        x        x          x        x          x
             (iii)  x        x        x          x        x          x
             (iv)   x        x        x          x        x          x

B. 1. Under Rule 9(1), where goods are used in the factory for the manufacture of the same commodity no duty is leviable and duty becomes leviable only if the goods are used for the manufacture of any other commodity. However, in view of the expression "in or outside such place" occurring in Rule 9 use of the goods in manufacture of another commodity even within the place premises that have been specified in this behalf by the Central Excise Officer in terms of the powers conferred upon the said rule, will attract duty.

B. 2. However, if in terms of Rule 9 the goods have been removed without payment of duty for being deposited in a store-room or other place of storage, subsequent, clearance from such store-room or place of storage, will attract duty in terms of Rule 49, even if they are to be used for the manufacture of the same commodity inside the factory.

C. The Supervising Officers must make it a point to give these issues their personal attention in order to ensure proper implementation.

Please acknowledge receipt of this letter.

Yours faithfully.

Sd/- (K.D. Tayal) FOR SECRETARY, Central Board of Excises & Customs.

(Emphasis supplied)

91. The said stay order dated 12.8.1981 not only continued upto the time of delivery of final judgment on 11th January, 1983 disposing of the said writ petition but also till 31.1.1983 as while granting Certificate of Fitness for leave to the Supreme Court in terms of Article 133(1) of the Constitution of India on 17.1.1983. The Delhi High Court further directed that the interim orders passed by the High Court during the pendency of the writ petition would continue to be operative till 31.1.1983.

92. From a close analysis of the prayer (a) made by the appellants in the application for stay as reproduced above and the order made by the Delhi High Court on August 17, 1981 it is clear that the department was prevented from serving the notice on the appellants in terms of Section HA read with its Explanation. To begin with in prayer (a) the appellants prayed for grant of stay

(i) permitting the petitioners forthwith to further process yarn, in its composite mill in the manufacture of fabrics at nil rate of duty and to clear cotton fabrics forthwith upon payment of duty in respect of cotton fabrics only (without payment of duty on cotton yarn);

(ii) to restrain respondents 4 to 6 from taking any action or proceedings pursuant to and/or on the same basis as the contents of the directive of the Board(Annexure-A to the writ petition); and

(iii) to stay further proceedings pursuant to the Notices dated 4th May 1981 and addendum thereto dated 5th May, 1981.

93. From the said directive (Annexure 'A' to the writ petition as reproduced above) it is clear that the Central Board of Excise and Customs made it clear that even in cases where in terms of Rule 9 of the Central Excise Rules, 1944 the goods have been removed without payment of duty for being deposited in a store-room or other place of storage, subsequent, clearance from such store-room or place of storage, will attract duty in terms of Rule 49, even if they are to be used for the manufacture of the same commodity inside the factory i.e. to say for captive consumption. In the said directive it was also made clear that in view of the expression "in or outside such place" occurring in Rule 9 use of the goods in manufacture of another commodity even within the place/premises that have been specified in this behalf by the Central Excise Officer in terms of the powers conferred under the said rule, will attract duty. In a nutshell in the said circular, the Board has directed the subordinate Excise Authorities that "use of goods in manufacture of another commodity even within the place premises that have been specified in this behalf by the Central Excise Officers in terms of the powers conferred under Rule 9 of the Rules, will attract duty."

94. From the prayer made in para (a) it is clear that the appellants prayed for grant of stay (injunction) restraining the department from taking any action or proceedings pursuant to and/or on the same basis as the contents of the directive of the Board as the said circular was going to be implemented to the prejudice of the appellants and the High Court granted the same prayer by its order dated August 12,1981. It was also admitted to the appellants (and also would appear from the stay application made in the Delhi High Court as reproduced above) that the show cause notices dated 4th May, 1981 and addendum thereto dated 5th May, 1981 was issued by the Board ignoring the judgment dt. 16th Oct. 1980 passed by the Delhi High Court in Writ Petition No. 644 of 1979 (1981 ELT 887) filed by the appellants wherein it was held that no duty was payable in respect of yarn which is further processed by the appellants within its composite Mill in the manufacture of fabric. From the application for stay made by the appellants in the Delhi High Court and as reproduced above it would also appear that It is admitted to the appellants that despite the said judgment the department was seeking to take action against the appellants for levying and collecting duty of excise in respect of the said yarn which is further processed within the factory in the manufacture of fabric and also issued notices for recovery of demand. From the stay application it is further clear that the appellants also made a grievance that no duty of excise in respect of such yarn could be charged. In the show cause notice dated 4.5.1981 and addendum thereto dated 5.5.1981 besides stating that "consequent upon the judgment dated 16.10.1980 of the Hon'ble High Court of Judicature of Delhi in Writ Petition No 664 restraining the department from levying excise duty on yarns manufactured by them whether at the stage of cone yarns or at the stage of sized yarn, they (appellants) stopped paying Central Excise duty on Cellulosic spun yarn at (he time of clearance. The appellants were also told that cellulosic spun yarn is covered under T.I. 18-111 o/ the First Schedule of Central Excises and Salt Act, 1944 and is chargeable to Central Excise duty at appropriate rate of Rs. 24/- per kg. In the show cause notice they were also called upon to show cause as to why duty at appropriate rate be not demanded under Section 11A of the Central Excises and Salt Act for the clearance of cellulosic spun yarn made without payment of duty from 6.11.1980 (as they had stopped payment from 6.11.1980 on account of the said judgment of the Delhi High Court dated 16.10.1980). From the prayer made in para (a) it is also clear that the appellants also prayed for staying further proceedings pursuant to the said Notices dated 4.5.1981 and addendum thereto dated 5.5.1981. From these facts it is clear that in their Writ Petition No. 1858/81 filed before the Delhi High Court it was the case of the appellants that in spite of the said decision of the Delhi High Court, the Central Board of Excise has wrongly issued a circular dt. Sept. 24, 1980 purporting to interpret Rules 9 and 49 of the Central Excise Rules, 1944 and directing the subordinate Excise Authorities to levy and collect duty of excise in accordance therewith and since the said circular was being implemented to the prejudice of the appellants, they filed the said Writ Petition before the Delhi High Court, inter alia, challenging the validity of the said circular and also moved an application for interim stay praying that the department be restrained from taking any action or proceedings pursuant to and/or on the same basis as the contents of the directive of the Board and ultimately the Hon'ble High Court granted the stay dated August 12, 1981 as prayed for. Thus, there can be no doubt that the department was restrained by the said stay order dt. Aug. 12, 1981 passed by the Delhi High Court from levying and collecting of the duty on cellulosic spun yarn captively consumed which was payable in respect of yarn which is further processed by the appellants within their composite mill in the manufacture of fabrics. Incidentally it may also be stated that for this view in the matter we also find assurance from the brief facts of the case stated by the Hon'ble Supreme Court while disposing of the Civil Appeal No. 297/83 (See ) filed by the appellants against the judgment rendered by the Delhi High Court in their case reported in 1983 ELT 239. The said observations run thus

2. The appellant No. 1, J.K. Cotton Spinning and Weaving Mills Limited, has a composite mill wherein it manufactures fabrics of different types. In order to manufacture the said fabrics, yarn is obtained at an intermediate stage. The yarn so obtained is further processed in an integrated process in the said composite mill of the appellant No. 1 for weaving the same into fabrics. The appellants do not dispute that the different kinds of fabrics which are manufactured in the mill are liable to payment of Excise duty on their removal from the factory. They also do not dispute their liability in respect of yarn which is also removed from the factory, it is the contention of the appellants that no duty of excise can be levied and collected in respect of yarn which is obtained at an intermediate stage and, thereafter, subjected to an integrated process for the manufacture of different fabrics. Indeed, on a writ petition of the appellants, the Delhi High Court by its judgment dated October 16, 1980 held that yarn obtained and further processed within the factory for the manufacture of fabrics could not be subjected to duty of excise. It is the case of the appellants that in spite of the said decision of the Delhi High Court, the Central Board of Excise has wrongly issued a circular dated September 24, 1980 purporting to interpret Rules 9 and 49 of the Central Excise Rules, 1944 (hereinafter referred to as 'the Rules') and directing the subordinate Excise authorities to levy and collect duty of excise in accordance therewith. In the said circular, the Board has directed the subordinate Excise authorities that "use of goods in manufacture of another commodity even within the place premises that have been specified in this behalf by the Central Excise Officers in terms of the powers conferred under Rule 9 of the Rules, will attract duty". As the said circular was being implemented to the prejudice of the appellants, they filed a writ petition before the Delhi High Court, Inter alia, challenging the validity of the circular.

(Emphasis supplied)

95. It may also be stated that challenge to the said circular dated Sept. 24, 1980 issued by the Central Board of Excise continued even before the Hon'ble Supreme Court in their aforesaid Civil Appeal No. 297/83 as would appear from paragraph 43 of the judgment delivered by the Hon'ble Supreme Court on 30.10.1987. Even assuming with the learned Counsel for the appellants that there was no express prohibition staying the service of notice, there can be no escape from the conclusion that in the presence of the facts and circumstances and the prayer made and the stay order passed thereon the department was restrained from serving the notice by necessary implication of the said stay order within the meaning of Explanation to Sub-section (1) of Section 11A of the Central Excises and Salt Act.

96. The case of Gokak Patel Volkart Ltd. v. Collr. CE, supra 1987 (11) ECR 363 cited by the learned Counsel for the appellants does not help the appellants. From the said judgment it is clear that in that case the High Court of Karnataka by its order dated 4.6.1976 only directed a stay of collection of excise duty and not levying of the duty. Since the High Court only directed stay of collection of excise duty, the Hon'ble Supreme Court held that since there is a difference between "levy" and "collection" and the High Court of Karnataka only stayed the collection of excise duty and not its levy the department cannot take the advantage of Explanation to Sub-section (1) of Section 11A of the Central Excises and Salt Act. In the present case we have held that the department was restrained from levying and collecting of excise duty, Hence the ratio of the decision in Gokak Patel Volkar Ltd. 1987 (11) ECR 53 is not applicable to the present case.

97. The other contention of the learned Counsel for the appellants that if the department was in doubt about the meaning or effeet of the said stay order it should have sought the clarification by the Court itself or would have asked for variation or modification as laid down by the Hon'ble Supreme Court in the case of Supdt. of Taxes v. O.N. Trust, also cannot be accepted. In the first instance the said stay order was passed in terms of prayer (a) and this prayer is clear. From a reading of prayer (a) as discussed above it is clear that the department was restrained from serving the notice under Section 11A. From the show cause notice dated 5.6.1982 (a part of the demand made therein is impugned bet ore us) it is clear that the department was not entertaining any doubt on this count. In the said notice dated 5.6.1982 the department clearly stated that in the said writ petition the appellants have obtained a stay order for restraining the department from levying and collection of duty on the yarn captively consumed. The relevant portion of the said show cause notice reads as follows-

Whereas consequent upon the judgment of Delhi High Court in the Writ Petition No. 664/79 dated 16.10 1980, they stopped payment of Central Excise duty on yarn removed for captive consumption in the manufacture of fabrics. On issuing the show cause notices for demanding duty for the aforesaid period from 6.11.1980 to 31.3.1981 they had again filed a Writ Petition No. 3858/81 in the Delhi High Court and obtained a stay order for restraining the department from levying and collection of duty on the yarn captively consumed.

98. Under these circumstances there was no necessity for the department to ask for variation or modification of the said stay order. The case of Supdt. of Taxes v. O.N. Trust, supra is clearly distinguishable on the facts of the case and not even relevant to the controversy in hand. In that case notices were admittedly issued after the expiry of the statutory period (i.e. to say on 31.12.1963) specified in Section 7(2) of the Assam Taxation (on Goods Carried by Road or on Inland Waterways) Act, 1961. These notices were challenged before the High Court on the ground that they were issued beyond the date of expiry of 2 years from the date when written should have been filed as specified under Section 7(2) of the said Act. In defence it was contended by the Revenue i.e. to say Supdt. of Taxes that the said Act of 1961 was passed by the legislature of Assam on 6.4.1961 with retrospective effect from 24.4 1954 and published in the gazette on 15.4.1961 and was to be operative upto 31.3 1962 and that the assessee i.e. to say O.N. Trust challenged the validity of the said Act before the High Court of Assam in writ petition and they applied for injunction restraining the Revenue from taking any proceedings under the Act and the interim orders for injunctions were passed on various dates and subsequently a common order was passed by the Court on 18.9.1961 making the interim orders absolute and restraining the Revenue from taking any proceedings under the Act. The High Court allowed the said writ petition on 1.8.1963 and declared the Act ultra vires of the powers of the legislature and granted certificate of fitness of the appeal to the Supreme Court. That against the said decision of the High Court declaring the Act ultra vires the State of Assam filed appeals before the Supreme Court on 4.3.1964 and applied for stay on 10.8.1964 and interim stay of the order of the High Court declaring the Act ultra vires was granted on 28.10 1964 and the orders of the stay were made absolute on 29.1.1965 and ultimately the appeals filed by the State were allowed on 1.4.1968 declaring the Act to be valid. In this premises it was contended by the State that for the period 1st Oct. 1961 to 31st Dec. 1961 or for the period 1st Jan, 1962 to 31st Mar, 1962 the State could not issue any notice by reason of stay of proceedings granted by the High Court on 10.8 1961 and that when the Supreme Court on 28.10.1964 granted interim stay of operation of the High Court judgment dated 1.8.1963 it became possible for the State to issue notice. In a nutshell it was submitted by the State that it became impossible for the State to issue notice under Section 7(2) of the said Act within the statutory period of 2 years. Repelling the contention the Majority held that although the assessee obtained injunction restraining the State from taking proceedings under the Act, at no stage, the State asked for variation or modification of the order of injunction Even when certificate to appeal to the Supreme Court was granted on 1.8.1963 by the High Court the State did not ask for any order for stay of operation of the judgment. Under these circumstances it was held that the State was guilty of default as the State had remedies open to take steps by asking for modification of the order. Consequently as the State did not ask for any variation or modification of the injunction order, it could not take advantage of its own wrong and lack of diligence. From this it is clear that the State in that case tried to exclude the period during which the stay/injunction remained operative for the purpose of computing the period of 2 years provided under Section 7(2) of the said Act. Here in the present case the department is not relying upon any impossibility i.e. to say on the maxim lex non cogit ad impossibilia. But on the explanation to Sub-section (1) of Section 11A of the Central Excises and Salt Act which expressly provides that where the service of the notice is stayed by an order of a Court, the period of such stay shall be excluded in computing the period of 6 months. Under these circumstances the argument that the department should have asked for variation or modification of the said stay order dated Aug. 12, 1981 is not available to the appellants.

99. It was also contended by the learned Counsel for the appellants that it was not impossible for the department to issue the demand notice for the period from 1.4.1981 to 5.12.1981 within 6 months from the relevant date on the same lines as the department had issued demand notices on 4.5.1981 and addendum thereto on 5.5.1981 to save the limitation. He drew our attention to the demand-cum-show cause notice C. No. MOR-1I/Assessment of yarn NES/79/652 dated 4.5.1981 wherein it was stated that "this Demand Notice is issued merely to comply with the time-barring provisions of Section 11A of the Act pending decision by Hon'ble Supreme Court. The demand will not be processed till finalisation of the issue by the Hon'ble Supreme Court" and also to its addendum No. 652A dated 5.5.1981 wherein para 11 it was stated that "This show cause notice is being issued without prejudice to the decision of Hon'ble Supreme Court that may be taken in regard to Special Leave Petition filed by this department and no action to determine the demand for the amount and for the period conveyed in this show cause notice will be taken till such time the decision is taken by the Hon'ble Supreme Court". We are afraid this contention cannot be accepted. It is an admitted fact that at the time of issue of the said show cause notice dated 4.5.1981 and its addendum dated 5.5.1981 the department had no right to levy excise duty on the petitioners in respect of non-cellulosic spun yarn manufactured by them whether at the stage of cone yarn or at the stage of sized yarn in view of the judgment delivered by the Delhi High Court on 16.10 1980 in the Writ Petition No. 664 of 1979 filed by the petitioners (since reported in 1981 ELT887) and the Special Leave Petition filed by the department against the said judgment was pending in the Supreme Court even for admission. In other words the said judgment of the High Court dated 16.10.1980 was in force. Under these circumstances apprehending that the said Special Leave Petition is not going to be decided expeditiously by the Supreme Court the department issued the said show cause on 4.5.1981 and its addendum dated 5.5.1981 and if we say may so wisely, to save the limitation. This is clear from the said show cause notice dated 4.5.1981 and its addendum dated 5.5.1981 wherein the department after stating the history of the litigation and the effect of the judgment dated 16.10.1980 passed by the Delhi High Court clearly stated that no action to determine the demand for the amount and for the period conveyed in the show cause notice will be taken till such time the decision is taken by the Hon'ble Supreme Court. But this cannot be said in the case of the show cause notice dated 5.6.1982. For, the interim stay order dated 12.8.1981 as aforesaid was operative during this period and it is only when the Central Government by enacting the Finance Act of 1982, the Parliament enacted Section 51 giving retrospective effect to the amendments made in Rules 9 and 49 of the Central Excise Rules, by Notification No. 20/82-CE, the department issued the said show cause notice dated 5.6.1982 notwithstanding the said interim order in terms of Section 51, ibid. Under these circumstances the question to issue any demand notice after passing of the stay order dated August 12, 1981 by the Delhi High Court as aforesaid for the period 14.1981 to 5.12.1981 and before the passing of the Finance Act, 1982 on the lines of show cause notice dated 4.5.1981 and its addendum dated 5.5.1981 did not arise. For, from the date of the stay order dated Aug. 12, 1981 till the passing of the Finance Act, 1982 the department could not issue any demand notice to the petitioner as the said stay order was in force and the department was entitled to exclude this period under Explanation to Sub-section (1) to Section 11-A of the Central Excises and Salt Act. On the point of clarity when the said Explanation itself gave a right to the department to exclude the period during which the interim stay remains operative in computing the period of 6 months there was no obligation on the department to issue nor it was necessary for it to issue such conditional show cause notice on the lines of show cause notices dated 4.5.1981 and addendum dated 5.5.1981 thereto.

100. Thus, we hold that the show cause notice dated 5.6.1982 was not barred by time under Section 11A read with Explanation to its Sub-section (1).

As regards the plea of the department that the assessment was provisional

101. It was contended by the department that since the matter was sub-judice before the High Court the assessments made during the pendency of the litigation became provisional. In view of our findings that since there was a stay by the High Court as aforesaid the period of such stay has to be excluded in computing the period of 6 months as provided under the Explanation to Section ll-A(1) of the Central Excices and Salt Act, 1944, it is not necessary for us to investigate this plea of the department any further. However, to complete the record we would like to record that the said plea of the department that the assessments made during the pendency of the litigation before the High Court were provisional is ex facie not tenable. What is "Provisional assessment" and when it amounts to provisional assessment is provided under Rule 9-B of the Central Excise Rules, 1944. The said rule reads as follows-

9-B. Provisional assessment to duty.(1) Notwithstanding anything contained in these rules

(a) where the proper officer is satisfied that an assessee is unable to produce any document or furnish any information necessary for the assessment of duty on any excisable goods; or

(b) where the proper officer deems it necessary to subject the excisable goods to any chemical or any other test for the purpose of assessment of duty thereon; or

(c) where an assessee has produced all the necessary documents and furnished full information for the assessment of duty, but the proper officer deems it necessary to make further inquiry (including the inquiry to satisfy himself about the due observance of the conditions imposed in respect of the goods after their removal) for assessing the duty, the proper officer may, either on a written request made by the assessee or on his own accord, direct that the duty leviable on such goods shall, pending the production of such documents or furnishing of such information or completion of such test or enquiry, be assessed provisionally at such rate or such value (which may not necessarily be the rate or price declared by the assessee) as may be indicated by him, if such assessee executes a bond in the proper form with such surety or sufficient security in such amount, or under such conditions as the proper officer deems fit, binding himself for payment of the difference between the amount of duty as provisionally assessed and as finally assessed.

(2) * * * (3) The Collector may permit the assessee to enter into a general bond the proper form with such surety or sufficient security in such amount or under such conditions as the Collector approves for assessment of any goods provisionally from time to time :

Provided that, in the event of death, insolvency or insufficiency of the surety or where the amount of the bond is inadequate, the Collector may in his discretion demand a fresh bond and may, if the security furnished for a bond is not adequate, demand additional security.

(4) The goods provisionally assessed under Sub-rule (1) may be cleared for home consumption or export in the same manner as the goods which are not so assessed.

(5) When the duty leviable on the goods is accordance with the provisions of these rules, 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 refund, as the case may be.

102. It is admitted to the department that in the present case there were no express order or any provisional assessment by the proper officer as required under the aforesaid Rule 9-B It is further admitted to the department that the circumstances laid down in the aforesaid rule under which the assessment is made provisionally are also absent in the instant case. It is further admitted to the appellants that in the show cause notice it was not aid or stated that the assessment made during the relevant period was provisional. However, we find from the adjudication order dated 29.12.1987 passed by the Assistant Collector that he for the first time recorded his finding in the adjudication order that "since the matter was sub-judice all the assessment for the period April 1981 to 15 3.1983 were therefore, made provisional" and the same "were made final by the Supdt, Central Excise, Range-II, Kanpur vide C. No. MOR-II/ Assessments of yarn/NES/79 dated 18.12.1987 and directing the party to deposit after adjustment the amount already paid". In the said adjudication order we do not find any discussion of Rule 9-B, ibid nor any basis for holding so except a bald observation that the matter was sub judice. On appeal the Collector of Central Excise (Appeals) while confirming the said findings of the Assistant Collector had not given any further reason. Under these circumstances the findings of the authorities below that the assessments in question were provisional cannot be accepted. However, during the hearing Shri Naik, the learned Jt. CDR tried to justify the said findings relying upon the various circumstances of the case. To begin with, he submitted that on the RT-12 Returns for the relevant period as endorsement to the effect the show cause notice of 4.5.1981 was issued and that later on in 1985 an endorsement to the effect that the assessment was made provisional was also made.

103. We have considered the circumstances and find that the said contention is far-fetched. The fact that an endorsement was made on the RT-12 Returns regarding the issuance of show cause notice of 4.5.1981 cannot make assessment provisional. Likewise any endorsement made on the RT-12 Returns subsequently in the instant case after a lapse of about 4 years i.e. to say in the year 1985 also cannot make the earlier assessment provisional. It is common knowledge that the assessments have to acquire the character of provisionality before the goods are removed on payment of duty provisionally assessed on an order of the proper officer directing the provisional assessment. A post facto endorsement that too after a long lapse of time does not make and cannot make past assessment provisional. To accept the contention of the learned Jt. CDR would be to non-est the provisions of Rule 9-B of the Central Excise Rules, 1944, which is not permissible. The cases cited by the learned Jt. CDR are also not apt to be controversy in hand nor in any way support the contention of the learned Jt CDR The case of Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Limited, 1978 ELT (J. 416) : ECR C 398 relates to Rule 10A of the Central Excise Rules which do not exist at the relevant time in question and the ratio of the said judgment is not applicable. Likewise the case of DR. Kohli v. Krishna Silicate and Glass Works and Ors., 1983 ELT 216 which deals with the scops of erstwhile Rule 10A is also not relevant. This judgment was rendered in the peculiar facts and circumstances of that case and does not apply to the present case. The other case of Khaitan Tribrewala Electricals (P) Ltd. v. Collector of Central Excise is also not applicable to the instant case since in that case the department took long time for the approval of the price list submitted by the manufacturer which showed a lower price than in the previously approved list and since there was a delay in approval the assessee in the meanwhile was asked to pay the duty on the higher value. In reply the assessee wrote back to the department that they would be paying the duty and would claim refund of excise duty paid, if any, on finalisation of the price list. Consequently, a refund claim was made. In these peculiar circumstances it was hetd by the Tribunal that the assessment was done provisionally because of the inability or delay on the part of the Department to finalise the price list and giving an impression to the assessee that, till finalisation of the price list they need not bother about filing a refund claim. Shri Naik, the learned Jt. CDR also cited the case of Premier Automobiles v. Union of India to convince us that though the assessment might not be provisional but final, it was still open to the department to reopen the assessment. It is true that on the facts and in the circumstances of that case it was held so by the Bombay High Court but on a closer reading of the said judgment it would be evident that in that case the rule invoked was 10A which covered short-levies not provided for by Rule 10, i.e. short-levies due to causes other than error, collusion or mis-construction on the part of the officer. Rule 10A had no limitation built into it. Whereas in the present case Section DA of the Central Excise Rules has been invoked by the department. It is a self-contained Section and itself provides the limitation for the issuance of a notice when any duty of excise had not been levied or paid or has been short-levied or short-paid or erroneously refunded. Hence this case also does not advance the contention of the learned Jt. CDR any further. The case of Castrol Limited v. Collector of Central Excise, is also distinguishable on the facts of that case. In that case the fact that assessment was made provisional was endorsed on the RT-12 Returns itself. This was also conceded by the Departmental Representatives in that case. In the instant case there is no such endorsement on the RT-12 Returns a fact which was admitted by Shri Naik. the learned Jt. CDR during the course of hearing after perusing the RT-12 Returns.

104. A farfetched argument was also advanced by Shri Naik, the learned Jt. CDR that the endorsement made on the RT-12 Returns in the instant case as aforesaid should be construed as "protective assessment" and cited the following case law

(i) P.K. Trading Co. v. Income Tax Officer

(ii) Commissioner of Income Tax v. Cochin Co. (P) Ltd.,

(iii) Mahamaya Dassi v. Commissioner of Income Tax, .

105. On a closer study of the aforesaid decisions it is clear that under the Income Tax laws where the identity of the assessee in respect of particular income is in doubt "a concept of protective assessment gains currency which the judicial system recognised". In the instant case under the Central Excises and Salt Act and the Rules made thereunder no question of protective assessment can arise for, Rule 9-B of the Central Excise Rules, 1944 expressly makes provisions for the provisional assessment and provides the circumstances when a provisional assessment can be made and also how it is to be made. Had the department wanted to make the assessment provisional it should have proceeded under the express provision of Rule 9-B. Nothing prevented them to do so. It appears that in view of the Explanation to Sub-section (1) of Section 11A of the Central Excises and Salt Act which provides for the exclusion of the period of stay in computing the period of limitation of 6 months for issuing the notice where duties are not levied or not paid or short-levied or short-paid the department was not mindful about the possible consequences of their neglect or inactivity upon the revenues of the State in not making the assessment provisional in case such challenge is thrown to the demand by the appellants. Indeed the department might not have even apprehended about such challenge when the assessments were made for the relevant period in view of the show cause notices already issued. Under these circumstances if the department remained inactive in making the assessment provisional it cannot now say that the assessment made earlier should be treated as provisional Such a plea appears to us to be disingenuous. It cannot apply to a case where a damage done to the powers of the taxing authorities was attributable to their own remissness.

106. Thus, we hold that the assessment made for the relevant period was not provisional assessment.

107. At one stage it was also argued by Shri Naik. the learned Jt CDR that on 15.3.1983 in the Writ Petition filed by the appellants themselves against the judgment dated Aug. 12, 1081 passed by the Delhi High Court the Hon'ble Supreme Court directed them to pay 50 per cent of the past dues in cash and for the balance to furnish the Bank Guarantee and thereafter the appellants had paid the past dues which includes the duty for the period in dispute i.e. to say for the period from 1.4.1981 to 5.12.1981 of which demand was made in the show cause notice dated 5.6.1982. In this premises he submitted that the appellants now cannot raise the plea that the demand raised for the period 1.4.1981 to 5.12.1981 in the show cause notice dated 5.6.1982 was time barred. In a nutshell his submission was that after having paid the duty for the period in question i.e. to say 1.4.1981 to 5.12.1981 by the appellants in compliance with the said stay order of the Hon'ble Supreme Court dated 15.3.1983 and their Writ Petition being dismissed by the Hon'ble Supreme Court on 30.10.1987 (since ) the plea that the demand made in the show cause notice dated 5.6.1982 so far as relates to the period from 1.4.981 to 5.12.1981which was admittedly issued before the said stay order passed by the Hon'ble Supreme Court on 15.3.1983 is not available to the appellants. To support his contention he submitted that Mis. Bhilwara Processors Ltd., and Ors. also filed their Writ Petition No. 848 of 1984 against the Union of India in the Hon'ble Supreme Court challenging the levy of duty and in that Writ Petition an interim order was passed on 20.2.1984 restraining the department from levying and recovering the disputed portion of the duty of excise on the condition that the petitioners of that case shall furnish Bank Guarantee The Bank Guarantee so ordered was furnished. Ultimately the said writ petition was dismissed by the Hon'ble Supreme Court on 4.11.1988 along with other connected writ petition No. 12183/85 filed by the Ujagar Prints Thereafter the department asked the petitioners of that case to pay the full duty otherwise the department will take the steps to enforce the Bank Guarantee. Aggrieved with this action of the department M/s. Bhilwara Processors Ltd. moved their Miscellaneous Petition before the Hon'ble Supreme Court making a grievance that since the demand cannot go beyond 6 months as provided under Sec 11A of the Central Excises and Salt Act, no recovery beyond the period of 6 months can be effected. This application of the petitioners of that case i.e. to say Bhilwara Processors Ltd. was dismissed by the Hon'ble Supreme Court by its order dated 29.11.1988 ("reported in Judgment Today Vol (4) November Part 1988 SC 330). Shri Naik, the learned Jt. CDR also placed a copy of the order dated 9.12.1988 passed by the Rajasthan High Court in Civil Writ Petition No. 4441/1988 to show that under somewhat similar circumstances M/s. Modern Suitings also made the same grievance before Rajasthan High Court to the effect that without complying with the provisions of Section 11A, no demand can be raised and no recovery can be effected by the department. Shri Naik, the learned Jt. CDR emphasised that the Modern Suitings also filed a Writ Petition before the Hon'ble Supreme Court and interim stay was granted on furnishing the Bank Guarantee and after the dismissal of the said Writ Petition when the department started recovery proceedings the Modern Suitings moved the said Writ Petition before the Rajasthan High Court challenging the said recovery proceedings on the ground that the demand was hit by limitation under Section 11A of the Central Excises and Salt Act and also could not be sustained for want of notice. Repelling the contention the Rajasthan High Court also noticed the said order dated 29.11.1988 passed by the Hon'ble Supreme Court in the case of M/s. Bhilwara Processors Ltd. as aforesaid and observed as follows-

.....Mr. Gupta, brought to our notice miscellaneous petition in Writ No. 848/84, which was filed by M/s. Bhilwara Processors Ltd. and Anr., it appears from the perusal of the grounds taken in the aforesaid miscellaneous petition ground Nos. 9.2 and 9.5 were taken before the Supreme Court, wherein it was stated that without giving a notice under Section 11-A of the Act, no recovery can be made. But the Supreme Court still under its order dated 29.11.1988, dismissed the miscellaneous petition.

It may be that during the course of arguments the above ground urged in the Misc. petition might or might not be urged before the Supreme Court and we enter into no controversy and can hardly enter into this question but it cannot be disputed that the grounds were taken before the Supreme Court in miscellaneous petition and the miscellaneous petition was dismissed. Be that as it may, we are of the opinion that once under orders of a Court, stay order is sought in respect of recovery of excise duty or any other duty for that matter and the stay order is conditional on furnishing a bank guarantee, if ultimately the writ petition is dismissed and the stay order is vacated, the bank guarantee can become encashable immediately. Therefore, we need not go into this question as to whether Section 11-A is or is not attracted, we are of the opinion that because the petitioner, furnished the bank guarantee, secured a stay order which was conditional as a result of which levy and recovery was stayed once the writ petition has been dismissed and the stay order has been dismissed and the stay order has been vacated, the bank guarantee has become encashable, neither it will be proper nor equitable for this Court to say or make an order that the bank guarantee should not be encashed. The Supreme Court alone can say anything.

With the above observation, we hereby dismiss the writ petition with no order as to costs.

108. Countering the contention raised by Shri Naik, Shri Ravinder Narayan, counsel for the appellants drew our attention to para 32 of the judgment passed by the Hon'ble Supreme Court on 30.10.1987 (since ) to show that the Hon'ble Supreme Court had categorically stated that though the authorities are entitled to make demand with retrospective effect, but such demand, though it may include within it demand for more than 6 months, must be made within a period of 6 months from the date of the amendment.

109. We have considered the submissions and find that in the present case after the decision of the Supreme Court rendered on 30.10.1987 the show cause notice dated 5.6.1982 was processed and the appellants did raise their objection that the demand so far as it related to the period from 1.4.1981 to 5.12.1981 was hit by limitation being beyond 6 months and ultimately both the authorities below while repelling the contention held that the demand was not time barred. We have also held as aforesaid that in view of the Explanation to Sub-section (1) of Section 11-A of the Central Excises and Salt Act the demand was not time barred. Under these circumstances it is not necessary for us to dwell further on the question as to whether after paying the duty for the aforesaid period by the appellants in terms of the interim order passed by the Hon'ble Supreme Court on 13.3.1983 the appellants could raise the plea of limitation. Apart from this it is on record that the appellants had paid the past duty which includes the duty paid during the period in question i e. to say 1.4 1981 to 5.12.1981 and had also executed the bank guarantee in terms of the said stay order dt. 15.3.1983 and now the department had moved an application before the Hon'ble Supreme Court for permitting them to realise the bank guarantee, and the said application is still pending before the Hon'ble Supreme Court for disposal. Under these circumstances it would not be proper and not permissible for us to decide this contention. The Apex Court alone can say about it.

110. In the result 1 hold that the show cause notice dated 5.6.1982 was within time under Section l1A read with Explanation to its Sub-section (1) of the Central Excises and Salt Act, 1944.

111. In this appeal also it was contended by the learned Counsel for the appellants that since the demand relating to the period prior to 6 12.1981 was time barred (which we have rejected as aforesaid) the appropriation of Rs 1.63,22,515.70 against the payment of Rs. 2,63,40,104.92 was illegal and ought to be refunded for appropriation towards the demand for the period from 20.2.1982 to 15.3.1983 as set out in appellant's letter dated 11.12.1987. I have considered this contention while dealing with Appeal No.E/2355/88-D and rejected the same for the reasons recorded therein. (In Appeal No E/2355/88-D).

112. In the result this appeal is also dismissed.

Appeal No.E/2355/88-D

113. 1 regret that 1 am unable to agree with the reasonings and findings recorded by the Hon'ble Sr. V.P. in the facts and circumstances of the instant case and record my judgment as under.

114. It was contended by Shri Ravinder Narain that in case his contention in other appeals that Show Cause Notices dated 4.5.1981 and addenda thereto dated 5.5.1981 do not lapse with the issuance of the Show Cause Notice dated 5.6.1982 and further that a part of the demand for the period from 1.4.1981 to 5.12.1981 was not time barred is not accepted then in that case the question as to whether the Department can appropiate the duty amounting to Rs. 2,58,10,387.90 for the period from 6.11.1980 to 31.3.1981 and from 1.4.1981 to 5.12.1981 out of the amount paid by the appellants in compliance with the stay order passed by the Hon'ble Supreme Court on 15.3.1983 would be of an academic interest. And if it is held that either the said Show Cause Notices dated 4.5.1981 and addenda thereto dt. 5.5.1981 or that a part of the demand of duty for the period from 1.4.1981 to 5.12.1981 made in the Show Cause Notice dated 5.6.1982 or both were time barred then in that case the Department had no right to appropriate the said amount of duty out of the amount paid by the appellants in compliance with the said stay order and consequently Order-in-Original No. 21 /Demand/87 (which is the subject matter of Appeal No. E/2355/88-D) insofar as it directs payment of the demand of Rs. 2,08,40,415.35 is liable to be set aside. In reply Shri Naik, learned Jt. CDR supported the impugned order.

115. We have considered the submissions. In view of our findings that the Show Cause Notices dated 4.5.1981 and addenda thereto dated 5.5.1981 do not lapse by the issuance of Show Cause Notice dated 5.6.1982 in A. No. E/2353/88-D and also our findings that a part of the demand for the period from 1.4.1981 to 5.12.1981 made in the Show Cause Notice dated 5.6.1982 in A. No E/2354/88-D was within time it is not necessary for us to consider the other argument of the learned Counsel for the appellants that the Department had no right to appropriate the amount of duty out of the amount paid by the appellants in compliance with the said order of the Hon'ble Supreme Court dated 15.3.1983.

116. However, I may state that the principle is well settled that "the person who pays money may, when he pays it, apply the payment to which account he pleases; but if he does not at the time of payment apply it to any specific account, the receiver may apply it to which account he pleases." (See Peters v. Anderson (1814) 5 Taunt 596,601. In Devaynes v. Noble; Clayton's case, (1816) 1 Mer. 572, 596 it has been stated that this rule has been borrowed from the Civil Law of England where it has been consistently held that the option to apply the payment belongs, in the first place, to the debtor, and, in the second, to the creditor.

117. In our country, the said rule has been codified in the Indian Contract Act, 1872 and finds expression in Sections 59 to 61 under the heading "Appropriation of Payments". The said Sections read as follows-

59. Application of payment where debt to be discharged is indicated.Where a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying that the payment is to be applied to (he discharge of some particular debt, the payment, if accepted, must be applied accordingly.

60. Application of payment where debt to be discharged is not indicated.Where the debtor has omitted to intimate and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits.

61. Application of payment where neither party appropriates. Where neither party makes any appropriation the payment shall be applied in discharge of the debts in order of time, whether they are or not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionately.

(Emphasis supplied)

118. In the case of Commissioner of Sales Tax v. Lord Krishna Sugar Mills. Ltd. (1964) 15 STC 335 a Division Bench of the Allahabad High Court had stated that "it is now well settled that the rule extends to statutory debts owed to the State, unless there is some provision to the contrary in the statute under which the debt comes into existence." In the case of Lal Behary Maity v. Rajendra Nath AIR 1926 Cal 866 it was held that Section 59 of the Contract Act applies to payments of Government revenue. In the case of Jia Ram v. Sulakhan Mal AIR 1941 Lahore 386, a Full Bench of the Lahore High Court held that Sections 59 to 61 of the Contract Act embody the general rules as to appropriation of payments in cases where a debtor owes several distinct debts to one person and voluntarily makes payment to him. They do not deal with cases in which principal and interest are due on a single debt, or where a decree has been passed on such a debt, carrying interest on the sum adjudged to be due on the decree. However, in the absence of a direction to the contrary in the decree, the sale proceeds of the properties sold in execution of a mortgage decree must be applied first in payment of subsequent interest and costs, and thereafter the balance to discharge the principal sum declared as a payable in the decree. In Chaganlal v. Gopilal AIR 1954 MB 151 it was held that although technically the principles laid down under Sections 59 and 60 of the Contract Act do not apply where certain amount is due for costs, interest and principal as awarded by a decree but the principle underlying them has been applied to a claim like this and there is a general rule that in the absence of any application by the debtor the payment should be applied in the first instance to interest and to the principal the balance only so far as those payments exceed the interest due. However, in the case of Dasharathi Ghose v. Khondkar Abdul Hannan AIR 1928 Cal 68 it was held that the general principles of appropriation as contained in the Contract Act can only be resorted to where there is no provision in the Special Act itself which may be applicable to a given case.

119. In the present case we are concerned with the recovery of sums due to Government under the Central Excises and Salt Act, 1944. Section 11 of the Act provides for 'recovery of duty' as well as 'any other sums of any kind payable to the Central Government under any of the provisions of the Act or of the rules made thereunder' and runs as follows-

11. Recovery of sums due to Government.In respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or of rules made thereunder the officer empowered by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (L1V of 1963) to levy such duty or require the payment of such sums may deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control, or may recover the amount by attachment and sale of excisable goods belonging to such person; and if the amount payable is not so recovered, he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and send it to the Collector of the district in which such person resides or conducts his business and the said Collector, on receipt of such certificate, shall proceed to recover from the said person the amount specified therein as if it were an arrear of land revenue.

120. From a bare perusal of the said section it is clear that apart from the other modes of recovery, one of the methods of recovery of sums due to the Government provided under the said section is that the officer concerned in respect of duty and any other sums of any kind payable to the Central Government may deduct the amount so payable from any money owing to the person from whom such sums maybe recoverable or due which may be in his hands or under his disposal or control.

121. Coming now to the controversy in hand it would be necessary to state the facts of the case under which the said contention was raised. At stated above after the passing of the judgment dated 16.10.1980 (since reported in 1981 ELT 887) the appellants stopped payment of Central Excise duty with effect from 6.11.1980 on the yarn captively consumed in their composite mills. Aggrieved by the said judgment the department filed SLP No. 57/81 in the Hon'ble Supreme Court and also issued 3 show cause notices all dated 4.5.1981 to the appellants calling upon them to pay the duty, the details of which are as follows-

"1. Demand-cum-show cause notice Rs. 89,59,476.60 No. MO R-11/Assessment of yarn NES/79/652 dated 4.5.1981 addenda thereto dated 5.5.1981 (N.C. Spun Yarn).

2. Demand-cum-show cause notice Rs. 43,936.41 No. MOR-11/Assessment of yarn NES/79/656 dated 4.5.1981 addenda thereto dated 5.5.1981 (Cotton yarn).

3. Demand-cum-show cause notice Rs. 4,84,459.19 No. MOR-II/Assessment of yarn NES/79/654 dated 4.5.1981 addenda thereto dated 5.5.1981 (C. Spun yarn).

                                                            ___________________
                                            G. Total        Rs. 94,87,872.20
                                                            __________________

122. The appellants challenged the said demand made in the aforesaid 3 show cause notices before the Delhi High Court questioning the right of the Government to levy and demand the duty by filing the Writs. These Writs were disposed of by Delhi High Court by its judgment dated 11.1.1983 since reported in 1983 ELT 239)=1983 ECR 117D partly allowing the Petitions. Against this judgment of the Delhi High Court the appellants filed their Civil Appeals in the Hon'ble Supreme Court and also moved an application for staying the recovery of duty demanded in the aforesaid show cause notices and also for staying the recovery of future duty On this said application the Hon'ble Supreme Court on 15.3.1983 passed the order directing that "in so far as past dues are concerned 50 per cent of the dues shall be paid to the authorities concerned within a period of three months from today". In regard to the balance of the 50 per cent the appellants were asked to furnish the bank guarantee within the said period. The appellants accordingly paid the 50 per cent of the past dues (duty) within the said period. The said Civil Appeal filed by the appellants were dismissed by the Hon'ble Supreme Court on 30.10.1987 [since ] After the said dismissal of the appeals the said 3 show cause notices were adjudicated upon by the adjudicating authority vide his Order-in-original No. 19/87 dt. 29.12.1987. In his adjudication order the Assistant Collector while confirming the said 3 demands made in the aforesaid show cause notices amounting to Rs. 94,87,872.20 ordered that since the appellants have already paid an amount of Rs. 45,17.899.65 (obviously paid in compliance with the stay order granted by the Hon'ble Court on 15.3.1983 as reported by the appellants in their letter dt. 22.6.1983 and 11.12.1987), the appellants, therefore, should deposit the balance of the adjudged amount i.e. to say Rs. 49,69,972.55 within 10 days of the receipt of this order. The said adjudication order was confirmed by the Collector, which is impugned and is the subject matter of Appeal No. E/2355/88-D.

123. Likewise during the pendency of the aforesaid Writ Petitions filed by the appellants in the High Court a show cause notice dated 5.6.1982 was also issued to the appellants to show cause as to why a duty amount of Rs. 3,13,10,077.47 remained unpaid from 6.11.1980 to 10.2.1982 be not recovered from them (which includes obviously an amount of Rs. 94,87,872.20 relating to the aforesaid 3 demands dated 4.5.1981 for the period from 6.11.1980 to 19.2.1982). The appellants also placed on record the said show cause notice dated 5.6.1982 in their pending Writ Petition before the Delhi High Court and after the disposal of this Writ Petition by the Delhi High Court sought the stay of the demand also in the Supreme Court in their aforesaid appeals and the Supreme Court passed the aforesaid order dated 15.3.1983 as stated above, in compliance the appellants also paid the said amount. After the disposal of appeals by the Supreme Court on 30.10.1987 the said show cause notice dated 5.6.1982 was adjudicated upon by the Assistant Collector fide his Order-in-Original No. 20/Demands/87 dated 29.12.1987 and while adjudicating he excluded the demand for the period from 16.11.1980 to 31.3.1981 observing that he had already confirmed the demand for the said period vide his Order-in-Original No. 19/ Demands/87 dated 29.12.1987. After excluding the said demand he confirmed the demand for Rs 3,13,10,077.47 and ordered for its adjustment out of the amount paid by the appellants in accordance with the said stay order dated 15.3.1983 passed by the Supreme Court. This adjudication order was confirmed by the Collector vide his impugned order. The said impugned order is the subject matter of Appeal No. E/2354/88-D.

124. In this appeal No. 2355/88-D the following 4 demand-cum-show cause notices amounting to Rs. 2,08,40,415.35 for the period from 20 2.1982 to 15.3.1983 were issued and the Assistant Collector confirmed the said demand after the usual adjudication proceedings vide his Order-in-Original No. 21/Demands/87 dated 30.12.1987 and after so confirming the demand asked the appellants to deposit the said amount within 10 days of the recepit of this order, which on appeal was confirmed by the Collector vide his impugned order DEMAND FOR THE SHOW CAUSE NOTICE AMOUNT OF DE-

         THE PERIOD             NO. & DATE                MAND WITHIN
                                                          TIME (RS.)
         20.2.1982 to           XJKCM/Assessment of       57,23,252.93
         31.5.1982              Yarn/NES/79/589 dt.
                                6.7.1982.
         1.6.1982 to            M0R-II/Assessment of      47,66,063.85
         31.8.1982              of yarn/NES/79/456 
                                dt 16.9.1982.
         1.9.1982 to            MOR-II/Assessment of      64,07,372.08
        31.12.1982              of yarn/NES/79/58 
                                dt 27.1.1983.
         1.1.1983 to            MOR-11/Assessment of      39,43,726.49
        15.3.1983               of yarn/NES/79/308 
                                dt 21.3.1983
                                                          ______________       
                                             TOTAL:       2,08,40,415.35
                                                          _______________

125. It may be stated that in this appeal the liability to pay the duty amounting to Rs. 2,08,40,415.35 for the said period under the aforesaid 4 show cause notices was not disputed by the appellants during the hearing. The main grievance of the appellants was that they have paid the said amount which the adjudicating authority had arbitrarily and illegally adjusted against the other demands relating to the period from 6.11.1980 to 19.2.1982 as can be seen from the aforesaid Order-in-Original No. 19/Demands/87 and 21/Demands/87.

126. Countering the arguments Shri Naik, the learned Jt. CDR submitted that the duty paid by the appellants in terms of the stay order dated 15.3.1983 granted by the Hon'ble Supreme Court was lying in the hands of the department and under Section 11 of the Central Excises and Salt Act, 1944 as reproduced above, the Assistant Collector was well within his right to adjust the same against the amount of duty confirmed under the said 2 adjudication orders.

127. We have considered the submissions and find that neither under the Common Law nor under Section 11 of the Central Excises and Salt Act 1944 the contention of the appellants can be accepted.

128. The following facts are admitted to the parties

(i) That on 15.3.1983 when the stay order was passed by the Hon'ble SC, the Central Excise duty amounting Rs. 5 2150 492 82 for the period from 6.11.1980 to 15.3.1983 as detailed out above under different demand-cum-show cause notices was due and the Hon'ble Supreme Court directed them to pay 50 per cent of the said dues to the authorities concerned within a period of 3 months from the date of order i.e. to say on 15.3.1983 and also to execute Bank Guarantee for the balance amount. Accordingly the appellants paid a sum of Rs. 2,61,51,000.00 within the given time of 3 months and R8. l,89,104.92 on 8.12.1987 total Rs 2,63,40.104.92 in cash against the past dues and executed a Bank Guarantee on June 10,1983 in respect of the balance of 50 per cent of the dues U. to say Rs. 2.60 crores in favour of the Registrar, Supreme Court of India.

(ii) That the Civil Appeal filed by the appellants in which the said stay order dated 15.3.1983 was passed was dismissed by the Hon'ble Supreme Court on 30.10.1987 and thereafter the appellants were called upon to submit their replies to the aforesaid show cause notices In their reply dt. 111.12.1987 the appellants submitted that out of the total amount of excise duty for the aforesaid period i.e. to say from 6.11.1980 to 15.3.1983 amounting to Rs 5,21,50,492.82 demand amounting to Rs. 2,58,10,387.57 relating to the period from 6.11 1980to 5.12.1981 is time barred and the balance demand relating to the period from 6.12.1981 to 15.3.1983 amounting to Rs. 2,63,40,104.92 b within time, it was also stated that out of the said demand which was within time the appellants had already paid a sum of Rs. 2,61,51,000.00 as per order of the Hon'ble Supreme Court dated 15.3.1983 and the amount remaining unpaid i.e. to say Rs. 1,89,104.92 was paid on 8.12.1987 In this premises the appellants asked to discharge the said demand.

(iii) That the Assistant Collector after the usual adjudication proceedings confirmed the said demands and after adjusting the duty paid by the appellants in pursuance of the said stay order dated 15.3.1983 directed the appellants to pay the balance within the given time as per his said 3 adjudication orders.

Under the Common Law :

129. Under Section 59 of the Contract Act as reproduced above the debtor has, at the time of making payment, a right to intimate that the payment is to be applied towards the liquidation of a particular debt. Such intimation may be expressed or implied but it is clear from the wordings of this section that such intimation should synchronise with the payment as an intimation made after the creditor has demanded the dues is not an intimation of the nature contemplated by the section. If the debtor had omitted to intimate and there are no other circumstances indicating to which the debt is to be applied, the creditor has a right to apply it at his discretion to any lawful debt actually due and payable to him from the debtor irrespective of the fact whether its recovery is or is not barred by the law in force for the time being (See Section 60). Section 61 of the Contract Act further provides that where neither party makes any appropriation the payment shall be applied in discharge of the debts in order of time, whether they are or not barred by the limitation. In the instant case it is not in dispute that excise duty amounting to Rs. 5,21,50,492.82 for the period from 6 11.1980 to 15.3.1983 was due to the appellants at the time when the stay order was granted by the Hon'ble Supreme Court on 15.3.1983. It is also not in dispute that in respect of the said past dues the appellants were directed by the said stay order to pay 50 per cent of the dues to the authorities concerned within the given period and also for the balance to execute a Bank Guarantee. It is also not in dispute that the appellants paid the 50 per cent of the past dues through various challans It was not the case of the appellants that at the time when they paid the past dues for the period from 6.11.1980 to 15.3.1983 they expressly intimated to the authorities concerned that this payment should not be applied to the discharge of the excise duty for the period from 6.11.1980 to 5.12.1981 or the duty so paid be applied only to the discharge of duty for the period from 6 12.1981 onwards. No circumstance was shown to us from which it can be implied that the duty so paid by the appellants was to be applied only to the discharge of duty for the period from 6.12.1981 onwards. Besides, from the stay order as extracted above we find that the Hon'ble Supreme Court directed the appellants to pay the 50 per cent of the past dues in cash to the authorities concerned. It may be stated that the Delhi High Court in its judgment dated 11.1.1983 (1983 ELT 239)=- 1983 ECR 117D against which the Civil Appeal was filed and the stay order was sought and obtained, held that though Section 51 of the Finance Act, 1982 and Rules 9 and 49 of the Central Excise Rules, as amended were valid, the retrospective effect given by Section 51 will be subject to the provisions of Section Il-A (which provides for limitation for issuing the show cause notice) of the Central Excises and Salt Act, 1944. It is also not in dispute that the said show cause notices dated 4.5.1981 as amended by addenda dated 5.5.1981 and show cause notice dated 5.6.1982 were on the record. Under these circumstances at the time of hearing on the said stay application by the Supreme Court the ground that the demands made in the show cause notices dated 4 5.1981 as amended by addenda dated 5.5.1981 and the show cause notice dated 5.6.1982 so far as they related to the period from 6.11.1980 to 5.12 1981 were time barred was before the Hon'ble Supreme Court. It may be that during the course of arguments the above ground might or might not be urged before the Supreme Court and we enter into no controversy and can hardly enter into this question, but it cannot be disputed that the same ground of limitation was before the Supreme Court in the stay application. Be that as it may, the fact remains that the Supreme Court ordered the petitioners to pay 50 per cent of the past dues in cash to the department and for the balance to furnish a Bank Guarantee and the appellants did pay the 50 per cent of the past dues in cash without intimating to the department that it should not be applied to the duty demanded for the period from 6.11.1980 to 5.12.1981. It is also significant to note that after the dismissal of the Civil Appeals by the Supreme Court on 30.10.1987 the department asked the appellants to submit their reply to the aforesaid show cause notices asking them to pay the duty from 6.11.1980 onwards, and the appellants in their reply dated 11.12.1987 only intimated to the department that out of the said demand duty amounting to Rs. 2,58,10,387.57 relating to the period from 6.11.1980 to 5.12.1981 is time-barred and the duty for the rest of the period i.e. to say from 6.12.1981 to 15.3.1983 amounting to Rs. 2,63,40,104 92 is within time and since they have already paid a sum of Rs. 2.61,51,000.00 as per stay order of the Hon'ble Supreme Court dated 15.3.1983 and the remaining unpaid amount of Rs. 1,89,104.92 on 8.12.1987 the demands may be discharged. It is curious that at this stage also the appellants in their letter dated 11.12.1987 did not intimate to the department that the amount paid by them in pursuance of stay order dated 15.3.1983 be applied only to the discharge of excise duty for the period from 6.12.1981 to 15.3.1983. From the contents of the letter dated 11.12.1987 which was pressed into service by the learned Counsel for the appellants in support of his contention, it can be implied that the duty paid in terms of the stay order was to be applied to the discharge of a particular duty i.e. to say excise duty payable for the period from 6.12.1981 to 15.3.1983 only. Under these circumstances when the appellants had omitted to intimate and there are no other circumstances indicating that the duty so paid was to be applied only to the demand for the period from 6.12.1981 onwards the Adjudicating Authority was well within its discretion to apply it to the excise duty actually due and payable from the appellants for the period from 6.11.1980 to 5.12.1981 whether its recovery was or was not barred by limitation. Even assuming with the learned Counsel for the appellants that the duty paid for the period from 6.11.1980 to 15.3.1983 in terms of the stay order of the Supreme Court dated 15.3.1983 could not be appropriated till the passing of the adjudication order and the duty so paid remained in the hands of the department unappropriated, still in terms of Section 61 of the Contract Act the duty so paid could be applied in discharge of the duty due in order of time, whether the same was or not barred by limitation, because in that case it could be said that neither party made any appropriation earlier.

130. Thus, under the provisions of the Indian Contract Act the said adjustment/appropriation done by the Adjudicating Authority cannot be challenged.

Under the Central Excises and Salt Act, 1944

131. Apart from the provisions of the Contract Act dealing with the appropriation of payments and assuming that the provisions of Contract Act do not apply to the instant case because the authority functioning under the Central Excises and Salt Act is not a Court nor can he has (sic) any right under Section 60 or 61 of the Contract Act to make any appropriation (See Munno Bibi v. I.T. Commissioner ) and Section 11 of the Central Excises and Salt Act deals with the recovery of sums due to Government, we find that the Assistant Collector rightly deducted the amount of duty which he confirmed in his said adjudication orders under the Central Excises & Salt Act, 1944.

132. Section 11 of the Central Excises and Salt Act as extracted above provides for recovery of sums due to Government. The scope of this section is very wide. Apart from the other modes of the recovery, one of the methods of recovery of sums due to the Government provided under Section 11 is that the officer concerned may deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control. In other words it empowers the concerned officer to deduct the amount of duty from any money owing to the person from whom such duty is recoverable or due which may be in his hands or under his disposal or control. Thus, assuming that the duty paid for the period from 6.11.1980 to 15.3.1983 in terms of the stay order could not be appropriated or adjusted by the department till the finalisation of the demand after the dismissal of the Civil Appeals filed by the appellants on 30.10.1987, the Assistant Collector was within his right under Section 11 to deduct or appropriate the amount of duty which he confirmed vide his adjudication order-in-original No. 19/Demands/87 and No. 20/Demands/87 out of the amount of duty paid by the appellants earlier as the said amount was in his hands and under his disposal and control.

133. Thus, we hold that the deduction or appropriation made by the Assistant Collector cannot be assailed.

134. Before we part with this question we feel it our responsibility to state that we have decided the issue in the light of the provisions of the Contract Act and Section 11 of the Central Excises and Salt Act. We were told at the Bar that after the dismissal of the Civil Appeals filed by the appellants (in which the stay order was granted by the Hon'ble Supreme Court) on 30.10.1987 the department has applied vide their Civil Miscellaneous Petition No. 21824 of 1988 for permission to execute the Bank Guarantee furnished in terms of the stay order dated 15.3.1983 passed by the Hon'ble Supreme Court in favour of the Registrar, Supreme Court of India which the appellants are contesting on the ground that nothing is due as the Assistant Collector illegally appropriated the amount of duty paid in cash (50 per cent of the total past duty) in compliance with the said stay order. The said Miscellaneous Application is still pending and the Hon'ble Supreme Court has directed us to dispose of the present appeals within the given time. Accordingly we have decided the appeals as aforesaid. In this view of the matter it would not be permissible for this Tribunal to interpret the effect of the said stay order any further. The Hon'ble Supreme Court alone can say anything more.

135. In the result I confirm the impugned order and reject the appeal.

Appeal No 2356/88-D

136. I agrre with the conclusion recorded by the Hon'ble Sr. Vice President.

(G.P. Agarwal) Judicial Member

137. I have had the benefit of going through the learned judgments of my two brothers Shri G. Sankaran, Sr. Vice President and Shri G.P. Agarwal, Judicial Member of the Tribunal. However, I would like to record my separate orders for different appeals as follows:

A.No.E/2353/88-D

138. I agree with the opinion of the learned Sr. Vice-President and the conclusions reached in regard to this appeal. 1 would only record, however, that the judgement of Karnataka High Court in the case of Davangere Cotton Mills 1986(7) ECR 137 holding pre-amended Rules 9 and 49 as allowing law of duty on goods used for captive consumption, cannot have the effect of overriding the specific judgement of Delhi High Court in the case of the appellants for the simple reason that judgement of one High Court cannot overrule the judgement of another High Court. Nevertheless, the notices dated 4 5 1981 and addendum thereto dated 5.5.1981 are well within tine by sheer' arithmetical calculation as mentioned by the learned Sr. Vice President and the amendment of Rules 9 and 49 by notification No. 20/82 dated 20th Feb. 1982 having been given retrospective and validating effect since the inception of the Central Excise Rules, 1944. The amended rules would be deemed to have the same effect during the period 6.11.1980 to 31.3.1981 to which the notice dated 4.S.I981 and addendum thereto dated 5.5.1981 pertains. Hence 1 dismiss the appeal No. E/2353/88-D. A.No.E/2354/88-D

139. I have carefully gone through the judgements of my two learned brothers with respect to this appeal. I regret respectfully that I am unable to persuade myself to agree with the conclusion reached by them. Therefore, I record my separate judgement regarding this appeal.

140. The short question involved in this appeal is whether the demand of duty for the period 1.4.1981 to 5.12.1981 made in the show cause notice dated 5.6.1982 is within time. The department contends that by the interim order dated 12.8.1981 passed by the Hon'ble High Court of Delhi it was restrained from levying and collecting duty on the goods under consideration and therefore, it could not serve the notices under Section 11-A of the Act. Accordingly, the time from 12.8 1981 to the date when Clause 51 of the Finance Bill of 1982 was brought into force and through which the amended provisions of Rules 9 and 49 were made retrospective in effect should be excluded from computing the time of six months for the purpose of said notice dated 5.6.1982 in terms of the Explanation to Section 1-AC 1).

140.1 The appellant, on the other hand, contends that the interim order dated 12.8.1981 did not restrain the department from serving the notice as stipulated in Section 11-A(1).

141. The exact interim order passed by the Hon'ble High Court of Delhi on 12 8.1981 and subsequently continued merely says as follows:

...interim orders in terms of prayer 'a' Dasti.

Prayer 'as' has already been reproduced earlier. Effect of prayer 'a' has already been given in para 92 of the order of my learned brother Shri G.P. Agarwal, Judicial Member. For the facility of analysis, effect of prayer 'a' is reproduced here again:

(i) permitting the petitioners forthwith to further process yarn, in its composite mill in the manufacture of fabrics at nil rate of duty and to clear cotton fabric upon payment of duty in respect of cotton fabric only without payment of duty on cotton yarn);

(emphasis supplied)

(ii) to restrain respondents 4 to 6 from taking any action or proceedings pursuant to and/or on the same basis as the contents of the directive of the Board(Annexure A to the writ petition); and

(iii) to stay further proceedings pursuant to Notices dated 4th May, 1981 and addendum thereto dated 5th May, 1981.

141.2 Effect of first part of the prayer is that the appellants were to be allowed clearance of the yarn for process into manufacture of fabric at nitrate of duty and without payment of duty on the yarn It is to be noticed that the emphasis is on granting the stay from payment of duty on the yarn and not serving show cause notice or determining the amount of duty on such yarn.

141.3 Second part of the prayer is to restrain the respondents from taking any action or proceedings pursuant to and on the basis of the Board's directive dated 24.9.1980 (reproduced supra in para 90). Alternative prayer built in this part is to restrain the respondents from taking any action or proceedings pursuant to or on the same basis as the contents of the Board's directive dated 24th Sept. 1980. The Board's directive dated 24th September, 1980 envisages approval or specification of the place or premises of production so that steps could be taken by the Collectors to attract duty on goods captively consumed in the place of production or premises so specified and approved. In short, the purport of the second part of the prayer is to restrain the respondents from levying and collecting duty in pursuance of the Board's directive by directly invoking 'it or on the basis of the reasons given in the said directive.

141.4 Third and last part of the prayer was for restraining the department to take further proceedings pursuant to the notices dated 4.5.1981 and addendum thereto dated 5th May, 1981. It is to be noted here again that the said notices dated 4.5.1981 and the addendum dated 5.5.1981 were not straightaway quashed by the High Court. The department was merely restrained from taking further proceedings on these notices. It is also worth noting that these notices themselves indicated that pending decision of Hon'ble Supreme Court in' special leave petition filed by the department against Delhi High Court's judgement dated 16.10.1980 in writ petition No. 664 of 1979, no action to determine the demand for the amount and for the period conveyed in the said show cause notices will be taken till such time a decision is taken by the Hon'ble Supreme Court. In other words, the effect of the third part of the prayer which was converted into stay by the Delhi High Court in its interim stay order dated 12.8.1981 did nothing more than what the department itself intended in the show cause notices.

141.5 Reading of the averment (reproduced in para 89 of the Learned Judicial Member's aforesaid order) leading to the prayer 'a' which was accepted by the Hon'ble High Court of Delhi in its interim stay order dated 12.8.1981 also indicates that the appellants requested the Court for direction to the respondents "not to persist in recovering the duty of excise in respect of the aforesaid yarn illegally from the petitioners."

141.6 The stay order, therefore, dated 12.8.1981 of the High Court could in its effect be treated as a stay against the recovery i.e. collection of duty on the yarn captively consumed by them in the manufacture of fabrics. It cannot, therefore, be read in the interim stay order dated 12.8.1981 that the department was barred from issuing the show cause notices of the type dated 4.5.1981 read with addendum thereto dated 5.5.1981.

142. Even levy of duty on such yarn was restrained only in terms of the Board's directive dated 24th September, 1981 or on the basis of the contents (herein. Levying of duty, therefore, in any other manner, as was taken subsequently, for example, by amending the Rules 9 and 49 and giving them restrospective and validating effect by Section 51 of the Finance Act 1982 was not barred.

143. Another way of taking away the effect of Delhi High Court's judgement dated 16.10.1980 could be by seeking an appropriate stay from the Supreme Court. No material has been brought on record as to what efforts have been made by the department in getting stay of operation of Delhi High Court's said judgement. It is admitted that the department's S.L.P. in that regard is yet to be admitted.

144. In view of the aforesaid analysis of the in term stay order dated 12.8.1981 of Delhi High Court it cannot be taken as an order barring he department from serving show cause notice. On most aspects, it was a stay order against collection of duty on yarn and therefore, the ratio of Supreme Court's judgement in the case of Gokak Patel Volkart Ltd. v. CCE Belgaum would directly apply. If the department has failed to serve the show cause notice within time in terms of Section HA it cannot take shelter behind the interim stay order dated 12.8.1981. Accordingly, the demand of duty in show cause notice dated 5.6.1982 for the period beyond the period of six months from the relevant date would stand barred by the provisions of Section 11-A.

145. From the following citations-

(i) AIR 1945 PC 5 (Narayan Patil v. Puttabai)

(ii) (Siraj-ul-Haq v. S.L. Board of Waqf).

(iii) AIR 1984 1983 (Anandilal v. Ram Narain) discussed and referred to in the order of my learned brother Shri G.P. Agarwal, Judicial Member, the following propositions emerge:

(i) Rules of limitation, though may cause hardship, have to be construed strictly; equitable considerations are immaterial and irrelevant. On similar lines are Calcutta High Court's observations in the case of National Tobacco of India Ltd. quoted in 1978 ELT J 416, ECR C 398 which are as follows-

The bar of limitation has been imposed by Statute. The morality of the case or the conduct of the parties is therefore irrelevant unless the law provides that the court on that ground can afford relief.

(ii) It is open to argument whether an interim injunction could be made applicable by necessary implication for satisfying the provisions of Sub-section (1) of Section 15 of the Limitation Act [which corresponds to the Explanation to Section 11-A(1) of the Central Excise Act, 1944].

(iii) Since the Explanation is for the purpose of providing a facility to the department by way of extending the time limit due to exclusion of any period on account of any injunction or interim stay, a beneficient construction should be given //alternative constructions are possible to an interm stay or injunction (emphasis supplied).

146. In the light of the aforesaid propositions, we should now examine the effect of the interm stay order dated 12 8.1981. It is apparent, as already observed, that it is not an express injunction against the department for serving the show cause notice in the same term as is expressed in the (Explanation to Section 11-A(1). Necessary implication of the interim order, [therefore, cannot be brought in to give the benefit to the department if there' J\8 one. Beneficient construction is available only if there are two views 'possible which in my considered opinion are not there.

147. I am of the view that no necessary implication can be drawn from the interim stay order dated 12.8.1981 which in any way restrained the department from serving the notices under Section 11 A. This is so in view of the settled legal position about the meaning of the terms Mew' and collection'.

148. Even if it is assumed that the stay order dt. 12.8.1981 could be taken to restrain the department from levying and collecting duty on the yarns manufactured by them and utilised by them for captive consumption for manufacture of fabric, implication that it restrained the department from serving a show cause notice cannot necessarily be read into it. Scope of the terms 'levy' and 'collection has been spelt out by the Supreme Court in the case of Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd. 1978 ELT J 416 : ECR C 398 in para 20 reproduced below:

20. The term 'levy' appears to us to be wider in its import than the term 'imposition' is generally used for the levy of a tax or duty by legislative provisions indicating the subject matter of the tax and the rates at which it has to be taxed. The term 'assessment' on the other hand, is generally used in the country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the subject of the tax in a particular case and determining its amount. The Division Bench appeared to equate 'levy' with an 'assessment' as well as with the collection of a tax when it held that "when the payment of tax is enforced, there is a levy". We think that, although the connotation of the term 'levy' seems wider than of 'assessment', which it includes, yet, it does not seem to us to extend to 'collection'. Article 26S of the Constitution makes a distinction between 'levy' and 'collection. We also find that in N.B. Sanjana v. The Elphinstone Spg. and Wrg. Mills Co. Ltd. this Court made a distinction between 'levy' and 'collection' as used in the Act and the Rules before us. It said there with reference to Rule 10.

We are not inclined to accept the contention of Dr. Syed Mohammad that the expression 'levy' in Rule 10 means actual collection of some amount. The charging provision Section 3(1) specifically says "There shall be levied and collected in such a manner as may be prescribed the duty of excise..."It is to be noted that Sub-section (1) uses both the expressions "levied and collected" and that clearly shows that the expression 'levy has not been used in the Act or the Rules as meaning actual collection.

[Emphasis supplied] Therefore, the term 'levy is used in two senses i.e. levy of duty by a legislative exercise and in the sense of the expression 'assessment of duty' which means quantification of duty or determination of amount of duty. It has also been held by the Supreme Court in the case of Orient Paper Mills v. Union of India 1978 ELT J 345-para 8 : ECR C 344 SC as early as 3.5.1968 and reported several times over in subsequent decisions that assessment of excise duty is a quasi-judicial procedure. In other words, a notice to show cause giving the grounds for imposition of a particular amount of duty has to be given and thereafter an opportunity for hearing must be given to the person on whom the levy is supposed to be imposed.

148.1 Apart from this categorical law laid down by the Hon'ble Supreme Court, the scheme of Section 11-A itself makes it clear. Sub-section (1) requires that a notice must be issued to the party for any short levy or short payment or non-levy or non-payment on any excisable goods. Sub-section (2) as it stood at the relevant time required the Assistant Collector to determine the amount of duty after considering the representation made by the person to whom the notice had been issued. This scheme of Section 11-A has been clearly upheld in para 9 of the report SC mentioned supra. It is only when the amount of duty has been determined in terms of Section 11-A(2) that it can be said that the department has levied or assessed the duty. The interim stay order dt. 12.8.1981, therefore, restrains the department from undertaking the exercise spelt out in Section 11-A (2). It does not restrain the department from serving the show cause notice spelt in Section 11-A(1). Service of the show cause notice is a stage prior to determination of levy after considering the representation of the assessee. Explanation to Section 1l-A(1) enables the department to exclude the time during which any interim order or injunction operated for service of the show cause notice and not for levying or determining the amount of duty. It is the first stage in the three stage process of levy and collection of duty that has to be restrained by an injunction of a Court before the period can be excluded in computing the period under Section 11-A. Restraint on any subsequent stage by an injunction order cannot be availed of by the department in computing the period of six months referred to in Section 11-A. This becomes clear from the Supreme Court's judgement in the case of Gokak Patel Volkart Ltd. v. CCE Belgaum in that case the High Court stayed the department from collecting the amount of duty i.e. it restrained the department from operating the third stage of levying and collection. It did not restrain the department from serving the show cause notice and then determining the amount of duty in terms of Section 11-A(2). The Hon'ble Supreme Court, therefore, held that the department was not restrained from serving a show cause notice in terms of Section 1l-A(1) and hence the injunction of the High Court did not come in the way of the department and therefore, the period of injunction could not be excluded in computing the time limit under Section 11-A. From the analogy of this reasoning as well, I am of the considered view that the department cannot avail of the interim stay order dated 12.8 1981 in excluding the period from 12.8.1981 onwards from computing the time limit of six months from the notice dated 5.6.1982.

148.2 Another shade of the above argument by the department is that it was restrained from levying/assessing the duty by the Delhi High Court's interim order dated 12 8.1981. This restraint would mean restraint on service of the show cause notice because no determination of duty under Sub-section (2) of Section 11-A could be made without issuing the show cause notice. This argument ignores the statutory distinction between service of show cause notice under Section 11-A(1) on the one hand, and determination of amount of duty under Section 11-A(2) on the other. In other words, it equates serving the show cause notice with levying or determination of the amount of duty. This in my view is not tenable. This argument is also contrary to the ratio of the Supreme Court's judgement in Gokak Patel Volkart Ltd. mentioned supra. Since the High Court of Karnataka staved collection of duty, it could be argued that all earlier stages were staved because there could not be any collection of duty without determination of duty which in turn depended upon service of the show cause notice In other words, there could be no collection of duty without service of the show cause notice. Yet the Supreme Court held that restraint ons collection of duty did not, in law, mean restraint on service of the show cause notice.

148.3 In this view of the matter as well the show cause notice dated 5.6.1982 is time barred for the period beyond the period of six months from the relevant date in terms of Section 11-A.

149. I am also inclined to agree with another plea of the appellants' learned Counsel that in case there was any doubt about the effect of the interim order dated 12.8.1981 the department could always ask for variation of it. This plea of the learned advocate is based on Supreme court a judgement in the case of Supdt. of Taxes Dhubri v. O.N Trust . "If the matter has got time barred either due to the department's town interpretation of the interim order or due to its own laches fault 'cannot be laid at the nature of the interim order." It could Snot fake advantage of its own wrong or lack of diligence as observed by the Hon'ble Supreme Court in that case. There is no provision for waiving the statutory period of issuing the show cause notices under Section 11-A and if any notice is barred because of this statutory provision it has to be held so.

150. Relevant date for computing the period of six months under Section ll-A in terms of Sub-section (3)(ii)(A) is the date on which a monthly return is filed; it is on record that monthly returns for yarn manufactured by the appellants in their factory have been filed in the succeeding month but we do not know the date on which they have been filed. Therefore, the duty for the period 1.4.1981 to 31.10.1981 (and not for the period 1.4.1981 to 5.12.1981) would be clearly time barred. As regards the duty for the month of November 1981 for which a monthly return (R.T. 12) must have been filed in December 1981 would be barred by time if and only if it has been filed before 5.12.1981. In other words, if the R.T.12 return for different types of yarn for the month of November 1981 has been filed on or after 5.12.1981, the duty on such yarn would not be barred by time. Subject to this modification, appeal No. E/2354/88-D is allowed.

A.No.E/2355/88-D

151. I have carefully gone through the judgements passed by my learned brothers. Respectfully I agree to the judgement of the learned Sr. Vice-President for the following reasons:

151.1 The Central Excises A Salt Act, 1944 is a self-contained Act. Accordingly, there is no scope, in my considered view, for applying the principles of other general laws in areas where there are provisions in the special enactments This is apparent from the various decisions themselves cited by the learned Brother Shri G.P. Agarwal, Judicial Member.

151.2 Section 11 of the said Act lays down the method of recovery of sums payable to the Government under that Act. Payments made by the appel1ant company in terms of the Supreme Court's interim order dated 15.3.1983 were in my view, moneys under the direction and control of the Hon'ble Court till the disposal of the petition by that Court in 1987.

151.3 Later on, before the impugned order of apportionment of the money so paid by the appellant company, it was made clear by the said company in its letter dated 11.12.1987 as to how that money is to be apportioned. Even if the letter dated 11.12.1987 is not so clear in its words expressly as it ought to have been, its effect regarding the company's intention is unmistakable that the payments made by it were for the period 6.12.1981 to 15.3.1983 and it considered that no payments were required to be made for the period 6.11.1980 to 5.12.1981 on account of the operation of time bar. In view of this effect of the letter dated 11.12.1987 the lower authorities went wrong in apportioning the money contrary to' the stipulation made by the company. This amount could not be taken, as rightly observed by the learned Sr. Vice-President, as "any money owing to the persons from whom such sums may be recoverable or due which may be in his (the Central Excise Officer) or under his disposal or control."

152. Hence, I allow this appeal.

A.No.E/2356/88-D I agree with the judgements passed by the learned Sr. Vice-President and allow the appeal.

(P.C Jain) Technical Member FINAL ORDERS In view of the majority opinion, the following orders are finally passed in respect of each of the appeals.

Appeal No.E.2353/88-D-The appeal is dismissed.

Appeal No.E.2334/88-D-The appeal is dismissed.

Appeal No.E.2355/88-D-The appeal is allowed.

Appeal No.E.B336/88-D-The appeal is allowed in terms of para 73 (d).

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Customs, Excise and Gold Tribunal - Delhi

J.K. Cotton Spinning And Weaving Mills ... vs Collector Of Central Excise on 31 January, 1989

Equivalent citations: 1989(23)ECR385(TRI.-DELHI)