Customs, Excise and Gold Tribunal - Mumbai
Collector Of Central Excise And Customs vs Kelvin Metal Crafts (Pvt) Ltd. on 13 April, 1993
Equivalent citations: 1993(43)ECC202
ORDER
P.K. Desai, Member
1. Invoking the provisions of Section 35-G(1) of the Central Excises and Salt Act, 1944, the Collector of Central Excise and Customs, Ahmedabad has sought for reference to the High Court of Gujarat, on the questions as formulated, pleading the same to be questions of law arising out of this Bench's Order No. 279/1990/WRB dated 1.2,1990 in Appeal No. E/527/89 Bom filed by the Respondents here.
2. Vide Section 35G of CESA, 1944, the application seeking reference has been filed beyond sixty days from the date of communication of the order. The Tribunal is invested with the power to condone the delay of a period not exceeding thirty days. The impugned order was received by the applicants on 19.3.1990 and the application for reference has been filed on 4.6.1990, and as such there is a delay of 16 days in filing the application. Application for condonation of delay (COD-55/90) has therefore been filed requesting for condoning the delay which in 'within the Tribunal's powers to do. The cause for delay is attributed to the fact, that the decision to file application for reference to the High Court, being the one not coming in a routine administrative functioning, consultation with higher ups had to be done and deliberations on vital issue of law, consumed some more time resulting into delay of sixteen days. The delay does not appear to be an act of negligence, and in that case, technicalities ought not to come in the way, for agitating the legitimate right. The delay is therefore condoned.
3. Order condoning the delay was orally pronounced on the same day on which the matter was listed for hearing and the parties were heard on merits on the main application.
4. Some disputes as to proper classification of the products manufactured by the Respondents existed, which came to be resolved OH a later date. By that time, however, the Respondents had been paying the excise duty at the rate higher than what was subsequently determined and as such the Respondents became eligible to claim refund of Rs. 4,83,585.00 A claim for refund was accordingly filed, and the Assistant Collector sanctioned the same, and issued a cheque for Rs. 4,33,018.79 and allowed the sum of Rs. 26,386.96 in RG23A Register. The jurisdictional Collectorate however felt the refund as not correctly given and invoked the provisions of Section 35E of the CESA, 1944 to prefer an appeal Wore the Collector (Appeals), who vide his order No. GIM-1042/89AHD dated 17.5.1989, reversed the order granting refund. The grounds on which the appeal was allowed, being not material to the issue here, need not be discussed. The respondents there upon preferred the appeal before the Tribunal and this Bench, vide its impugned order, set aside the order of the Collector (Appeals), by referring to the decisions of CEGAT Special Bench 'C' in Collector of Central Excise v. Universal Radiators Ltd and in Kirloskar Cummins Ltd. v. Collector of Central Excise and holding that it was mandatory as per the provisions by Section 35A of the CESA, 1944, for the Collector (Appeals) to issue a Show Cause Notice within the time limit specified under Section 11-A of the said Act, and that in the instant case no such Show Cause Notice was issued.
5. The applicant has formulated following two issues as questions of law, pleading them to be arising out of the impugned order of this Bench and has sought reference thereon to the jurisdictional High Court:--
(a) Whether this is a case of simple refund governed by Section 11-B of the Central Excises and Salt Act, 1944, or it is a case of erroneous refund governed by Section 11-A of the Central Excises and Salt Act, 1944?
(b) Whether under Section 11-B, relevant date is the date of payment of duty or the date of finalisation of assessment of RT-12 Returns and therefore, whether the refund claim is barred by limitation under Section 11B from the date of finalisation of RT-12 Return?
6. Before considering the submissions made on both the sides, it may be mentioned that reference vide Section 35-G of CESA, 1944, is provided for, only on such points that arise out of the order of the Tribunal. Though the first question out of the two formulated, could have its genus in the impugned order of this Bench, so far as the second question is concerned, though the same could have its nexus in the order of the Collector (Appeals), could not be said to be arising out of the order of this Bench, as that aspect has not been considered in the order. This Bench has allowed the appeal only on the ground that Section 35A of CESA 1944, requires the Collector (Appeals) to issue a notice vide Section 11A of the Act. The Tribunal has not gone into the issue as to whether it could be the date of payment of duty or the date of finalisation of RT-12 Returns, from which the period of limitation, for entertaining a claim for refund, be computed. In that case, question (b) as framed, or in any other form, could not be said to be arising out of the order of this Bench. Ex facie, therefore the said question cannot be considered for reference. Submission made in relation thereto therefore, are not considered.
7. Mr. Aran Tandon, the Ld SDR, has submitted that this Bench has in the impugned order, allowed the appeal only by interpreting the provisions of Section 35-A of the Act, and observing that if the Collector (Appeals) was satisfied that the duty refunded was erroneous, he ought to have issued a notice vide Section 11-A, asking the party to show cause against the proposed order. In his submission, what the applicant wants is the reference to the High Court on true interpretation of the provisions of Section 35-E, particularly with reference to the point whether Section 11A of CESA, 1944, could stand attracted under the set of circumstances, when the very order sanctioning refund is under challenge before the Collector (Appeals). In his submission, appeal being the continuation of the proceedings, and the very order sanctioning refund being under challenge, it could not be considered as giving rise to any other proceedings, and as such no fresh notice vide Section 11-A of the Act, is called for. Admitting that this Bench, in passing the impugned order, has referred to and relied upon some earlier decisions of the Tribunal, he has submitted that a contrary view has been taken by the CEGAT Special Bench 'C' in Andhra Sugar Ltd. v. Collector of Central Excise 1991 (17) ETR 645 : [1986] 9 ECC-T31 (SB) and it has been categorically decided that no fresh notice vide Section 11A of the Act is called for, when the order is itself in challenge before the Collector (Appeals). In his submission, the view expressed in the said decision is clearly in conflict with the view expressed by this Bench in the impugned order and the same therefore give rise to a question of law, necessitating a reference to the High Court. He has also pleaded that this very Bench has, in its order dated 10.7.1991 in appeal No. E/519/87 Bom in the matter of Hindustan Petroleum Corporation Ltd. Bombay v. Collector of Central Excise, doubted the correctness of the view held earlier and referring to the CEGAT decision in Re: Andhra Sugar Ltd. (supra) has referred the matter to the Larger Bench.
8. Submitting that the question that requires to be referred could be formulated on the aspect as to what is the scope of the second proviso to Section 35-A(3) of the CESA, 1944, and whether it covers the cases, where an annulment of the order of the adjudicating authority is sought from the Collector (Appeals), in appeal preferred by the Department, the effect of which could be repayment of the refund already granted and received by the party, or whether it would necessitate issuance of a Show Cause Notice complying with the requirement of Section 11A. To put it otherway, whether a notice under Section 11A of CESA is essential for recovery of the refund ordered/sanctioned by the Assistant Collector, but held to be erroneous by the Collector (Appeals) in pursuance of an appeal by the Department vide Section 35A(3) of the CESA, 1944. He has submitted that if the question as suggested by the applicant does not correctly reflect the crux of the issue to be referred, the same may be suitably modified.
9. Mr. Uday Joshi, the Ld Advocate for the Respondents, has, however, submitted that besides the decisions referred to by this Bench in the impugned order, the Tribunal has, in its Larger Bench of five members, in Collector of Central Excise v. Fedders Llyods Corporation [1986] 10 ECC-T227 (SB) : 1986 (7) ECR 461 and its regular Bench has, in Digvijay Cement Co Ltd v. Collector 1991 (7) ECR 461, taken a similar view, and as such, there appears no need to refer the issue as formulated, or the same issue in any other format, to the High Court.
10. Considering the submissions made, and also going through the various decisions referred to on both the sides, what is required to be considered, for the purpose of determining as to whether a reference ought to be made to the High Court vide Section 35G of the CESA, 1944, is, whether the interpretation of second proviso to Section 35A (3) of the Central Excises and Salt Act, 1944, other than the one given by this Bench in the impugned order, is probable, and if yes, the reference has to be made.
11. A note has to be taken here, that in the subsequent matter (Appeal No. E/519/87 Bom) this Bench has already decided that with apparently conflicting views expressed, the issue be referred to the Larger Bench. A detailed order is passed in the said appeal, where various aspects of those decisions have been examined.
12. Before touching the crux of the issue, it is necessary to have a glance at the history of the legislative provisions relevant to the point at issue, Chapter VI-A (Section 35, 35A, 35B, 35C, 35D, 35E, 35F, 35G, 35H, 35-I, 35J, 35K, 35L, 35M, 35N, 35-0, 35-Q, and 36) was inserted by Finance Act(No 2) 1980, replacing Section 35, 35A and 36. (For keeping the records straight, Section 35EE, came to be inserted by Finance Act, 1984). Prior to the replacement of the aforementioned provisions, the department had no right to appeal, and the only right invested in them was of suo motu revision against the order of the officer subordinate to him, and it is only with the creation of the Appellate Tribunal and induction of Chapter VI-A to CESA, that the three tier remedies have been made available, both, to the assessee and the Department, but simultaneously, with replacement of the provisions of Section 35, 35-A and 36, as they then existed, by the induction of new provisions, the powers of suo motu revision have been withdrawn and the provisions of preferring the appeal before the competent authority have been introduced. These provisions remain applicable as on to-day.
13. As per the scheme of the Act, as it now exists, the Collector of Central Excise, if he is of the opinion that order of adjudicating authority subordinate to him is not proper, he may, by virtue of Section 35E(3) take appropriate decision within a period of one year from the date of decision or order of the adjudicating authority and by virtue of Section 35E(2) direct for applying to Collector (Appeals) for setting aside the said order, which application, by virtue of Section 35E(4) has to be entertained as an appeal, with all the provisions of appeal made applicable to them. By virtue of Section 35A(3) the Collector (Appeals) is entitled to either confirm, modify or annul the decision, or may refer the case back to the adjudicating authority for fresh adjudication, with such directions as he may deem fit.
14. Special Bench 'C' of the CEGAT, in Andhra Sugars Ltd. v. Collector of Central Excise 1991(17) ETR 645, on which the applicant strongly relies, were considering an argument that, there was no notice served on the assessee, by the Collector (Appeals), vide Section 11A of CESA, within the time specified therein and that the notice about filing of an appeal by the Department, served by the said authority could not be construed as the notice envisaged in the second proviso, though the Collector (Appeals) was required to form an opinion that certain duty of excise had been erroneously refunded. While answering the point raised, the Hon. Members observed thus:--
The provisions of Sub-section (3) of Section 35A have been reproduced earlier. The second proviso very clearly requires that where the Collector (Appeals) is of opinion that any duty of excise has been erroneously refunded no order requiring the appellants to pay back the amount erroneously refunded shall be passed unless the appellant is given notice within time limit specified in Section 11A of the Act to show cause against the proposed order. The notice issued by the office of the Collector (Appeals) undoubtedly is not a notice as envisaged in the second proviso. It does not say that the duty of excise had been erroneously refunded and did not call upon the noticee to show cause why an order should not be passed directing him to pay back the amount erroneously refunded. In the present case, however, the appellant before the Collector (Appeals) was the Assistant Collector of Central Excise and not Andhra Sugar Ltd., who were the respondents. Therefore, in terms, the second proviso does not seem to apply because it makes reference to the appellant and not to the respondent. However, in the instant case, the above provisions have to be read along with the provisions of Section 35E of the Act; Sub-section (4) thereof reads as follows:--
It follows from the above that the application filed by the Assistant Collector was to be heard as an appeal by the Collector (Appeals) and the provisions relating to appeals (including the provisions of Sub-section (4) of Section 35E) applies, so far as may be, to such application.
Drawing their conclusion on the point, the Hon'ble Members have held thus:--
The provisions of Section 11A, in our view, do not apply to the instant case. This is the way to harmonise the various relevant provisions we have referred to. Any other view would, in our opinion, defeat the course of justice. This may be readily appreciated if we assume that a notice under Section 11A, within the prescribed time limit is a pre-requisite. There is no explicit provision requiring the notice where the noticee happens to be the Respondent undisputably, the Collector (Appeals) has the power to set aside the Assistant Collector's order directing refund. What then? Surely, the consequential recovery of the erroneously refunded amount cannot again be the subject of another adjudication, under Sec 11 A? If this be so, the Collector's order, in the absence of any machinery to direct the Respondent to pay back the erroneous refund, will remain an ineffective and infructuous order. Surely, law should not be interpreted in such a manner? We sec no merit in the Learned Counsel's contention in this regard.
Supplementing to the reasonings adopted by the Hon'ble Members and in support of what has now been pleaded it may be observed that one of the fundamental tenets of law is that the appeal is a continuation of proceedings and on decision by the appellate authority, the order appealed against merges into the order of the appellate authority and an annulment of the original order, the same becomes non-existent and the parties have to be restored to their original position or the position that may emerge out by appellate order. What is understood by the consequential reliefs, is also restoration to the original position or to the position as directed by the appellate authority. When right to file an appeal has been made available to both the assessee and the Department, in availment of consequential reliefs, no differential treatment could be given to them, and if assessee appellant, for making recovery of the dues need not resort: to the provision of Section 11B, the department could also not be directed to resort to the provisions of Section 11A. An irresistible question that would then arise, is why then, the second proviso to Section 35A(3) has been inserted, and a probable answer thereto is that there may be instances where besides consequential effect and redressal to the status quo ante, a demand has to be made, not by way of granting any consequential relief, but in addition thereto, then the second proviso, to Section 35A(3) has to be resorted to, and this is exactly what is spelt out in the CEGAT Special Bench 'A' decision in Shree Digvijay Cement Co. Ltd. v. Collector of Central Excise (1991)(17) ETR384 (supra).
15. In the said decision (Re Shree Digvijay Cement), the Assessee filed a refund claim, which was rejected by the Assistant Collector but the Collector (Appeals) allowed the same, and remanded the matter to the Assistant Collector for quantification of actual freight for which the refund was initially claimed. The Assistant Collector on erroneous calculation refunded the amount. Against the said order of sanction, the Collector, exercising powers under Section 35E(2) ordered filing of an appeal to the Collector (Appeals) on the ground that part of the amount refunded were not in confirmity with the order of Collector (Appeals), and as such it was a case of erroneous refund. The refund of that part therefore did not flow from the order of Collector (Appeals) and as such, it was not in the nature of consequential relief and the CEGAT 'A' Bench held that order granting refund had to be set aside which could be done vide Section 35E(2) and then observed:
However, the order passed under Section 35E(2) does not automatically result in recovering the erroneous refund. This order should be followed by a show cause notice under Section 11A, according to which the show cause notice should be issued within six months from the date of actual refund. Since the time limit, for filing an appeal under Section 35E(2), is longer than the time limit prescribed under Section HA, the show cause notice should precede the proceedings under Section 35E(2), otherwise, the order under Section 35E(2) becomes an empty formality and is not enforceable. Similarly, even if the show cause notice is issued for recovering the erroneous refund within the time limit prescribed under Section 11A, without setting aside the order granting erroneous refund under Section 35E(2), no erroneous refund can be recovered. Therefore, the department should initiate proceedings simultaneously under Section 35E(2) within the time limit prescribed therein.
The decision, besides giving an illustration as to under what type of circumstances, second proviso to Section 35A(3) stands attracted, further indicates that the point at issue there was different from the one dealt with in Re: Andhra Cements, and that these two decisions do not hold conflicting views.
16. Decision of the Larger Bench (Five Members) of CEGAT, in CCE v. Fedders Llyods Corporation. [1986] 10 ECG-T227(SB) : 1986 (7) ECR 461 has dealt with the provision, allied to the one found in second proviso to Section 35A(3), as it existed in Section 36(2) of CESA, before it was amended. Going through the said decision, it appears that the Larger Bench was constituted to consider two points referred to it, one of them was--
Whether the special period prescribed in Section HA would apply to review show cause notice issued under the third proviso to Section 36(2) even though Section 11A had not been brought into force, and the Larger Bench, has given its finding as under:--
In view of the above analysis and if we bear the cardinal principles of avoiding repugnance and inconsistencies in mind, we must hold that the special period prescribed in Section 11A would apply to review show cause notices issued under the third proviso to Section 36(2) even if Section HA had not been brought into force.
Third proviso to Section 36(2) reads thus:--
Provided also that where the Central Government is of opinion that any duty of excise has not been levied or has been short levied or erroneously refunded no order levying or enhancing the duty, or no order requiring payment of the duty so refunded shall be made under this section unless the person affected by the proposed order is given notice to show cause against it within the time limit specified in Section 11A.
For the purpose of better appreciation, second proviso to Section 35A(3) is reproduced below:
Provided further that where the Collector (Appeals) is of opinion that any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, no order requiring the appellant to pay any duty not levied or paid, short levied, or short paid or erroneously refunded shall be passed unless the appellant is given notice within the time limit specified in Section 11A to show cause against the proposed order.
The wordings are apparently not absolutely identical. Striking distinction is the use of the word "the person affected by the proposed order" in Section 36(2) as it then stood and "the appellant" in second proviso, under consideration. The CEGAT Special Bench 'C' has, in Re: Andhra Sugars Ltd. (supra), emphasised the importance of the use of word "appellant.
17. A view is probable that assuming that both the provisions are virtually identical, the interpretation given to Section 36(2) by the Larger Bench, would ipso facto not stand attracted so as to remain applicable even when vital changes have been effected in the statutory provisions. Undisputedly the finding give there under relates to the pre-amended provisions of the Customs Act and an embargo was placed on the department, who did not have any statutory right to file an appeal. With no right t6 file an appeal invested in the department, there was absolutely no scope for the department to challenge the legality or validity of the order-in-original, and get a redressal there for. Further, the finding of the Bench is to the effect that provisions of Section 11A ought to be invoked for issue of review show cause notice, and not in relation to any finding to be given in appeal. No authenticity is called for to emphasise that an appeal is distinct from a revision. The appeal is considered as continuation of the proceedings whereas revision application is not a continuation of proceedings. By this, it is meant that the original order would get finality only when confirmed in appeal, if the appeal is preferred. It of course, becomes final when, though right to appeal exists but appeal is not filed. When right of appeal does not exist, the order becomes absolute on passing of the same. Review or revision thereof are independent proceedings and are not at par with appeal proceedings. When the said Bench had not before it, the amended statute, bringing in far reaching change, the finding given by them in relation to different set of provisions, may not, with vital changes in the statute, operate binding, irrespective of their interpretation of similarly worded provision.
18. It has been convincingly argued, even going by the proposition that Larger Bench decision has a force of law, then also, what they have held is that the review notice issued, ought to be in conformity with the requirement of Section 36(2) third proviso. With the amendment in the statute, issue of any show cause notice for review, does not arise, as provisions of suo motu revision have stood withdrawn, and provisions of preferring an appeal have been incorporated.
19. With substantial change in the entire structure, and insertion of the provisions of appeal, the Larger Bench decision given under the statutory provisions then existing, do not prima facie appear to be effective and binding under the new provision.
20. The Two Member Bench of CEGAT Special Bench 'B' in Collector of Central Excise v. Universal Radiators Ltd. -- 1988(12)ETR 408, had also before them a case where Assistant Collector passed an order on a refund claim and sanctioned the refund and the said order, by virtue of the direction given vide Section 35E(2) was appealed against. The Collector (Appeals) however held that the cheque for refund was already encashed, and period of six months had already passed before the notice of appeal was served and as such, he was not authorised to pass an order requiring to pay the duty erroneously refunded. The Tribunal upheld the view taken by the Collector (Appeals), and made observation in para 9, as under:--
The only way by which an erroneously refunded duty can be recovered is a notice under Section 11A, an application and proceedings under Section 35E are not a step in that direction. If it were, then the department can, by using this section, recover erroneously refunded duty or short levied duty for which no notice was issued within the time specified under Section 11A, the primary and fundamental section, and the fountain-head of all the powers for recovery of any money erroneously refunded. Thus, by resort to Section 35-E, the Department can recover erroneous refunds that have long become barred by limitation under Section 11A, to say nothing of the fact that it is almost inconceivable that any notice issued by the Collector (Appeals) under Section 35E, as he did in this case, could ever reach the assessee in time. All of them would be out of time and illegal. To argue that, because Section 35-E allows this procedure of application and determination by the Collector (Appeals), the department can recover such duties, is to enlarge the powers of the department in a way that sets Section 11A at naught. It defeats the right process laid out in the Act.
21. Reading of this decision as also the decision of another two members Bench in Re: Andhra Sugars (supra), they appear to be holding conflicting and contradictory views. It may be noted that in Re: Andhra Sugars, the earlier decision is not referred. With larger Bench decision in Re: M/s. Fedders Lfyods Corporation not available, as discussed above, for the purpose of laying down correct law, on the point at issue, one can hardly state that the law is settled on the issue.
22. A view that appears equally probable that second proviso to Section 35A(3) when read in proper perspective provides that if in the appeal filed by the appellant, instead of granting the relief claimed by him, it appears that the appellant on the contrary, is required to pay some more amount than ordered, or that the refund already given to the "appellant" (not the respondent) was not proper, and that the "appellant" had to pay the same back, then recourse to provision of Section 11A, has to be taken, but if any refund is to be made, or demand is to be renewed as a sequential relief, the same does not come into play.
23. It is pertinent to note that, the legal position is settled that, if the adjudicating authority, has dropped the notice of demand, and the said order is net aside in appeal, and matter is remanded for de novo adjudication, the original notice stands revived, and fresh notice for demand is not required or issued.
24. From what has been discussed above, it becomes clear that a question of law has arisen out of the order of this Bench, which requires to be referred to the jurisdictional High Court of Gujarat at Ahmedabad. The question as formulated, however, may not bring out the real point on which the considered opinion of the Hon'ble High Court is solicited. In view thereof, the question is reformulated as under:--
What is the scope of the second proviso to Section 35A(3) of the Central Excises and Salt Act, 1944? Whether it covers the cases where the Collector (Appeals), on the appeal filed by the department vide Section 35A(1), holds an opinion that the order sanctioning refund, which has been appealed against, is required to be set aside, as a consequence whereof the party affected has to refund the amount?
25. The Registry to draw the statement of the case and forward the same to the High Court of Gujarat at Ahmedabad vide Section 35G of the Central Excises and Salt Act, 1944.