Bombay High Court
Metal Extruders India Pvt. Ltd. vs Union Of India on 11 June, 1987
Equivalent citations: 1994(69)ELT477(BOM)
JUDGMENT H. Suresh, J.
1. The petitioners are engaged in the manufacture of copper alloys pipes and tubes, in which copper alloy is used which has approximately 65% copper content and 35% zinc content. The said tubes and pipes manufactured by the petitioners are subject to excise duty under Item 26A of the First Schedule to the Central Excises and Salt Act, 1944. By a Notification No. 213 of 1963 as amended from time to time and issued under Rule 8 of the Central Excise Rules, 1944, the Government had exempted pipes and tubes of copper and copper alloys falling under sub-item (3) i.e. pipes and tubes of Item 26A of the Schedule to the said Act in the manufacture of which duty-paid copper and/or copper alloys in any crude form or manufactures thereof are used. The relevant portion of the said Notification as amended from time to time is as follows :
"In exercise of the powers conferred by Rule 8(1) of the Central Excise Rules, 1944, the Central Government hereby exempts pipes and tubes of copper or copper alloys, falling under sub-item (3) of Item No. 26A of the Central Excises and Salt Act, 1944 (1 of 1944) in the manufacture of which duty paid copper or copper alloys in any crude form or manufactures thereof are used from the payment of so much of the excise duty leviable thereon as is equivalent to the duty of excise or as the case may be, the additional duty leviable under Section 2A of the Indian Tariff Act, 1934 (32 of 1934), already paid on copper or copper alloys in any crude form or manufactures thereof.
Notwithstanding anything contained in the foregoing paragraph, such pipes and tubes of copper an copper alloys manufactured from copper or copper alloys in any crude form purchased from the market on or after the 20th day of August 1966, shall be exempt from so much of the duty of excise leviable thereon as is equivalent to the duty payable on the copper or copper alloys in any crude form, as the case may be."
In view of the aforesaid Notification, the petitioners were entitled to exemption from the payment of duty to the extent specified therein and they had availed such exemption from time to time.
2. However, on or about 3rd May 1972, the Superintendent of Central Excise issued a show cause notice to the petitioners alleging that the Petitioners-Company had again contravened the provisions of Rules 173B and 173C of the Central Excise Rules, 1944, in that the Petitioners had suppressed vital information with regard to the classification list and price list. It was alleged that in the classification list, the fact of the content of not less than 50 per cent of the copper had been suppressed which had resulted in an alleged wrong and undue claiming of set off of Rs. 53,840.41 and, therefore, there was a short-levying of the excise duty to the extent specified in the said notice. The said notice related to the period from 24th February 1971 to 28th February 1972. The petitioners by their reply dated 9th June 1972 submitted that they had properly claimed the set-off and that they had not violated any of the rules. After considering the reply and after hearing the petitioners, the Assistant Collector by his order dated 24th May 1974 dropped the proceedings as against the petitioners. Ordinarily, the matter should have rested at that stage.
3. However, after about 10 months, once again the Officer of the Superintendent of the Central Excise thought of issuing another notice dated 14th February 1975 again alleging that the petitioners had availed of excess set-off for the period from 12th October 1971 to 23rd August 1972 and, therefore, called upon the petitioners to show cause why action be not taken against the petitioners. The petitioners by their reply dated 13th March 1975 pointed out that they had not claimed any wrong set-off of duty, inasmuch as their claim of set-off was covered by the said notification. They also contended that, earlier, the Assistant Collector had dropped the action against the petitioners and, therefore, there was no question of a second action on the same set of facts and more or less covering the same period. In any event, the petitioners contended that the action was clearly barred by limitation, inasmuch as the relevant date for payment of duty was of 1971 and 1972 and therefore, no notice could have been issued or any action could have been taken in February, 1975.
4. The Assistant Collector by his order dated 7th May 1975 negatived the contention of the petitioners and demanded a sum of Rs. 53,000/- and odd being the amount claimed by way of set-off by the petitioners. As against this order, the petitioners preferred an appeal to the Appellate Collector of Central Excise. The Appellate Collector of Central Excise by his order dated 25th September 1975 allowed the said Appeal and set aside the order passed by the Assistant Collector. Thereafter on 14th June 1976 the Government issued as show cause notice suo motu under Section 36(2) of the said Act proposing to set aside the order passed by the Appellate Collector of the Central Excise and to restore the order of the Assistant Collector of Excise. The petitioners by their reply dated 4th August 1976 explained the entire circumstances and pointed out that the action was against law, equity and fair play and, therefore, they submitted that no such review or revision was possible. The government by its order dated 18th January 1978 negatived the contention of the petitioners and set aside the order of the Appellate Collector and restored the order of the Assistant Collector. The petitioners have challenged in this petition under Article 226 of the Constitution of India the said two orders of the Assistant Collector of Customs and the order of the Government, being Exhibits G and K respectively.
5. The respondents have not appeared and, therefore, I do not have the benefit of their submissions. However, I have gone through the affidavit-in-reply filed on behalf of the respondents. The said affidavit contains no new submissions which are not set out in the two impugned orders.
6. Mr. Dharmadhikari appearing for the petitioners submitted that the Government while interpreting the said notification wrongly stated that the benefit of the aforesaid notification is a available to an assessee only to the extent of the duty actually paid under Item 26A and "that would mean to the extent of the copper content only." Mr. Dharmadhikari submitted that if one has regard for the language in the notification, it does not say that the exemption is with regard to the copper content only. I am inclined to agree with the submissions made by Mr. Dharmadhikari. The notification in itself refers to the duty paid on copper or copper alloys in any crude form or manufactures thereof and it further says that these shall be exempt from so much of the duty leviable thereon as is equivalent to the duty of excise already paid on copper or copper alloys in any crude form or manufactures thereof. It does not say that the exemption is only to the extent of copper content. Therefore, the interpretation sought to be put forward by the Government of the said notification is per se erroneous. Therefore, they could not have called upon the petitioners to pay the amount claimed by them by way of set-off under the said notification.
7. But it is unfortunate that the Government has persisted in their action. Earlier on 3rd May 1972 they thought of taking action against the petitioners and that is how the first show cause notice was issued. When the petitioners submitted their case and explained all the facts the Assistant Collector by his order dated 24th May 1974 dropped the entire action against petitioners. Therefore, no second notice could have been issued by the Department for the same period and on the same facts. The Government tried to justify it on the basis that the earlier notice was with regard to the penal action while the latter notice was with regard to the demand of the amount claimed by the petitioners by way of set-off. In my view, this kind of approach on the part of the Government is nothing but hair-splitting. It makes no sense. The facts were identical and if the Government was right and the petitioners were to pay this amount, there would have been no action either on the basis of the first notice or on the basis of the second notice. The period is more or less identical. In the first notice the period was from 24th February 1971 to 28th February 1972 while in the second notice the period was from 12th October 1971 to 23rd August 1972. There is a clear overlapping of the period in these two notices and, therefore, the second notice could not have been issued in law. If the Government was aggrieved by the order of the Assistant Collector dated 24th May 1974, the matter could have been taken higher at that stage. Since the Government accepted the order dated 24th May 1974, there was no question of issuing a second show cause notice on 14th of February 1975. It is in this sense the action becomes unwarranted in law and, therefore, will have to be struck down.
8. I am also inclined to accept the contention of the petitioners that the action contemplated by the respondents was clearly barred by the law of limitation. Under rule 10 of the said Rules, it is open to the respondents to claim the said amount within one year from the relevant date. The relevant date in so far as this petition relates to would be the date when the duty paid or such other date when the duty has been short levied or has not been paid in full, or the date on which the duty was required to be paid under these Rules. The notices themselves show the relevant dates when the duty was paid or was not paid by claiming the benefit of the said notification and the exemption claimed was in the years 1971 and 1972. If that is so, the Government could have taken action as against the petitioners under Rule 10 of the said Rules within one year from the said date when the duty was paid or was required to be paid. The contention of the respondents that the limitation would start from the date when the Department makes an endorsement on the assessment memorandum of R.T. 12 returns, and that according to them in the present case such an endorsement was made as on 28th June 1974 and that, therefore, the limitation would start from that date, is per se not tenable in law and the same is not based on any of the rules or provisions of the said Act. If such a contention were to be accepted, it is possible for the Department to wait any number of years and make an endorsement at their own sweet will at any time they like and thereafter initate action as against the assessee, and in that it would cause undue hardship to such assessees.
9. In the result, the decision taken by the Government as contained in Exhibits 'G' and 'K' to the petition will have to be struck down. I, therefore, pass the following orders.
ORDER
10. The impugned order dated 7th May 1975 (Exhibit 'G') and the impugned order dated 18th January 1978 (Exhibit 'K') are hereby quashed and set aside. Consequently the Notices issued pursuant to these decisions being Exhibits 'L' (Collectively) also stand quashed and set aside. The respondents will also pay costs of this petition to the petitioners.