Customs, Excise and Gold Tribunal - Delhi
Mohinder Steels Ltd. vs Commissioner Of C. Ex. on 8 April, 2002
Equivalent citations: 2003(85)ECC128, 2002ECR257(TRI.-DELHI), 2002(145)ELT290(TRI-DEL)
ORDER C.N.B. Nair, Member (T)
1. The appellants are Hot Re-rolling Steel Mills discharging their Central Excise duty liability at compounded rates on the basis of capacity of their production in terms of Section 3A of the Central Excise Act. They filed declarations under Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 before the Commissioner of Central Excise, Chandigarh declaring relevant particulars of the machinery installed in their mills for determination of Annual Capacity of production by the Commissioner and the Commissioner passed orders determining such capacity in each case. However, duty amounts due under those orders were not paid by the appellants. The dispute arising in these appeals relates to the procedure for the recovery of duties at compounded rates. When the appeal came before a Division Bench of this Tribunal it was contended that demands were partly or fully time barred as recovery proceedings had not been initiated in time in terms of Section 11A of the Central Excise Act. This contention was raised relying on the Division Bench decision of this Tribunal in Appeal Nos. E/401-405/2001-NB (DB), dated 21-9-2001 in the case of Shri Guru Hargobind Steel Indiistries. Vide Final Order Nos. A/718-722/2001-NB (DB), dated 27-8-2001 [2001 (136) E.L.T. 1047 (T)]. As the Division Bench which heard the present appeals doubted the correctness of the view taken in the case of Shri Guru Hargobind Steel Industries the matter was referred to a Larger Bench. This Larger Bench has been constituted to consider the reference. The reference itself is reproduced as under :-
"Misc, Order No. M/255/2001-NB-D Learned Counsel submits that the view taken by the Commissioner in the impugned order that once the capacity has been determined by the competent authority, duty is already determined, and failure by the party to pay this predetermined duty as stipulated under Rule 96ZP does not require issuance of any notice for confirming the duty already determined, is incorrect. According to him, even in such cases the Department has to proceed under Section 11A. In support of his contention he placed reliance on an order passed by a Two Member Bench of this Tribunal in Appeal Nos. E/401-405/2001-NB(DB), dated 21-9-2001.
2. In the light of the provisions contained under Rule 96ZP, in the nature of declaration given by the assessee opting for the procedure under Rule 96ZP and also in the light of the direction given by the High Court of Punjab and Haryana in the petition filed by the assessee we find it difficult, prima facie, to accept the view taken by the Bench in the above order. We therefore refer this matter for consideration by a Larger Bench. Post for hearing on 14-1-2002".
2. The appellants application for determination of annual capacity of production was the subject matter of several adjudication and appellate orders before the Commissioner and this Tribunal. During the pendency of the dispute appellants paid duty according to the calculation indicated in their applications. The applications were finally ordered by the Commissioner determining higher annual capacity of production and consequent increase in the amount of duty liability. Upon delay in payment of the increased duty amount (consequent to the determination of annual capacity by the Commissioner), actions were taken under Section 11 of the Central Excise Act for recovery of the amounts. This led to the filing of writ petitions in the Hon'ble High Court of Punjab and Haryana by some of the appellants challenging the recovery proceedings under Section 11 of the Central Excise Act and passing of directions by the High Court.
3. The submission made on behalf of the appellants is that provisions of Section HA are mandatory for recovery of any duty short levied and short paid. The Counsel for the petitioners contended that the Section 11A stipulates the procedure to be followed invariably and without exception for recovery of any duty which has not been levied or not paid or short paid or erroneously refunded. The learned Counsel drew our attention specifically to Sub-section (2) of Section 11A which stipulated that determination of amount of duty short levied etc. from a person is to be made after considering his representation in the matter. The Counsel contended that in the present case, since the recovery proceedings have been initiated under Section 11, the procedural requirement for issuing notice, determining the amount etc. have not been satisfied at all. The Counsel also submitted that there is no exception in the Central Excise Act or Rules regarding procedure of recovery in respect of compounded levy. In this connection, he referred to Rule 173A and other Central Excise Rules in Chapter VII-A of the Rule which relate to assessees working under Self Removal Procedure and submitted that units working under compounded levy scheme (XI) are not exempt from the provisions under Chapter VII-A. He also submitted that Rule 173-1 further made it clear that Section 11A procedure has to be followed for recovery of any short levy. Further, specific reliance was placed by the Counsel on the observations of this Tribunal in Paras 11,12 and 13 of Final Order Nos. A/718-722/2001-NB (DB).
4. Learned Counsel for the appellants submitted that even under other tax laws, quantification of tax has to be undertaken in terms of the relevant section or rule. In this connection, reference has been made to the decision of the Apex Court in the case of Harshad Shantilal Mehta v. Custodian and Others (S.C.) 1998 (231) ITR 871. Learned Counsel also relied upon the decisions of this Tribunal in the case of Collector ofC. Ex., Vadodara v. Mafatlal Fine Spg. & Wvg. Co. Ltd., 1995 (79) E.L.T. 715 in support of the submission that time limit as prescribed in Section 11A has to be observed for recovery of duty. The learned Counsel also pointed out that in the light of decision of the Madras High Court in the case of Eternit Everest Ltd. v. Union of India, 1997 (89) E.L.T. 28 (Mad.) it is clear that in the absence of machinery provision for recovery of amounts under a statute, no recovery action could be taken. It was explained that in the case of Eternit Everest Ltd., in regard to deposit of duties collected under Section 11D of the Central Excise Act, 1944, the High Court had held that in the absence of a machinery provision, even if payments are due to the Government, the amounts cannot be recovered. The learned Counsel contended that demands in these appeals have become time barred as action in terms of the relevant legal provision (Section HA) had not been taken on time.
5. As against the aforesaid submissions on time bar on behalf of the appellants, learned DR has submitted that the provisions contained in Chapter VII-A relating to goods under Self Removal Procedure have no application in respect of payment of duty under compounded levy scheme. It is the contention of the Revenue that Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 and other Rules relating to the scheme contained separate machinery provisions in respect of units working under that scheme and the general provisions in the statute relating to time bar and other aspects have no application to the scheme. It was pointed out that under this scheme, manufacturers opted for payment of duty at compounded rates and filed declarations furnishing details about annual capacity of production and duty payable on such capacity of production. Once the Commissioner approved such applications, payments are to be made in terms of Rule 96ZP. Learned DR pointed out that it is now well settled by the Apex Court's decisions in the case of Commissioner of C. Ex. & Customs v. Venus Castings (P) Ltd., 2000 (117) E.L.T. 273 (S.C.), Union of India v. Supreme Steels and General Mills, 2001 (133) E.L.T. 513 (S.C.) that compounded levy scheme being a separate scheme altogether, an assessee opting for the scheme is bound by the terms of that scheme.
6. Learned DR also explained that it is now well settled that Section 11A has no application to recovery under different schemes. In this connection, learned DR referred to the decision of the Apex Court in the case of CCE, Jaipur v. Raghuvar (India) Ltd. - 2000 (118) E.L.T. 311 (S.C.) wherein the Apex Court observed that Section 11A is not an omnibus provision which stipulates limitation for every kind of action to be taken under the Acts or Rules. Learned DR pointed out that the Apex Court has observed with regard to Modvat scheme, that scheme of Modvat being a different scheme altogether, the provisions in Section 11A have no application in respect of time limit or otherwise with regard to administration of that scheme. It is, therefore, his submission that Section 11A has no application to compounded levy scheme or Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997. Those, manufacturers covered by that scheme have to function entirely according to the Rules applicable to that scheme. Relying on the Apex Court decision in the case of Raghuvar (India) Ltd. he pointed out that an assessee's liability under a specific scheme will continue untill the application is discharged. An assessee cannot take cover behind general provisions relating to time bar under the Customs Act or Central Excise Act to defeat recovery of amounts due from him. Learned DR also referred to the decision of the High Court of Punjab & Haryana as reported in 2002 (139) E.L.T. 285 (P & H) = 2002 (48) RLT 241.
7. The short issue referred to this Larger Bench for consideration is whether the provisions of time limit contained in Section 11A of the Central Excise Act are applicable to the recovery of amounts due under the compounded levy scheme for Hot Re-rolling Steel Mills. This issue is no more res-integra in view of the judgment of the Apex Court in the case of Venus Casting Ltd. & Supreme Steels and General Mills. The Apex Court noted that compounded levy scheme under the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 is a separate scheme for discharge of duty liability and held that issues arising under that scheme should be decided within the provisions of that scheme. The Apex Court made the following observations in Para 12 of the judgment :-
"12. On the reasoning adopted by us and bearing in mind that in taxation measures composition schemes are not unknown and when such scheme is availed of by the assessee it is not at all permissible for him to turn around and ask for regular assessment, we think, there is no substance in the contention urged on behalf of the respondents".
The compounded levy scheme for collection of duty based annual capacity of production under Section 3 of the Central Excise Act and Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 is a separate scheme from the normal 'scheme for collection of Central Excise duty on goods manufactured in the country. The assessees working under that scheme, make an application to the Commissioner indicating particulars of the machinery installed in their factory, the annual capacity of production and the duty payable on that capacity. The Commissioner considers the applications and makes a determination of the annual capacity of production. The duty amount being dependent on the capacity* of production, determination of annual capacity of production by the Commissioner decides the amount payable. Rule 96P of the Rules stipulate the method of payment. Rule 96P contains detailed provisions regarding time and manner of payment. It also contains provision relating to payment of interest and penalty in the event of delay in payment or nonpayment of dues. Thus, this is a comprehensive scheme and general provisions in the Central Excise Act & Rules are excluded.
8. The judgment of the Apex Court in Raghuvar (India) Ltd. case throws valuable light on how to construe general provisions in Central Excise Act in the context of specific schemes. The issue for consideration in that case was whether Section 11A of the Act was relevant for determining time bar under Modvat scheme. The Apex Court held that Section 11A of the Central Excise Act is not an omnibus provision which provides any period of limitation for all or any kind of action to be taken under Central Excise Act or Rules. The Court observed as follows in Para 13 of the judgment :-
"13. Any law or stipulation prescribing a period of limitation to do or not to do a thing after the expiry of period so stipulated has the consequence of creation and destruction of rights and, therefore, must be specifically enacted and prescribed therefor. It is not for the Courts to import any specific period of limitation by implication, where there is really none, though Courts may always hold when any such exercise of power had the effect of disturbing rights of a citizen that it should be exercised within a reasonable period. Section 11A is not an omnibus provision which provides any period of limitation for all or any and every kind of action to be taken under the Act or the Rules but will be attracted only to cases where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded. The section also provides for an extended period on certain contingencies and situations. The situation on hand and the one which has to be dealt with under Rule 57-I, as it stood unamended, does not fall under any one of those contingencies provided for in Section 11A of the Act. Part AA of the Rules in which Rule 57-I is found included provides a special scheme for earning credit and adjustment of duty paid on excisable goods used as inputs in the manufacture of what is referred to as "final product", and thereby enable the manufacturer to utilize the credit so allowed towards payment of duty of excise leviable on the final products, in the manner and subject to the terms and conditions stipulated therein. The manufacturer, in this case while removing the final product manufactured has adjusted against payment of excise duty on such final product a part of portion of the credit earned by him under the special scheme and what is sought to be really and in substance done is to inform the manufacturer that the adjustment he purported to have made was with an amount not legitimately or factually earned by or due to him. For this purpose, the irregularity and impropriety committed by the manufacturer in maintaining the accounts and the error in the calculation of the credit said to have been earned by him is pointed out, and the manufacturer is only directed to reverse the credit so wrongly and undeservedly made by readjustment and if need be, to recover the amount equivalent to such credit wrongly avoid of and disallowed by the proper officer. The recovery of credit availed of and utilized in utter breach of the faith and mutual trust and confidence which is the raison d'etre for the proper and successful working of the Modvat scheme and that too in gross violation of the mandatory requirements necessarily to be fulfilled before ever claiming or availing of such benefits cannot be said to be the same as the demand for payment to be made under Section 11A of the Act of any excise duty not levied or paid or has been short-levied or short-paid. They fall into two distinct and different categories altogether with basic as well as substantial differences to distinguish them from each other. As a matter of fact, Rule 57-I envisages disallowance of the credit and consequential adjustment in the credit account or the amount current maintained by the manufacturer and if only any such adjustments are not possible proceed to recover the amount equivalent to the credit illegally availed of. Consequently, the situation postulated to be dealt with under Rule 57-I cannot be said to involve a case of manufacture and removal of excisable goods without subjecting such goods to levy or payment of the various nature and category enumerated in Section 11A of the Act on its own terms will have no application or operation to cases covered under Rule 57-I of the Rules".
9. The importing of elements of one scheme of tax administration to a different scheme of tax administration would be wholly inappropriate as it would disturb the smooth functioning of that unique scheme. A time limit prescribed for one scheme could be wholly inappropriate for an other scheme and time limit under Section 11A is no exception. Therefore, in the light of the judgment of the Apex Court in the cases of Venus Casting and Raghuvar (India) Ltd., we hold that recoveries of amounts under the compounded levy scheme for re-rollers is not covered by the general time limit prescribed under Section 11A of the Central Excise Act.
10. The contrary view taken by a Division Bench of two Members of this Tribunal in its Final Order Nos. 718-722/2001-NB(DB), dated 27-8-2001 is over-ruled. The appellants shall discharge the duty liability under the scheme according to the capacity determined by the Commissioner. In the event of non-payment the revenue shall be at liberty to recover such amounts in terms of the provisions of Section 11 of the Central Excise Act.
11. As already stated, some of the assessees to this appeal had challenged the proceedings initiated to recover the amounts before the Hon'ble High Court of Punjab & Haryana. We find that the High Court only directed that final order determining the annual capacity in the case of each petitioner be passed and furnished before taking recovery action pursuant to such de-
termination. The present appellants who were parties to the High Court proceedings cannot now be challenging the order passed by the Commissioner on the ground to time bar under Section 11A.
12. Having answered the reference as above, we turn to other issue raised by individual assessees in their appeals. M/s. Lakshmi Steel Rolling Mills (Appeal Nos. E/709/2001-NB(DB), E/762-70/2001-NB(DB) and E/888/2001-NB(DB), M/s. Hans Steels Rolling Mills (Appeal No. E/765/2001-NB(DB), M/s. Vashist Ispat Products (Appeal No. E/767/2001-NB(DB), M/s. Indian Mechanical Works (Appeal Nos. E/769/2001-NB(DB), M/s. Prince Agro & Allied Industries (Appeal No. E/888/2001-NB(DB) and M/s. Prem Khalsa Iron & Steel Rolling Mills (Appeal Nos. E/709/2001-NB(DB), E/762-70/2001-NB(DB) have submitted that the capacity determination has been carried out by the Commissioner in terms of Rule 5 of Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 based on the actual production of the previous year even though that Rule is not applicable in cases where change in production capacity has taken place on account of changes in the machinery. Learned Counsel for the appellants referred to the Larger Bench decision of this Tribunal in the case of Sawanmal Shibumal Steel Rolling Mills v. CCE, Chandigarh-1, 2001 (127) E.L.T. 46 (T). M/s. Shree Bhagwati Steel Rolling Mills (Appeal No. E/768/2001-NB(DB) have submitted that the capacity determination in their case has not been correctly done inasmuch as the same was done based on parameters of other manufacturers. It is their contention that capacity determination should be with regard to the machinery installed in the premises of manufacturer itself.
13. Appellants claims for relief on the above points is required to be considered. A Larger Bench of the Tribunal has rendered a decision on the scope of Rule 5 in the case of Sawanmal Shibumal Steel Rolling Mills v. CCE, Chandigarh-I, 2001 (127) E.L.T. 46 (T-LB). Similarly, since the amount payable under the compounded levy scheme is depending upon the machinery installed by each re-roller, determination of capacity of production should be based on the parameters of the machinery installed by each manufacturer. The parameters of the machinery installed by other manufacturers would not be of any relevance. Accordingly, it is ordered that in respect of appeals mentioned in Para 10 above, annual capacity of production and duty amount due shall be re-determined by the Commissioner after giving the appellants an opportunity to present their case. Rest of the appeals are rejected.
14. The reference and the appeals are disposed of as above.