Customs, Excise and Gold Tribunal - Tamil Nadu
D.C.W. Limited vs Collector Of Central Excise on 31 December, 1987
Equivalent citations: 1988(35)ELT167(TRI-CHENNAI)
ORDER K.S. Venkataramani, Member (T)
1. The petition has been filed seeking to adduce additional grounds which, for the reasons contained therein, is allowed.
2. E/Stay/716/87. The petition is seeking a say of the proceedings before the Collector for rendering a decision on merits on the issues raised in the Show Cause Notice dated 12/5/83 pursuant to the impugned order of the Collector dated 24-4-1987. Since we intend to take up the appeal filed before us against the Collector's Order dated 24-4-1987 today itself for disposal on merits, the petition has become infructuous and is accordingly dismissed.
3. A. No. E/430/87. - This appeal is directed against the order dated 24-4-1987 passed by the Collector of Central Excise, Madurai, by which he had held that the Collector had jurisdiction to issue the Show Cause Notice demanding duty from the appellants for a period March 1979 to May 1981 and the same is not hit by limitation.
4. The appellants are manufacturers of Hydrochloric Acid which was liable to excise duty under the erstwhile Central Excise Tariff Item 14G. The origin of the dispute is a Show Cause Notice issued on 12-5-1983 by the Superintendent of Central Excise (Technical) Madurai, asking the appellants to show cause to the Collector as to why the assessable value of hydrochloric acid as approved for another manufacturer viz. Mettur Chemicals & Industrial Corporation Limited, Mettur Dam, should not b'e adopted for the hydrochloric acid produced and consumed by the appellants during the period 1-3-1979 to 30-11-1982 and why the differential duty amounting to Rs.36,18,045.40 for the above period should not be demanded from the appellants under Rule 9(2) of the Central Excise Rules 1944 read with Section 11A of the Central Excises & Salt Act, 1944 and why a penalty should not be imposed on the appellants under Rule 9(2) and 173Q of Central Excise Rules 1944 for the contravention of the provisions of Rule 9(1), 173B, 173C read with Rule 173F and 173G as well as Rule 226 of the Central Excise Rules. In reply to the Show Cause Notice, the appellants raised certain preliminary issues, which they contended, should be decided first as they went to the root of the matter. These were all questioning the Collector's jurisdiction to issue the Show Cause Notice for the payment of duty for the back .period, and on limitation. The Collector took the stand that there could be no separate decision for jurisdiction as demanded by the appellants, whereupon the appellants moved the Madras High Court, and the Collector filed a counter before the Court offering to decide the preliminary issues of limitation and jurisdiction as requested for by the appellants. On a consideration of the preliminary petitions raised by the appellants on these issues, the Collector passed the impugned order against which the present appeal has been filed.
5. Shri K. Narasimhan, the learned Counsel appeared along with the learned Counsel Shri S.V. Subramanian for the appellants. It was contended that the Show Cause Notice issued by the Collector covers the period 1-3-1979 to 30-11-1982. It was pointed out that in this, for the demand for the period 1-3-1979 to 31-5-1981, _the Superintendent of Central Excise, Tiruchendur Range, had already issued a notice to the appellants on 25-8-1981 demanding a sum representing the differential duty on hydrochloric acid amounting to Rs. 1,62,689.83. In response to this, the appellants had sent a detailed reply resisting the demand dated 12-11-1981. Subsequently, they had addressed a letter to the Collector on 18-1-1982, endorsing a copy to the Assistant Collector, in which they had referred to the Show Cause Notice issued by the Superintendent, and had agreed to pay the amount of differential duty demanded in order to maintain good and cordial relations with the department. The Assistant Collector issued a letter dated 3-2-1982 in response to this in which he informed the appellants that they were permitted to pay the amount specified in the Show Cause Notice only in settlement of issue raised in the notice. The learned Counsel contended that the Collector, in his impugned order has held that the letter of the Assistant Collector dated 3-2-1982 was not a decision order within the meaning of Section 35 of the Central Excises and Salt Act, 1944 (New) and Section 35A (Old). It was the appellants' contention that this letter was in fact a decision, and since it decided the question of demand over the period specified therein in the Show Cause Notice, the Collector cannot for the same period issue Show Cause Notice. By his letter dated 3-2-1982 concluding the adjudication proceedings the Assistant Collector not only determined the enhanced duty liability for the period 1-3-1979 to 31-5-81, but also determined the prospective liability from 1-6-1981 onwards. The letter of the Assistant Collector dated 3-2-1982, though described by the Collector in the impugned order as a simple letter, must really be treated and considered as an adjudication order/decision determining the rights of parties, and, according to the appellants, it will necessarily constitute the starting point for any time limit to operate from that date. In such circumstances there cannot be a fresh adjudication on the same issue by the Collector. He can only exercise the powers for review of the Assistant Collector's order. The time limit for such a review was only one year, and the Show Cause Notice issued by the Collector is beyond that period. The learned Counsel further contended that in the first Show Cause Notice issued by the Tiruchendur Superintendent, the demand for duty had been made for a period beyond six months for which the Show Cause Notice had not specifically invoked the proviso to Section 11A(1) of the Central Excises & Salt Act, 1944 but since the deman can be made a long for a Jonger period in /aw on/y under the proviso, it should be held that it has been invoked by implication in the first Show Cause Notice. Therefore, the second Show Cause Notice issued on 12-5-1983 again invoking the longer period on the same fact as before the Assistant Collector is barred by constructive res judicata. In any event the Counsel contended that the Collector had no jurisdiction to issue Show Cause Notice during the material time invoking the longer period under Section 11A as the "Proper Officer" at the material time was only the Assistant Collector, and not the Collector, and further the Show Cause Notice can also not be considered as having been issued under the amended Section 11A effective from 27-12-1985, as it is not signed by the Collector personally. By this amendment only the Collector has been empowered to issue Show Cause Notice and determine duty demand for longer period under Section 11 A. In support of this argument reliance was placed on the case law relating to Kwality Containers v. Collector of Central Excise, Bombay, 1987 (29) E.L.T. 304 read with para 95 of Atma Steel Case 1987 (17) E.L.T. 331 and also on Punalur Paper Mills v. Collector of Central Excise, Cochin, 1987 (31) E.L.T. 770 where the Tribunal held that the Show Cause Notice under Section 11A invoking the longer period has to be signed by the Collector himself.
6. The learned S.D.R., Shri K.K. Bhatia, appearing for the Depart-ment, contended that a perusal of the two Show Cause Notices issued by the Superintendent, Tiruchendur and that issued on 12-5-1983 would show that whereas the first Show Cause Notice did not allege any suppression at all, the second Show Cause Notice gives detail of grounds for alleging suppression, mis-statement and improper accounting. Therefore, these being grounds not taken before the Assistant Collector, there could be an adjudication thereon by the Collector and no question of review of the Assistant Collector's order would arise. The Assistant Collector in his letter dated 3-2-1982 has not adjudicated upon the issues raised in the Show Cause Notice but had merely accepted the offer of the appellants to pay the amount demanded in settlement in order to keep up good relations. Therefore, the letter of the Assistant Collector is not an adjudication order. Reliance was placed for this purpose in the case of Jaswant Sugar Mills A.I.R. 1963 S.C. 677 wherein the Supreme Court had laid down the criteria to determine whether the order is judicial order or decision. None of this criteria is satisfied by the Assistant Collector's order. There was also no infirmity in the Show Cause Notice issued by the Collector, as by the time the case actually came up for adjudication, the amendment to the Central Excises and Salt Act in December 1985 that only the Collector has the power to invoke the longer period for demanding duty under Section 11A had come into force. Even otherwise, according to the learned S.D.R., it cannot be accepted that prior to amendment of the Act, only the Assistant Collector could determine the demand for duty under Section 11A for a longer period. Such a view would militate against the provisions of Section 33 of the Central Excises & Salt Act, 1944 which defines the powers of adjudication of various officers of Central Excise. The demand for duty for back period cannot and always be separated from contravention of the rules which had to be adjudicated upon. The learned S.D.R. pointed out that Rule 6 of the Central Excise Rules clearly empowers the Collector to discharge the functions of his subordinates, and when the Rule and the provisions of the Act are read together, it would follow that even prior to amendment it will be valid in law for the Collector to issue demand for a longer period. He submitted in this context that the provisions of the Act and the Rules are inseparable and they have to be read together in order to carry out the purpose of the Central Excises and Salt Act. In this connection the learned S.D.R. placed reliance on the case law in Cheran Engg. Corporation Limited v. Collector of Central Excise, Coimbatore 1986 (26) E.L.T. 611. The South Regional Bench of the Tribunal had held in that case that by virtue of Rule 6 of the Central Excise Rules, a demand for duty made by the Collector under Rule 9(2) read with Section 11A cannot be held to be improper or an order lacking jurisdiction nor is the case that the Rules or the Act provisions have specifically excluded the Collector's jurisdiction. In this context, according to the learned S.D.R., the subsequent amendment to Section 11A of the Act was only clarificatory in nature.
7. In reply the learned Counsel Shri K. Narasimhan contended that the nature of a communication whether it is an order or a decision is well brought out in the case of Task & Company, decided by the Privy Council A.I.R. 1940 PC 105 in which it has been laid down that order or decision is a wider terminology and adjudication, according to the Counsel, is different. Section 11A is only for the purpose of determination of duty to be demanded whereas adjudication envisaged in Section 33 would involve determination of contravention and imposition of penalty, and the two according to the Counsel, are separate functions. The Assistant Collector has been given the powers for invoking the. longer period under Section 11A specifically, and where anything is specified in a statute, it would mean the exclusion of. Rule 6 cannot also be invoked to the aid of the Department because the demand for short levy is under the Section in the Act, and the provisions of the Rule cannot override those of the statute. In fact, the learned Counsel pointed out, that the position was rectified by an amendment in 1985 by insertion of Section 12A which is analogous to Rule 6. Therefore, until then provisions of Rule 6 cannot come to the aid of the Department to justify action by Collector instead of the Assistant Collector under proviso to Section 11 A. Nor can it be said, according to the Counsel that the proceedings would be covered by the transfer provisions brought out at the time of amendment of Section 11 A. Section 8 of the Central Excises and Salt (Amendment) Act, 1985, provides for transfer of pending proceedings before Assistant Collector only to the Collector. In this case, the proceedings were not pending before the Assistant Collector. When it was put to the Counsel that if only the Assistant Collector could act under proviso to Section 11A prior to amendment, and that too only with respect to determination of short levied duty, and if the penalty aspect for contravention were to be adjudicated upon separately, then it may lead to certain anomalies, the reply was that such anomalies might occur in the operation of a statute, and in this connection reference was made to the provisions of Income Tax Act, 1961 which provide for separate adjudication by a higher authority in respect of penalty whereas the assessment was by another authority.
8. The submissions made by the learned Counsels as well as the learned S.D.R. have been carefully considered. The issue is whether the letter dated 3-2-1982 of the Assistant Collector amounted to an adjudication order or not. On a perusal of this letter, it is seen that it has been issued with reference to the Show Cause Notice issued by the Tiru-chendur Superintendent of 25-8-1981, and the appellant's letter addressed to the Collector of Central Excise, copy endorsed to the Assistant Collector dated 18-1-1982, and has informed the appellants that they were permitted to pay the differential duty demanded on Hydrochloric Acid as per the Show Cause Notice in settlement of the issue raised in the Show Cause Notice. It is seen that the Assistant Collector's letter which does refer to the Show Cause Notice though not giving any finding on the objections raised by the appellants in their reply thereto, has the effect of settlement of the issue accepting the offer of the appellant to pay the differential duty demanded. Therefore, the communication of the Assistant Collector has certain attributes of a decision. The further question is whether the Collector's Show Cause Notice dated 12-5-1983 was on the same issue settled by the Assistant Collector and hence whether it would suffer from the vice of res judicata, and whether the Assistant Collector's order, if at all, could only be reviewed by the Collector. To examine this issue we have carefully perused the Show Cause Notices of 25-8-1981 issued by the Tiruchendur Superintendent and the one dated 12-5-1983 issued to the appellants to show cause before the Collector. The first Show Cause Notice does not at all refer to any element of suppression, mis-statement for invoking the longer period under Section 11 A, although the demand admittedly therein is for the period beyond six months. A perusal of the reply dated 12-11-1981 to this Show Cause Notice sent by the appellants also does not show that they had resisted it on the grounds of the absence of the charges of suppression, mis-statement, etc. for which 'only the longer period could be invoked. On the other hand, the second Show Cause Notice dated 12-5-1983 issued by the Collector refers to the events culminating with the Assistant Collector's letter of 3-2-1982, and goes on to state that even while accepting their offer certain investigations had been undertaken by the Assistant Collector regardding the correctness or otherwise of the valuation of Hydrochloric acid produced by the appellants, and that as a result of the investigations conducted, certain points had come to light which had revealed that the appellants had been short accounting the production in the statutory Central Excise accounts and the Show Cause Notice alleges, "It is significant to mention here that the assessees voluntarily paid the differential duty on the l/3rd quantity of hydrochloric acid produced from 1-3-1979 to 31-5-1981 on par with the rate approved for M/s. The Mettur Chemicals & Industrial Corporation Limited, Mettur, only with the idea of escapement of duty on the 2/3rd quantity of hydrochloric acid produced, consumed and not shown in the Central Excise records."
The Show Cause further contains other charges of wilful mis-statement and goes on to demand duty from the appellants under Rule 9(2) of Central Excises Rules, 1944 read with Section 11A of the Act and for imposing penalty on them inter alia under Sub-clauses (a), (b) & (d) of Rule 173Q(1) of Central Excise Rules. From the above, it is very clear that the second Show Cause Notice dated 12-5-1983 disclosed certain materials which had come to light as a result of investigations made, subsequent to the sequence of the events culminating with the Assistant Collector's letter dated 3-2-1982, and it, therefore, cannot be accepted that it is an instance of the Collector seeking to adjudicate on the same facts. Further, when new facts have been revealed by investigations then in law there can only be an adjudication thereon by the Collector, and, it will be a bar also for a review of the order of the subordinate officer, because review, it is well settled, has necessarily to be only to examine the legality, validity and propriety of an order with reference to the materials on which the subordinate authority passed that order, and cannot take place with reference to fresh material. The other legal arguments are that before amendment to Section 11A only Assistant Collector had the power to demand duty and that the Show Cause Notice dated 12-5-1983 to show cause to the Collector does not have legal validity; that the provisions of Rule 6 will be of no avail when Section 11A of the Act specifically empowers Assistant Collector only; that even according to the amendment, the Show Cause Notice even after the amendment to Section 11 A, the Show Cause Notice as it exists is invalid since it is not signed by the Collector, and also that the proceedings will not be saved by the transfer provisions contained in the amendment Act of December 1985. Examining these contentions, it is observed that in the first instance, the features of the Scheme of Central Excise, as spelt out in the Central Excises & Salt Act, 1944 and the Rules thereunder, have all been considered in great detail by a larger Bench of the Tribunal in the case of S. Kumar and Ors. v. Collector of Central Excise and Ors. (Interveners S/Shri K. Narasimhan, P.K. Dain, D.N. Kohli and M. Ganesan)' 1983 E.L.T. 1057. The Tribunal in that decision has held that ¦ statutory rules are always considered as part of an enactment which provides for framing of the same, based inter alia, on Supreme Court decision, A.I.R. 1961 S.C. 751 wherein the Supreme Court laid down that rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act. The Tribunal observed in paras 58, 59 & 60 of the order :
"The peculiar features of the Central Excises Act further strengthen the view that in the setting of this Act, rules were meant to enjoy a very crucial and significant position. A reading of the Act reveals that it only provided a broad framework and almost all details, and very significant ones at that, were left to be filled up by the Rules, and came into force along with the Act.... We further find that Section 37 itself which confers the Rule-making power on the Central Government specifies such important matters to be regulated by the Rules, as... provide for remission of duty on any excisable goods, and most significant of all, to exempt and goods from the whole or part of the duty imposed.... Thus apart from unreserved powers of Rule-making conferred by Sub-section (2) is even more revealing of the intention that matters of great consequence were left to be determined, governed and regulated by the Rules. It is, therefore, difficult to comprehend that when Rules have been given such immense scope, and basic functions, how they could be even urged to be considered inferior or secondary to the Act. "
Therefore, having regard to the well settled principle that one has to read the provisions of the Act so as to give meaning to the various expre-ssions occurring in a Section and not to give a meaning as would render particular phrases superfluous, it has to be held that even prior to the insertion of Section 12A in the Act by the amendment of December 1985, by virtue of Rule 6, the Collector, could exercise the powers of his subordinate and that even though the Assistant Collector was specifically mentioned in the proviso to Section 11 A, there will be no legal infirmity if the Collector were also to exercise the power. The appellants have placed reliance on the case of Kwality Containers v. Collector of Central Excise, Bombay, 1987 (29) E.L..T. 304 wherein the Hon'ble Member Shri V.T. Raghavachari held that Collector has no power to raise a demand under Section 11A of the Central Excises & Salt Act, 1944. But a perusal of this order shows that Shri G. Sankaran, Vice-President and Hon'ble Member Shri K. Prakash Anand, had taken a view that It is not necessary in their opinion, to consider the contentions dealt with by the Hon'ble Member V.T. Raghavachari in the order. Therefore, it is not the Tribunal that took the view but it is only one of the Hon'ble Members of the Bench which constituted the Bench took that view. It was a minority view. Further, it has to be pointed out that similar contentions came up for consideration before the Special Bench when in the case of Piya Pharmaceutical Works v. Collector of Central Excise, Meerut, 1985 (19) E.L.T. 272 the three Member Bench dealt with the contention and observed, "The learned Counsel for the appellant submitted that the proper course for the Collector was to exercise his power under Section 35A of the Central Excises & Salt Act and review the decision taken by the Assistant Collector, who approved the classification list. He also argued that Rule 9(2) would not permit the Collector to do what he did because by reason of Section 11A only the Asstt. Collector could determine the duty demand. What the learned Counsel appears to have overlooked is that the incorporation of Section 11A in Rule 9 was not to make Section 11A the operative procedure but merely to put a curb on the issue of demands. In the past, before the incorporation, the demands under Rule 9(2) were governed by no time limit; with the incorporation of Section 11A such demands are required to be made within the period specified in Section 11A of the Act by the Proper Officer. It is that the demand should be made within the time limit prescribed by Section 11A not the process developed in Section 11A that should be followed."
Similar views were expressed by this Bench of the Tribunal in the case of Cheran Engineering Corporation v.Collector of Central Excise cited by the learned SDR wherein the Bench observed, "There is no doubt a reference to Section 11A in Rule 9 but that reference is for the limited purpose of specifying the period within which a demand can be made even under Rule 9(2) -- in ordinary cases it will be six months from the relevant date as defined in Section 11A and in cases of suppression etc. it will be 5 years. This is a far cry from the proposition that power exercised under Rule 9(2) is in fact one exercised under Section 11 A. As we have seen the Show Cause Notice dated 12-5-1983 issued to show cause to the Collector is one wherein Rule 9(2) read with Section 11A have been cited. Apart from this, the power which the Collector is exercising is the power conferred under the Rules. Therefore, if the subordinates of the Collector can exercise that power the Collector by virtue of Rule 6 of the Rules can also exercise those powers. Another point to be noted is that the Show Cause Notice was issued on 12-5-1983 and the hearing in this case took place on 19-9-1986. The Collector's order is dated 24-4-1987. The Central Excise Act has been amended by Central Excises & Salt (Amendment) Act, 1985 with effect from 27-12-1985 to the effect that after the amendment the Show Cause Notice for recovery of duty falling under the proviso to Section 11A(1) shall have to be issued only by the Collector of Central Excise and also the Collector is required to determine the amount of duty of excess demanded in the said Show Cause Notice. In other words, the Collector alone is given the exclusive jurisdiction to issue the Show Cause Notice as well as to determine the amount of duty demanded. Section 8 of the amended Act provide for transfer of matters pending before the Assistant Collector. Admittedly the Show Cause Notice in this case was issued before coming into force of the amended Act of 1985 and strictly speaking it was not pending before the Assistant Collector and it could be said that the matter would not get transferred to the Collector. However, just because of this it cannot be contended that the Collector will have no jurisdiction. Since the matter had not been finally determined by the Collector at that time the same shall be deemed to be pending when the amended Act came into force and therefore, the Collector and the Collector alone will be competent to determine the demand. An argument has also been put forth that the Collector had himself not signed the Show Cause Notice and therefore, it will not be a valid Notice even under the provisions of Section 11A after its amendment, relying upon the decision of this Tribunal in the case of Punalur Paper Mills v. Collector of Central Excise, Cochin, reported in 1987 (31) ELT 770. However, it has to be pointed out that the case referred to was one where the Show Cause Notice was issued by the Collector after the amended provisions had come into existence and in that context the Tribunal had held that the Show Cause Notice has to be signed by the Collector, whereas in the present case the Notice was issued, prior to the amendment, by the Superintendent asking the appellants to show cause to the Collector. A further argument has also been put forth by the appellants that the exercise of power for demanding short levy under Section 11A is separate from adjudication proceedings for imposition of penalty and that there could be two separate proceedings for these two separate purposes. If this argument were to be accepted it would lead to an incongruous position, for example, if in a case the duty as determined by the Asstt. Collector were to go in appeal and decision taken by the Collector (Appeals), and if in the same case, the penalty adjudicated upon by thev Collector were to go before the Tribunal, and if a decision contrary to that of the Collector (Appeals) were to be arrived at by the Tribunal, then it would lead to a situation where while the penalty may be confirmed for the offence of evasion of duty by one Appellate authority the demand for duty itself may be set aside by another appellate authority. Surely then such an interpretation has to be avoided. The analogy of the provisions of the Income-Tax referred to by the appellants also would only show that those provisions of the Income-Tax Act had been over the period sought to be modified by subsequent amendments in order to minimise the duality of the exercise of powers by two different authorities on the same set of facts. Therefore, it is necessary for the smooth implementation of the provisions of the Act that adjudication provisions of Section 33 thereof and the provisions for demanding short levy under Section 11A should not be compartmentalised. In this connection it is also significant that one of the grounds for invoking the longer period for demanding duty short levy under proviso to Section 11 A(1) is contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty. Correspondingly, Sub-clause (d) of Rule 173Q(1), relating to confiscation and penalty, is also similarly worded which lays down that if any manufacturer or producer contravenes any of the provisions of these Rules with intent to evade payment of duty, the goods shall be liable to confiscation and the manufacturer or producer liable to a penalty. In the present case also it is seen that in the Show Cause Notice issued by the Collector to the appellants in Rule 173Q(1)(d) is invoked.
9. In the result, we hold that the Collector of Central Excise, Madurai, does have jurisdiction to issue the Show Cause Notice dated 12-5-1983, and, in this view of the matter, we find no reason to interfere with the order passed by the Collector. The appellants are, therefore, at liberty to pursue their case before the Collector as is open to them in a manner known to law. The appeal is disposed of in the above terms.