Customs, Excise and Gold Tribunal - Delhi
Collector Of Customs And Central Excise vs Cotton Corporation Of India And Ors. on 23 December, 1985
Equivalent citations: 1986(25)ELT327(TRI-DEL)
ORDER V.T. Raghavachari, Member (J)
1. In respect of import of certain quantity of Pakistani Cotton, the Government of India, under an ad hoc exemption order No. 164 dated 31-3-1975, granted exemption from duty from so much as was in excess of 15% ad valorem, subject to a certain condition. The said import was canalised through the Cotton Corporation of India, the cotton to be imported for use of various mills who are the other respondents in this batch of appeals. A quantity of 66,701 bales out of the quantity covered by the abovesaid exemption order had been cleared on payment of 15% import duty in terms of the said order. Subsequently, in response to another letter dated 24-10-1975 of the Ministry of Commerce, the Government; passed another ad hoc exemption order dated 11-11-1975, whereunder full exemption was granted with reference to 1,20,354 bales consisting of 66,701 bales already cleared as well as 53,653 bales which had been imported but for which duty had not been paid, as the said goods had been stored in the Bonded Warehouse.
2. With reference to the quantity for which duty had already been paid at 15%, the Collector of Customs Ahmedabad, under orders dated 22-12-76 and 29-1-77, held that the assessment in respect thereof had been made erroneously in view of the order dated 11-11-1975. He consequently ordered refund of the duty already collected. It is admitted that duty so ordered to be refunded had in fact been refunded in about March or April 1977, the refunds having been received by the various Mills who are respondents to this batch of appeals, i.e. respondents except the Cotton Corporation of India.
3. Subsequently, the Government of India issued a show cause notice dated 8-10-1982 under Section 131 (3) of the Customs Act, 1962. It was mentioned therein that the Central Government was tentatively of the view that ad hoc exemption order No. 442 dated 11-11-1975, could not be applied to the goods which had been cleared earlier in terms of ad hoc exemption order No. 164 dated 31-3-1975. It was accordingly proposed to set-aside the two orders of the Collector earlier mentioned and to restore the assessment as originally made. This show cause notice had been issued to the Cotton Corporation of India, as well as the various mills which had received the refund. It is the proceedings initiated under the said show cause notice that, on transfer to this Tribunal, are being dealt with as appeals and are being disposed of under this order.
4. We have heard Shri Vineet Ohri, SDR for the department as well as Shri J.R. Gagrat, Advocate and Shri A.F. Patel, Advocates for some of the respondents. Shri M.A. Rangaswamy, Advocate for the Cotton Corporation of India and Shri Rishikesh, Advocate for some of the other respondents were not ready in their respective appeals. But we heard arguments on the side of the appellant Collector and such of the respondents who were ready, as indicated above.
5. For the respondents it has been urged that there is no valid transferred proceedings pending before us in terms of Section 131B of the Customs Act and for that reason itself this batch of appeals must be dismissed. It is contended that 11-10-1982 is the appointed date in terms of Section 131B and that it is only proceedings before the Central Government as were pending on that date that could be validly transferred for further proceedings, in terms of the said Section, before this Tribunal. The argument for the respondents is that there was no such valid proceeding pending before the Central Government on 11-10-1982, to be transferred to this Tribunal.
6. The show cause notice under Section 131 (3) of the Customs Act, as mentioned earlier, is dated 8-10-1982. A photostat copy (of evidently the office copy) has been filed by the department as part of its paper book. It contains therein a series of notings in the margin -
(1) Please issue to-day as desired by Secretary(R), (initialled 11-10-1982);
(2) This dak packet was given to R&I(D) at 1.20 by Godwani, (initialled 11-10-1982);
(3) Please issue to-day, (dated 12-10-1982, no initials);
(4) Issued all except C.B.E.C. and Director, C.B.E.C. and SI. No. 39, (initialled 12-10-1982);
(5) Issued 4 and 5 only, (initialled 14-10-1982).
It is on the basis of these notings that the argument as above mentioned has been built up for the respondents. The argument is that though the notice may have been prepared, and also signed, on 8-10-1982 (the date found beneath the signature), the decision to issue the same was taken on 11-10-1982 only, as indicated by noting No.(1) above mentioned and therefore there had been no validly initiated proceedings as on the end of the date 10-10-1982. It is, therefore, contended that as on 11-10-1982 there was no validly initiated proceeding pending before the Central Government as would require transfer thereof to this' Tribunal under Section 131 B of the Act. It is further pointed out that the further notings would establish that even on 11-10-1982 notice had not been issued and therefore a further decision was taken on 12-10-1982 for issue and hence the proceeding can be said to have been validly initiated only on 12-10-1982, when the notice was actually issued. The contention for the department in this connection is that the initiation of proceedings was on 8-10-1982, when the Secretary had signed the office copy of the notice. It is pointed out that not merely had he signed the office copy but that the Senior Technical Officer under whose signature the notice (will have) to be issued, had also signed the notice on 8-10-1982. It is, therefore, argued that the proceedings had been validly initiated on 8-10-1982, though the actual issue of notices may have been postponed to 11-10-1982 or even beyond. The argument is that the actual issue is but a part of the clerical process involved in the issue of the notice and plays no part in the actual initiation. During the course of the hearing, on a doubt being expressed by the Bench as to whether 9th and 10th October, 1982 may have been even holidays, the Departmental Representative ascertained the fact and informed the Bench that 9th and 10th were holidays on account of Second Saturday and Sunday.'
7. On a careful consideration of the submissions of both sides, we are satisfied that the submission for the department, that 8-10-1982 is the date of initiation of proceedings in the present matter, has to be accepted. The decision to issue the notice must have been taken sometime even earlier and, evidently after drafts were prepared and verified and approved, the office copy of the actual notice to be issued had been prepared on 8-10-1982 and signed, not merely by the Secretary who was authorised to issue the same but also by the subordinate authority over whose signature the actual notices were to go to the parties concerned. Once this had been done, there would be no question of the initial proceedings being postponed to a further date, depending upon the actual despatch of the notice. It may be noted (we are not offering any opinion on this matter in the facts and circumstances of the present case) that if there is proof that even after the preparation and signature of the notice there was a conscious decision, taken not to issue the same immediately but to postpone it to a future date there may be a basis for argument that inspite of the signature there had been no actual initiation of the proceedings. But, in the absence of such proof, it appears to us to be eminently proper to draw a conclusion as to the date of actual initiation on the basis of the date when the notice was signed by the competent authority. Regarding the notation regarding direction to issue on 11-10-1982, the explanation is quite obviously that after the notice was signed on 8-10-1982 the clerical process of despatch was not completed that day and could not be carried out in the next two days as they happened to be holidays and so when the question of actual despatch on 11-10-1982 arose there was evidently a hesitation as to whether it may be issued on that date (as it was the appointed date under the Act) and therefore, the Secretary had to be consulted who directed the issue. The Secretary had evidently given the direction as he himself was satisfied that the proceeding having been validly initiated on 8-10-1982, there was no bar on despatch of the same on 11-10-1982. No doubt this is all merely by way of speculation. But, as earlier mentioned, in the absence of evidence as to a conscious decision to postpone the issue of the notice even after signature thereof, the only conclusion to be drawn would be that the signature in the notice was made in pursuance of the decision taken for issue thereof and therefore the initiation of proceedings thereon was on the date the notice was signed. Accordingly, we are not impressed with the objection on the part of the respondents that there was no validly initiated proceedings pending on 10-10-1982 as would have required transfer under Section 131 B of the Act. We hold that the proceedings before us by way of these appeals have been validly received on transfer.
8. The review show cause notice has been issued under the provisions of Section 131 (3) of the Customs Act, 1962. This is dated 8-10-1982 and the orders proposed to be set aside thereunder are dated 22-12-1976 and 29-1-1977. Shri Ohri pointed out that it is only under Section 131 (5) of the Act that a period of limitation has been prescribed for issue of show cause notice and that no such period has been prescribed under Section 131(3) of the Act. Shri Gagrat also did not contend that there was any bar of limitation involved in the issue of notice under Section 131 (3). He contended that even when there was no period of limitation prescribed, the power, unless exercised within a reasonable period, ought not to be allowed to be exercised. In this connection, Shri Gagrat as well as Shri Patel relied upon the fact that notices under Section 28 of the Customs Act had been sent in October 1978 but that when the same were objected to as being barred by time no further steps were taken in pursuance thereof, but, instead, the present notice under Section 131 (3) had been resorted to. In this connection Shri Ohri relied upon the decision of the Supreme Court in Geep Flash Light Industries Limited v. Union of India 1983 ELT 1596 (SC). No doubt, no actual refund had been made in that case, though an order for refund had been made which was sought to be set aside under Section 131 (3) of the Act. But that does not appear to make for any distinction with reference to the ratio which laid down that no question of limitation would be involved in issue of a notice under Section 131 (3) of the Act.
9. Shri Gagrat then contended that though no period of limitation may have been prescribed under Section 131 (3), the power ought not to be allowed to be exercised unless it was sought to be exercised fairly and promptly. He contends that the refunds having been made in 1977, the issue of notice under Section 131 (3) in 1982 would not be an exercise of the power of review either fairly or promptly. In this connection, he relied on the decision of the Bombay High Court in Bhagwandas S. Tolani v. B.C. Aggarwal and Ors. 1983 ELT 44 (Bombay). Thereunder adjudication proceedings restarted after 11 years were struck down by the High Court. It was pointed out in that case that as notice was issued on 2-8-1966 and reply was sent on 9-8-1966 but yet no further action was taken till January 1977, the proceedings ought not to be allowed to be continued. In the present case it should be noted that even in 1978 proceedings were commenced under Section 28 but, evidently realising the validity of plea regarding bar of limitation as had been raised by the several of the respondents, that line of action had been dropped and resort had been taken to the provisions of Section 131 (3) of the Act. The period taken cannot be said to be unduly long or not properly explained. Further, while the High Court may have power to strike down proceedings on the ground of laches on the part of the Department, we do not think that the Tribunal would have any such power on that ground. We, therefore, hold that the proceedings initiated under the show cause notice dated 8-10-1982 cannot be said to be affected by bar of limitation or liable for being struck down on the ground of laches.
10. The background leading to the issue of the. show cause notice had been already indicated. The show cause notice proceeded on the basis that the ad-hoc exemption order No. 442 dated 11-11-1975 would not have any application with reference to goods which had been already cleared on payment of duty in terms of the earlier order No. 164 dated 31-3-1975. In supporting this contention, Shri Ohri relies on the decision in the Cannanore Spinning and Weaving Mills case AIR 1970 SC 1950. He contends that on the basis of the ratio of the said decision, it has to be held in the present case also that the order dated 11-11-1975 would not have effect with reference to clearances made earlier after assessment under the proper provisions and payment of duty thereunder. In effect, he contends that to hold otherwise would be to give retrospective effect to the order dated 11-11-1975 and that would be against the ratio of the decision of the Supreme Court cited above. But Shri Gagrat relies upon the decision of the Delhi High Court in Dr. Hari Vishnu Pophale and Ors. v. Union of India and Ors. [ILR (1981) I DEL 514]. That case also dealt with orders under Section 25(2) of the Customs Act. A contention similar to the one now raised by the department had been raised in that case also on behalf of the Government, on the basis of the decision in AIR 1970 SC 1950. Shri Gagrat points out that the Delhi High Court rejected the said contention, pointing out that the decision in AIR 1970 SC 1950 dealt with a case where orders had been issued under Rule 8(1) of the Central Excise Rules which would be in pari materia with the provisions of Section 25(1) of the Customs Act but not similar to orders issued under Section 25(2) of the Customs Act. The High Court had further pointed out that the legislative schemes of the Central Excises and Salt Act and the Customs Act are different, liability to excise duty arising immediately on the manufacture of the goods liable for excise duty, but liability for customs duty arising not on all goods imported/exported but only on such goods as are specified in the tariff, the Act itself carving out certain areas where customs duty would not be attracted. It was, therefore, pointed out that no taxing event under Section 12 of the Customs Act takes place if the goods are covered by an exemption order. It was pointed out that a special order under Section 25(2) would be an instance of an executive order or an administrative order and not the exercise of a legislative power. At page 534 it had been further pointed out that considerations of retroactivity are not relevant for an order under Section 25(2). For the same reasons we are unable to agree with the contention of Shri Ohri that the order dated 11-11-1975 would have to be held to be had on the basis that it was retroactive in character and that in law it cannot have such an effect.
11. It may be seen that the order dated 11-11-1975 came to be issued in pursuance of a letter dated 24-10-75 from the Deputy Secretary in the Ministry of Commerce. The said letter reads as follows :
" Most Immediate J.L. Bajaj D.O. No. 12(10)/74-TE (II) Dy. Secretary. Ministry of Commerce, New Delhi, the 24th October, 1975.
Dear Shri Mandal, Kindly refer to your D.No. 355/106/74-Cus.I, dated the 21st October," 1975, regarding the exemption of Import duty on Pakistani Cotton. A total of 1,20,354 bales of Pakistani Cotton have been imported of which 66,701 bales imported by the Cotton Corporation of India on Government Account were cleared on payment of 15% import duty and are stored at Bombay. Of these 27,809 bales are of BSI variety and 38,892 are of AC-134 variety. An additional quantity of 53653 bales have been imported for which the duty has not been paid as they have been stored in the Bonded warehouse in the following places:
BOMBAY : 15,653 (12,038 bales of AC-134 and
3,615 bales of BS-I)
BHAVNAGAR : 38,000 (29,000 bales of BS-1 and
8,080 bales of AC-134)
55,653
2. Both these varieties are of 15/16" staple length (25 mm). The necessary notification exempting the total quantity may kindly be issued urgently so that this cotton can be distributed to the consumers in the absence of which it is attracting carrying charges and adding to the cost.
Yours sincerely, Sd/-
Shri D.C. Mandal, J.L. Bajaj Under Secretary, Deptt. of Revenue & Insurance, Ministry of Finance."
It may be seen from the contents of the said letter that reference was made to not merely the 53,653 bales for which duty had not yet been paid (as the same was stored in the bonded warehouse) but also the earlier imported quantity of 66,701 bales which had been already cleared on payment of duty at 15% in terms of the earlier order dated 31-3-1975. The request in the letter was that necessary notification exempting the total quantity may kindly be issued.
12. The order dated 11-11-1975 reads as follows :
"In continuation of this Ministry's letter of even number dated the 31st March 1975 (Ad-hoc exemption order No. 164) I am directed to enclose a copy of D.O. No. 12(10)74-Tex(II) dated 24-10-75 from Shri J.L. Bajaj, Deputy Secretary, Ministry of Commerce on the above subject and to say that in exercise of the power conferred by subsection(2) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts, 1,20,354 (one lakh twenty thousand and three hundred and fifty four) bales of Pakistani Cotton as specified in the above mentioned D.O. tetter of the Ministry of Commerce having staple length 15/16" (2* mm). When imported into India from the whole of the duty of Customs leviable thereon which is specified in the First Schedule to the Indian Tariff Act, 1934 (32 of 1934).
2. The quantity of Cotton in question imported at various ports is as follows :
S1.No. Port Quantity in Bales
1. Bombay 82,354
2. Bhavnagar 38,000
1,20,354 "
It may be noted that paragraph 2 of the said order referred to the quantity of cotton in question as "imported at various ports". There can, therefore, be no doubt that the order dated 11-11-1975 had been issued with reference to the 66,701 bales already imported and for which duty had been paid (the refund of which is in question in the present proceedings). There can, therefore, be no doubt that the Government, in exercise of its powers under Section 25(2), had thought it fit to issue an order for exemption from duty with reference to the quantity already imported and cleared on payment of duty and also the quantity landed but not yet cleared. In the circumstances, the reliance by Shri Ohri on the words "when imported into India" in paragraph 1 of the order dated 11-11-1975, to build an argument that the order related to the quantity to be cleared thereafter only, cannot be accepted.
13. Shri Gagrat in this connection relied upon a decision of this Tribunal in Food Corporation of India v. Collector of Customs, Bombay 1985 (21) ELT 128. It had been held in that decision (following a decision of the Madras High Court in Indian Leaf Tobacco Development Company Limited v. Union of India) 1984 (16) ELT 234 (Mad.) that it will be open to the Government, in exercise of its powers under Section 25(2), to grant exemption even in a case where duty had been already collected and in consequence order refund of the levy. As observed in ILR (1981) I DEL 514 the courts frown at creation of new penalties but do not stand in the way of relief granted by retrospective operation of an enactment. Further the order dated 11-11-1975 is a special order under Section 25(2) and there can be no question of retroactivity with reference thereto as in the case of a legislative measure.
14. Shri Ohri further contended that the assessment on the import of 66,701 bales had been properly done under Section 15 of the Customs Act, with reference to the relevant tariff and the exemption under the order dated 31-3-1975 and thereafter the Collector had no power of review thereof except on ground of illegality. He contended that the orders of assessment having been passed validly and in accordance with law, the purported review thereof by the Collector, was improper and, therefore, the Government was entitled to review the orders of the Collector under Section 131(3). It may be noted that a similar contention had been raised in the case dealt with by the Delhi High Court in the case earlier cited but rejected by the Court. In the present case also the Government had, after due consideration, passed a special order under Section 25(2) specifically exempting from liability for duty the 66,701 bales of cotton, fully cognizant of the fact that duty had been already paid at the appropriate rate on the said goods. When such an order had been passed by the Government, it was not open to the Collector to ignore the same, denying the benefit of the said exemption to the said goods. He was bound to implernent the orders of the Government and, therefore, cannot be said to be in error in having passed the two orders now sought to be reviewed.
15. For all these reasons, we are satisfied that there were no grounds to review and set aside the two orders of the Collector dated 22-12-1976 and 29-1-1977. Accordingly we are satisfied that the show cause notice dated 8-10-1982 is liable to be discharged.
16. As earlier noted, several of the respondents had requested for an adjournment even while the hearing with reference to the other respondents was going on. But the point at issue is exactly the same with reference to all the respondents and the facts as well as the legal considerations are exactly the same in all the appeals. In these circumstances, we are satisfied that the show cause notice will have to be set aside in respect of all. the respondents.
17. Accordingly, all these appeals are dismissed and the show cause notice dated 8-10-1982 is discharged.
G. Shankaran and K.L. Rekhi
18. I have perused the order proposed by my learned brother Shri Raghavachari. While I agree with the conclusion that the show-cause notice dated 8-10-82 issued by the Central Government under Section 131(3) of the Customs act should be discharged and accordingly all these appeals should be dismissed, by reasoning for doing so is different.
19. With regret, I am unable to agree with the finding in para 7 of the Order holding that these proceedings were validly initiated proceedings pending before the Central Government immediately before the "appointed day". Section 131(3) of the Customs Act as it stood at the material time provided that "The Central Government may of its own motion annul or modify any order passed under Section 128 or Section 130". (In the present case, the order sought to be reviewed is an order under Section 130). It is true that the said Section 131(3) does not prescribe a limitation for initiation of proceedings under it. However, for the present review proceedings sought to be initiated by the show-cause notice issued by the Central Government purported to be a notice under Section 131(3), to be considered as having been validly initiated and transferred to this Tribunal in terms, of Section 131-B(2), we have to determine whether it could be said that the proceedings were pending immediately before the "appointed day" [i.e. the day of coming into force of the amendments to the Customs Act brought about by the Finance (No. 2) Act, 1980], before the Central Government under Section 131 as it stood immediately before that day. The factual position has been narrated in para 6 of the order proposed by Shri Raghavachari. While the Secretary (Revenue) signed the notice on 8-10-82, and the Senior Technical Officer, over whose signature copies of the notice were sent to the respondents, had also signed on 8-10-82, it is clear from the record that the notice did not issue till 12-10-82 on which date the bulk of the notices were issued and a couple of them were issued two days later. The question arises whether the notice which was signed before the "appointed day" (which was 11-10-82), but was issued to the respondents after the appointed day, could be said to have resulted in the initiation of the proceedings on 8-10-82 or before the appointed day. While Section 131(3) as it existed at the material time before the appointed day, did not specifically set out the requirement of issue of a notice to the person or persons who were likely to be affected by the proposed order, it needs no arguments to come to the conclusion that a notice was a must in view of the settled principles of natural justice. That this if the correct view of the matter is supported by the fact that sub-sections (4) and (5) of Section 131, as they existed at the material time, specifically provided for limitation for notice to be "given" to the affected persons in cases where the proposed review was likely to result in enhancement of any penalty or fine in lieu of confiscation or confiscation of goods of greater value or levy or enhancement of duty. This would mean that, in the circumstances specified in Sub-sections (4) and (5), the notice under Section 131(3) must be "given" within the limitation specified in the said Sub-sections. It would not mean that no notice was required under Section 131(3) if none of the situations, envisaged in Sub-sections (4) and (5) was involved. In this connection, one may profitably refer to the observations of the Supreme Court in its judgment in Geep Flash Light Industries Ltd. v. Union of India and Ors. 1983-ELT-1596 (SC) (para 22) to the effect that the power of the Central Government to suo-motu annul or modify any order passed under Section 128 or Section 130, in exercise of its power under Section 131(3), is to be exercised on giving notice to the person concerned.
20. On the basis that giving a notice under Section 131(3) was a must for valid initiation of proceedings under that sub-section, we have now to see whether the Customs Act prescribes the manner of service of notice. Section 153 of the Act provides inter alia that a notice issued under the Act shall be served by tendering the notice or sending it by Registered Post to the person for whom it is intended or to his agent or if the notice cannot be served in the aforesaid manner, by affixing it on the notice board of the Customs House. In the present batch of cases, the notices were sent to the respondents by registered post. The act of sending the notice by registered post could not, by any stretch of logic, be said to have commenced till the notices were in fact tendered at the Post Office for registration, transmission and delivery. It is evident from the series of notations on the office copy of the notice in the present case (para 6 of Shri Raghavachari's order) that the aforesaid event took place on 12-10-82 or later but certainly not before 11-10-1982, the appointed day. As such, in my view, the present notices cannot be said to have resulted in the valid initiation of proceedings under Section 131(3) of the Customs Act before the appointed day. On the day(s) the notices were sent by registered post, the Central Government no longer enjoyed powers under Section 131(3), Section 131 having been repealed on 11-10-1982. With respect, I am unable to subscribe to the view that the fact that the Reviewing Authority signed the notice on 8-10-1982 could be construed as amounting to valid initiation of the proceedings before the appointed day. In the present case, it would appear from the notation on the office copy of the show cause notice that the decision to issue the notice was taken on 11-10-1982, though the notice had been signed on 8-10-1982. Whether the decision to issue the notice on 11-10-1,982 was a conscious one or was the result of the peculiar circumstances obtaining (viz. 9th & 10th Oct. 1982 were holidays and for some reason or other, the notices, though signed, were not issued on 8-10-1982), would hardly matter. For, the fact is that the notice was issued only after the appointed day (11-10-1982). I am, therefore, of the view that no action can be pursued or taken against the respondents in pursuance of these notices.
21. Before concluding my order, I would, however, like to add that in so far as the merits of the dispute before us are concerned, I wholly agree with the conclusion reached by my learned brother Shri Raghavachari.
22. In any view of the matter, therefore, the present appeals deserve to be dismissed.
I agree with brother Sankaran.