Bombay High Court
Precision Steel Fasteners And Others vs Union Of India And Others on 1 January, 1800
Equivalent citations: 1980(6)ELT693(BOM)
JUDGMENT A.N. Mody, J.
1. The petitioners are the manufacturers of nuts and bolts which are covered by item 52 of the first schedule to the Central Excises and Salt Act, 1944. An exemption from payment of duty was granted in respect of such goods if they did not exceed the value of Rs. 5,00,000. This was done by a Notification dated 26th July, 1971. It would appear that the petitioners, cleared goods in excess of Rs. 5,00,000 but did not pay the requisite duty at the time of clearance. With the result of a notice of demand dated 29th March 1975 was issued demanding a sum of Rs. 49,852.92. This notice on the face of it is a clear notice of demand and does not even purport, either expressly or impliedly, to call upon the petitioners to show cause as to why the duty should not be recovered on one or the other grounds mentioned under Rule 10.
2. The petitioners made a representation dated 1st June, 1975 to the Assistant Collector of Central Excise. One of the grounds taken in the said reply is that the the said demand notice was issued without a prior show cause notice and was therefore in violation of Rule 10(1). By his letter dated 1st July 1975 the Superintendent Central Excise also treated the said notice as notice of demand and threatened recovery proceedings against the petitioners to which the petitioners replied by their letter dated 1st July 1975. The Assistant Collector by a letter dated 31st December 1975, fixed a date ands time for personal hearing. After the personal hearing he passed an order dated 23rd April 1976 rejecting the contentions of the petitioners and upholding the demand notice. The petitioners filed an appeal against the said order.
3. Before the appeal was heard a judgment dated 22nd June 1976 was delivered by Rege J. in Miscellaneous Petition No. 723 of 1974, New Prahlad Mills Ltd. v. Union of India, which concluded the contention of the petitioners, that the said demand notice cannot be treated as a show cause notice and that the demand made without issuing a show cause notice was invalid as being in violation of Rule 10, in favour of the petitioner. Before the Appellate Collector, this judgment was cited and based on that it was contended that the demand made being without a show cause notice was illegal and void. The Appellate Collector of Customs summarily rejected the contention of the petitioners as per paragraphs 4 and 5 of the said order, which read as follows :
"As requested by the appellants, personal hearing was granted when Shri B. D. Deshmukh appeared before me on 26th July 1976. He pleaded during personal hearing that no show cause notice issued under rule 10, but the demand was issued straightway and when the factory approached the Assistant Collector, the orders in appeal were issued. He further pleaded that since the demand was issued without issuing of show cause notice, the demands are invalid according to Bombay High Court judgment as reported on 17th July 1976 in the case of M/s. New Prahlad Mills Limited. He further stated that the demand should be quashed without a new show cause notice being issued. He further stated that Rule 10 cannot apply in the instant case as there has been no error or misconstruction or inadvertance either on the part of the officer or on the part of the officer or on the part of the License, inasmuch as the factory gave these figures according to past years clearances and the expected production of the year in appeal.
I have heard the appellant and gone through the various successions made in the appeal petition. In view of the circumstances of the demand the Notification No. 158/71, I do not see any reason to interfere with the orders passed by he Assistant Collector. The appeal petition is accordingly rejected."
4. The said order of the Appellate Collector is, to say the least, dishonest. Though it is clear that the point raised by the petitioners regarding the validity of demand notice was covered by the said judgment and concluded in favour of the petitioners, the Appellate Collector not only decided against the petitioner but deliberately omitted to give reasons as to why he did not follow the said judgment. It appears that the Appellate Collector was not able to distinguish or explain away the judgment of Rege J., and, therefore, he deliberately omitted to discuss the same. Mr. Dalal in his arguments was not able to show as to how the said judgment did not apply to the facts in the present case. He only raised the same contention as were negatived by Rege J. so that it remained open for the respondents to canvass the same before a proper forum.
5. Apart from raising the same contentions as those before Rege J., Mr. Dalal contended that if the demand cannot be said to be covered by Rule 10 it can be said to be covered by Rule 10A and a reference to wrong rule cannot invalidate the notice. I do not see the relevance of this contention as it is not contended before me on behalf of the petitioners that Rule 10 is not the applicable rule. In any event, in view of the specific finding of both authorities that the demand is covered by Rule 10 it is not open to Mr. Dalal to raise this contention. However, it is unnecessary to decided this point as both the rules require issue of a show cause notice before making a demand. In my opinion therefore whether the demand is treated as made under 10 or 10A, the position is the same and in the absence of show cause notice for demand is illegal and void.
6. In the circumstances, Rule is made absolute in terms of prayer (a). Respondents to pay to the petitioners the costs of the petition.