Customs, Excise and Gold Tribunal - Mumbai
Mahindra And Mahindra Ltd. vs Collector Of C. Ex. on 6 July, 1989
Equivalent citations: 1989(25)ECR424(TRI.-MUMBAI), 1989(44)ELT669(TRI-MUMBAI)
ORDER P.K. Desai, Member (J)
1. This appeal is direct against the order-in-appeal bearing No. M-1610-1611/81, 552, 553/84, dated 18-7-1984, confirming the order-in-original No. V-34 (15) 3/81/403 & V-34 (15) 4-81/4035 both dated 26-8-1983 and demanding Rs. 46,232.58 towards the excise duty payable on export of eight agricultural tractors to Nepal.
2. The Government of India, vide Finance Department Circular No. 297/2/77 CX-9, dated 23-9-1977, decided to allow "in bond" export of excisable goods to Nepal without charging excise duty where the payment was to be received in free foreign exchange. The Government also, vide Notification No. 304/77, dated 24-10-1977 made amendment in Rule 13 of the Central Excise Rules, by incorporating Sub-rule (2), enabling the Government to permit such export without charging duty and Trade Notice No. 248 (MP)/Gen/36/77 dated 14-12-1977 was issued laying down the procedure to be followed for availing of such benefit.
3. The appellants, who are the manufacturers of Agricultural Tractors, falling within T.I. No. 34 of the Central Excise Tariff, and are holding the L-4 licence, received, in Jan.-Feb. 1981, order from Nepal for 5 units of 444 type of Agricultural Tractors, and they opened L/C on 28-1-1981 for the same with the State Bank of India. Subsequently thereafter, they received an additional order for 3 units of tractors of B-275 models, and opened L/C with the same bank on 28-8-1981 for the same, with a view to avail of the facility of "in bond" export without payment of excise duty, the appellant applied to the Jurisdictional Collector of Central Excise as per the procedure prescribed, for grant of permission to export the same under "in bond" facility, and they were granted the permission vide Department's letter dated 26-2-1981 and 21-4-1981 the appellants accordingly executed B-l bonds on 28-2-1981 and 29-4-1981 which were accepted and export. was permitted. The tractors were accordingly exported on 30-4-1981. Payment thereof was received in free foreign exchange and certificate to that effect was issued by the State Bank of India which was placed before the Jurisdictional Assistant Collector with a request to release the appellants from the liability under the bond.
4. On 3-7-1981 the Collector of Central Excise & Customs, issued a Trade Notice, informing that "in bond" export to Nepal was withdrawn, and earlier Trade Notice, therefore, stood cancelled.
5. The Jurisdiction Assistant Collector vide No. CE/RI1/D No. 1/M&M/TT/81/617 dated 15-7-1981 issued notice of demand, demanding Rs. 46,232.58 mentioning therein that the export to Nepal under "in bond" facility was discontinued after 21-11-1980 as per instructions issued by the Central Board of Revenue, and as the tractors in question were exported after that date, the amount was demanded. The said notice was issued under Rule 13 of the Central Excise Rules, 1944. The appellants submitted reply to the said notice of demand and explained that the export was in pursuance of the Govt. Circular dated 23-9-1977 and the Trade Notice dated 14-12-1977, and that the export was under express permission granted by the competent authority. They also pleaded that it was only under the Trade Notice dated 3-7-1981 that the facility stood withdrawn, whereas the export was prior to the same. They also pleaded that no such demand could be raised without issue of notice to show cause under Section 11A of the Central Excises & Salt Act, 1944. They also pleaded promissory estoppel.
6. After granting personal hearing, the Assistant Collector vide his order dated 23-6-1983, confirmed the demand, holding that notice was a show cause-cum-demand notice, and that the principles of natural justice have been fully met with by giving prescribed hearing though same was not asked for. In his view principles of promissory estoppel did not apply in relation to revenue matters. He also held that Rule 13 of the Rules contemplates issue of Notification by the Government of India and that there was no such notification issued.
7. The appellants preferred appeals against the said order of the Collector (Appeals), who, vide impugned order dated 27-7-1984, rejected the appeals and confirmed the demand.
8. Heard Mr. J.N. Pikle, Manager Excise for the appellants and Mr. C.P. Arya, the learned SDR, for the respondent.
9. The first point that Mr. Pikle urged before me was that the demand raised is without issue of any valid show cause notice, which is the statutory requirement to be followed. He submitted that the notice of demand dated 15-7-1981, issued vide Rule 13 of the Rules, is clearly not a notice as contemplated under Section 11A of the Act. He submitted that the notice should be precise and unambiguous and should clearly show as to what case the appellants were required to meet with, and cited the decision of the Andhra Pradesh High Court in Burhnuddin Hussain v. State of Andhra Pradesh, reported in AIR 1970 AP137, and of the Madhya Pradesh High Court in Madhumilan Syntax Pvt. Ltd. v. Union of India, reported in 1985 (19) E.L.T. 329 (MP). He also submitted that in absence of any notice to show cause, the demand made is bad in law and cannot be sustained, and in support of their claim, cited decision of the Bombay High Court in Precision Steel Fasteners v. Union of India, reported in 1980 (6) E.L.T. 643 (Bom.). He also relied upon the decision of CEGAT West Regional Bench in Mis. Kiran Spinning Mills v. Collector of Central Excise, reported in 1989 (22) ECR 82, and of CEGAT Special Bench 'B' decision hi Hydraulics Ltd. v. Collector of Central Excise, reported in 1983 E.L.T. 533.
10. Mr. C.P. Arya, the learned SDR, however, submitted that notice of demand dated 15-7-1981, was in effect a notice to show cause as it did specify the grounds on which the demand was based. He also submitted that merely because wrong rule was quoted or that the relevant Section was not quoted, would not alter the nature of the notice. According to his submission, in any case, the appellants were given opportunity to show cause and were also heard personally and that there was no violation of principles of natural justice.
11. Referring to the notice dated 15-7-1981, it is clearly a notice demanding specific amount by way of excise duty payable by the appellants. Though, it specifies the cause why the demand is raised, there is nothing in the notice, to indicate that the appellants were required to "show cause" why demand should not be made. Further it mentions that it is issued invoking powers under Rule 13 of the Rules.
12. Reading of Rule 13 of the Rules, indicates that no provision thereunder, is made for recovery of the duty. The said Rule only provides for permitting exports without payment of duty. Therefore, if any duty becomes payable, by virtue of anything done or omitted, giving rise to any duty liability, then the only course open to the department is to resort to the provisions of Section 11-A of the Act, and the said Section requires service of notice "to show cause why he should not pay the amount specified in the notice". Obviously the notice in question does not comply with the requirement of the said Section.
13. The Bombay High Court, in Precision Steel Fasteners v. Union of India, reported in 1980 E.L.T. 693 (Bom.) had before it a question where the demand covered under Rule 10 (as it existed then) of the Rules was raised without issue of any show cause notice and the Bombay High Court came to the conclusion that the demand was illegal and void.
14. It was, however, submitted that, assuming that the notice dated 15-7-1981 was not a notice under Section 11A of the Act, the defect was cured by permitting the appellants to file representation and giving personal hearing.
15. This point was squarely before the CEGAT Special Bench 'B' in Hydraulics Ltd. v. Collector [1983 (12) E.L.T. 533] and the CEGAT Special Bench 'B' comprising of three members, in Para 4, held as under :-
"His argument that the defect in the show cause notice was cured in the Order-in-Original is hardly acceptable. The appellants were entitled to a proper notice calling upon them to show cause why duty should not be demanded in respect of the subject pertons before the Order-in-original was passed. Since no such notice was given to them, we held the subsequent proceedings culminating in the Order-in-original and Order-in-Appeal as bad in law and accordingly, we quash the same."
16. CEGAT WRB in Mis. Kiran Spinning Mills v. Collector [1989 (40) E.L.T. 385 (Tribunal), has observed that mere opportunity of submitting explanation is not enough and a valid "show cause notice" ought to have been given.
17. Section 11A of the Act, which is the appropriate provision for raising demand, contemplates issue of show cause notice before raising the demand, and as such a notice to show cause has to preceed the notice of demand. Granting of personal hearing, at a subsequent stage could not cure the defect in non-compliance of the statutory requirement and as such issue of notice of demand without issue of any show cause notice, cannot be sustained.
18. Here when the order-in-original and order-in-appeal are based on the notice of demand, the same cannot be sustained.
19. Even otherwise, here, the notice of demand is based on the plea that facility of "in bond" export to Nepal is suspended, under the order from the Board, whereas the adjudicating authority has confirmed the demand, on the ground that no notification was issued under Rule 13(2) of the Rules. This may also lead to quashing of the order, on the ground that the conclusion is based on the ground not indicated in the so-called "notice of demand cum show cause notice", if at all the notice dated 15-7-1981, can be so interpreted, what is sought to be emphasised here however is that the notice of demand dated 15-7-1981, is even not taken as the show cause notice by the department, who has adjudicated the on the points not shown in the said notice.
20. When any demand is made without issue of show cause notice, it cannot be sustained. The appeal of the appellants deserve to be allowed on that count alone.
21. I would have thought of remanding the matter for de novo proceeding by issue by proper show cause notice, but, by this time, the statutory period has already lapsed and the demand has became time-barred.
22. As the appeal stands allowed on this point, I see no reason to discuss other points urged, as they remain to be only of academic interest.
23. In the result, I allow the appeal. Consequential relief to follow.