Customs, Excise and Gold Tribunal - Delhi
Kelvinator Of India Ltd. vs Collector Of Central Excise on 26 March, 1991
Equivalent citations: 1991ECR693(TRI.-DELHI), 1991(56)ELT361(TRI-DEL)
ORDER G. Sankaran, President 1. The facts of the case, briefly stated, arc that M/s. Kelvinator of India Ltd., Faridabad, are engaged in the manufacture inter alia of tools falling under Item No. 51 A(iii) of the First Schedule (hereinafter referred to as the 'CET') to the Central Excises and Salt Act, 1944. These tools are partly taken into captive consumption in the same factory and partly removed to the appellant's factory at Ballabgarh for consumption without payment of duty. Since Central Excise Notification No. 321/77 dated 21-11-1977 exempted only tools used in the factory of production, the appellants were asked to show cause, by notice dated 31-10-1,990, why duty amounting to Rs. 1,02,230.04 leviable on tools valued at Rs. 6,49,079.69 cleared to their Ballabgarh factory during the period from 18-6-1977 to 20-11-1977 should not be recovered from them. After holding adjudication proceedings, the Assistant Collector of Central Excise, Faridabad, by his order dated 29-5-1981, confirmed the demand for duty. The appeal filed before the Collector of Central Excise (Appeal) against the Assistant Collector's order did not meet with success. It is the Collector (Appeal) 's order dated 11-7-1983 that is impugned in the present appeal. 2. We have heard Shri M. Chandrasekharan, Advocate, for the appellants and Shri K.C. Sachar, D.R., for the respondent and read the record. 3. At the outset, the counsel for the appellants made it clear that the only point on which he would be making submissions was on the issue of limitation. According to him, the show cause notice dated 31-10-1980 demanding duty for the period from 18-6-1977 to 20-11-1977 without alleging any suppression of material facts or other ingredients required for invocation of the extended period of five years for recovery of duty was barred by limitation. He drew our attention to the correspondence exchanged between the appellants and the Central Excise authority and, in particular, to the appellants' letter dated 11-5-1978 (Annexure 5A of the appellants' paper-book) whereunder it was clearly stated that the Centralised Tool Room Division at Faridabad was manufacturing tools required for use not only in the factory of production but also in their Ballabgarh factory. Since this fact was within the knowledge of (he department as early as 11-5-1978, the extended period of limitation could not be invoked. In response to a query from the Bench, the counsel fairly stated that there was no evidence of any earlier communication to the department couched on similar lines. He further submitted that in accordance with the law interpreting Central Excise Rules 9 and 49 as in existence during the material period, it could not be alleged that t he appellants had intended to evade duty, though the argument about Rules 9 and 49, the counsel stated in reply to a query, had not been taken up before the Collector (Appeals). He also submitted that there was error in calculation of the duty amount inasmuch as, during the material lime, the basic excise duty was leviable at 10% only and not at 15% as shown in the show cause notice and the order passed by the Assistant Collector. Further, special excise duty was not at all leviable during the said period. 4. In reply, Shri Sachar referred to the Tribunal's decision in the case of Simon Carves India Ltd. v. Collector of Central Excise, Patna, 1987 (32) ELT 186. He drew our attention to the Superintendent's letter dated 22-7-1977 (Annexure 1) whereby the Superintendent had advised the appellants to take out a licence for the manufacture of tools and two further letters telling the appellants that manufacture of tools and their clearance for sale as also for use in the factory without obtaining a valid licence were against Central Excise Law. On 8-12-1977, the department had specifically drawn the attention of the appellants to the Notification No. 321/77 and advised the appellants to pay Excise duty at 10% ad valorem on tools, falling under Item No. 51A(iii), manufactured and cleared by them during the period from 18-6-1977 to 20-11-1977 (Annexure 4 of the paper-book). The letter further called upon the appellants to submit the clearance particulars month-wise and advised them to file price-lists. Despite this intimation from the department, the appellants took a long time in furnishing the required particulars and taking out the necessary licence which they did only on 24-10-1977 (Annexure 2). Shri Sachar submitted that the department's letter dated 8-12-1977 at page 22 could also be said to be a notice of demand and, in any event, the show cause notice dated 31-10-1980 was within the period of five years from the relevant dates. 5. In a brief rejoinder, Shri Chandrasekharan submitted that the department's letter dated 8-12-1977 at page 22 was not in the nature of a show cause notice as contemplated in the Central Excise Law, It could not be said that by responding to the said letter, the appellants had been afforded an opportunity which they had availed themselves of. The fact that the department had considered it necessary to issue a formal show cause notice on 31-10-1980 itself would show that the said letter dated 8-12-1977 could not be considered as a show cause notice. 6. We have carefully considered the submissions. It is clear from the record that, as early as 22-7-1977, the Superintendent had intimated to the appellants that they should take out a licence for the manufacture of tools and that such manufacture without a valid licence would be viewed seriously. Followed a reminder on 12-9-1977 in which it was further stated that manufacture and clearance of tools for sale as also for use in the factory without obtaining a valid licence was actionable under Central Excise Law. Though the appellants applied on 24-10-1977 for a licence under protest, they carried on what amounted to a virtually endless correspondence with the Department and the Central Board of Excise and Customs in seeking confirmation of their view that tools manufactured for captive consumption in the factory of production as well as in their Ballabgarh factory were eligible for duty exemption. It is in this context that one must view the relevance of the submissions about the department's letter dated 8-12-1977 (Annexure 4) whereby the appellants were specifically requested to pay excise duty at 10% ad valorem on tools falling under Item No. 51 A(iii), CET which were manufactured and used by them during the period from 18-6-1977 to 20-11-1977 and also submit price lists in respect of such tools. It is evident that the appellants had been put on clear notice that they were liable to pay duty at 10% ad valorem on tools cleared during the specified period for the reason stated therein. Evidently, the department could not have specified the amount of duty for the simple reason that the appellants had not submitted the particular necessary for computation of the amount of duty till as late as 29-7-1980 (Annexure 22). Thereafter, a request was made again vide Superintendent's letter dated 25-8-1980 (Annexure 23) to deposit the duty amount. On 1-10-1980 (Annexure 25) the appellants protested that the demands were time-barred. It is thereafter that the Superintendent issued a show cause notice on 31-10-1980 (Annexure 26). Though this notice does not refer to the letter dated 8-12-1977, on a reasonable view of the entire correspondence exchanged between the appellants and the department, there is no escape from concluding that the show cause notice must be read together with, and not divorced from, the department's letter dated 8-12-1977. If the letter of 8-12-1977 is considered as a demand then it is well within time and non-specification of the duty amount would not vitiate its character. The said letter no doubt does not use words like 'show cause' but the precise basis for demanding duty, the rate of duty and the period covered by the demand have been clearly spelt out. If, however, the formal show cause notice of 31-10-1980 is alone to be considered, that demand also could not be considered as barred by limitation since it was only on or around 25-8-1980 that the appellants had furnished the particulars necessary for computation of the duty amount. Thus from whatever point one looks at the matter it must be held that the department has acted within time. We are fortified in this view by the ratio of the Tribunal's judgment in the Case of Simon Carves, 1987 (32) ELT 186 (supra). In this view of the matter, we reject Shri Chandrasekharan's contention that the notice of demand was barred by limitation. 7. Shri Chandrasekharan correctly points out that in the original calculation, the rate of duty shown in the department's letter of 8-12-1977 was 10% basic duty with no special excise duty whereas in the show cause notice dated 31-10-1980 as well as in the order-in-original passed by the Assistant Collector, the duty amount has been computed at the rate of 15% + Special Excise Duty. This appears to be erroneous. 8. In the result, while we hold that the demand was not barred by limitation, we direct the Assistant Collector to re-calculate the duty due from the appellants applying the correct rate of duty in force during the material time and if this amount is less than what has been paid by the appellants, to refund the balance to them. The appeal is disposed of in these terms. V.T. Raghavachari, Member (J)
8.1 I have carefully read the order prepared by the Senior Vice President. Since I have been unable to persuade myself into joining with his conclusions I am recording this separate order.
8.2 As mentioned in the order of the Senior Vice President arguments were advance on behalf of the appellants on the question of limitation only. Shri Chandrasekharan submitted that the show cause notice issued (dated 31-10-1980) made no allegations as would have entitled the department, on the basis of the said allegations, to invoke the larger period of limitation mentioned in Rule 10 of the Central Excise Rules instead of the normal period of six months and, therefore, the .lower authorities were in error in confirming the demand raised under the notice dated 31-10-1980 in respect of duty not paid during the period 18-6-1977 to 20-11-1977. We see from the notice dated 31-10-1980 that it did not in fact allege any of the grounds mentioned in Rule 10 as would entitle the invocation of the larger period of limitation. In the absence of such allegations the department could not, in the orders passed subsequently, invoke the larger period. In the order of the Senior Vice President the orders of the lower authorities are upheld not for the reason that the larger period was available but on the ground that the show cause notice, when construed properly, must be held to have been issued within the normal period of limitation. Reference in this connection has been made to the letter dated 8-12-1977 whereunder the appellants had been requested to pay duty at 10% for the removals of tools falling under Item 51A(iii) CET during the period 18-6-1977 to 20-11-1977. The Senior Vice President has held that the later notice (dated 31-10-80) must be read with, and not divorced from, the earlier letter dated 8-12-1977.
8.3 In this connection, it has to be noted that the letter dated 8-12-1977 merely gave a direction and was not in any sense a show cause notice; nor could it be said that the appellants construed it as a show cause notice and sought to comply with the direction to show cause. The notice dated 31-10-1980 also did not refer to, or rely upon, this letter of 8-12-1977 as part of the show cause notice. It was only under the notice dated 31-10-1980 that the appellants were directed to show cause against the demand for payment of duty.
8.4 Shri Sachar submitted, and the Senior Vice President has also agreed, that the decision in the Simon Carves case (1987 Vol. 32 ELT 186) would cover the present situation. It may be noted that in the said case what came up for consideration was the validity of a show cause notice which, according to the assessee, was defective in two senses (failure to indicate the amount of duty demanded and failure to indicate the period for which demand was being made). The notice under consideration in the said case was a full-fledged show cause notice containing all the formalities required of a show cause notice. The decision of the majority was that the mere omission to mention the amount or the period did not, in the peculiar circumstances of the said case, amount to an irreparable defect which, for that reason itself, would result in the demand (confirmed pursuant to the show cause notice) being set aside. The said case, therefore, dealt with the validity of a show cause notice that had been issued within time and had called upon the assessee to show cause, but was defective in the two particulars mentioned above. In the present case the letter dated 8-12-1977 did not even purport to be a show cause notice and was not construed either by the department or by the assessee to be a show cause notice. This would be apparent when we see that when subsequently a show cause notice was issued on 31-10-1980, the department neither referred to nor relied on the letter dated 8-12-1977 as being part of the show cause notice. The assessee also had not chosen to show cause against the letter dated 8-12-1977. In the circumstances the reliance on the letter dated 8-12-1977 as part of the show cause notice later issued on 31-10-1980 (in order to hold that the show cause notice was first isssued on 8-12-1977 and later completed on 31-10-1980) would not appear to be proper. That would mean that the only notice relevant to the adjudication was the notice dated 31-10-1980. Since, as earlier noted, the said notice did not even charge the appellants with any of the circumstances mentioned in Rule 10 as would entitle the department to invoke the larger period of limitation, the demand raised under the said show cause notice must be held to have been barred by time as it related to a period much anterior to the six months period preceding the said notice.
8.5 In a later portion of his order the Senior Vice President has observed that if, however, the notice dated 31-10-1980 is alone to be construed that demand also could not be construed as barred by limitation since it was only on or around 25-8-1980 that the appellants had furnished the particulars necessary for computation of the duty amount. Limitation, for purpose of Rule 10, as it stood at the relevant time, would have to be computed from the relevant date as defined in the said rule. Under Rule 10(3) (ii) (a) relevant date in respect of excisable goods on which duty had not been levied would be the date on which the duty was required to be paid under the rules. That date, so far as the present ;case is concerned would not be 25-8-1980 but the actual dates of removals during the period 18-6-1977 to 20-11-1977. Therefore, it does not appear to me proper to hold that even if the notice dated 31-10-1980 is alone to be construed demand could yet be deemed to be within time for the reason mentioned by the Senior Vice President.
8.6 In view of the above I hold that the demand in the present instance was barred by time. I would, therefore, propose an order allowing the appeal and setting aside the orders of the lower authorities.
(V.T. Raghavachari) Member (J) Dated 15th Feb., 1988.
In view of the difference of opinion between the two members the following point of difference is referred to the President in terms of Section 35D(1) of the Central Excises and Salt Act read with Section 129C(5) of the Customs Act:
"Whether, or not, on the facts and in the circumstances of this case, the demand for duty as raised under the notice dated 31-10-1980 is barred by time."
(G. Sankaran) (V.T. Raghavachari) Sr. Vice President Member (J) Dated 15th Feb., 1988. 8.7 [Per : Harish Chander]. - There was a difference of opinion between the Senior Vice-President (now President) and the Judicial Member and the following point of difference has been referred to me in terms of provisions of Section 35D(1) of the Central Excises and Salt Act, 1944 read with Section 129C(5) of the Customs Act, 1962 :-
"Whether, or not, on the facts and in the circumstances of this case, the demand for duty as raised under the notice dated 31st October, 1980 is barred by time?"
8.8 Briefly the facts of the case are that Kelvinator of India Ltd., Faridabad, hold Central Exise Licence for the manufacture of tools falling under Tariff Item 51A(iii) of the Central Excise Tariff. Besides the manufacture and captive consumption of these goods in the factory of production where other goods falling under Tariff Item 28A etc. are also manufactured. It came to the notice of the revenue authorities that the assessee had cleared the tools as used in captive consumption without payment of duty from 18th June, 1977 to 20th November, 1977 to their factory located at Ballabgarh which is engaged in the manufacture of the goods falling under Tariff Item 33D.
9. Since the exemption from payment of duty under Notification No. 321/77-C.E., dated 21st November, 1977 was confined to the use of the took in the same factory where these were produced, the assessee was issued a show cause notice by the Range Officer vide C.No.CE-Demand/Kel/Tools/80/1975 dated 31st October, 1980 as to why an amount of Rs. 1,02,230.04 (Rs. 97,361.95 Basic Excise Duty and Rs. 4,868.09 Special Excise Duty) on the total value of Rs. 6,49,079.60 for the tools cleared to their Ballabgarh factory during the period 18th June, 1977 to 20th November, 1977 may not be recovered from them under Rule 9(5) of the Central Excise Rules, 1944, read with Rule 10 as amended. A reply to show cause notice was given vide their letter dated 30th November, 1980 and it was contended by the assessee that the demand was hit by limitation under Section 11A of Central Excises and Salt Act, 1944 and also Rule 10 of the Central Excise Rules, 1944. It was contended by the appellant that the show cause notice was issued under Rule 10 of the Central Excise Rules, 1944, which was deleted by way of amendment without any saving clause in respect of the notice as time-barred. It was also contended that the exemption in respect of tools used in the factory of production was intended to be given to a manufacturer who uses them in his own factories and in such a case, there was no sale to self. It was also contended that under Section 13 of the General Clauses Act, where a singular number is used, it has to be included plural number and the expression 'factory of production' should be read to include 'factories of production' belonging to the same manufacturer. The appellant, therefore, contended that the use of the tools in their Ballabgarh factory should be treated as use in the factory of production of the same manufacturer.
10. The Assistant Collector did not accept the contention of the appellant and had confirmed the demand.
11. Being aggrieved from the aforesaid order, an appeal was filed before the Collector of Central Excise (Appeals), New Delhi and before the Collector of Central Excise (Appeals), the appellant had filed a letter dated 12th September, 1977 written by the Suprintendent of Central Excise SRP VI, Faridabad to the effect that the appellant had been advised to take out a licence for the manufacture of tools in their factory under T.I. 51A. The Appellate Collector had observed that: "It is, therefore, evident that the appellants must have taken out a licence after the receipt of this letter, whereas they had started removing tools without payment of duty from 18-6-1977 to 20-11-1977 and, therefore, when the appellants did not possess a licence and they were not willing to take out a licence, the matter of wilful mis-statement and suppression is automatically proved." He had upheld the findings of the Assistant Collector and had rejected the appeal.
12. Being aggrieved from the aforesaid order, the appellant had filed an appeal before the Tribunal and there was hearing before the Tribunal. There was a difference of opinion between the Senior Vice-President (now President) and the Member Judicial and the point of difference has been referred to me.
13. Shri M. Chandrasekharan, the learned advocate has appeared on behalf of the appellant. Shri M. Chandrasekharan, the learned advocate reiterated the facts and argued that the show cause notice was issued on 31st October, 1980 and it was served on the same day. Shri Chandrasekharan argued that the show cause notice pertained to the period 18th June, 1977 to 20th June, 1977 and there was no allegation of suppression in the show cause notice and the appellant was following SRP self-removal procedure and there was no physical control. He argued that there was a difference of opinion between the Senior Vice-President and the Member Judicial and the Senior Vice President (now President) was of the view that the show cause notice as well as the letter have to be read together and the letter was issued by the Superintendent and the show cause notice was also issued by the Superintendent. Shri M. Chandrasekharan has referred to the letter dated 8th December, 1977 written by the Superintendent which appears on page 22 of the paper-book. He also stated that the show cause notice dated 31st October, 1980 appears on page 50 of the paper book. He reads the order passed by the Senior Vice President and the Judicial Member. Shri Chandrasekharan argued that by no stretch of imagination the letter dated 8th December, 1977 could be treated as a show cause notice. He also pleaded that the appellant had written a letter on 1st October, 1980 to the Superintendent. The said letter appears as Annexure 25 on page 49 of the paper-book. In the said letter the appellant had duly mentioned that all the four cases cited in their letter stood time-barred under provisions of Rule 10 of the Central Excise Rules, 1944. Shri Chandrasekharan, the learned advocate argued that the later show cause notice did not supplement the earlier show cause notice and in the later show cause notice there was no mention of continuation of the earlier show cause notice. He argued that the Simon's case was distinguishable. In support of his argument, he has referred to the following judgments :-
(1) 1989 (42) ELT 618 - Raj Nigam v. Collector of Central Excise.
Where the Tribunal had held that the extended period of five years could not be invoked in the absence of any allegation in the show cause notice of mis-statement, suppression of facts, fraud, etc. with intent to evade payment of duty and the department could not invoke the period beyond six months.
(2) 1989 (43) ELT 195 (SC) - Padmini Products v. Collector of Central Excise.
Where the Hon'ble Supreme Court had held that mere failure or negligence on the part of the manufacturer either not to take out a licence or not to pay duty in case where there was scope for doubt, does not attract the extended limitaion. Unless there was evidence that the manufacturer knew that good were liable to duty or he was required to take out a licence. For invoking extended period of five years limitation duty should not have been paid, short-levied or short-paid or erroneously refunded because of either any fraud, collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder. Likewise suppression of facts is not failure to disclose the legal consequences of a certain provision. Shri Chandrasekharan, the learned advocate further argued that the department could have issued the show cause notice without figures and facts if they so intended. In support of the same he has cited a judgment of the Tribunal in the case of Jenson & Nicholson v. Collector of Central Excise reported in 1989 (42) ELT 496 where the Tribunal had held that in the absence of recourse having been had to the procedure about provisional assessment containing Rule 9B and in the background of the earlier show cause notice dated 4-1-1978 having been cancelled and superseded by subsequent show cause notice dated 27-7-1979 and in the absence of any allegation of mis-statement, suppression of fact, collusion and the like applying six months limitation from the later show cause notice dated 27-7-1979 under Rule 10 which was in force between 6-8-1977 till 16-11-1980 from the relevant date, which in the instant case under the meaning of 'relevant date' in the Rules would be the date on which the duty was required to be paid under the Rules i.e. when they were cleared from the factory, would clearly be barred by limitation. Shri Chandrasekharan, the learned advocate argued that in the present matter extended period of limitation cannot be invoked, as there was no allegation of suppression in the show cause notice and the show cause notice cannot cover period beyond six months. He has referred to another judgment in the case of Rajasthan Worsted Spinning Mills v. Collector of Central Excise reported in 1990 (47) ELT 483 (Tribunal) where the Tribunal had held "that the right to claim refund arose before 6-8-1977 but the claim for refund was made after 6-8-1977. The new Rule 11 did not provide for any saving clause or breathing time. The new law of limitation cannot suddenly extinguish vested right of action by providing for a shorter period of limitation. Where a subsequent law curtails the period of limitation previously allowed, and such law comes into force at once, it should not be allowed to have retrospective effect, which it would otherwise have, so as to destroy pre-existing vested right of suit, because the giving of such retrospective effect amounts to hot merely a change in procedure but a forfeiture of the very right to which the procedure relates. Thus the claim for refund lodged by the appellants was not time-barred in view of old Rule 11, which would apply in the instant case." Shri Chandrasekharan argued that Rule 10 was amended with effect from 6th August, 1977 and in the matter before the Tribunal the period is from 18th June, 1977 to 20th November, 1977. So part of the period is covered by old Rule 10 as prevalent upto 6th August, 1977 and later period after the amendment. Lastly, Shri Chandrasekharan has taken an alternative argument that in case his plea of limitation is not accepted, alternatively he pleaded that subsequent amendment of law will not revive the right. In support of the same he has referred to a judgment of the Tribunal in the case of Rajasthan Worsted Spinning Mills v. Collector of Central Excise reported in 1990 (47) ELT 483 (Tribunal). Shri Chandrasekharan has pleaded for the acceptance of the appeal.
14. Mrs. Vijay Zutshi, the learned Joint CDR who has appeared on behalf of the respondent, pleaded that she admitted the infirmities in the show cause notice to the effect that there was no allegation of suppression in the show cause notice. She has pleaded that for ascertaining whether there was any suppression or not, the facts and circumstances of each and every case have to be seen. She referred to the letter dated 8th December, 1977 which appears on page 22 of the paper-book where the revenue had duly intimated the appellant to pay excise duty and wanted information. She argued that prior to the issue of exemption notification duty had to be paid. Mrs. Zutshi further stated that the department had written a letter on 8th December, 1977 and as such the demand cannot be deemed as time-barred. She has also referred to a letter dated 22nd July, 1977 which appears on page 18 of the paper book and in the said letter it has been mentioned that the Finance Bill, 1977 vide Notification No. 172/77 dated 18th June, 1977 had imposed levy of Central Excise at the rate of 10% ad valorem on tools covered under Tariff Item 51A. Mrs. Zutshi fairly stated that the appellant had a licence dated 31st October, 1977 and had undertaken to file a copy of the licence and later on she filed a photo copy of licence. The licence was issued on 31st October, 1977 and the licence was for the manufacture of tools and thereafter it was renewed on 18th April, 1980. She has pleaded for the dismissal of the appeal.
15. Shri Chandrasekharan, the learned advocate who has appeared on behalf of the appellant, in reply referred to para Nos. 2, 3, 4 and 5 of the Judicial Member's order. Shri Chandrasekharan argued that the show cause notice as well as the letter dated 8th December, 1977 have to be read independently. Shri Chandrasekharan also referred to the later inserted Rule 233A. He has again referred to the show cause notice dated 31st October, 1980 which appears on page 50 of the paper-book and stated that there is no allegation of suppression. Shri Chandrasekharan argued that the letter written by the Superintendent cannot be treated as a show cause notice. In support of the same he has referred to a judgment in the case of Beehive Foundry Engg. Works v. Collector of C. Ex., Madras reported in 1986 (23) ELT 496 (Tri.) where the Tribunal had held as under :-
"5. I have carefully considered the submissions of the parties herein. In my opinion, the lower appellate authority has misdirected himself in holding that the letter of the Superintendent dated 17-2-1977 is an appealable order. An appealable order cannot be passed by a quasi-judicial authority without conforming to the basic legal requirements of giving a show cause notice to the aggrieved party unless otherwise waived as per law, and in the instant case Rule 10 of the Central Excise Rules, 1944 which would govern the situation enjoins on an authority to give a show cause notice to the aggrieved party. As rightly contended by the learned representative for the appellants, a show cause notice should be issued to the aggrieved person in terms of Rule 10, objections of the appellants should have been invited, heard and the objections considered to be an appealable order. It is more a communication in the exercise of his administrative functions rather than an appealable order in exercise of his quasi-judicial functions. The ratio decidendi of the Division Bench ruling of the Delhi High Court reported in 1981 (8) ELT 632 (Delhi) in the case of International Computers Indian Manufacturers Ltd. and Anr. v. Union of India and Ors., relied upon by the learned representative for the appellants supports the view I have taken and the Delhi Bench has held that issuance of show cause notice to a person to whom the refund has been erroneously made has been statutorily provided and this is a principle of natural justice which is a condition precedent. Even if the letter of the Superintendent is considered to be a show cause notice, it cannot be construed as one either, as contended by the learned SDR, for the simple reason that a show cause notice and an order of assessment cannot be rolled into one. The fact also remains that neither the Collector of Central Excise who in exercise of his power of review nor the Assistant Collector who filed an appeal before the lower appellate authority in terms of Section 35E, ever contended that the communication of the Superintendent referred to supra is an appealable order and was not appealed against and therefore reached a stage of finality disentitling the Assistant Collector to sanction any refund. The lower appellate authority would appear to have taken up the stand that the communication of the Superintendent is in the nature of an appealable order without putting either of the party on notice of this issue and suo moto taking up the stand or affording them an opportunity of being heard. The appellate authority has also not considered under the impugned order the plea made on behalf of the Department that the letter of protest relied upon by the appellants is not a valid protest under the provisions of the Act and Rules. I, therefore, for the above reasons, set aside the impugned order and remand the matter to the lower appellate authority for fresh disposal of the case after affording the parties herein an opportunity of being heard."
He has also referred to a judgment of the Bombay High Court in the case of J.B.A. Printing Inks Ltd. v. Union of India and Ors. reported in 1980 (6) ELT 121 (Bom.) where the Bombay High Court had held as under :-
"21. To summarise (i) it is not necessary that a show cause notice under Rule 10 must state the rule under which it is issued as long as the requirements of that rule are satisfied; (ii) the notice must require the party to show cause to the proper officer why he should not pay a certain stated amount; (iii) the amount must be stated and manifestly specified in the notice itself; (iv) the party must not be relegated to conjecture, speculation or calculations in order to ascertain the amount in respect of which the show cause notice is issued; (v) the amount determined by the authority as payable shall not exceed the amount specified in the show cause notice; and (vi) such amount which the party is ordered to pay must be stated and manifestly specified in the order without relegating the party to conjecture or calculations for ascertainment of the amount ordered to be paid. None of these mandatory requirements of Rule 10 have been complied with in this case. Hence the show cause notice and the impugned orders are liable to be set aside."
He has also referred to a judgment of the Delhi High Court in the case of Hindustan Aluminium Corporation Ltd. v. Superintendent, Central Excise, Mirzapur and Ors. reported in 1981 (8) ELT 642 (Delhi) where the Hon'ble Delhi High Court had observed as under :-
"17. The next challenge was to the demand of arrears from the period 17-5-1969 to 23-6-1979. Rule 10 provides for recovery of duty not paid and provides that the proper officer may within 6 months from the relevant date serve a notice on the person chargeable with duty which has not paid the duty requiring him to show cause why he should not pay the amount specified in the notice. Relevant date is defined in sub-rule 2(ii) (a) of Rule 10 to mean in the case of excisable goods on which duty has not been levied the date on which the duty was required to be paid under the Rules. It is common case between the parties that the relevant date would be the date on which goods were cleared for export from the warehouse. Any goods which were, therefore, cleared for export from the warehouse prior to 30-4-1979 i.e. before 6 months from the date of issue of notice dated 31-10-1979 would evidently be hit be the bar of limitation under Rule 10 and proceedings to recover that amount would be unauthorised."
Shri Chandrasekharan, the learned advocate argued that the department could have issued the show cause notice even without quantifying the demand well in time, but in the present matter the department did not issue the show cause notice. The show cause notice was issued in 1980 and as such the demand is hit by limitation. Shri Chandrasekharan has referred to a judgment in the case, of Simmonds Marshal Ltd. v. M.R. Baralikar, Assistant Collector of Central Excise, Pune and Ors. reported in 1985 (22) ELT 378 (Bom.) where the Bombay High Court had held that the demand notice under Rule 10 was issued without prior show cause notice. The said letter of demand was beyond the scope of Rule 10 and hence illegal and without jurisdiction not enforceable in law. Shri Chandrasekharan has pleaded for the acceptance of the appeal.
16. I have heard both the sides and have gone through the facts and circumstances of the case. The facts are not disputed. Earlier the revenue had written a letter on 8th December, 1977. In the said letter it was intimated that in terms of Notification No. 32x1/77-C.E., dated 21st November, 1977, there was exemption from payment of duty on tools falling under Tariff Item 51A(iii). The said notification was issued on 21st November, 1977 and was effective from the said date. In the letter written by the revenue it was mentioned that the appellant was to pay duty at the rate of 10% ad valorem on tools falling under Tariff Item 51A(iii) from 18th June, 1977 to 20th November, 1977 manufactured by the appellant and that was also given in that letter which desired the assessee to give particulars from 18th June, 1977 to 20th November, 1977. The said letter appears on page 22 of the paper-book. Thereafter, a show cause notice was issued on 31st October, 1980 and in the show cause notice it was mentioned that the clearances were to the tune of Rs. 6,49,079.69 and the duty on this amount worked out at Rs. 1,02,230.04. Shri G. Sankaran, President (then Senior Vice President) had taken the view that the letter dated 8th December, 1977 and the show cause notice dated 31st October, 1980 have to be read together. In para No. 6 of his order he had observed that though the show cause notice did not refer to the letter dated 8th December, 1977, on a reasonable view of the entire correspondence exchanged between the appellants and the department, there was no excape from, concluding that the show cause notice must be read together with, and not divorced from the department's letter dated 8th December, 1977 and if the letter of 8th December, 1977 was considered as a demand, then it was well within time and non-specification of the duty amount would not vitiate its character. The said letter no doubt did not use words like 'show cause' but the precise basis for demanding duty, the rate of duty and the period covered by the demand had been clearly spelt out, and if the formal show cause notice of 31st October, 1980 was alone to be considered, that demand also could not be considered as barred by. limitation since it was only on or around 25-8-1980 that the appellants had furnished the particulars necessary for computation of the duty amount. Whereas the Judicial Member had taken the view that the letter dated 8th December, 1977 could not be purported to be a show cause notice. He had held that the demand was time-barred. For the proper appreciation of the facts letter dated 8th December, 1977 is reproduced below :-
"Central Excise, SRP VI, Faridabad C.No. CE-20/Tools/77/8792 dated 8-12-1977.
To M/s. Kelvinator of India Ltd., 28, N.I.T., Faridabad Dear Sir, Subject: Central Excise, Central Excise duty on Tools covered under Tariff Item 51A. Exemption of Central Excise duty on tools covered under Tariff Item 51A(iii) under Notification No. 321/77/C.E., dated 21-11-1977.
Your attention is drawn to Notification No. 321/77-C.E., dated 21-11-1977 issued by Govt. of India, Ministry of Finance, Department of Revenue, New Delhi, under which Tools falling under Tariff Item 51A(iii) have been exempted from the whole of the duty of excise leviable therein, subject to the condition that such tools are used within the factory of production. This exemption of tools falling under Tariff Item 51A(iii) is effective from 21-11-1977 as Notification No. 321/77-C.E. has been issued on 21-11-1977;
You are requested to pay Central Excise duty @ 10% ad valorem on Tools falling under Tariff Item 51A(iii) from 18-6-1977 to 20-11-1977 manufactured by you as such Tools are used within the factory of production.
You are requested to submit the following information to the office within seven days on the receipt of this letter.
------------------------------------------------------------------------
Month/Year Description of Tools Qty. in Value of
manufacture goods
and cleared cleared
by use in the
factory of
production.
------------------------------------------------------------------------1 2 3 4
------------------------------------------------------------------------
June, 1977, (18-6-1977 to 30-6-1977) July, 1977, August, 1977, September, 1977, October, 1977, November, 1977, (upto 20-11-1977).
------------------------------------------------------------------------
You should also submit Price Lists of Tools falling nder Tariff Item 51A(iii) cleared for use in the factory of production.
Yours faithfully, Sd/-."
A simple perusal of the same shows that nowhere there is mention to which authority he is to show cause and the duty amount has also not been mentioned. Bombay High Court in the case of J.B.A. Printing Inks Ltd. v. Union of India and Ors. reported in 1980 (6) ELT 121 (Bom.) had laid down the law for the ingredients of the proper show cause notice. Para No. 21 from the said judgment is reproduced below :-
"21. To summarise (i) it is not necessary that a show cause notice under Rule 10 must state the rule under which it is issued as long as the requirements of that rule are satisfied; (ii) the notice must require the party to show cause to the proper officer why he should not pay a certain stated amount; (iii) the amount must be stated and manifestly specified in the notice itself; (iv) the party must not be relegated to conjecture, speculation or calculations in order to ascertain the amount in respect of which the show cause notice is issued; (v) the amount determined by the authority as payable shall not exceed the amount specified in the show cause notice; and (vi) such amount which the party is ordered to pay must be stated and manifestly specified in the order without relegating the party to conjecture or calculations for ascertainment of the amount ordered to be paid. None of these mandatory requirements of Rule 10 have been complied with in this case. Hence the show cause notice and the impugned orders are liable to be set aside."
Delhi High Court in the case of Hindustan Aluminium Corporation Ltd. v. Superintendent, Central Excise, Mirzapur and Ors. reported in 1981 (8) ELT 642 (Delhi) in para No. 17 had held as under :-
"17. The next challenge was to the demand of arrears from the period 17-5-1969 to 23-6-1979. Rule 10 provides for recovery of duty not paid and provides that the proper officer may within 6 months from the relevant date serve a notice on the person chargeable with duty which has not paid the duty requiring him to show cause why he should not pay the amount specified in the notice. Relevant date is defined in sub-rule 2(ii) (a) of Rule 10 to mean in the case of excisable goods on which duty has not been levied the date on which the duty was required to be paid under the Rules. It is common case between the parties that the relevant date would be the date on which goods were cleared for export from the warehouse. Any goods which were, therefore, cleared for export from the warehouse prior to 30-4-1979 i.e. before 6 months from the date of issue of notice dated 31-10-1979 would evidently be hit by the bar of limitation under Rule 10 and proceedings to recover that amount would be unauthorised."
In view of the facts and the legal position discussed above, the letter dated 8th December, 1977 cannot be considered as a show cause notice. During the course of arguments before me it was observed that on 24th October, 1977 the appellant had applied for the issue of the Central Excise Licence which appears as Annexure 2 on page 20 of the paper-book. The learned Joint Chief Departmental Representative, Mrs. Zutshi has also filed a copy of the Central Excise Licence of the appellants on form L-4. The licence was issued on 31st October, 1977 vide licence No. 16/tools/77 for the manufacture of tools and the licence was valid upto 31st December, 1979. Thereafter, it was renewed on 18th April, 1980 for the years 1980 to 1982. This means from 24th October, 1977 i.e. the date of the application for the L-4 licence for the manufacture of tools to the date of issue of the show cause notice it was very well within the knowledge of the department that the appellant is manufacturer of tools. Even in the show cause notice issued by the revenue there is no mention of suppression. The Tribunal in the case of Raj Nigam v. Collector of Central Excise reported in 1989 (42) ELT 618 (Tribunal) had held that extended period of five years could not be invoked in the absence of allegation in the show cause notice of mis-statement, suppression of facts, fraud, etc. with intent to evade payment of duty, and the department could not invoke the period beyond six months. Hon'ble Supreme Court in the case of Padmini Products v. Collector of Central Excise reported in 1989 (43) ELT 195 (SC) had held that mere failure or negligence on the part of the manufacturer either not to take out a licence or not to pay duty in case where there was scope for doubt, does not attract the extended limitation. Hon'ble Supreme Court in the case of Collector of Central Excise v. Chemphar Drugs & Liniments reported in 1989 (40) ELT 276 (SC) had held that extended period of five years applicable only when something positive other than mere inaction or failure on the part of manufacturer is proved - Conscious or deliberate withholding of information by manufacturer necessary to invoke larger limitation of five years. Para Nos. 8 and 9 from the said judgment arc reproduced below :-
"8. Aggrieved thereby, the revenue has come up in appeal to this Court. In our opinion, the order of the Tribunal must be sustained. In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to sub-section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful mis-statement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case. The Tribunal came to the conclusion that the facts referred hereinbefore do not warrant any inference of fraud. The assessee declared the goods on the basis of their belief of the interpretation of the provisions of the law that the exempted goods were not required to be included and these did not include the value of the exempted goods which they manufactured at the relevant time. The Tribunal found that the explanation was plausible, and also noted that the Department had full knowledge of the facts about manufacture of all the goods manufactured by the respondent when the declaration was filed by the respondent. The respondent did not include the value of the product other than those falling under Tariff Item 14E manufactured by the respondent and this was in the knowledge, according to the Tribunal, of the authorities. These findings of the Tribunal have not been challenged before us or before the Tribunal itself as being based on no evidence.
9. In that view of the matter and in view of the requirements of Section 11A of the Act, the claim had to be limited for a period of .six months as the Tribunal did. We are, therefore, of the opinion, that the Tribunal was right in its conclusion. The appeal, therefore, fails and is accordingly dismissed."
17. In view of the above discussion and judicial pronouncements, I am of the view that the letter dated 8th December, 1977 cannot be treated as a show cause notice. The appellant had a Central Excise Licence dated 31st October, 1977. In the show cause notice also there is no allegation of suppression. Accordingly, I hold that there was no suppression or wilful mis-statement. I agree with the conclusion of the learned Judicial Member.
18. In the result, the appeal is allowed. The matter may be placed before the regular bench for passing appropriate orders.
FINAL ORDER In the light of the majority opinion, the demand in the present instance was barred by time. The appeal is allowed setting aside the orders of the lower authorities.