1989 (4) TMI 91 - HC - Central Excise

Summary

Issues Involved:
1. Legality of the interlocutory order passed by the learned Single Judge.
2. Requirement of further inquiry under Section 11A of the Central Excise Act for the execution of assessment orders passed under Rule 173-I.
3. Entitlement of the Union of India to encash bank guarantees pending adjudication under Section 11A.

Issue-wise Detailed Analysis:

1. Legality of the Interlocutory Order Passed by the Learned Single Judge:
The interlocutory order dated February 14, 1989, in Writ Petition No. 202 of 1989, was challenged by both Swan Mills Limited and the Union of India. Swan Mills Limited contended that further proceedings under Section 11A of the Central Excise Act were necessary for the execution of the assessment orders, whereas the Union of India was aggrieved by the injunction preventing the encashment of bank guarantees. The court examined the legality of this order and found that the learned Single Judge's order was not sustainable, as it misinterpreted the necessity of Section 11A proceedings for the execution of finalized assessment orders.

2. Requirement of Further Inquiry Under Section 11A of the Central Excise Act for the Execution of Assessment Orders Passed Under Rule 173-I:
The court held that the contention that assessment orders under Rule 173-I require further inquiry under Section 11A is "gravely misplaced." Section 11A is not intended for executing assessment orders but is applicable only in specific situations of duty assessment. Once assessment orders under Rule 173-I become final, they are to be executed under Section 11 of the Act, which contains provisions for recovery. The court found no merit in the argument that further proceedings under Section 11A were necessary for the execution of these orders.

3. Entitlement of the Union of India to Encash Bank Guarantees Pending Adjudication Under Section 11A:
The court noted that the Union of India became entitled to recover amounts due under the assessment orders and to seek enforcement of bank guarantees following the Supreme Court's dismissal of the petitioner's appeal on November 4, 1988. Despite the issuance of notices under Section 11A, the court held that the Revenue should not be prevented from encashing the bank guarantees for amounts due under finalized assessment orders. The court emphasized that the Revenue could proceed with encashment even if the Section 11A inquiry was pending, as the assessment orders had already become final.

Conclusion:
The court dismissed Appeal No. 227 of 1989 filed by Swan Mills Limited, upholding that no further proceedings under Section 11A were necessary for the execution of assessment orders. Conversely, the court allowed Appeal No. 285 of 1989 filed by the Union of India, setting aside the part of the interlocutory order that prevented the encashment of bank guarantees. The court directed the Prothonotary and Senior Master to take steps to encash the bank guarantees and pay the amount to the Union of India within two weeks, rejecting the application for stay by Swan Mills Limited. The court clarified that these views were prima facie and expressed solely for the disposal of the present appeals against the interlocutory order.