9911796707
TMI Blog1986 (2) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... tash was canalised through M/s. Indian Potash Limited, and they were selling the same to all consumers including the appellants at the pooled price. The pooled price did not give particulars of the countervailing duty paid by M/s. Indian Potash Limited on Muriate of Potash. Towards the end of 1975-76 the appellants received the consignment of Muriate of Potash from M/s. I.P.L. and M/s. I.P.L. in turn issued a certificate dated 1-3-1976 showing the quantity sold by the latter to the appellants and the amount of countervailing duty involved on the same and the particulars of duty paid by the I.P.L. to the customs authorities. Accordingly the appellants requested in their letter dated 18-3-1976 to the Collector of Central Excise, Panaji, for availing of proforma credit of countervailing duty paid on the Muriate of Potash for paying the Central Excise duty on fertilisers manufactured by them under Rule 56A. The Assistant Collector of Central Excise in his letter dated 21-7-1976 accorded the permission for availing of the benefit under Rule 56A of duty on the Muriate of Potash received by the appellants from 5-7-1976 onwards. Thereafter, another letter was issued by the Assistant Collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned Advocate argued that the Assistant Collector's decision in his letter dated 22-3-1977 amounted to review of his earlier decision contained in his letter dated 28-10-1976, and therefore, it was not legal. In reply to our query from the Bench, Shri Ganesh clarified that the Assistant Collector's decision in his letter dated 28-10-1976 did not tentamount to review of his decision in his letter dated 21-7-1976 as in his letter dated 21-7-1976 the Assistant Collector gave permission to avail the benefit of Rule 56A on Muriate of Potash which would be received by the appellants from 5-7-1976, while in his letter dated 28-10-1976 he gave the permission for similar benefit in respect of the quantity of Muriate of Potash received by the appellants upto 17-4-1976. Coming back to the impugned decision contained in the Assistant Collector's letter dated 22-7-1977, Shri Ganesh contended that there was no authority or provision in the Central Excise Act or the Rules for review of his own decision by the Assistant Collector. Moreover, no inference could be drawn in this behalf for exercise of any such power of review by the Assistant Collector. The Advocate referred to the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication. There was no provision in this rule to extend its scope beyond this date. As regards the Advocate's argument regarding the Assistant Collector not having been vested with the power of reviewing his own order, Shri Pattekar pleaded that the Assistant Collector's order was administrative in nature, and therefore, there was no question of its legal review. When the Assistant Collector realised his error in giving the benefit of Rule 56A to the assessee from a date earlier than the date of the appellants' application, he corrected his error. This did not amount to review of his order. Shri Pattekar referred to Rule 56A(2) to highlight the fact that the Collector can give the permission for availing of the benefit under Rule 56A provided an application is made in this behalf to the Collector. The facility is thus admissible from the date of application, which was 18-3-1976 in the present case. He stated that an application could not be made with retrospective effect and that Rule 56A did not envisage the same. He referred to the judgment of the Bombay High Court in the case of M/s. Zenith Tin Works Pvt. Ltd., 1976 E.L.T. J 618 to support his contention. He also referred to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of the duty already paid on such material or component parts on the finished products. The Collector's permission envisages an application to be made by the manufacturer, and thereafter, to receive the material or component parts etc. for the benefit under Rule 56A. Therefore, the Rule itself is prospective in nature from the date of application by the manufacturer. There is no dispute that the appellants applied for the benefit of this procedure to the Collector of Central Excise on 18-3-1976. It was therefore, not open to the Assistant Collector vide his letter dated 28-10-1976 to give the benefit on the raw material received upto 17-3-1976. This decision of the Assistant Collector was obviously erroneous, and therefore, it was necessary for him to rectify the mistake which he did in his letter dated 22-3-1977 under which he decided to withdraw the credit amounting to Rs. 7,92,405.77 prior to 18-3-1976. Examining this matter further it is seen that Rule 56A(2) cannot be construed otherwise, namely, to permit retrospective effect, otherwise the provisions in sub-rules (2A) and (2B) would lose any meaning. Such an interpretation of law is not permissible and cannot be upheld. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y High Court was with reference to Rules 10 and 10-A of the Central Excise Rules, 1944. These rules envisage notices of demand being issued earlier and the demands being confirmed subsequently by the Assistant Collector. No such provisions find place in Rule 56A. Hence the ratio of the Bombay High Court's decision does not apply to this case. On the other hand the last proviso to sub-rule (2) of Rule 56A lays down that in case the credit allowed under that sub-rule is varied subsequently due to any reason resulting in payment of refund to or recovery of more duty from the manufacturer, the credit allowed should be varied accordingly, if necessary by grant of refund or recovery in cash. This is a mandatory proviso and does not admit of any adjudication by the Central Excise Officer. Hence the contention of the appellants that no notice was issued by the Assistant Collector before withdrawing the amount of credit has no force. This leaves me with the remaining argument of the appellant that the Assistant Collector became functus officio after passing his order in his letter dated 28-10-1976, and therefore, he had no authority to review his own order dated 22-3-1977. The appellants' A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertilisers havinq the brand name 'Sampurna'. In the manufacture of 'Sampurna' the appellants were using imported Muriate of Potash as one of the raw materials. At the relevant time Muriate of Potash was canalised item. M/s. Indian Potash Limited were the canalising agency. This canalising agency was importing Muriate of Potash and were selling the same to all the consumers at the pooled price. This pooled price did not give particulars of the countervailing duty paid by M/s. Indian Potash Limited. On 1-3-1976 the appellants obtained a certificate from M/s. Indian Potash Limited showing the quantity of Muriate of Potash sold to the appellants during the year 1975-76 and also giving the amount of countervailing duty paid in respect of the sales effected to the appellants. By their letter dated 18th March, 1976 addressed to the Collector, Central Excise, Panaji (Goa) the appellants requested the Collector to allow them to take credit of countervailing duty under Sub-rule (2) of Rule 56A of the Central Excise Rules on a quantity of 3532.250 tonnes of Muriate of Potash purchased by them from M/s. Indian Potash Limited. The appellants renewed their above request by another letter dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the quantity of 5902.879 M.Ts. of Muriate of Potash brought by them into the factory prior to 18-3-1976 and already utilised by them. As their application for the grant of Proforma Credit of duty of Muriate of Potash under Rule 56A was dated 18-3-1976, it was now held that they are not entitled to the Proforma Credit of Rs. 7,92,405.77 being prior to 18-3-1976 and they were directed to debit from their RG-23 Part II or PLA the amount of Rs. 7,92,405.77 under intimation to his office. 10. Feeling aggrieved by the order of the Asstt. Collector of Central Excise, Goa dated 22-3-1977 the appellants herein preferred an appeal before the Appellate Collector of Central Excise, Bombay. The Appellate Collector of Central Excise, Bombay by his order dated 3-4-1978 rejected the appeal holding that the Rules did not permit grant of Proforma Credit for the period prior to the date of application, and therefore, there was nothing wrong in the Asstt. Collector's order withdrawing the facility which had been wrongly given to the appellants. 11. During the hearing of this appeal Shri S. Ganesh, the appellants' learned Advocate urged the following grounds:- (1) The order dated 22-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the order dated 22-3-1977 is not a purported review of the order dated 28-10-1976 but it is only an order of rectification and that the Asstt. Collector is entitled to rectify the mistake in the order. Shri Pattekar urged that before a person could avail the facility of proforma credit he has to make an application to the Collector and has to follow the procedure laid down in Rule 56A. Looking to the procedure laid down in Rule 56A the credit could be allowed only with effect from the date of application and not retrospectively. Therefore, if the Asstt. Collector had rectified the order, no objection can be taken to such an order of rectification. In support of his contention that proforma credit could be granted only with effect from the date of application and not anterior to that Shri Pattekar relied on the following decisions:- (1) 1967 E.L.T. - J 618 - in the case of M/s. Zenith Tin Works Pvt. Ltd. v. K.K. Verma and others. (2) 1981 E.L.T. (DEL) p.496 - In the case of Electronics Ltd. v. Union of India and others. 13. In reply Shri Ganesh contended that what could be rectified is only a clerical error or mistake and that the order dated 28-10-1976 did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 10,39,229.19. 15. In the order dated 22-3-1977 it was stated that a sum of Rs.7,92,405.77 representing the credit of countervailing duty paid on the quantity of 5902.879 M.Ts. of Muriate of Potash brought by the appellants into their factory prior to 18-3-1976 and already utilised by them. It was then stated in this order that the application for grant of proforma credit under Rule 56A was dated 18-3-1976, it was held that the appellants are not entitled to the proforma credit of Rs. 7,92,405.77 being prior to 18-3-1976. 16. From the narration of facts it is seen that the Asstt. Collector purported to have passed three independent orders in the matter of allowing proforma credit to the appellants. The first order is dated 21-7-1976. Under this order the credit is allowed in respect of raw materials brought to the factory with effect from 5-7-1976. Though the application for permission was made on 18-3-1976 the permission was granted from a prospective date. In the order dated 28-10-1976 the credit was allowed for the entire quantity brought upto 17-4-1976. This is a detailed order. The reasons are also assigned for allowing the credit. In this order the quantity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity received or utilised in the manufacture of fertilisers mentioned in the order dated 28-10-1976, probably such a mistake could have been rectified. But that was not the case. By the order dated 22-3-1977 the Asstt. Collector disallows the proforma credit of Rs. 7,97,405.77 on the qround that the appellants were not entitled to that credit because the quantity was received and utilised prior to 18-3-1976. The Asstt. Collector in the order dated 22-3-1977 makes clear that it is now held that the appellants are not entitled to the proforma credit for a period prior to 18-3-1976. Therefore, what had been done by the Asstt. Collector is not rectification of any mistake or error apparent on the face of the record but purported review of the two orders dated 21-7-1976 and 28-10-1976. 17. The next question for consideration is whether the Asstt. Collector has power or jurisdiction to review his earlier order? Shri Pattekar could not point out any provisions in the Central Excise Act or Rules conferring such a power on the Asstt. Collector. The power conferred on the Collector under Rule 56A is a statutory power. The statutes should expressly provide a power of review. In the absen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of material or component parts or finished products brought to the factory and utilised in the manufacture of finished products. From the wording of Sub-rule (2) to Rule it may be possible to contend that unless and until the permission is granted to receive the raw material, no proforma credit can be allowed and that permission could be granted only when a request to that effect was made. In other words, availment of proforma credit could be permitted with effect from the date of application and not earlier. But then, looking to the object behind granting of proforma credit viz., to avoid double payment of duty the Collector in appropriate cases could grant proforma credit in respect of the raw material received even prior to the date of application. The subsequent amendment of Rule 56A recognised the power of Collector to grant the proforma credit in respect of raw materials received even prior to the date of application. By Notification dated 21-2-1981 Sub-rule 2(B) was inserted. This rule authorises the Collector to condone the delay in making the application, and further authorises him to allow a manufacturer to take credit of the duty already paid on the materials or com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power under Rule 56A has not been delegated to the Asstt. Collector. If there had been no such delegation, the order of the Asstt. Collector would have been a nullity and no appeal could have been filed against his order. 22. The power conferred on the Collector under Rule 56A is a statutory power. If a Collector arbitrarily or unjustly refuses a permission to avail of the proforma credit, his order could be challenged before the appropriate appellate authority. When an Act or Rules provides for filing an appeal or revision against an order then that order would acquire the character of being a quasi-judicial order and the authority which passes the order would be considered as a quasi-judicial authority. 23. In Kraipak v. Union of India (AIR 1970 S.C. Page) the Supreme Court held that the power of a selection board to prepare a selection list from amongst the public servants for appointment in the senior and junior scales to be quasi-judicial although the board had no power of appointment itself. In doing so, the Court observed that the dividing line between judicial and administrative functions was thin and gradually evaporating and that the functions performed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri K.L. Rekhi, Member (T)]. - As there was difference of opinion between the two learned Members who comprised the Bench, the President assigned the matter to me for disposal under Section 129-C(5) of the Customs Act, 1962 read with Section 35-D(1) of the Central Excises and Salt Act, 1944. 27. After due notice and making available copies of the orders already recorded by my learned brothers, I have heard both sides at Bombay today. Shri S. Ganesh, Advocate, appeared for the appellants and Shri S. Senthivel for the Department. 28. Relying on the authorities at AIR 1970 S.C. 150; AIR 1981 S.C. 818; AIR 1978 S.C. 851; 1978 E.L.T. J 416 (SC); 1980 E.L.T. 693 (Bom.). Shri Ganesh pleaded that the second order of the Assistant Collector dated 22-3-1977 which had the effect of divesting the appellants of the benefit given to them by his first order dated 28-10-1976, was a nullity since it was not preceded by a show cause notice and that observance of the principles of natural justice was a must regardless of the fact whether the order was quasi-judicial or administrative in nature. He reiterated that the Asstt. Collector could not review his own earlier order. I drew his attentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provision of rule 10. (4) The Asstt. Collector's order dated 22-3-1977 amounted to a demand. Proforma credit given by means of book credit entry, is as good as cash refund because the assessee can use the credit amount towards payment of Central Excise duty on his finished goods. Principles of natural justice as well as the relevant rule 56A(5) specifically required that a demand or direction to withdraw the credit already given should be preceded by a show cause notice. No such notice was issued by the Asstt. Collector. His order dated 22-3-1977 has, therefore, to be held as arbitrary and null and void. I agree with brother Shri Hegde, set aside the impugned orders and allow the appeal. 31. Final Order: The points of difference in this appeal were referred by the President in terms of Section 129-C(5) of the Customs Act read with Section 35D of Central Excises Act to the third Member and that Member has since recorded his findings. 32. As per the provisions of these Sections, the appeal has to be disposed of in terms of the majority opinion. Accordingly, we allow the appeal and set aside the order dated 22-3-1977 passed by the Asstt. Collector as well as the or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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