TMI Blog1987 (7) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... y itself either at Calcutta or at Bombay and that the declaration filed by them under Notification No. 120/75-C.E. without disclosure of these facts was a mis-declaration and that they had failed to furnish the requisite information though called for under various letters commencing from 21-8-1978 and that they had thus defrauded Government revenue by failing to include the cost of the raw material in clearing the fabricated material for purposes of payment of duty thereon ever since they obtained their licence in 1975. The show cause notice stated that it was proposed to levy penalty under Rule 173Q of the Central Excise Rules and also to demand differential duty under Rules 9 and 10 of the Central Excise Rules. The appellants replied denying the said charges. After adjudication the Assistant Collector of Central Excise, Jamshedpur passed an order on 23-7-1981 holding that the charges made under the show cause notice were established. Accordingly, he demanded payment of differential duty on the cost of the raw materials received by the appellants from their Calcutta or Bombay office during the period 1-3-1975 onwards and also imposed a penalty of Rs. 2,000/-. The appeal against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants in the present instance being the Adityapur unit) that their work mainly consisted of the work sent to them by the Bombay and Calcutta office units, work from the other independent customers being accepted depending upon the spare capacity available at the relevant time. For instance in their letter, dated 7th March, 1980 they had stated as follows : Further to our letter No. AFS/048/276/80, dated 13-2-1980 wherein we have explained you that we are mainly engaged in carrying out works order placed on us by parent company, for labour services, other than few orders received directly from other customers. In the said letter details of 13 work orders are mentioned of which 11 are by the Calcutta or Bombay offices of the same company, 2 alone being from outsiders. Again in their letter, dated 12-6-1980 it is mentioned the factory also undertakes, depending on their spare capacity, outside jobs either as a job worker or as a complete manufacturer . Therefore, it is clear that the major portion of the fabrication work of the Adityapur unit was with reference to materials received from the Bombay or Calcutta units. 6. It is admitted, and is made clear in several let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alidate the notice or the adjudication order following the same. Shri Bagaria in his turn contended that the observations in paragraph 10 of the said judgment itself would support his contention. 8. The Delhi High Court had referred in the above cited judgment to an earlier judgment of the Bombay High Court in the case of J.B.A. Printing Inks Ltd. v. Union of India [1980 E.L.T. 121 (Bom.)] but distinguished the same. The Bombay High Court had held in the decision cited supra as follows : 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon the department to specify the amount, as suggested by the Delhi High Court. 11. The annexure to the show cause notice refers, in paragraph 2 thereof, to various letters addressed by the Department to the appellants whereunder the information relevant to the present issue was being called for from the appellants. Reference is made therein to letters, dated 21-8-1978, 13-12-1978, 5-2-1980, 24-3-1980, 8-5-1980 and 16-5-1980. Copies of this correspondence have also been produced by the appellants. It is seen therefrom that particulars as to the value of the materials received from Bombay and Calcutta units were being called for but that the requisite information was not being furnished by the appellants. The correspondence appears to have commenced in August, 1978 and information not obtained even till May 1980. It is apparent that the appellants had not been acting fairly and had been evading to furnish the necessary information. But the question is whether that would absolve the department from complying with the statutory requirements of Rule 10 of the Central Excise Rules (CER). If the appellants were proving recalcitrant it was open to the department to rescind the earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... future removals there could have been no occasion for quantifying the duty in the notice itself and therefore, the failure to quantify the duty may not vitiate the notice. It appears to us that even such a course may not be permissible in the present instance. If an order had been passed on a classification list that may become enforceable with reference to either the date mentioned or the date of the show cause notice or the date of the order, depending upon the particular circumstances of the case. The order in the present instance was on a notice of demand for payment of short levied duty and part thereof cannot be upheld in order to enforce the same from the date of the show cause notice when, for the reasons stated earlier, the very notice was defective in material particulars and, therefore, the adjudication following the same would also be equally defective and the order will therefore have to be set aside on that ground itself. We are, therefore, of the view that in the present instance the order could not be upheld even with reference to the removals from the date of the show cause notice. As earlier mentioned it would have been open to the department to rescind its earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the relevant sale and that the price was the sole consideration for the sale and that the invoice price was not influenced by any commercial, financial or other relationship by contract or otherwise between them or any person associated in their business. It was on the basis of this letter and certification that the department appeared to have accorded their approval to the classification list No. 35 effective from 1-3-1975. Since the transactions presently in dispute were between the units of the company at Bombay/Calcutta and the appellant Unit at Adityapur, there could naturally be (and there in fact was) no case of sale of the Item 68 goods manufactured by the appellants to the units of the same company at Bombay/Calcutta. This position was fairly conceded by the counsel for the appellants. 17. As set out in brother Raghavachari s order, the appellant Adityapur unit cannot be considered to be a job worker entitled to duty concession under Central Excise Notification No. 119/75. In other words, they had to pay duty not merely on the job charges recovered by them from Bombay and Calcutta units but also on the cost of the raw material received by them from the Bombay/Calcutta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing prevented the appellants from collecting the relevant information from the Bombay/Calcutta units and furnishing it to the departmental authorities. They do not seem to have taken any steps in this direction. It is against this background that one has to consider the issue of the show cause notice, dated 19-6-1980. The absence of any indication of the amount of duty alleged to be short-levied and required to be paid by the appellants was, in the circumstances, perfectly understandable because the department was dependent on information to be furnished by the appellants and the appellants, for reasons of their own, did not furnish the same. Though not spelt out in so many words, it is clear that the demand for duty in terms of the show cause notice was in respect of the differential amount that is to say the difference between the duty chargeable on the proper assessable value and that charged on the declared value which was only the job charges. The facts and circumstances of the case being what they are, the demand for duty could be made in respect of the extended period admissible in terms of Central Excise Rule 9 read with Rule 10. 20. The question which arises is whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on the appellant to furnish the information necessary for specifying the exact amount of duty in the notice. That the department could have possibly cancelled the earlier approval to the classification list would not, in any view, detract from the assessee s obligation to supply the data demanded by a lawfully constituted authority in the course of his public duty. (It is doubtful) whether, having regard to the non-cooperative attitude of the assessee in the present case, the department could have cancelled the approved classification list which process would have called for a process of adjudication). Should the assessee, then, be allowed to keep the fruits of his intractable conduct especially when a show cause notice was given (after offering several opportunities to furnish necessary information) and adjudication undertaken? On the facts and the circumstances of the present case and having regard to the observations of the Delhi High Court (extracted earlier), I think the answer is no. 22. I would, therefore, conclude that, on the peculiar facts and in the circumstances of the present case, the absence of certain particulars in the show cause notice as mentioned earlier, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them from their Calcutta or Bombay offices during the period 1-3-1975 onwards . This however did not alter the fact that the show cause notice did not specify any period. 27. The learned Judicial Member had held that the show cause notice was fundamentally defective, since the amount alleged to have been short-levied had not been specified, nor could it be worked out from what was stated in the notice. As against this, the learned Vice-President had held that the appellants could themselves have worked out the differential duty. They were in the wrong because they did not supply the particulars asked for by the Department and could not be permitted to benefit from their own non-compliance. However, as regards the question that the show cause notice did not state the period which it covered, the learned Vice-President was silent. 28. Shri Bagaria cited a number of authorities to the effect that statutes should be given a literal interpretation. These were the following :- (i) AIR 1977 S.C. 1802 at p.1811 - Smt. Tarulata Syam and Others v. The Commissioner of Income-tax, West Bangal. Para 34 of the judgment refers with approval to the pronouncement that in a taxing Act noth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be worked out from facts within the special knowledge of the assessee, Shri Bagaria replied in the negative). Shri Bagaria submitted that the object of Sub-rule (2) of Rule 10 was to limit the power of the adjudicating officer. The amount finally demanded could not go beyond the amount specified in the show cause notice. The second object was to make things final and not to give scope for further litigation. 30. As regards the interpretation of the term specified , Shri Bagaria referred to a number of provisions in the Central Excises and Salt Act, namely :- (i) In Section 11, relating to certificate action for recovery, the certificate had to specify the amount due. (ii) In Section 14, relating to issue of summons for documents or things, there was a reference to the production of certain specified documents or things . (iii) In Section 37A, relating to delegation of powers, the delegation was to be subject to conditions specified in the notification . Shri Bagaria submitted that all the above sections required a definite specification of the things referred to. 31. The Bench drew Shri Bagaria s attention to another example of the use of the same term. Clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down the conditions incumbent on an officer acting under Rule 10. This had been further explained in para 14 ibid (vide para 8 of Member, Shri Raghavachari s order). These observations fully applied to the present case. 36. Vice-President, Shri Sankaran had relied on the observations of the Delhi High Court in Hindustan Aluminium Corporation Ltd., v. Superintendent of Central Excise, Mirzapur [1981 ECR 2.08D = 1981 E.L.T. 642 (Del.)]. He referred to para 19 of the judgment, which made it clear that the period had been specified. But in the present case even the period had not been mentioned, and without the period there could be no quantification. Again, in the Hindustan Aluminium case, it had been made clear that duty was being demanded on the difference between the Tariff rate of duty and the concessional rate under the notification. In the present case this had not been done. The whole purpose of Rule 10 was to indicate the amount of liability sought to be fastened on the manufacturer. The observations of the Delhi High Court would make it clear that they were insisting on substantial compliance with this requirement, even if the exact amount was not specified. In the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take its own investigation to arrive at the necessary figures regarding earlier clearances, so that the statutory requirement of Rule 10 could be observed. Smt. Saxena. submitted that the Department did not have the necessary information regarding the value of the goods. Undertaking a raid for seizure of documents was not practicable. It was clear that the appellants intended to evade the duty, and they were not likely to keep relevant documents available for seizure. Thus, the Department had no other recourse except to seek the information from the appellants, and when that proved fruitless, to issue a notice on the basis of whatever information was available with it. The only rule applicable to the situation was Rule 10, and this was duly invoked by the Department. 43. In these circumstances, it was clear that the basis for the demand had been stated in the show cause notice. The date from which liability would arise had also been specified. If the appellants wanted any further details, they could have asked for them. 44. Smt. Saxena strongly relied on the decision of the Delhi High Court in the case of Hindustan Aluminium Corporation Ltd. [1981 E.L.T. 643 (Del.)]. She parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g litigation. 49. The point for consideration is whether the notice, dated 19-6-1980 could be considered a valid notice in terms of Rule 10 of the Central Excise Rules as in force at the relevant time. The argument advanced at great length on behalf of the appellants is that the notice does not specify any amount, as required in terms of Rule 10. On behalf of the Department, it is argued that the exact amount could not be mentioned because the information necessary to work it out was not available with the Department, and the appellants, despite repeated requests, failed to furnish the information. 50. The Paper Books contain a good deal of correspondence. They also contain a number of documents and statements, without indicating whether. they were filed, and if so at what time and in what context. However, the orders of both the learned Members are agreed that in spite of protracted correspondence the appellants did not furnish the correct assessable values, without which a proper assessment of the differential duty could not be made. Vice-President, Shri Sankaran has concluded that in the facts and circumstances the notice was valid in terms of Rule 10 (vide paras 19 to 22 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bench which had a specific bearing on Rule 10 were those of the Supreme Court in Gokak Patel Volkart Ltd. (para 14 supra), the Delhi High Court judgment in the Hindustan Aluminium Corporation Ltd. (para 13 supra) and of the Bombay High Court in J.B.A. Printing Inks Ltd. (para 12 supra). When there are judgments specifically dealing with the provision under consideration, it is not necessary to go through judgments containing general observations. Where a signpost is available there is no need to refer to a map. In the present case, therefore, it is necessary and sufficient to consider the law with reference to Rule 10 as laid down in the abovementioned three judgments. 55. Shri Bagaria appeared to think that the judgment of the Hon ble Supreme Court in the case of Gokak Patel Volkart Ltd., was strongly in his favour. With great respect to him, I find it difficult to see how it applies to the present case. In that case, the Excise authorities had issued a show cause notice (apparently under Rule 10) for the period 1-3-1975 to 18-8-1975. Subsequently, the Collector sought to raise a demand for the period from 20-6-1976 to 28-2-1981, apart from the period between 1-3-1987 to 18-8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers addressed to them by the Department, seeking this information, which were not complied with. From the show cause notice and the enclosure, it is found that this case closely resembles that of Hindustan Aluminium Corporation Ltd. There, the amount alleged to be due was the differential duty as between the Tariff rate under Item 27 and the concessional rate under Notification No. 148/69, dated 17-5-1969. Here, it is between the Tariff rate under Item 68 and the concessional rate under Notification No. 119/75 or 120/75, as the case might be. There, the period was specified as between 17-5-1969 to 23-6-1979. Here, the period has not been set out in terms of dates, but it is obvious that the notice would cover the period starting from the date of the relevant notification. (The learned SDR laid stress on the date 29-8-1975, which was the date of the appellants letter containing incorrect information. I would not, however, take this as the critical date for the purpose of Rule 10, as it has no special significance, nor has this date been referred to in the show cause notice). The other observations in the judgment of the Delhi High Court apply in full force to the present case. 57 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detail as possible, the show cause notice should be deemed to be a valid one under Rule 10. 59. It will bear repetition that this is an exceptional case in the light of the circumstances which have been mentioned. It is in view of these circumstances that the show cause notice may be held to be valid, notwithstanding that the specific amount has not been stated. This does not mean, as apprehended by Shri Bagaria, that in every case of a show cause notice under Rule 10 the Excise authorities would omit to specify the amount, or that if they did so the notice would be held valid by the appellate authorities. But in the facts and circumstances of the present case, the show cause notice, dated 19-6-1980 has to be treated as valid. Consequently, the order of adjudication cannot be set aside on the ground that the show cause notice was defective. 60. The case should now go back to the original bench for its final order in the light of the above decision. New Delhi, Sd/- 8th July, 1987. (S. Venkatesan) President FINAL ORDER In view of the above order, we dispose of the appeal in the following terms :- We dismiss the appeal except t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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