TMI Blog1989 (12) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 1981 E.L.T. 887 allowed the Writ Petition challenging the levy of Central Excise duty on yarn captively consumed in the manufacture of fabrics. Thereafter, the appellants stopped paying duty on yarn captively consumed. The department have taken up the matter by way of SLP before the Supreme Court [It is reported to be still pending]. The Government carried out an amendment in Rules 9 49 of the Central Excise Rules by way of Notfn. No. 20/82-C.E., dated 20-2-1982 to the effect that for the purpose of removal, goods removed for captive consumption should also be deemed to be removal. This Notification dated 20-2-1982 was given retrospective effect through Sec. 51 of the Finance Act, 1982, which received the President s assent on 11-5-82. The retrospective validity of Sec. 51 of the Finance Act was challenged before the Delhi High Court and later before the Supreme Court and both the Delhi High Court and the Supreme Court upheld the validity of Sec. 51 of the Finance Act but held it subject to the provisions of Sec. 11-A of the Central Excises Salt Act, 1944. The Supreme Court judgment is reported in 1989 (23) ECR 178 (SC) in the case of M/s. J.K. Spinning Wvg. Mills Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were raised that there were no regular notices under Sec. 11-A for covering certain periods, but endorsements were made on the RT-12 at the time of completion of the assessment pointing out the short-levy. The disputed amount in the case of M/s. Maheshwari Mills Ltd. is Rs. 7,49,357.22 and Rs. 8,23,180.60 in the case of M/s. Ahmedabad Advance Mills. Barring the cases in the aforesaid 3 appeals, where the demands during the disputed period are to be considered separately, in all the other cases, the admitted position is that the demands have been issued within a period of six months as laid down under Sec. 11-A. 3. All the aforesaid appellants moved the stay applications before this Bench on various dates. The Bench at that stage, dispensed with the pre-deposit and listed the appeals for hearing. When these appeals were listed for hearing, the learned advocate Shri S.I. Nanavati, on behalf of the appellants, admitted that he has gone through the judgment of the Special Bench D of the Tribunal in the case of M/s. J.K. Spinning Wvg. Mills Ltd. and agreed that the ratio of the said decision given by the three Members Bench would be binding on this Bench. However, he has come to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision has been given by the D Bench, the appeals are to be heared without any further adjournment. Thereupon, Shri Nanavati agreed to proceed with the arguments on the appeals. 5. Shri Nanavati, arguing on the merits of the appeals, made the following common arguments in regard to all the appeals. First he contended that in the case decided by the D Bench of the Tribunal at Delhi cited supra, notices were issued by the Department on 4-5-1981 followed by 3 addenda dated 5-1-1981 under Sec. 11-A of the Central Excises Act demanding duty on yarn captively consumed, which were challenged before the Delhi High Court. The Delhi High Court by its interim order dated 12-8-1981 granted stay for further proceedings pursuant to the notices issued by the department dated 4-5-1981 followed by the addenda dated 5-1-1981. The department, after the enactment of the Finance Act, 1982, issued further notices invoking Sec. 51(2)(d) of the Finance Act, for the same periods as were covered by the notices dated 4-5-1981. In the absence of supersession of the earlier notice dated 4-5-1981, issued under Sec. 51 of the Finance Act, the D Bench of the Tribunal held that the demands issued are su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut such yarn has been captively consumed in the manufacture of fabrics. He also submitted that there were two criteria for levying duty prior to the amendment of Rules 9 49 : (i) The product should be excisable; (ii) There should have been a physical removal from the place of manufacture. Shri Nanavati does not dispute the excisability of the yarn but the dispute was with regard to the physical removal of the goods in terms of the unamended Rules 9 49. The Supreme Court in the aforesaid case did not give a final verdict on the erstwhile Rules 9 49. The SLP filed against the Delhi High Court judgment on unamended Rules 9 49 is still to be decided. In the circumstances, it has to be held that the department had not legally issued any notice in terms of Sec. 11-A which also refers to removal. In view of this position, the notices issued prior to 20-2-1982, being ab initio void, cannot be enforced against them without a proper notice under Sec. 51(2)(d) of the Finance Act. He also contended that when such notices have been issued as per the Supreme Court s direction, they should be subject to the provisions of Sec- tl-A of the Central Excises Act and they could cover only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods. Only endorsements have been made on RT-12 returns. In the case of M/s. Ahmedabad Advance Mills for the period from 1-1-1983 to 15-3-1983, only RT-12 endorsements have been made pointing out non-recovery of duty to the extent of Rs. 8,23,180.60 in toto. In the case of M/s. Maheshwari Mills Ltd. (A. No. 367/89) it was submitted by him that for the period from 1-12-1982 to 15-3-1983 endorsements have been made on RT-12 in similar fashion covering a total duty amount of Rs. 7,14,998.40. He contended that the aforesaid endorsements on RT-12 returns without a valid notice issued under Sec. 11-A cannot be enforced against them. For any non-payment, or short payment. Sec. 11-A is the only machinery provided. There is no provision either in the Act or in the Rules to recover the demands by the department. He, therefore, contended that mere endorsements on RT-12 cannot be said to be a valid notice tenable in law and this cannot be construed a demand as per Sec. 11-A. In this context he cited the judgment of the Supreme Court reported in 1988 (38) E.L.T. 573 (SC) in the case of Kosan Metal Products Ltd. He also referred to the judgment of the D Bench of the Tribunal in the case of M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and argued that the notices issued prior to 20-2-1982 are deemed to be valid as per the provisions of that Section. He also pointed out that the Supreme Court have not accepted the contentions of the Attorney General. He particularly referred to paras 30, 31, 32 and 33 of the judgment of the Supreme Court. He pointed out that in terms of the Supreme Court judgment the arguments of the learned Attorney General on the question of non-applicability of Sec. 11-A and that the cause of action has arisen only on or after 20-2-1982, have not been accepted by that Court. He, therefore argued that it is immaterial if the show cause notice is issued prior to or subsequent to 20-2-1982. According to the Supreme Court s judgment in J.K. Spinning Wvg. Mills Ltd. case, the notices are to be issued under Sec. 11-A and they are to be validated within the time limit of six months from the relevant date as laid down under Sec. 11-A. He also contended that the distinction made out between the D Bench of the Tribunal s decision and the present appeals is only imaginary and does not have any real basis. He also contended that even assuming that the notices issued prior to 20-2-1982 were void, they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department automatically. Merely passing of a legislation does not vest the right. Some positive action on the part of the department is called for in pursuance to that legislation. He also contended that the Bombay High Court in Swan Mills Ltd. case cited by the other side has not properly distinguished the facts of the case before the Supreme Court in Kosan Metals Products. Hence, the Supreme Court s decision is to be followed, especially when that Court has finally directed the department to decide on the notices issued in the context of Sec. 11-A of the Central Excises Act in regard to these appeals. 14. After hearing the detailed arguments of Both sides, we propose to identify the following major issues to be decided in disposing of these appeals : (i) Whether the notices issued under Sec. 11-A prior to 20-2-1982, can be held to be ab initio void and hence cannot be acted upon? (ii) Even assuming that they are void, can Sec. 51(2) of the Finance Act, 1982 be construed to validate the notices automatically or whether further notices are required to be issued invoking Sec. 51(2)(d) of the Finance Act for acting upon the earlier notices? (iii) Whether endorse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so unable to find anywhere in the judgment that the Supreme Court has taken it as a point of law conceded by the learned Attorney and accepted by that Court. 19. Now coming to the question whether the notices under Sec. 11-A could be issued prior to 20-2-1982 even otherwise, we obseve that it is not disputed by the appellants that Central Excise duty on yarn captively consumed was paid for a number of years till 16-10-1980, but for the intervention by the Delhi High Court judgment on the interpretation of Rules 9 49, as they stood then. This judgment was also not accepted by the department and SLP has been filed which is reportedly pending. On the very same issue, there is also another judgment of the Karnataka High Court reported in 1986 (7) ECR 137 (Karnataka), wherein that High Court have held that even before the amendment of Rules 9 49, duty is leviable on yarn captively consumed and the amendment only made the position explicit what is otherwise implicit in Sec. 3(1) and the original Rules 9 and 49. We, no doubt, recognise the fact that there is no authoritative pronouncement of the Supreme Court on the validity of pre-amended Rules 9 and 49 for collecting duty on capti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e such notices have been issued in terms of Sec. 11-A they can be acted upon. The Supreme Court, have, nowhere stated that such notices should be issued only on or after 20-2-1982. Even while disposing of the writ petitions, in regard to these appellants, the direction given by the Supreme Court was as below: In the light of the observations in J.K. Spinning Wvg. Mills Ltd. and Another v. Union of India it would be appropriate to direct that in cases where notices under Sec. 11-A of the Central Excises Salt Act have been served and the claims do not cover for any period beyond six months from the respective date of the notices, the respondent could be entitled to realise the dues . (Emphasis supplied by us). 21. From the above, it is clear that the requirement ordered by the Supreme Court was that wherever Sec. 11-A notices have been served and the claims do not cover the period beyond six months from the respective dates of the notices, the department is entitled to realise the dues. Even from this direction, we are unable to accept the contentions raised by the learned advocate that the notices are required to be issued only on or after 20-2-1982 and that too covering a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all purposes as validly and effectively taken. Hence, such a demand issued even prior to 20-2-1982 gets automatically validated, notwithstanding the Delhi High Court s judgment against the revenue. Hence, in our view, issue of a further notice under Sec. 51(2) (d) of the Finance Act for being acted upon is redundant. Even without such a notice so long as there are notices issued under Sec. 11-A on the very same issue they get validated because of the specific provisions under Sec. 51(2) of the Finance Act. On this issue, we observe that even the D Bench of the Tribunal in J.K. Spinning Wvg. Mills Ltd. has held the same view, which we would like to reproduce: Now Section 51(1) of the Finance Act, 1982, clearly provides that the amendments to Rules 9 and 49 by Notification dated 20-2-1982 shall be deemed to have, and to have always had effect on and from the date on which the Central Excise Rules, 1944, came into force. Further sub-section (2) provides that any action or thing taken or done or purporting to have been taken or done before 20-2-1982 under the Central Excises Act and the Central Excise Rules, shall be deemed to be, and to have always been, for all purposes, as va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned advocate that further notices are required to be issued after amendment, invoking Sec. 51(2)(d) of the Finance Act. Accordingly, we decide the point in favour of the revenue and reject the contention of the appellants on this score. 25. Regarding the 3rd issue, though this is not a major issue, it has been raised only with regard to certain endorsements made on RT-12 returns not being followed by the issue of notices. The contention of the learned advocate is that such short endorsement on the RT-12 returns cannot be said to construe notices issued under Sec. 11A, whereas the learned departmental representative contended that in this case because of the writ petitions and stay orders granted by the High Court of New Delhi, the amount not paid has been pointed out while assessing the RT-12 returns pointing out their liability to pay the duty as indicated therein. The assessment order is a quasi-judicial order, which has been passed by the proper officer. The appellants have accepted this order without any questioning. They have not chosen to go in appeal against the said assessment orders. In the circumstances, when the writ petitions are finally decided and stay is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such short payment pointed out on RT-12 returns could be construed as proper notice issued under Rule 10. The Supreme Court have held that where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, a notice has to be served on the concerned person within a period of six months. The Supreme Court have also held that in the facts of the instant case before it, Sec. 11-A clearly applies. We reproduce the relevant extracts of the Supreme Court judgment in the case of Kosan Metal Products : We have considered the contentions urged and do not find any ground which supports the allegation that there had been fraud, collusion or any wilful mis-statement or suppression of facts on the part of the respondent. Therefore, Sec. 11-A clearly applies to the facts of the instant case. In that view of the matter, the appeals were correctly allowed by the Tribunal. On careful examination of the facts of the case and the contentions raised, we are of the opinion that there is no merit in the appeals before us. The appeals, therefore, fail and are accordingly dismissed. However, in view of the facts and the circumstances of the case, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt directions and accordingly hold the issue against the revenue. 28. We, therefore, hold that in the case of the appellants M/s. Ahmedabad Advance Mills Ltd., the demand raised on RT-12 returns for the period from 1-1-1983 to 15-3-1983 for a sum of Rs. 8,23,180.60 is not enforceable and accordingly this sum is to be deducted from the total demands confirmed by the authorities below. Likewise, in the case of M/s. Maheshwari Mills Ltd. an amount of Rs. 7,14,998.40 being the demand raised on RT-12 returns for the period from 1-12-1982 to 15-3-1983 is not enforceable and accordingly this amount is required to be deducted from the demand confirmed by the authorities below. 29. Now coming to the minor issues raised, it was contended that in the case of M/s. Rohit Mills Ltd., the 3 show cause notices issued traversed beyond a period of six months particularly for the month of June, 1982. RT-12 returns for the month of June 1982, are reported to have been filed on 3-12-1982 and hence an amount of Rs. 4,29,576 in respect of the demand for the month of June, 1982 is time-barred. Since this appeal was taken up along with the other appeals, Shri Mondal pleaded that he could not check up ..... X X X X Extracts X X X X X X X X Extracts X X X X
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