TMI Blog1996 (3) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... d the confirmation thereof are as follows : I Show cause notice II S.C.N. III S.C.N. Date 26-8-1983 19-4-1984 2-9-1985 Period covered 1978-79 to 1982-83 1978-79 to 1982-83 1-7-1978 to 30-11-1980 Factory covered GTC Bombay GTC Baroda GTC Bombay and Baroda Universal Tobacco Hyderabad, J.K. Cigarettes, Jammu Amount of demand Rs. 28.93 crores Rs. 35.32 crores Rs. 13.37 crores Final order Different-ial duty The principles on the basis of which differential duty has to be worked out are laid down and differential duty directed to be worked out accordingly by representatives of Bombay and Baroda Collectorates. Final order confiscat-ion Final order penalty Composite penalty of Rs. 10 crores imposed only on GTC factories at Bombay and Baroda. No penalty on the other two factories. Final order limitation Claim in the show cause notice held to be barred by time. The final order in regard to I and II show cause notices is challenged by the assessee under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date 21-8-1987. The date on which it was communicated to the assessee is not known. The I and II show cause notices were challenged by the assessee before the High Court of Bombay in W.P. No. 67/1984. The High Court passed several interim orders at various stages. The High Court permitted the adjudication proceedings to continue but directed that after the adjudicating authority signs the adjudication order, it shall be kept in a sealed envelope and shall not be communicated to the assessee and no official shall inform the assessee of the fact that the order has been passed or signed. Subsequently, the writ petition was amended to challenge the III show cause notice. On 18-6-1991, the High Court directed that the sealed envelope in which the impugned order was placed be opened and the order be shown to the counsel for the parties, that copy of the order be supplied to the assessee s counsel. Sealed envelope was opened on 18-6-1991. Subsequently, the writ petition was amended challenging the impugned order also. On 21-7-1994, the High Court directed that the assessee and the department file appeals against the order before the Tribunal within three months from that day and the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Excise, or, as the case may be, the other party preferring the appeal. The starting point of limitation for applying to the Tribunal under Section 35E(4) of the Act is from the date of communication of the order. Similar is the language used in Section 35(1) of the Act in case of appeal to the Collector (Appeals). However, the language used in Section 35E(3) is different. It says that No order shall be made under sub-section (1) or sub-section (2) after the expiry of one year from the date of the decision or order of the adjudicating authority. The Supreme Court had occasion to deal with this provision in Collector of Central Excise v. M.M. Rubber Co. - 1991 (55) E.L.T. 289. In that case the order of the Collector was to passed on 28-11-1984. A copy of the order was despatched to and received by the assessee on 21-12-1984. The Board on 11-12-1985 directed the Collector under Section 35E(1) to apply to the Tribunal for correct determination of points arising and accordingly an application was filed under Section 35(4) of the Act. The Tribunal held that the relevant date of the adjudication order for the purpose of Section 35E(3) should be taken to be 28-11-1984 and not 21-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is bound by the proceedings of its officers but persons affected are not concluded by the decision. Section 35E comes under the latter category of an authority exercising its own powers under the Act. It is not correct to equate the Board, as contended by Shri Gaurishankar Murty, to one of the parties to a quasi judicial proceeding before the Collector and the Board s right under Section 35E to the exercise of the right of appeal by an aggrieved assessee from an order passed to its prejudice. The power under Section 35E is a power of superintendence conferred on a superior authority to ensure that the subordinate officers exercise their powers under the Act correctly and properly. Where a time is limited for the purposes by the statute, such power, as under Section 33A(2) of the Indian Income-Tax Act, 1922 referred to in Muthia Chettiar (supra), should be exercised within the specified period from the date of the order sought to be reconsidered. To hold to the contrary would be inequitable and will also introduce uncertainties into the administration of the Act for the following reason. There appears to be no provision in the Act requiring the endorsement, by a Collector, of al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the assessee in the High Court of Bombay. Initially, the Bombay High Court stayed all further proceedings, but subsequently allowed the proceedings to continue and directed that after the order is signed, it shall be kept in a sealed envelope. It was only on 18-6-1984 that the High Court directed sealed envelope to be opened and the order to be shown to the counsel for the parties and a copy of the order to be supplied to assessee s counsel. It was on that date that the sealed envelope was opened. The purpose that was sought to be achieved by these interlocutory orders was to ensure that the adjudication proceedings was not unnecessarily held up, but at the same time to ensure that any adjudication order passed was not effectuated without the permission of the High Court. Far from there being any possibility of communication of the order to the assessee or to the departmental authorities, the order passed by the High Court effectively prevented any such communication. The order was kept under the custody of the High Court. We can very well visualise a situation where it would have been possible for the adjudicating authority to request the High Court to return the sealed enve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently re-designated as Commissioner (L A). In the application dated 13-12-1995 filed by the Commissioner (L A) it was stated that he did not have any knowledge of the direction of the Board until he was informed by the Deputy Director (Inv.), Directorate General Anti Evasion, New Delhi by letter dated 7-12-1995, enclosing a copy of the Board order. A copy of the letter is also filed along with the application. The letter invited the attention of the Commissioner (L A) to the order of the Board and in particular last para of the order containing the direction to the Commissioner (L A) to file appeal before the Tribunal. The letter also informed the Commissioner (L A) that the assessee had filed appeals before the Tribunal which were coming for final hearing on 14-12-1995. The Commissioner was requested to confirm whether the appeal was filed and if so, hand over a copy of the appeal for briefing the Departmental Representative as well as the advocate. The application referred to is supported by an affidavit sworn to by the Commissioner (L A) where he stated that the contents of the application are true and correct. The assessee did not file any rebuttal to this ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contended by learned counsel for the Department that the Collector was in error in holding that even adopting the extended period of limitation under proviso to Section 11A of the Act, the third show cause notice was barred by time. Section 11A relates to recovery of excise duty not levied or not paid or short-levied or short-paid or erroneously refunded. The provision requires service of notice on the person chargeable with the duty, requiring to show cause why he should not pay the amount specified in the notice. The notice should be served within six months from the relevant date. Under the proviso the period is extended to five years from the above date. Relevant date is defined in Clause (ii) of sub-section (3) of Section 11A. Sub-clause (b) of Clause (ii) states that in a case where duty of excise is provisionally assessed under the Act or the rules, the date of adjustment of duty after the final assessment thereof will be the relevant date . The contention of the Department is that for the period covered by the third show cause notice, there were only provisional assessments and no final assessments had been made and, therefore, even on the date of the show cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration. The impugned order in relation to the subject matter of the third show cause notice has to be set aside and the appeal of the Department allowed. 12. The three show cause notices were taken up together for adjudication, since in the view of the Collector the basic question involved was the same and duty demanded was for an over-lapping period. The assessee did not file replies to any of the show cause notices. Assessee wanted to have inspection of documents before filing replies and the process of inspection was delayed and stretched. There was correspondence regarding supply of copies of documents. Inspection of documents was made some time in May and June, 1987 and further time for inspection was denied. Personal hearing was granted on 29-6-1987 and 13-6-1987 and adjournment was sought and hearing was adjourned finally to 15-7-1987. Even at that stage, further time for inspection was sought and a further application for cross-examination was made, though unsuccessfully. Meanwhile, writ petitions were pending in several High Courts, which were ultimately disposed of. Since we are remanding the proceeding arising from the third show cause notice, we think it necessary i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the period covered by the first and second show cause notices and this was illegal. (iii) There has been violation of principles of natural justice by denial of opportunity to cross-examine persons whose statements have been relied on, by denial of opportunity to inspect documents and by denial of adequate opportunity of hearing. (iv) The alleged extra amounts realised, in any event, have to be regarded as cum-duty and the amount of duty should have been determined in accordance with the judgment in MRF Ltd. case 1995 (77) E.L.T. 434. (v) It was beyond the jurisdiction of the Collector to direct officers of the two Collectorates to quantify the demand. 14. We will first deal with the contention that show cause notices I and II are barred by time. If the extended period of limitation is available, the notices are admittedly not barred by time. According to the assessee, the extended period of limitation is not available and since the period of limitation available is only six months, almost the entire period covered in the two show cause notices would be barred by time and if at all, only a small part would be within six months. The matter has not been dealt with by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional consideration should have been declared in the price lists, but this was not done. Clearances were made without declaring the correct value and consequently without paying correct duty. The allegations attracting the proviso to Section 11A are as follows : (c) By not disclosing the arrangement with the wholesale buyers regarding the acceptance and adjustment of deposits to the approving authority, the assessee appears to have suppressed vital facts which would have helped in arriving at the correct assessable value. (d) By providing a false declaration in the body of the price list to the effect that there is no additional consideration flowing directly or indirectly back to them, wilful mis-statement and suppression of facts appear to have been patent." 16. The answer of the learned counsel for the assessee to the above allegations is one of denial based on various documents which, it is said, show that there has been total disclosure of these facts to the Department and all relevant information was within the knowledge of the departmental officers. Reference is made to an earlier show cause notice dated 1-2-1977 issued by the Assistant Commissioner in regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uires fresh consideration at the hands of the adjudicating authority. We have referred to the substance of the first and second show cause notices. The basis of these two show cause notices is that the assessee fixed varying amounts of security deposits from the wholesale buyers stipulating very low interest and when sale proceeds were received from the wholesale buyers, they were credited to the security deposit account (with liability for low interest) and account of sale price was deliberately allowed to remain in substantial arrears with liability on the part of the wholesale buyers to pay very high rate of interest. This strategy was adopted so that additional sale consideration was received by way of differential interest. The basic allegation in the third show cause notice is that the assessee adopted the strategy of generation of extra profit margin in the hands of the wholesale buyers and controlling the prices at all levels so as to reduce the invoice prices charged to wholesale buyers and use part of the extra profit margin to meet advertisement and sale promotion expenses till the end of February, 1979 and substantially increasing the extra profit margin thereafter and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the three show cause notices and since the assessee has been aware of these allegations during the last several years and a common enquiry is required to be held, we see no legal difficulty in holding that the allegations contained in the third show cause notice which are relevant and apposite to the period covered by first and second show cause notices, can be looked into for the purpose of adjudication. 19. We do not intend to expatiate on the contention of denial of opportunity to cross-examine persons whose statements have been relied on and denial of opportunity to inspect documents and denial of adequate opportunity of hearing, since remand is being ordered and we have already given appropriate directions in regard to the third show cause notice, which directions shall apply to the adjudication of the first and second show cause notices also. (see directions in paragraph 12 of this order). 20. We do not propose to examine the contention that the alleged extra amounts realised have to be regarded as cum-duty, since this matter will be open before the adjudicating authority on remand. Last contention that it was beyond the jurisdiction of the Collector to direct the officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
