TMI Blog1983 (6) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 and its re-enactment as Section 11 of the Act with effect from 17-11-1980 without providing for any saving of pending proceedings? (d) Whether, in the facts and circumstances of the case, there has been a manufacture of the pistons in question, and if so, the process carried out by the Appellant came within the scope of Rule 173H of the Rules? 2. The material facts are not in controversy and can briefly be set out as under - (a) The Appellant manufactures high precision pistons for use as original equipment in automobiles. (b) Prior to 1976, the Appellant submitted a claim for refund of duty paid under Rule 173L of the Rules, in respect of such of those duty paid pistons as were rejected and returned for replacement. (c) The Assistant Collector, however, informed by his letter dated 28-7-1976 (S. No. 1 of the Paper Book) that it was Rule 173(H) that was applicable and not Rule 173(L). (d) Subsequently, the procedure to be followed in terms of Rule 173(H), for - (i) receipt in the factory of the rejected pistons; (ii) the process of which they are to be subjected to; and (iii) the manner of removal, was mutually discussed and settled on two differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was no specific period during which the processes adverted to in Rule 173(H) could be undertaken and duty had been evaded under cover of this Rule, the extended period of limitation alone was applicable and not six months as contended by the Appellant. In the result, the Appellant was ordered to pay the duty amounting to ₹ 4,42,159/- under Rule 9(2) of the Rules and a penalty of ₹ 25,000/- under Rule 173(Q) of the Rules. There was no penalty levied under Rule 9. 3. In the Appeal before us, it was contended by Shri Ravinder Narain, appearing for the Appellant that - (a) the Collector was in error in levying penalty and demanding duty under Rule 9(2) because - (i) the said rule applied only if there had been a wilful mis-statement, suppression of facts and a positive intent to contravene the provisions of Central Excise Rules, i.e. there had been a clandestine removal [AIR 1971 S.C. 2039 - N.B. Sanjana v. Elphinston Spinning and Weaving Mills - 1978 E.L.T. (J 399)]; (ii) in the facts and circumstances of the case, there could have been no clandestine removal and it cannot be that the processes undertaken were only in the exclusive knowledge of the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the process of remaking that is involved but fresh manufacture ; (d) even though Rule 10 was repealed with effect from 17-11-1980, Section 11A in pari materia with the repealed Rule, was enacted on the same day and since a rule framed under the Act was part of the Act for all purposes of construction or obligation (A.I.R. 1961 S.C. 751 - State of U.P. v. Baburam), there was neither repeat nor omission of an enactment but continuance thereof in one part of the statute or another and consequently the principles relating to repeal or omission of an enactment cannot apply. [1982 E.L.T. 844 - Gwalior Rayon Mfg. (Wvg.) Co. v. Union of India - M.P. - D.B.]. 5. We are disinclined to remand the matter so as to enable the Revenue to make good the deficiencies in evidence to be afforded a second opportunity to prove the gravemen of the charge when they had the evidence in their possession all the time and no attempt would appear to have been made to bring it on record. Indeed, one would look in vain in the adjudication order for a reference to a single identifiable document like e.g. any single gate pass, that would substantiate contravention of the relevant provisions in the Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules provides for confiscation and penalty, inter alia, for removal of goods in contravention of any of the Rules, failure to account, manufacture without licence, and contravention of the rules with intent to evade duty, when the goods are liable to confiscation and a penalty not exceeding three times the value of the goods in respect of which the rules had been contravened or ₹ 5,000/- whichever is greater, has to be imposed. 8. If Section 9 of the Central Excises and Salt Act, 1944, Rule 9, 10 and 173(Q) are examined in juxtaposition, it would be observed that - (a) Rules 9, 10 and 173Q would appear to have been made pursuant to Section 37(4) of the Act; (b) While Section 9 specifies - (i) evasion of payment of duty; and (ii) removal of excisable goods in contravention of the provisions of the Act or the Rules, as offences punishable after prosecution, Rule 9(2) merely penalizes in adjudication removal of excisable goods in contravention of Rule 9(1) (i.e. without payment of duty or in other words, evasion of duty) but not contravention of the Act or the Rules; (c) Rule 173(Q) penalizes - (i) removal of excisable goods in contravention of any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing done pursuant to the discussions and whether the requirements of the Rule in question were being fulfilled. The Revenue were singularly quiescent after 10-1-1977. After the discussions and the letter of 10-1-1977 and the silence thereafter, how was it necessary for the Appellant to come out on his own and make a statement that he had been fully and strictly complying with the requirements of Rule 173(H) and his failure to do so, per se, an act of fraud ? 10. Fraud , occurring in clause (9) of the proviso to Rule 10 had not been defined, in the Rules. Going by the definition of the word in the Contract Act, it would mean and imply - (i) the suggestion, as to a fact, of that which is not true by one who does not believe it to be true; (ii) the active concealment of a fact by one having knowledge or belief of the fact; suppresio veri, suggestio falsi; (iii) a promise made without any intention of performance. It would be observed that wilful misstatement or suppression of facts occurring in the proviso to Rule 10 after fraud fall within the ambit of (i) and (ii) supra in the definition of fraud . 11. In the premises, it cannot, but be held that the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the entire procedure to be followed if the intent were actually to evade payment of duty; (iv) even if, therefore, there was contravention of any of the Rules, it was not with intent to evade payment of duty; (v) on similar facts, the A.P. High Court in 1979 E.L.T. 402 held that there was no intent to evade payment of duty. (f) Reliance on the proviso to Rule 10 was clearly an after thought and ill-conceived when there was no foundation laid for it in the show cause notice. It is not a question of competency or jurisdiction to treat a demand made under one provision to have been made under another. It is on the contrary a question of making the necessary averments in the show cause notice so as to define the scope of the enquiry and justify resort to the proviso to Rule 10 to avail of the larger period of limitation provided for therein. It is strange logic to say that since there was no specific period prescribed in Rule 173(H) for carrying out repairs etc., the larger period of limitation in the proviso to Rule 10 was applicable. 12. Once the proviso to Rule 10 was inapplicable to the facts of the case, obviously a demand on 5-9-1980 for payment of duty in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A.I.R. 1970 S.C. 494 - 1970 (1) SCR 639) it has to be held that with the omission of Rule 10 a notice issued under that Rule will lapse and no proceedings under that provision can now be taken. The Notification omitting Rule 10 did not contain any provision for continuance of the proceedings already initiated and neither did Act 25 of 198 which introduced Section 11A of the Act adopt the legal device of creating a fiction by virtue of which proceedings under Rule 10 could be deemed to be proceedings under Section 11A of the Act. The Supreme Court in the case of Rayala Corporation has held that Section 6 of the General Clauses Act does not apply to cases of omission and further that it does not apply to the case of repeal of a Rule. Once help of Section 6 of the General Clauses Act is not available, proceedings under Rule 10 cannot be continued for, the provision under which they were taken no longer exists on the statute book. (c) In the case reported in 1982 E.L.T. 844, however, the decision of the Supreme Court in the case of M/s. Rayala Corporation was distinguished on the grounds that - (i) the Rule omitted and re-enacted in the Supreme Court case was one providing for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch identity having been established by specification, description, weight, invoices, etc., it was held mere melting for repair does not impair or negate the identity; (ii) it was observed in the course of the judgment - 6. .......Mr. Bhaba rightly contended that it was an error on the part of the Customs authorities to hold that the identity of the goods is changed merely because the material of the worn out spinnerettes was melted and the new spinnerettes were manufactured........ . * * * * 9. .........Merely because the worn out spinnerettes are melted for the purpose of repair, it cannot be concluded that the said spinnerettes have lost their identity. ; (iii) a bare perusal of the head note for the report in juxtaposition reveals the extent of its erroneousness. Adverting to para (6) of the judgment, the head note reads - Merely because the worn out spinnerettes were melted or repaired, it cannot be said that a new product was manufactured liable to payment of duty. ; (iv) it will be observed that in terms of the judgment, identity of the goods was the issue and not their manufacture (irrelevant altogether for the purpose of applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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