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TMI Blog1991 (6) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. This writ petition was filed on 5-6-1989 and an interim order was issued on 15-6-1989 and after notice to the respondents, Rule was issued on 15-12-1989. 3. The impugned show cause notice was issued by respondent No. 1 consequent on the dismissal of writ petition No. 31466/1981 by this Court by order dated 4-10-1985. In the said writ petition, the petitioner had challenged the constitutional validity of Entry 28-A and the classification of laminations under the said entry and had also challenged the levy of excise duty on the laminations captively consumed in the petitioner's factory in the production of transformers. Consequent on the dismissal of the writ petition by this Court and on a remand by the Collector (Appeals), the matter is now pending adjudication before the Assistant Collector. 4. The show cause notice which is challenged in this writ petition is issued for the following purposes :- (i) to decide the classification of the laminations manufactured by the petitioner-Company under erstwhile Tariff Item 28-A; (ii) to show cause why the Central Excise Duty of Rs. 1,75,75,571 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uitable for its own design and use as components of transformers and therefore they did not constitute 'goods' to attract Central Excise Duty. This Court, while dismissing the writ petition observed in the course of its order that the question whether laminations are excisable goods under the Act is highly technical in nature and the question as to excisability or otherwise under the Act in the light of the contentions of the petitioner raised in the writ petition has to be decided by the Competent Authority appointed under the Act and is therefore not a matter for the High Court to decide. The petitioner was therefore permitted to file an appeal to the Appellate Collector and agitate all the grounds in the appeal. This Court also reserved liberty to the Department to take such action as it deemed necessary for the subsequent period viz., from 21-7-1981 to 4-10-1985 in respect of which this Court had stayed the levy and recovery. 6. The Appellate Collector in the appeal filed by the petitioner thereafter set aside the classification list approved by the Assistant Collector and directed him to decide the classification of the goods on the basis of evidence if any and make a de novo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , cannot be construed as a provisional assessment made under Rule 9B. 9. Elaborating his contentions the learned Counsel for the petitioner Sri Jagadeeshan submitted that the assessment memorandum on the RT 12 returns filed by the petitioner every month from December 1981 to 4th October 1985 cannot be construed as 'provisional assessment' made under Rule 9B. Relying on the factual position as borne out from the relevant documents viz., the classification lists and the RT 12 returns and the endorsements made on the respective memoranda, it was demonstrated and urged, with emphasis, that a statutory order as contemplated under Rule 9-B did not come into existence at all. It was therefore submitted by the learned Counsel that RT 12 is not a document of provisional assessment but it is only a document of recapitulation and a separate specific order is required to be made under Rule 9B. 10. The learned Counsel also pointed out that under Rule 9B, provisional assessment may be done only in three circumstances referred to at (a), (b) and (c) of Rule 9B(1) and it was argued that the Department has failed to establish on facts of the present case that a provisional assessment was actually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable) 1. The assessee has paid the duty on the above goods correctly except to the extent indicated below: " The duty debited less by the assessee, as indicated above should be paid by the assessee within 10 days by debit in his personal ledger account. The assessee may take credit for the duty paid in excess as indicated above in his Personal Ledger Account. 2. Duty on the goods removed under gate pass(es)........ and included in this return has been assessed provisionally under Rule 9B and provisions of the said rule shall apply for recovery of deficiency in or refund of excess duty. Assessment is subject to finalisation of price list for the year 1982-83. Differential duty if any is demanded, duty on laminations is payable but for the stay order of the Hon'ble High Court of Karnataka. (Underlining supplied) Place: Bangalore Sd/-Dated: Signature and Stamp of Central Excise Officer incharge." 12. The argument developed by the learned Counsel for the petitioner on these facts is that the rules do not contemplate "provisional approval" and there can be either an approval of the classification list or rejection for reasons to be recorded or "a provisional assessment" as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; the amount of security or surety as may be fixed by Assistant Collector keeping in view the instructions issued by Board from time to time, 5. if any of these conditions are not observed, the assessments will not be considered as provisional, notwithstanding the fact that the words "provisional assessment", "provisionally approved" etc. are endorsed on the relevant documents." On these grounds, it was urged by Sri Jagadeeshan that it is not open to the Department to ask this Court to construe the endorsement made on RT 12 as Provisional assessment and the said contention should be rejected out right. 13. Another point urged by Sri Jagadeeshan, was that the 'proper officer' to make a provisional assessment under the Act is either the Collector or the Assistant Collector and not a Superintendent or an Inspector of Central Excise. On this premise, it was argued that even if the endorsement on RT 12 should be construed as a provisional assessment, the Inspector of Central Excise is not competent to make an order of provisional assessment and the requirement of the rules in this behalf is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained an order not to levy excise duty on the laminations and it is not open to the very same petitioner now to advance an argument opposing the final assessment for the period between 10-12-1981 and 4-10-1985 and that the writ petition should be dismissed on this sole ground. It was pointed out that what is now proposed to be done by the department pursuant to the show cause notice is to make a final assessment for the period in question, since no recovery was made by virtue of the interim order issued by this Court at the instance of the petitioner. It was further argued by Sri Ashok Harnahalli that the interim order was in operation against the department until the writ petition was dismissed on 4-10-1985. It was pointed out that though the subject matter of the writ petition was in respect of only one year viz., 21-7-1980 to 21-7-1981, a general order of stay was issued for future periods also and the department was restrained from taking any action to levy and to collect the duty payable on laminations. The application filed by the department to vacate the interim order was also dismissed by this Court and thus the department could not collect the Central Excise Duty amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his decision. But according to the department's counsel, the observations made therein are in favour of the department rather than the petitioner. The Supreme Court reversed the view of the High Court and held that the department could not be barred completely from assessing or completing the assessment even in the absence of an order of provisional assessment. The decision of Delhi High Court in 1986 (23) E.L.T. 318 (Ajanta Iron & Steel Co. v. Union of India) was also cited in this context; 19. The learned Standing Counsel further submitted that Rule 9-B is enacted only to help the assessees and a strict or technical construction tending to affect the interests of the revenue prejudicially should be avoided. Reliance was also placed on Rule 9B(l)(c) which is a residuary provision under which it is permissible to make a provisional assessment for reasons other than those mentioned in (a) & (b). It was therefore argued by the learned counsel, that the inevitable conclusion that flows from the facts narrated above can only be that the classification lists, though approved, did not and could not culminate in final assessment and the recovery or collection of the duty also could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns urged by both sides, it would be useful and necessary to summarise the relevant provisions of the Act and the Rules which call for consideration. The charging Section is Section 3 which provides for levy and collection of Central Excise Duty on all excisable goods in such manner and at such rate as may be prescribed. Section 4 provides for the manner of determination of the value of the goods for purposes of levy of excise duty. Power to make rules to carry into effect the purpose of the Act is conferred on the Central Government under Section 37 of the Act. Chapters III and VII-A of the Central Excise Rules are relevant to be considered. Chapter III provides for procedure for levy, refund and exemption from duty; Chapter VII-A prescribes the procedure for removal of goods, determination of duty, making an order of assessment and all other incidental matters including recovery. Chapter III may be taken up first for consideration. This Chapter starts from Rule 7 which provides for recovery of duty. Rule 8 confers on the Central Government the power to authorise exemption from duty in special cases. Under Rule 9, it is stipulated that no excisable goods shall be removed from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting, the price list cannot be approved. Where the assessee disputes the price list approved by the Proper Officer under sub-rule (2), he may pay the duty under protest and remove the goods under sub-rule (8). The next important rule is 173G, which provides for procedure to be followed by the assessee in the matter of payment of duty, maintenance of statutory registers and provides for self removal system by crediting the duty to PLA Account. Monthly returns in Form RT 12 have to be filed as required under sub-rule (3) giving particulars of goods removed, duty paid etc. Rule 173-I, assessment is done by the Proper Officer, determining the duty due on the goods removed and the assessment is completed on the assessment by endorsing in the memorandum of the return on the basis of the information contained in the returns. The other rules in this Chapter are not necessary for the purpose of this case. This is the Scheme of the Rules relating to determination of duty on the excisable goods and their removal after payment of the duty. In the light of the scheme of these rules referred to above, the question that arises for decision on the facts borne out from the relevant documents in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute, were classified as dutiable under Entry 28A of Schedule I to the Act and the classification lists were approved by the Assistant Collector. Note No. 1 and Note No. 2 to the Memorandum of Approval are reproduced earlier at Page 11. The substance of these endorsements is that the tariff classification and the rate of duty leviable on the goods was approved by the Assistant Collector. Under Note 2 however, it was stated that the classification list is approved provisionally and it was also mentioned therein that the assessment of the goods shall be made by the Officer Incharge, provisionally under Rule 9B. The criticism on this memorandum of approval is that Note 1 and Note 2 which are both ticked are inconsistent with one another and it was argued that they are mutually exclusive. It was demonstrated that if the classification list is approved, the question of making a provisional assessment under Note 2 does not arise. It was also argued that there could be only one order either of approval or rejection of the classification list and if the classification list cannot be approved for any reason, the proper Officer may resort to provisional assessment to duty under Rule 9B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Delhi High Court in International Computers v. Union of India [1981 (8) E.L.T. 632] in which the scope of Section 18 Customs Act which is analogous to Rule 9B of the Excise Rules came up for consideration. It was held on facts that none of the conditions of Section 18 were shown to have been attracted with reference to the clearances made. It was further held that the demand made after six months from the date of assessment was time barred. The other decisions relied upon by the learned Counsel do not assist the petitioner's case. 26. But the real question, which is a vexed question, in this case is about the legal effect that flows from the endorsements made on the classification lists and the monthly returns. This question should have been the subject matter of adjudication to be decided by the appellate authority constituted under the Act. It is purely a question of fact and any conclusion must follow an appreciation of the facts, materials on record and all other circumstances considered together. Since Rule is issued in the present case, I am left with no alternative and therefore, I proceed to decide this question on merits. Normally, the assessment should be completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice? If it is construed as a provisional assessment, then the department is safe and the show cause notice will have to be upheld as valid in law. If it is held that final assessment had been done and the duty payable was ascertained and determined on the approval of the classification lists for the relevant periods and what was stayed by the interim order made by this Court W.P. 31466/81 was only recovery of the duty levied, then the recovery now sought to be made pursuant to the show cause notice would be barred by limitation under Section 11A(1). 29. These are the various aspects of the case that arise for consideration on the arguments advanced by both sides. It has to be noted at the outset, that the classification of laminations under Entry 28A was approved by the Proper Officer including the rate of duty payable on the goods. There is no dispute that the price list which was filed by the petitioner under Rule 173B was also approved. In the assessment that followed, though the petitioner was liable to pay full duty as per the approved classification lists and the price lists, it was mentioned in the assessment memorandum that "the assessment is subject to finalisation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court held there was not enough material on record to conclude that there was any 'provisional assessment' under Rule 10B (now Rule 9B). The assessee failed to produce before the Supreme Court any order made as contemplated under Rule 10B nor was there any evidence that the Company was asked to furnish a bond for the difference of duty. It was borne out from the records that the price lists supplied by the Company were being provisionally approved pending acceptance of their correctness as to the real value of the goods, as a matter of practice. It was the contention of the assessee Company before the Supreme Court that the facts disclosed there was substantially a 'provisional assessment' although it did not conform to the technical procedural requirements of such an assessment. The Supreme Court concluded on the facts of the case that it was neither a provisional assessment nor a final assessment, but it was a case of 'incomplete assessment'. On the peculiar facts of the case, the Supreme Court observed (at paragraphs 16 to 19) that it was admittedly a case of 'incomplete assessment'. The observations of the Supreme Court occurring in Para 17 which has a bearing is reproduced a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat where a mode of performing a duty is laid down by law it must be performed in that mode or not at all. This rule flows from the maxim: Expressio unius est exclusio aterius". But, as was pointed out by Wills J. in Colquhoun v. Brooks, (1988) 21 QBD 52 at P. 62, this maxim "is often a valuable servant, but a dangerous master......." This rule is subservient to the basic principle that Courts must endeavour to ascertain the legislative intent and purpose and then adopt a rule of construction which effectuates rather than one that may defeat these. Moreover, the rule of prohibition by necessary implication could be applied only where a specified procedure is laid down for the performance of a duty. Although Rule 52 makes an assessment obligatory before goods are removed by a manufacturer, yet neither that rule nor any other rule, as already indicated above, has specified the detailed procedure for an assessment. There is no express prohibition anywhere against an assessment at any other time in the circumstances of a case like the one before us where no "assessment" as it is understood in law, took place at all. On the other hand, Rule 10A indicates that there are residuary powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was no final assessment made in this case for the entire period covered by the show cause notice even though classification lists were approved. On the special facts of the case, and the situation in which the Department was placed, it can safely be said that it was an 'incomplete assessment' even if it cannot be called a 'Provisional assessment' made strictly in accordance with Rule 9B. I derive support for this view of mine, from the observations of Supreme Court in National Tobacco's Case [1978 (2) E.L.T. (J 416)], and the Bombay High Court decision in D.N. Kohli's Case [1983 (12) E.L.T. 216]. This is also a rare case of unforeseen special circumstances. The Department may legitimately rely on the endorsements made on the assessment memoranda (RT 12) in support of its stand that it is a case of 'provisional assessment'. The argument of the learned Counsel for the Department that this case is covered by the residuary powers under Rule 9B(l)(c) also merits acceptance. In the ultimate analysis, I conclude that the petitioner has failed to establish that there was a final assessment made by the Department for the relevant period. I therefore exercise my discretion under Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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