2000 (2) TMI 823 - SC - Central Excise

SC Rules Pending Central Excise Cases Non-Est Due to Omission in New Rule, Overturns Lower Court Decisions.

The SC held that the absence of a saving clause or provision in the new rule meant pending proceedings under the omitted Rules 10 and 10A of the Central ... Effect of omission of a Rule on pending proceedings - Applicability of Section 6 of the General Clauses Act to repeal/omission - Continuance of proceedings in absence of a saving clause - Substitution of statutory provision and vested rightsApplicability of Section 6 of the General Clauses Act to repeal/omission - Rule vs Regulation vs Central Act - Whether Section 6 of the General Clauses Act applies to the omission of Rules 10 and 10A of the Central Excise Rules - HELD THAT: - The Court held that Section 6(1) of the General Clauses Act is confined to repeals of a Central Act or a Regulation as defined in the Act and does not extend to the omission or deletion of a 'Rule'. The definitions in the General Clauses Act (notably of 'Central Act', 'enactment', 'Regulation' and 'Rule') must be applied; a 'Rule' retains its statutory character distinct from a 'Central Act' or 'Regulation' for the purposes of Section 6. Reliance on the Constitution Bench decision in Rayala Corporation was endorsed: Section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not of a Rule. Decisions treating a Rule as equivalent to a repealed Act or Regulation and applying Section 6 were held to be incorrect. [Paras 21, 32, 33, 37]Section 6 of the General Clauses Act does not apply to the omission of Rules 10 and 10A and cannot be invoked to continue proceedings initiated under those Rules.Effect of omission of a Rule on pending proceedings - Continuance of proceedings in absence of a saving clause - Substitution of statutory provision and vested rights - Whether proceedings initiated under old Rules 10/10A could be continued after omission and substitution by a new Rule 10 (and later by Section 11A), in the absence of any saving clause - HELD THAT: - The Court explained the general common-law consequence of repeal or deletion: omission without a saving clause ordinarily obliterates the provision as if it had never existed and pending proceedings lapse unless a saving is provided. Where a rule is unconditionally omitted and replaced by a new provision that contains no clause preserving pending proceedings, those pending proceedings terminate on omission and cannot be continued or adjudicated under the new provision. The Court rejected the view that courts should not look to the newly introduced rule to see if pending proceedings continue; instead the correct approach is to examine the new provision (or statute) for an express or pari materia saving or, alternatively, whether Section 6 or a similar statutory saving applies. In the absence of any saving in the notification omitting Rule 10/10A or in Section 11A (or elsewhere in the statute), the proceedings pending under the deleted Rules lapsed and any order made thereafter is to be treated as non-est. [Paras 35, 38, 39, 40, 41]Proceedings initiated under Rules 10/10A lapsed on omission of those rules; absent any saving clause in the notification or statute, the departmental order passed thereafter is non-est and cannot be sustained.Final Conclusion: The Court held that omission of Rules 10 and 10A cannot be saved by Section 6 of the General Clauses Act; in the absence of any saving clause in the notification or in the statute, proceedings pending under the omitted Rules (notably in respect of season 1973-74) lapsed upon omission and any order made thereafter is to be treated as non-est. The contrary High Court decisions were overruled and the appeals disposed accordingly. Issues Involved:1. Applicability of Rules 10 and 10A of the Central Excise Rules.2. Validity of proceedings initiated under the old rules after their omission.3. Application of Section 6 of the General Clauses Act to the omission of rules.4. Continuance of pending proceedings after the omission of rules and introduction of new provisions.Issue-wise Detailed Analysis:1. Applicability of Rules 10 and 10A of the Central Excise Rules:The common question in all cases relates to the applicability of Rules 10 and 10A of the Central Excise Rules. The appellant, M/s Kolhapur Cane Sugar Works Ltd., applied for a rebate of excise duty on sugar for the 1973-74 season. They were initially denied the rebate by the Superintendent, Central Excise, Kolhapur, but later a sum of Rs. 61,14,930/- was sanctioned. Subsequently, a notice to show cause was issued questioning the rebate as the appellant was not considered a new factory.2. Validity of proceedings initiated under the old rules after their omission:The Assistant Collector of Central Excise confirmed the demand for recredit of the rebate amount after the deletion of Rules 10 and 10A and the introduction of a new Rule 10. The appellant's appeal and revision applications were dismissed by the Appellate Collector and the Central Government, respectively. The High Court also dismissed the writ petition, leading to this appeal.3. Application of Section 6 of the General Clauses Act to the omission of rules:The appellant argued that the omission of Rules 10 and 10A without a saving clause rendered further proceedings without jurisdiction, as Section 6 of the General Clauses Act does not apply to the repeal of statutory rules. The High Court rejected this contention, and the matter was referred to a Constitution Bench due to the importance of the questions involved.4. Continuance of pending proceedings after the omission of rules and introduction of new provisions:The Supreme Court examined whether the proceedings initiated by the notice dated 27-4-1977 could continue after the omission of the old rules. The Court noted that Section 6 of the General Clauses Act applies to the repeal of a Central Act or Regulation, not to the omission of a rule. The Court referred to the case of M/s Rayala Corporation P. Ltd., which held that Section 6 does not apply to the omission of rules. The Court found that the omission of Rules 10 and 10A without a saving clause meant that pending proceedings could not continue under the new Rule 10.Judgment:The Supreme Court held that the decisions of the Full Bench of the Gujarat High Court and the Division Bench of the Karnataka High Court, which took a different view, were not correctly decided. The Court concluded that in the absence of a saving clause or a provision in the new rule for continuing pending proceedings, such proceedings would lapse. Consequently, the order passed by the Assistant Collector of Central Excise after the omission of Rules 10 and 10A was non-est. The Court disposed of all the cases on these terms, with no costs.