1988 (2) TMI 75 - HC - Central Excise

Invalid demand for excise duty quashed due to time limit breach under Central Excises and Salt Act

ASRAMAM VILLAGE INDUSTRIAL CO-OP. SOCIETY LTD. Versus UNION OF INDIA AND OTHERS

ASRAMAM VILLAGE INDUSTRIAL CO-OP. SOCIETY LTD. Versus UNION OF INDIA AND OTHERS - 1988 (38) E.L.T. 14 (Ker.) Issues Involved:1. Demand for excise duty without concessional rate benefit.2. Retrospective application of Notification No. 99 of 1980.3. Validity of Section 52 of the Finance Act, 1982.4. Time-barred demand under Section 11A of the Central Excises and Salt Act, 1944.Detailed Analysis:1. Demand for Excise Duty Without Concessional Rate Benefit:The petitioner, a manufacturer of safety matches, challenged the demand for excise duty under the Central Excises and Salt Act, 1944, for matches cleared between June 19, 1980, and March 31, 1981. The demand was made without giving the petitioner the benefit of the concessional rate of Rs. 1.60 per gross of fifty's, as per Notification No. 99 of 1980.2. Retrospective Application of Notification No. 99 of 1980:The Government of India issued Notification No. 99 of 1980 on June 19, 1980, reducing the rate of duty for safety matches manufactured and cleared by small-scale units. This notification was later modified by Notification Ext. P3, issued on February 23, 1982, which imposed additional conditions for eligibility for the concessional rate. Section 52 of the Finance Act, 1982, gave this notification retrospective effect from June 19, 1980.3. Validity of Section 52 of the Finance Act, 1982:The petitioner initially challenged the constitutional validity of Section 52 of the Finance Act, 1982, but did not persist in this challenge, accepting the correctness of the Madras High Court's decision in Bharath Match Works v. Union of India, which upheld the validity of Section 52.4. Time-barred Demand under Section 11A of the Central Excises and Salt Act, 1944:The petitioner argued that the demand notice Ext. P4, issued on October 19, 1982, was beyond the six-month period prescribed by Section 11A of the Central Excises and Salt Act, 1944, and therefore null and void. The respondents contended that Section 52 of the Finance Act, 1982, allowed them to review and demand duties retrospectively, overriding the time limitation in Section 11A.Judgment Analysis:Section 11A of the Central Excises and Salt Act, 1944:Section 11A(1) stipulates that any duty of excise not levied or paid must be demanded within six months from the relevant date, extendable to five years in cases of fraud, collusion, or willful misstatement. The court noted that there was no allegation of such circumstances in this case.Section 52 of the Finance Act, 1982:Section 52 retrospectively denied the benefit of concessional rates of duty for certain small-scale units and enabled the recovery of duties not collected. However, it did not contain a non-obstante clause to override Section 11A's time limitations.Supreme Court Precedent:The court referred to the Supreme Court's decision in J.K. Cotton Spinning and Weaving Mills Limited v. Union of India, which held that Section 51 of the Finance Act, 1982, was subject to the provisions of Section 11A, implying that retrospective amendments must comply with the six-month limitation period unless explicitly stated otherwise.Conclusion:The court concluded that Section 52 of the Finance Act, 1982, did not override Section 11A of the Central Excises and Salt Act, 1944. Therefore, the demand notice Ext. P4 and subsequent orders Ext. P6, P7, and P8 were illegal and invalid as they were issued beyond the six-month limitation period. The original petition was allowed, and the proceedings were quashed.Order:The original petition is allowed, and there is no order as to costs.