2000 (9) TMI 185 - AT - Central Excise

Tribunal invalidates show-cause notice, rejects interest claim, and allows appeal.

The Tribunal set aside the show-cause notice, ruling it invalid and the duty demand time-barred. The interest claim was rejected for lacking statutory ... Limitation under Section 11A of the CESA - notice of demand under Section 11A - entries in R.T.12 are not a substitute for a notice under Section 11A - interim order in writ jurisdiction is not a general mandate to levy interest - absence of statutory authority to levy interest on excise dues - obedience to Supreme Court interim order dated 28-4-1988Obedience to Supreme Court interim order dated 28-4-1988 - limitation under Section 11A of the CESA - notice of demand under Section 11A - Validity of the show-cause notice dated 10-9-1988 and whether the demand raised complied with the Supreme Court's order dated 28-4-1988 and the limitation in Section 11A. - HELD THAT: - The Apex Court's permission to the Department to proceed for recovery was confined to three categories: (a) cases where notices under Section 11A had already been served and the claims did not cover any period beyond six months from the respective dates of the notices; (b) disputes as to whether such notices had been issued to be decided by the Assistant Collector; and (c) cases where notices were yet to be issued, such notices could be issued but must not cover any period beyond six months. No notice under Section 11A had been issued to the appellants prior to 10-9-1988, so clauses (a) and (b) did not apply and their case fell under clause (c). The show-cause notice issued on 10-9-1988 sought recovery for the period 1-6-1981 to 15-3-1983, which plainly went beyond the six-month limitation permitted by the Supreme Court. Consequently the demand as raised by the show-cause notice contravened the mandate of the interim order dated 28-4-1988 and is liable to be set aside. [Paras 12, 13]The show-cause notice and the demand of duty for the period 1-6-1981 to 15-3-1983 are contrary to the Supreme Court's order dated 28-4-1988 and are liable to be quashed.Entries in R.T.12 are not a substitute for a notice under Section 11A - notice of demand under Section 11A - Whether entries or endorsements in R.T.12 returns amount to a demand notice under Section 11A so as to render the show-cause notice within the scope of the Supreme Court's permission. - HELD THAT: - The Tribunal rejected the lower authorities' contention that repeated provisional entries in R.T.12 returns amounted to a demand under Section 11A. Reliance was placed on the Supreme Court's decision in Kosan Metal Products Ltd. which held that an entry on R.T.12 for short payment does not amount to a formal demand of duty and that a demand must be made by way of a notice under Section 11A. Accordingly, entries in R.T.12 cannot substitute for the statutory notice required for invoking past-period recovery. [Paras 14]Entries in R.T.12 do not amount to a Section 11A notice; they cannot validate the show-cause notice or cure its limitation defect.Absence of statutory authority to levy interest on excise dues - interim order in writ jurisdiction is not a general mandate to levy interest - Whether interest at 12% per annum could be levied on the alleged past excise dues by relying on the Supreme Court's interim order dated 11-9-1985 or otherwise. - HELD THAT: - Although the point became academically moot after holding the demand time-barred, the Tribunal examined the contention and noted the decision of the Andhra Pradesh High Court in Delta Paper Mills that, in the absence of statutory provision, interest cannot be levied by executive instruction or rule. The interim order dated 11-9-1985 was passed in writ jurisdiction as a discretionary condition associated with stay and does not constitute a general command enabling departmental authorities to charge interest in all cases. To give such an interim writ order the effect of creating a continuing statutory liability to pay interest would conflict with Article 265 and the statutory scheme. The Tribunal therefore indicated that the Department had no lawful authority to levy interest on excise dues by relying on that interim order. [Paras 15, 16]No lawful basis exists to levy interest on the excise dues by virtue of the interim order dated 11-9-1985; there is no general statutory authority to charge such interest.Final Conclusion: The appeal is allowed: the adjudicatory order based on the show-cause notice dated 10-9-1988 is set aside as the demand exceeded the limitation permitted by the Supreme Court's interim order of 28-4-1988; R.T.12 entries do not substitute for a Section 11A notice; and there is no lawful basis to levy interest on the excise dues by relying on the interim writ order of 11-9-1985. Issues Involved:1. Validity of the show-cause notice issued by the Department.2. Whether the demand raised in the show-cause notice is barred by limitation.3. Legitimacy of the claim of interest on the alleged dues of Central Excise duty.Detailed Analysis:1. Validity of the Show-Cause Notice:The appellants were engaged in the manufacture of various types of yarns and fabrics and consumed the same captively for the manufacture of fabrics without paying Central Excise duty. The Department issued a show-cause notice dated 10-9-1988 to recover over Rs. 30 lakhs as Central Excise duty along with interest at 12% per annum. The appellants contended that no duty was payable as there was no 'removal of the yarns from the factory' under Rules 9 and 49 of the Central Excise Rules. The Supreme Court's interim order dated 28-4-1988 allowed the Department to realise dues for the past six months preceding the notice date under Section 11A of the CESA. However, the show-cause notice issued on 10-9-1988 demanded dues for the period from June 1981 to March 1983, which was beyond the six-month limitation.2. Limitation of the Demand:The appellants argued that the demand was contrary to the Supreme Court's order and barred by limitation under Section 11A of the CESA. The Department's reliance on entries in R.T.12 returns as substitutes for a formal notice under Section 11A was rejected. The Tribunal held that the demand raised in the show-cause notice was time-barred and contrary to the Supreme Court's mandate, thus liable to be set aside.3. Legitimacy of the Interest Claim:The Department claimed interest at 12% per annum based on the Supreme Court's order dated 11-9-1985, which was an interim order in writ petitions relating to special/additional duty of excise. The Tribunal noted that there was no provision under the CESA for levying interest on excise duty dues and that the Supreme Court's interim order should not be taken as a general mandate for levying interest. The High Court of Andhra Pradesh's decision in Delta Paper Mills Ltd. v. CCE, Guntur supported the appellants' argument that interest could not be levied without statutory authority.Conclusion:The Tribunal set aside the impugned order, holding that the show-cause notice was invalid and the demand of duty was time-barred. The claim of interest was also rejected as it lacked statutory backing. The appeal was allowed, and the cross-objections by the Department were considered as submissions but were not maintainable. The final decision in the appellants' Civil Appeal No. 430/83 by the Supreme Court on 4-1-1989 was noted but not available for consideration in this judgment.