1989 (6) TMI 202 - AT - Central Excise

Collector's Order Overturned for Time Limit Violation Under Section 11A

The Tribunal held that the order of the Collector (Appeals) was not sustainable due to non-compliance with the time limit specified under Section 11A of ... Demand - Limitation Issues Involved:1. Provisional Assessment and Finalization2. Time Bar for Demand Notice3. Legality of the Order of the Collector (Appeals)4. Compliance with Section 11A and Section 35A of the Central Excises & Salt ActIssue-wise Detailed Analysis:1. Provisional Assessment and Finalization:The applicants were required to deposit Rs. 1,60,78,525.84 for hearing their appeal on merits. During 1978-83, they paid duty based on manufacturing cost plus profit, as per various High Courts' verdicts. The assessments were provisional. Post the Supreme Court's decision in the Bombay Tyre International case, proceedings were initiated to finalize these provisional assessments. The Asstt. Collector's initial order was set aside and remanded for de novo consideration. On 15-10-1984, the Asstt. Collector finalized the assessment, allowing 7 items of deductions but disallowing 3, confirming a demand of Rs. 5.90 crores, which was paid under protest on 31-3-1985. The applicants appealed against the disallowance of 2 deductions. The Collector of Central Excise, Bombay-III, directed a review under Section 35-E, leading to an appeal by the department on 2-12-1985.2. Time Bar for Demand Notice:The applicants contended that the department's appeal was time-barred as no demand for short levy was issued within six months from the relevant date, as required by the second proviso to Section 35A(3) of the Central Excises & Salt Act. The Collector (Appeals) did not consider this preliminary objection. The applicants argued that any short payment notice should have been issued within six months from 31-3-1985 or from the certificate of payment date, 11-7-1985. The department served demands only on 5-10-1988, leading to the stay application. The applicants maintained that the demand was prima facie time-barred, requiring a stay.3. Legality of the Order of the Collector (Appeals):The Collector (Appeals) did not address the time bar objection. The applicants cited various judgments supporting their contention. The department argued that the assessments were still provisional as the duty had not been adjusted due to ongoing appeals. The final adjustment date was crucial for determining the time limit. The applicants countered that the assessment was finalized on 15-10-1984, and the duty was paid by 31-3-1985, making this the relevant date for Section 11A purposes.4. Compliance with Section 11A and Section 35A of the Central Excises & Salt Act:The Tribunal observed that the main issue was the time bar. The Asstt. Collector's order on 15-10-1984 finalized the assessment and confirmed a demand of Rs. 5.90 crores, paid by 31-3-1985. The Tribunal noted that provisional assessments have a distinct legal connotation under Rule 9B of the Central Excise Rules. The relevant date for Section 11A in provisional assessments is the date of final adjustment. The Tribunal concluded that the provisional assessment was finalized on 15-10-1984, and the demand was paid by 31-3-1985. Any short levy notice should have been issued within six months from this date, which was not done.Conclusion:The Tribunal found the order of the Collector (Appeals) not sustainable as it did not comply with the time limit specified under Section 11A. The additional demand appeared prima facie time-barred. Therefore, the Tribunal granted an unconditional stay of the duty demanded.