1990 (6) TMI 172 - AT - Central Excise

Validity of Show Cause Notices Upheld Under Finance Act despite Post-1982 Periods

The Tribunal upheld the validity of show cause notices issued under Section 51(2)(d) of the Finance Act, 1982, despite being inappropriate for periods ... Demand - Show Cause Notice Issues Involved:1. Validity of show cause notices issued under Section 51(2)(d) of the Finance Act, 1982.2. Remand for redetermination of duty considering duty paid on yarn removed outside and waste yarn.Detailed Analysis:Issue 1: Validity of Show Cause Notices Issued Under Section 51(2)(d) of the Finance Act, 1982Background:The Assistant Collector issued 19 show cause notices for recovery of duty on yarn captively consumed by the respondents during 1981-83. The Supreme Court in J.K. Spinning and Weaving Mills Ltd. v. Union of India held that demands should be within the purview of Section 11A of the Central Excises and Salt Act, 1944, and Section 51 of the Finance Act, 1982, cannot override Section 11A.Arguments:- Department: The department's appeal focused on the proposition of law set out by the Collector (Appeals) regarding the 9 show cause notices issued under Section 51(2)(d) of the Finance Act, 1982. The department argued that these notices were issued within the six-month limitation period prescribed under Section 11A of the Central Excises and Salt Act, 1944, and thus should be considered valid.- Respondents: The respondents contended that the show cause notices issued under Section 51(2)(d) of the Finance Act, 1982, were without authority of law and should be dropped. They argued that the notices should have been issued under Section 11A of the Central Excises and Salt Act, 1944, for periods after 20-2-1982.Judgment:- The Tribunal held that the notices issued under Section 51(2)(d) of the Finance Act, 1982, for periods after 20-2-1982 were not appropriate. However, it was determined that the Assistant Collector, who issued the notices, had the authority to do so under both Section 51 of the Finance Act and Section 11A of the Central Excises and Salt Act.- The Tribunal applied the doctrine of tracing the power, as established in J.K. Steel Ltd. v. U.O.I., and concluded that the origin of power is traceable to the Assistant Collector, making the notices valid despite the wrong section being cited.- The Tribunal dismissed the contention that the notices were ab initio invalid and upheld the validity of the show cause notices.Issue 2: Remand for Redetermination of Duty Considering Duty Paid on Yarn Removed Outside and Waste YarnBackground:The Collector (Appeals) remanded the case to the Assistant Collector to consider the respondents' claims regarding duty paid on yarn removed outside and waste yarn.Arguments:- Department: The department argued that the respondents had not provided details of such removals or payments and should seek a refund under Section 11B of the Act rather than adjustment.- Respondents: The respondents claimed they were entitled to adjustments for duty paid on waste yarn and yarn removed outside.Judgment:- The Tribunal found no documents supporting the respondents' claims and noted that the respondents could claim a refund under Section 11B of the Act.- The Tribunal held that the remand for redetermination of duty was not justified and set aside this part of the Collector (Appeals)'s order.Conclusion:The Tribunal allowed the department's appeal, validating the show cause notices issued under Section 51(2)(d) of the Finance Act, 1982, and dismissed the respondents' claims for adjustments. The appeal filed by M/s Mihir Textiles Ltd. was rejected, and the remand for redetermination of duty was set aside.