TaxTMI 
TaxTMI 
1991 (3) TMI 165
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....lling under Tariff Item 26A(4) during the period 1-3-1981 to 31-7-1984 and under sub-item (10) of T.I. 26A w.e.f. 1-8-1984, manufactured and cleared by the appellants from their factory premises during the period 1-3-1981 to 5-12-1985 without discharging their duty liability be not recovered and as to why the seized goods and the land, building, plant, machinery etc. belonging to the appellants be not confiscated and the penalty be not imposed on the allegation that the appellants had contravened the provisions of Rule 9, 52, 52A, 53, 173C, 173F, 226, 56B read with Rule 173Q of the Central Excise Rules, 1944 as detailed out more vividly in the show cause notice. In reply the appellants contested the show cause notice inter alia on the ground that (i) the show cause notice demanding duty in respect of removals from 1-3-1981 to 5-12-1985 after a period of 5 years and therefore it was time barred by limitation under Section 11A of the Central Excises and Salt Act, since there was no fraud, collusion or any wilful mis-statement or suppression of facts and (ii) that the notice has been issued without any authority of law, since the notice of demand after the amendment made on 27-12-1985....
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....tion to redeem the same on payment of a redemption fine of Rs. 50 lakhs in lieu of confiscation and also imposed a penalty of Rs. 25 lakhs. Hence the present appeal. 3. At the outset Shri V. Laxmikumaran, Advocate duly assisted by S/Shri A.R. Madhava Rao and L.R. Mehta, Advocates raised a preliminary ground that since the show cause notice issued in the instant case was without any authority the whole impugned order is void and therefore the hearing may be limited on this preliminary point and if this preliminary point is over-ruled, then in that case the appeal may be heard on merits. In reply Smt. Dolly Saxena, learned SDR also agreed that the said preliminary point may be heard and decided at the outset. Accordingly we agreed to hear the parties on the said preliminary point i.e. to say regarding the validity of the show cause notice issued in the instant case and reserved the orders making it clear that if necessary the case will be re-opened for further arguments. 4. Shri V. Laxmikumaran, learned counsel for the appellants while elaborating on his arguments submitted that the demand-cum-show cause notice dated 6-3-1986 was without jurisdiction because the same was issued....
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....al Excise and Customs, Jaipur through their letter dated 24-3-1986 to keep the matter in abeyance for the time being reserving their right to submit a detailed reply to the show cause notice after receipt of clarification from the Board and went on requesting the Adjudicating Authority to keep the matter pending till the disposal of the representation by the Board. However, since the Adjudicating Authority was insisting for the reply to the show cause notice, the appellants submitted their interim reply dated 17-11-1988 specifically challenging the authority of the Deputy Collector of Central Excise to issue the show cause notice under reference in para 22 of their reply. In this premises he submitted that there was no delay on the part of the appellants to challenge the legality/validity of the show cause notice. Alternatively he submitted that even otherwise since there was a lack of inherent jurisdiction in that authority (i.e. to say Dy. Collector), no amount of consent, express or implied, can confer jurisdiction on the Deputy Collector to deal with the matter not within its jurisdiction and the appellants cannot be estopped from challenging the impugned order on the ground of....
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....entral Excise Officer," the words "Collector of Central Excise," and for the words "six months", the words "five years" were substituted. This amendment was effected vide Central Excises and Salt (Amendment) Act, 1985 (79 of 1985) w.e.f. 27-12-1985. In a nutshell the effect of the amendment is that with effect from 27-12-1985 whenever a larger period of five years is invoked for reason the demand, a show cause notice must be issued by the Collector of Central Excise and not by a Central Excise Officer. In the instant case it is an admitted fact on record that the larger period of limitation provided under the said proviso to sub-section (1) of Section 11A was invoked by the Department for raising the demand for the period from 1-3-1981 to 5-12-1985 i.e. to say exceeding six months and the show cause notice was issued on 6-3-1986 i.e. to say much after the amendment came into force on 27-12-1985 and the show cause notice was not issued by the Collector of Central Excise as required under the said proviso but was issued by the Deputy Collector. Thus, the show cause notice under reference is patently illegal and in contravention of sub-section (1) of Section 11A of the Act read with i....
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.... substitute the words 'Collector of Central Excise' for the words 'Central Excise Officer' in sub-section (1) of Section 11A, it becomes obvious that the Collector of Central Excise only can issue a show cause notice if the Department seeks to invoke the proviso to sub-section (1) of Section 11A of the Act. In this view that we take, we are of the opinion that the impugned notice is illegal and in contravention of sub-section (1) of Section 11A of the Act." The same view was also expressed by this Tribunal in the case of M/s. Pratap Rajasthan Copper Foils & Laminates Ltd. v. CCE, Jaipur, supra. Even otherwise the reasoning of the learned Collector, who had adjudicated the case that draft of the notice was approved by the Dy. Collector on 20-12-1985 when the relevant provision of the Act had not been amended and a fair copy of the notice had been issued in March 1986 (i.e. to say on 6-3-1986 when the law has been amended) appears to be factually incorrect. From the copy of the show cause notice on record we find that after a tentative draft was prepared and approved by the Deputy Collector on 20-12-1985 as alleged the factory premises of the appellants were again visited on 26th ....
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.... the opposite party therein that where a party has submitted to the jurisdiction of an authority such conduct disentitles him from any relief from the hands of the Court observing that where there is absence of jurisdiction to decide a matter and jurisdiction is exercised, the dispute goes to the root of the matter and relied upon the observations made by the Hon'ble Supreme Court in the case of United Commercial Bank Ltd. v. Their Workmen, AIR 1951 SC 230 to the effect that "consent cannot give a Court jurisdiction if a condition which goes to the root of the jurisdiction has not been performed or fulfilled. No appearance or consent can give a jurisdiction to a Court of limited jurisdiction which it does not possess". 6. Thus, we do not approve the reasoning recorded by the learned Collector in his impugned order for rejecting the defence of the appellants. 7. As regards the alternative submission of the learned SDR that since the show cause notice could be issued by the Deputy Collector (meaning thereby a Central Excise Officer), the notice in hand issued by the Deputy Collector could be held valid for six months, it would suffice to say that statutory requirements cannot b....
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....as it holds that the show cause notice dated 6-3-1986 is not valid even for six months. 10. The appellants have relied on, so far as the above issue is concerned on a judgment of the two-members Bench in the case of M/s. Partap Rajasthan Copper Foils and Laminates Ltd. v. C.C.E., Jaipur. Relevant para 38 from the said judgment has already been reproduced in para 7 of the judgment proposed by the Ld. Brother. 11. It has been pleaded that a show cause notice for recovery of duty based on the grounds of fraud, collusion or any wilful mis-statement or suppression of facts could be issued only by the Collector and not by any other officer, even if such a notice is made only for the normal period of six months. This plea has been upheld in the above judgment of the Tribunal. 12. In order to appreciate the plea, it is appropriate to set out the relevant extracts of the provisions of Section 11A :- "11A(1) - When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid ....
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....14. Effect of the proviso is to carve out an exception to the main provisions which stipulates issuing of a notice by a 'Central Excise Officer' within the period of six months from the relevant date - exception being that if the notice is based on any of the reason of fraud, wilful mis-statement etc., the notice may be issued by a Collector of Central Excise within five years. There is an extension of time for issuing the notice as well as restriction on the category of the Central Excise Officer issuing the notice. Both these parameters i.e. (1) invocation of longer time limitation of five years and (2) issuing of a notice by a particular category of Central Excise Officer, namely Collector under the exceptional grounds of fraud, collusion etc. have to be fulfilled simultaneously. 14.1. The general rule in construing a proviso is that "the words of a proviso are not to be taken 'absolutely in their strict literal sense' but that a proviso is of necessity ........ limited in its operation to the ambit of the section which it qualifies. And, so far as that section itself is concerned, the proviso again receives a restricted construction where the section confers powers, "it woul....
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....r-able from the subjects of liability to confiscation of goods and plant and machinery and imposition of penalty on the notice appellant. [See 1983 (13) E.L.T. 1321 (SC) para 12 - Amba Lal v. U.O.I.]. The notice, therefore, is not liable to be struck down for the purpose of adjudicating the confiscation of goods, plant and machinery and imposition of penalty. The notice is, therefore, perfectly valid so far as the aforesaid two subjects are concerned. Merits of the case on these two subjects are, therefore, required to be argued by both sides. 18. Preliminary point disposed of in the above terms. Dated: 14-3-1990 (P.C. Jain) Technical Member Since a difference has arisen between the two Members comprising of the Bench, the following question requires determination by a Third Member in accordance with law - "Whether the show cause notice under reference was without jurisdiction and if so, whether the entire demand of duty made therein was time barred, and so also the entire proceedings for other purposes". (P.C. Jain) (G.P. Agarwal) Technical Member ....
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....hri P.C. Jain himself accepted such severance cannot be made. (h) That there is yet another error in Shri Jain's order in assuming that a show cause notice could be issued by an authority for imposing penalty and confiscation of the goods and to this extent at least the present show cause notice is valid. The learned Advocate submitted that power to impose penalty or confiscation is derived from the power to re-open assessments and if the assessments cannot be re-opened, the question of imposing penalty does not arise. Explaining he submitted that the power to reopen assessments is derived from power to issue show cause notice and that if there is lack of power for issuing the show cause notice by an authority under Section 11A for reopening assessments, the Adjudicating authority cannot impose penalty alone. In support of his submission that severability does not apply to jurisdiction the learned Advocate relied on 1983 (12) E.L.T. 533 (CEGAT) in the case of Hydraulics Ltd. v. Collector of Central Excise, Madras. (i) That the Central Board of Excise and Customs issued instructions [F. No. 4/3/87-CX-1, dated 21-7-1987 (Cir. No. 8/87-CX-l)] clarifying that where a demand is....
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.... the objects and reasons of the amendment bill referred to the experience gained in the implementation of the Act, Shri Asthana submitted that the experience was confined to improper exercise of the power to demand duty beyond five years by the Assistant Collector of Central Excise, Collectors, etc. there could be no question of any abuse with regard to notices issued for a period of six months because such notices needed no reasons to be given. Referring to the earlier suggestion by the learned Advocate for the appellants that the object of the amendment was to take away from the officers of the Central Excise lower than a Collector the power to deal with cases of suppression etc. in toto, Shri Asthana submitted that these officers have vast powers of adjudicating offences where big issues are involved. Referring to the background of the amendment to Section 11A the learned Representative submitted that the question of making a distinction on the basis of competence of the officers did not arise and that all that was done by the amendment of 1985, was that the powers to issue demand beyond the period of six months was given to the Collector instead of the Assistant Collector of Ce....
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.... short-paid etc. by reason of fraud, collusion, etc. should be issued and such cases decided by the Collector. He submitted that the Finance Minister's own words disprove the arguments of Shri Asthana. He further submitted that there is no question of any anomaly because in matters where fraud, collusion, etc. are to be alleged, the show cause notice is issued by the Collectors and in other matters by officers below the rank of Collectors. He reiterated that merely containing an allegation of fraud etc. would place the matter in the proviso. He submitted that there is no question of whittling down sub-section (1) as that sub-section (1) is general in nature and the proviso to it is specific. He further submitted that a demand can follow a finding on the liability and only on such liability being established can there be a question of confiscation and penalty. He further submitted that the judgment in Khemka & Co. is in fact in the appellants' favour and referred to paragraph 10 of the said judgment. 28. We have considered the submissions of both sides. Our learned Brothers had already taken note of way in which Section 11A and its proviso are worded. At the time of his arguments....
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....lication of any of these principles the words employed in the sub-section and the proviso quite clearly show that there are two circumstances and there are two provisions of law viz. a situation in which no fraud, etc. is alleged, such a situation would be governed by the sub-section (1) of the Section 11A. The second situation would be where fraud, collusion, etc. are alleged and such cases would be governed by the proviso. 31. The learned Member (Judicial) took note of two judgments which were relied on by Shri Lakshmikumaran before us also. These are Gujarat State Fertilizer Co. Ltd. and Pratap Rajasthan Copper Foils and Laminates Ltd. (supra). In Gujarat State Fertilizer Co. Ltd. the facts involved show that a demand beyond six months was made by an officer below the rank of a Collector. Therefore, the facts are not similar. But, as mentioned in the Member (Judicial's) order, the language of the judgment helps, if at all, the appellants and not the Department. 32. The arguments advanced by Shri Asthana are based on the assumption that the proviso to sub-section (1) to Section 11A does not whittle down or take away anything from the main provision, but merely, in specified....
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....because the rule number or section number is not material so long as the power sought to be exercised is legally and validly exercised. The question now is whether that is the case in these demands and whether the recovery of duty under Rule 10 remains unvitiated by quotation of Rule 9(2) whereas the power was exercised under Rule 10. Rule 9(2) was resorted to in the demand because there was suspicion that there had been suppression of the production in respect of which the demands were issued. However, as we have seen, the demands were enforced by exercising power under a different rule. It is not that the same power exercised as had been proposed under the show cause notice but that a different power were employed under circumstances different from the ones in the mind of the issuer of the show cause notice. The quotation of Rule 9(2) was indicative of the circumstances in which he considered the short levy had arisen. Therefore, the issue of show cause notice under Rule 9(2) was incorrect and must be struck down. In the result the order of the Assistant Collector was not based on a show cause notice issued validly in accordance with the law." Keeping this position in view we ....
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....sp; (I.J. Rao) Member (Technical) Vide paras 38 to 40 enclosed (D.C. Mandal) Member (Technical) Vide para 41 enclosed (Jyoti Balasundaram) Member (Judicial) 38. Per : D.C. Mandal, Member, (T). - I agree with the findings and conclusion reached in the order written by learned brothers S/Shri G.P. Agarwal and I.J. Rao so far as they relate to the jurisdiction of the Deputy Collector of Central Excise in issuing the show cause notice for recovery of duty. I agree with the view that there are two situations for demanding duty under sub-section (1) of Section 11A of the Central Excises and Salt Act and under the proviso to the said sub-section, respectively. In the first situation, where there is no allegation of fraud, collusion, suppression or mis-statement of facts, etc. and the duty is sought to be demanded for a period of six months, a Central Excise Officer below the Collector of Central Excise is competent to issue the show cause notice under the main provision of sub-section (1). In the second situation, where fraud, collusion, or suppression of facts, etc. is alleged, it is only the Collector who can issue the show cause notice....
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....answered thus : the show cause notice under reference was totally without jurisdiction and the entire demand of duty made therein was time barred and so also the entire proceedings for other purposes. The file may be placed before the Original Bench for final orders. (I.J. Rao) Member (Technical) (D.C. Mandal) Member (Technical) Dated : 21st November, 1990. (Jyoti Balasundaram) Member (Judicial) FINAL ORDER 42. On receipt of the opinion of 3-Member Bench, the case was posted for delivery of judgment and notices were issued to the parties. 43. Shri V. Laxmikumaran, Advocate, appeared on behalf of the appellants and Shri G. Bhushan, learned SDR, on behalf of the respondent. 44. Arguing on behalf of the respondent Shri G. Bhushan, learned SDR, submitted that, at the time of the arguments of the appeal before the Referring Bench, the only argument advanced by the appellants was that the show cause notice dated 1-9-1986 issued in the instant case was incompetent being without jurisdiction, and the orders following the said notice were bad on that account and have to be struck down on that....
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....was time-barred, and so also the entire proceedings for other purposes" was framed by the Referring Bench. Consequently, it shall be deemed in the eye of law that the other Member agreed with the opinion expressed by the Technical Member by implication. To draw support to his arguments, he drew our attention to the case of Metal Extruders (I) Private Limited, Bombay v. Collector of Central Excise, Bombay, 1985 (19) E.L.T. 198, wherein it was held by this Tribunal that if an argument is advanced and no findings are given thereon in the order, then the same is taken to have been rejected. He also cited the case of Commissioner of Income Tax, Bombay v. Scindia Steam Navigation Co. Ltd., AIR 1961 (SC) 1633, wherein while interpreting the words "any question of law arising out of such order" appearing in Section 66(1) of the Income-tax Act, 1922, the Apex Court inter alia held that "when a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is therefore one arising out of its order". Continuing further he submitted that on reference by the Referring Bench, the President of the Tribunal constituted a 3....