1. These two appeals arise out of a show cause notice under Section 131, Customs Act (as then in force) issued by the Central Government, proposing 1o revise the combined Order-in-Appeal No. S/40-24/77LC and S/40-25/77I.C., both dated 5.10.1977, of the Appellate Collector of Customs, Bombay. In accordance with the provisions of Section 131B (2), Customs Act, these proceedings have been transferred to the Tribunal to be dealt with as an appeal filed by the Collector of Customs, Bombay, to the Tribunal. Since the Order-in-Appeal is a combined one covering two appeals to the Appellate Collector, the appellant Collector was required to file a supplementary appeal, in accordance with the practice of the Tribunal, which has been numbered as appeal No.CD(SB)-1/84D. However, since the issues dealt with in both these appeals are common, they were heard together and a common Order is being passed.
2. The substantive question involved in these appeals is whether the goods imported by the respondents, and described by them as "staple fibre tow", were liable to countervailing duty at the rate of Rs. 30/- per Kg., applicable to "Nylon staple fibre" under notification No.8/75-CE dated 1.3.1975. On their importation the goods were charged to countervailing duty at the concessional rate, applying the above exemption notification. Subsequently, the Customs authorities issued less charge demands under Section 28(1), Customs Act, on the ground that the countervailing duty should have been levied at the rate of Rs. 30/- per Kg., as against the concessional rate of Rs. 6/- per Kg. There is no controversy on the fact that these demands were within the time limit specified under Section 28(1). On the demands being confirmed by the Assistant Collector, the respondents appealed to the Appellate Collector. In his combined Order dt. 5.10.1977, the Appellate Collector held that since the description of Central Excise Tariff Item 18 did not specifically mention "tow", tow would naturally be covered by the description "rayon and synthetic fibres" (the description is now "man-made fibres"). He also observed that notification No. 28/75 provided that "Nylon staple fibres" would be exempted from excise duty in excess of Rs. 6/- per Kg. He held that the low, being uncut staple fibre, would be covered by this exemption. He accordingly allowed the appeals and directed that the less charge demands be withdrawn.
3. It is in respect of this combined Order-in-Appeal that the Central Government had issued their show cause notice dated 18.12.1978. In that notice it was observed that in notification No. 28/75, the description was "staple fibre" and "staple tow" which seemed to indicate that "staple fibre" and "staple tow" were two separate items, and that the lower rate of Rs. 6/-per Kg., in the aforesaid notification was exclusively applicable to "nylon staple fibre" and not to "nylon staple tow". Government were, therefore tentatively, of the view that the goods were liable to countervailing duty at Rupees 30/- per Kg.
Government accordingly proposed to annul the appellate Order dated 5.10.1977 and called upon the respondents to show cause against their proposal.
4. When the matter came up for hearing, Shri Lakshmi Kumaran, the learned representative of Department, addressed us in great detail and with great conviction regarding the justification for the view proposed to be taken by the Central Government. He also, anticipating an argument which he felt the respondents were likely to advance, argued that the show cause notice was not barred by limitation. His arguments on this aspect are set out below.
5. The date of the Appellate Collector's order is 5.10.1977. The date of the show cause notice is 18.12.1978, i.e., about one year and two and a half months after the date of the Order-in-Appeal. The show cause notice is evidently issued under Section 131, Customs Act. Rather strangely, there is no mention in the body of the show cause notice of the section or Sub-section under which the appellate order is proposed to be revised. However, the "subject" of the show cause notice refers to Section 131(3), which is the appropriate provision. It has, therefore, to be assumed that the show cause notice was issued under Section 131(3), under which the Central Government had the necessary power. It has not been argued by the respondents that the show cause notice was vitiated by non-mention of any section in the body thereof.
6. On the assumption that the show cause notice was issued under Section 131(3), a question would still arise whether it was within time. For a proper appreciation of this question, Sub-sections (3), (4) and (5) of Section 131 as then in force, are produced below- (3) The Central Government may of its own motion annul or modify any order passed under Section 128 or Section 130.
(4) No order enhancing any penalty or fine in lieu of confiscation or confiscating goods of greater value shall be passed under this section- (a) in any case in which an order passed under Section 128 or Section 130 has enhanced any penalty or fine in lieu of confiscation or has confiscated goods of greater value ; and (b) in any other case, unless the person affected by the proposed order has been given notice to show cause against it, within one year from the date of the order sought to be annulled or modified.
(5) Where the Central Government is of opinion that any duty of customs has not been levied or has been short levied, no order levying or enhancing the duty shall be made under this section, unless the person affected by the proposed order is given notice to show cause against it within the time-limit specified in Section 28.
7. In the present case, the countervailing duty, which is an additional duty of customs, was levied at Rs. 6/- per Kg., whereas in the tentative view of the Central Government it should have been levied at Rs. 30/- per Kg. The proposal of the Central Government was to enhance the duty from Rs. 6/- to Rs. 30/- per kg., and the show cause notice was given in this context. On the face of it, such a notice would appear to attract the provisions of Sub-section (5) above. Under Section 28, Customs Act, when any duty has not been levied or has been short-levied or erroneously refunded, the proper officer may within six months from the relevant date serve a notice on the person concerned to show cause why he should not pay the amount of duty not levied or short levied. (Limitation period of six months is the normal period. In certain cases the period is one year and in certain other cases it is five years. It is, however, no one's case that the latter two periods are applicable to the present case). The relevant date for the purposes of Section 28 in a cause of this nature would be the date of payment of duty. It would, therefore, appear, from the terms of Section 131(5), read with Section 28, that the show cause notice in the present case which was issued more than one year after the date of the Order-in-Appeal, was barred by limitation.
8. It was, however, Shri Lakshmi Kumaran's contention that the notice was not barred by limitation. He first argued that Sub-section (3) of Section 131 was an independent provision, which did not specify any time-limit. It was, however, pointed out to him by the Bench that this sub-section was plainly to be read with the subsequent sub-sections, and that Sub-section (5) clearly applied to a case of short-levy of duty like the one before us. Shri Lakshmi Kumaran then argued that Sub-section (5) did not require the Central Government to issue the show cause notice within six months from the date of the Order-in-Appeal. According to him, the reference to the time-limit specified in Section 28 meant that the show cause notice was the one contemplated in Section 28. In other words, so long as a show cause notice under Section 28 had been issued at the initial stage, the limitation under Sub-section (5) of Section 131 would not come in the way of the Central Government when it subsequently invoked that section, irrespective of the time lag between the show cause notice issued by the Central Government and the date of the Order-in-Appeal.
9. In this connection Shri Lakshmi Kumaran sought to draw support from the difference in the working of Sub-sections (4) and (5) of Section 131. In Sub-section (4), relating to enhancement of a penalty, etc., Clause (b) requires that the person affected should have been given notice to show cause within one year from the date of the order sought to be annulled or modified. In Sub-section (5), on the other hand, there is no reference to the date of order sought to be annulled or modified but only to the time-limit specified in Section 28. According to Shri Lakshmi Kumaran, this difference in wording between two closely connected sub-sections was very significant and meant that under Sub-section (5) there was no limitation with reference to the date of the Order-in-Appeal.
10. Referring to the judgment of the Supreme Court in the case of (Jeep Flashlight Industries, reported in 1983 E.L.T. 1596 : 1977 Cen-Cus 1D, 39D, Shri Lakshmi Kumaran pointed out that in that case the Supreme Court had held that, in a case where a refund had been ordered under Section 128 but had not actually been made, the time-limit under Sub-section (5) of Section 131 did not apply, as it could not be said that refund had been made. Shri Lakshmi Kumaran fairly did not argue that this decision applied to the present case, which was one of alleged short-levy and not erroneous refund.
11. In the course of the hearing, Shri J.R. Gagrat, learned Counsel for another appellant, who was present in the court room sought the permission of the court to make a brief intervention, since the point before us was one of general interest and importance. He then submitted that there was a decision of the Delhi High Court which was squarely applicable to this question. This was in the case of Associated Cement Companies Ltd. v. Union of India, reported in 1981 E.L.T. 421 : 1981 ECR 66D-Delhi. Shri Lakshmi Kumaran responded by stating that the judgment was with reference to the provisions of the Central Excises and Salt Act, which were not pan materia with the relevant provisions of the Customs Act.
12. In view of the decision we propose to take we are not setting out the arguments advanced by Shri Lakshmi Kumaran as regards the merits of the classification.
13. On behalf of the respondents, Shri N. Singh confined himself to the question of limitation. He sought to reply on the judgment of the Supreme Court in the case of Geep Flashlight Industries to which reference has already been made. He submitted that the show cause notice issued by the Central Government was plainly barred by limitation and was, therefore, invalid and that we should accordingly reject the two appeals.
14. We have carefully considered the point raised regarding the interpretation of Section 131 of the Customs Act. It appears to us that the judgment of the Delhi High Court to which our attention was drawn is quite relevant to the issue As already stated, that was a case under the Central Excises and Salt Act, and the notice was issued under Section 36(2) of that Act, as in force at the relevant time. The said sub-section is reproduced below: The Central Government may, of its own motion or otherwise, call for and examine the record of any proceeding in which any decision or order has been passed under Section 35 or Section 35A of this Act for the purpose of satisfying itself as to the correctness, legality or propriety of such decision or order and may pass such order thereon as it thinks lit: Provided that no decision or order shall be varied so as to prejudicially affect any person unless such person is given a reasonable opportunity of making a representation and, if he so desires, of being heard in his defence: Provided further no proceedings shall be commenced under this sub-section in respect of any decision or order (whether such decision or order has been passed before or after the coming into force of this sub-section) after the expiration of a period of one year from the date of such" decision or order: Provided also that where the Central Government is of opinion that any duty of excise has not been levied or has been short-levied or erroneously refunded, no order levying or enhancing the duty, or no order requiring payment of the duty so refunded, shall be made under this section unless the person affected by the proposed order is given notice to show cause against it within the time limit specified in Section 11A.15. In the case before the Delhi High Court the notices of the Central Government under Section 36(2) were issued after the expiry of six months but within the period of one year after the orders of the Appellate Collector, which were sought to be revised, were passed.
These notices were challenged before the Delhi High Court as being ultra vires of the third proviso to Section 36(2), being barred by limitation thereunder. In its judgment, the Delhi High Court found that the show cause notices were barred by limitation and therefore quashed them. In reaching this decision, the Delhi High Court held that the period of limitation for the purposes of the application of the third proviso to Section 36(2) should be calculated from the date of the appellate order. The observations made by the Delhi High Court in this regard are reproduced below: In passing we may make it clear that we understand the words "Time limit specified in Section 11-A" used at the end of the third proviso to Section 36(2), to mean a period of six months from the date of the order passed under Section 35 or 35A. We emphasise that the expression "relevant date" is not used in the third proviso. The reason according to us, is that the limitation which is specified in Section 11A has to be read into the third proviso in Section 36(2) in relation to the orders passed under Section 35 or 35-A. The relevant date in Section 11-A is of action taken by assessing authorities and, therefore, it is not applicable and cannot be incorporated in the third proviso to Section 36(2) for the simple reason that the revision under Section 36(2) is not of the orders of the original assessing authorities but only of the orders passed in appeal/revision under Section 35 or 35-A. We have, therefore, calculated the period of six months for the purposes of the application of the third proviso to Section 36(2) from the date of the appellant orders. It may also be mentioned that the same policy of providing a shorter period of limitation, namely, of six months with reference to duties not levied or not paid or short levied or not paid in full or erroneously refunded is to be found in Rule 9.
16. We have earlier produced the relevant provisions of Section 131, Customs Act as well as those of Section 36(2), Central Excises and Salt Act, as they stood at the relevant times. We find that the wording of the third proviso to Section 36(2) of the Central Excises and Salt Act, corresponds almost exactly to that of Sub-section (5) of Section 131 of the Customs Act. We cannot, therefore, accept the contention of the learned Senior Departmental Representative that the two provisions are not pari mateia. It appears to us that they are indeed pari inateria and that the judgment of the Delhi High Court in the case of Associated Cement Companies Ltd., would be very relevant in regard to the question now before us. In other words, Section 131(5) would require that in cases like the present which come within the scope of that sub-section, the show cause notice of the Central Government should be issued within six months (or one year or five years, as the case may be) from the date of the Order-in-Appeal 17. While we thus respectfully follow the judgment of the Delhi High Court, we would add a few other observations reinforcing the view which we are taking.
18. If the interpretation urged by Shri Lakshmi Kumaran is adopted, it would mean that, once the original show cause notice by the Assistant Collector or other lower authority is issued within time, there is no time limit at all applicable for revision by the Central Government under Section 131. This would be the case even if a period of several years were allowed to pass between the date of the Order-in-Appeal and the date of issue of show cause notice by the Central Government. Since in cases of this category the assessee would have a decision in his favour by the appellate authority, he would normally be entitled to regard the matter as settled in his favour. It would not be in accordance with the equity if in such a situation an assessee can, after an inordinately long period, be called upon to pay the amount of duty alleged to have been short-levied. This, however, would be the inevitable consequence of adoption of the interpretation canvassed by the learned Senior Departmental Representative. We may point out that in the case of Geep Flashlight Industries Ltd., which was the subject matter of the Supreme Court decision, there was no question of taking back an amount already refunded, but of withholding an amount ordered to be (but not actually) refunded.
19. Again, even the language of Sub-section (5) goes against the interpretation proposed by Shri Lakshmi Kumaran. The relevant words of that sub-section are "unless the person...isgiven notice...." (emphasis added). The word "is" is in the present tense. It is difficult to reconcile this language with the interpretation that it refers to a notice which had already been given at the initial stage.
20. For these reasons we consider that the show cause notice issued by the Central Government in this case, being well beyond six months from the date of the Order -in-Appeal, was clearly time-burred and that the proceedings were consequently barred by limitation. In this view, there is no need for us to go into the question whether the concessional rate of Rupees 6/- per Kg. under notification No. 28/75 was applicable. In the result, we reject both these appeals and confirm the combined Order-in-Appeal dated 5.10.1977 of the Appellate Collector of Customs.