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Pyrites Phosphates and Chemicals Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1983)LC880DTri(Delhi)
AppellantPyrites Phosphates and Chemicals
RespondentCollector of Central Excise
Excerpt:
1. this matter, by way of a revision petition, filed by pyrites phosphates & chemicals ltd., a government of india undertaking, before the central government under section 36 of the central excises and salt act, 1944, has been transferred to the tribunal, to be disposed of as an appeal because of provisions of section 35p of the said act. it is accordingly being taken as such for disposal.2. the appellant is stated to be engaged in mining and marketing of phosphorite, and one of the area of its activities is mussoorie phosphorite deposits, commonly known as mussoorie-phos. they state to have commenced their operations some time in september, 1969 but in the beginning, they were marketing the run of mine in its virgin form without any treatment but in the year 1973, they started.....
Judgment:
1. This matter, by way of a revision petition, filed by Pyrites Phosphates & Chemicals Ltd., a Government of India Undertaking, before the Central Government under section 36 of the Central Excises and Salt Act, 1944, has been transferred to the Tribunal, to be disposed of as an appeal because of provisions of section 35P of the said Act. It is accordingly being taken as such for disposal.

2. The appellant is stated to be engaged in mining and marketing of phosphorite, and one of the area of its activities is Mussoorie Phosphorite Deposits, commonly known as Mussoorie-Phos. They state to have commenced their operations some time in September, 1969 but in the beginning, they were marketing the run of mine in its virgin form without any treatment but in the year 1973, they started crushing of the rock phosphate mine, and marketed the same as mineral fertilisers.

3. Some time in May 1975, they addressed a letter to the Superintendent, Central Excises, Dehra Dun for clarification as to whether their preparation of the fertilisers, the process whereof was explained, attracted the provisions of excise laws, including obtaining of licence and payment of excise duty and it was on this enquiry that the concerned Superintendent of Excise intimated to them that rock fertilisers fell under Tariff Item 14HH, and the same was excisable, as such. They were also advised by means of subsequent letter dated 28/30-6-1975 to obtain a licence, further reiterating the stand that excise duty was payable on this product known as Rock Phosphate, including all past clearances and the appellant was directed to make a note of the said fact and proceed accordingly. This correspondence was followed by a notice of demand dated 14-9-1977, revised subsequently by means of notice dated 27-12-1977, whereby the appellant was called upon to show cause as to why duty calculated at Rs. 35,04,904.44 be not paid, which calculation was made on the basis of price list as on 15-9-1975 approved by the proper officer. The original demand was under rule 9 of the Central Excise Rules, to which rule 10 was added in the subsequent notice.

4. The appellant contested this demand by filing a detailed reply, as reproduced in the Order-in-Original on the following pleas :- (2) That, though they started mining operations in December, 1959, but actual marketing of crushed phosphates was started in August 1973 and prior to that ROM was being marketed in its virgin form.

(3) That ROM and phosphorite were not specified in the First Schedule of the Central Excise Tariff and therefore no duty was leviable on the goods cleared in virgin form which was cleared to the extent of 14,926.695 M.T. (4) That, excise duty was chargeable only on the goods cleared and not on goods manufactured.

(5) That they had incurred storage, transit, crushing, grinding and handling losses and no duty was chargeable on the quantity so lost.

(6) That, as a result of crushing and grinding there was a change in the physical form of phosphorite mined by them and in the absence of any chemical treatment it cannot be stated that any new product came into being and that mere change in the form did not amount to manufacture.

This point was sought to be fortified by reference to a number of Supreme Court and High Court Rulings.

(7) That, it was on their own initiative that they had sought clarification from the Department whether their product was dutiable or not and that on being advised the rock phosphate had been classified as a fertiliser; they started paying duty from 1-4-1976 although they were not convinced that duty was payable on their product.

(8) That, even the ground phosphorite could not be classified as a General Fertilizer as it could be used as a Fertilizer only in selected soils whereas chemical fertilizers can be used in all types of soils.

(9) That, under rule 9(2) duty could be demanded within the period specified in rule 10 and that period having been specified as 6 months in rule 10, the demand relating to the period prior to 15-3-1977 was time-barred.

(10) That, in term of Rule 10, demand could be raised within five years instead of the normal 6 months if there had been any fraud, collusion or wilful misstatement or suppression of facts on their part, this provision cannot be made applicable to them.

They also filed two statements showing the production and clearance of ROM and ground material for the year 1971-72 to 1975-76.

5. The Assistant Collector, after considering all the contentions, raised by the appellant held the view that on plain reading of Tariff Entry 14HH which took in its ambit "Fertilizers : all sorts", the appellant's contention that the product marketed by them was natural mineral fertiliser not chemically treated, was not relevant because according to the specifications as given in the Fertilizer (Control) Order, 1957 and Amendment Order of 1970, which laid down certain specifications, chemical treatment was not a necessary requirement in order to qualify for being classified as fertilizer. He also rejected the appellant's plea that this rock phosphate fertilizer was not a fertilizer for the reason that it could be used in special type of soils, as no such distinction had been made in the Tariff. He also found it to be not practical at that stage to verify the appellant's assertion as to the quantity turned out or marketed by them or alleged losses suffered in storage, transit, handling, clearance, etc., and holding the view that excise duty was leviable on manufacture though postponed to the time of clearance and the appellant having failed to submit documentary evidence in support of the figures supplied by them, the demand as made by him in the show cause notice was liable to be confirmed, and he passed orders accordingly. He disposed of the objection as to the time-bar by holding that it was a case clearly attracting rule 9(2) of the Central Excise Rules inasmuch as although the operations had been started as far back as in 1969, no steps were taken to comply with the provisions of the Central Excises Act and Rules, and that it was incumbent upon them to satisfy all the requirements as soon as they started manufacturing this excisable product and the initiative which they took in the year 1975, could have been taken much earlier, and in that event there would have been no question of falling into arrears or time-bar arising, and further observing that this was a case falling under proviso (a) of rule 10 whereby the demand of duty could be raised even for the period covering 5 years from the date the duty became payable and he accordingly confirmed the demand amounting to Rs. 35 lakhs, on a specified quantity of fertilizers, which demand related to both run of mine as well as rock phosphate fertilizer in their fine form.

6. The appellant contested this demand and levy, by going up in appeal before the Appellate Collector of Central Excise and the appeal was disposed of by order of the Appellate Collector, Bombay dated 18-1-79 whereby he rejected, as untenable, the contention of the appellant that demand for excise duty for the period 1971-72 to 1975-76 having been issued on 14-9-1977, was barred by time under rule 10, because according to him, the demand pertained to the period prior to amendment of rule 10, and rule 10A and as such the case being of non-levy provisions of old rule would apply by virtue of rule 10A. He, thus held demand for the entire period to be justified. He, however, modified the order of the Assistant Collector to the effect that run of mine could not be subjected to any excise duty and it was only crushed and ground rock phosphates turned into fertilizers which could be subjected to excise duty and directed that after ascertaining the quantity and value of this category, the demand be worked out and excise duty determined accordingly.

7. The appellant still felt aggrieved by this order despite the partial relief having been granted and took the matter in revision before the Central Government, pleading that they were a Government of India Undertaking, and engaged in mining and marketing of phosphorite from Mussoorie-Phosphorite deposits and they had started crushing activity only from the year 1973. According to them, to be classified as a fertilizer, the Government of India under the Fertilizer (Control) Order, 1957 have laid down that rock phosphate should satisfy the conditions specified in the Fertilizer (Control) Order, 1957, as to fineness in order to be treated as a fertilizer covered under Item 14HH of the C.E.T. for the purposes of duty and that in this view of the matter, the run of mine was not liable to duty of central excise and that it was not covered even after 1st March, 1975 under Entry 68 of C.E T., inasmuch as the levy of duty of central excise was only on goods, produced in a factory. And as such "rock of mine", in its virgin form, was not leviable to excise duty. They gave details of the quantity that had been so cleared without being subjected to any process of crushing or seiving, etc.

8. They also pleaded that the mines, in which they were carrying on their operations, were excluded from the definition of 'factory' as contained in section 2(m) of the Factories Act, 1948.

9. They further averred that it was on their own initiative that they had moved the Excise Department for the purposes of clarifications, and it was only then that they were advised that the crushed rock phosphate as per sample provided by them, had been classified as "fertilizer" falling under Tariff Entry 14HH and this correspondence was followed by the notice of demand dated 14-9-77 with reference to rule 9(2) of the Central Excise Rules. They pleaded to have submitted a reply, urging that rule 9(2) covered cases of clandestine removal, and that in the absence of that, demand was barred by time, further urging on facts that these phosphorites could not be treated as a manufactured item, inasmuch as there was no chemical treatment or change and that mere physical change brought about by crushing etc. could not be treated as a process of manufacture. They reiterated all other pleas such as this fertiliser, not being a common fertiliser but only restricted to certain soils and that it was a settled proposition that mere crushing etc. did not amount to process of manufacture and further that there was no suppression or misstatement by them and as such provision of rule 9(2) would not apply nor that of rule 10, inasmuch as there was no fraud, misstatement, misconstruction on their part and further that rule 10A had been erroneously invoked by the Appellate Collector on his own when it was not the case of the department originally. According to them, even under rule 10, the demand could not go beyond period of one year preceding the dates thereof and as such the demand for the whole of the period could not be enforced and that in any case rule 10 and rule 10A having both been amended by the time the demand was issued, there could be no recourse to the provisions of the old rules and that the Appellate Collector has erred in saying that since the period of demand related to the unamended rules, the same could be invoked. They made a specific reference to the authority of the Supreme Court reported as AIR 1970 SC 494 [M/s Rayala Corporation (P) Ltd. v.Director of Enforcement, New Delhi], supporting their contention that unless there was a saving clause while bringing about an amendment in the rule, section 6 of the General Clauses Act could not be invoked to protect action under the amended or repealed rules. They thus prayed that entire demand be quashed, and that, in any case, no demand covering the period beyond six months was sustainable, so preceding the date of the first notice issued on 14-9-1977.

10. On the date of first hearing of the appeal, which was 4th March, 1983, Shri S.P. Kampani, Consultant, appeared for the appellant alongwith Mr. Singh, General Manager of the Unit and submitted the same contentions, as set out in the grounds of appeal by laying emphasis on the fact that mere crushing of the rock phosphate into powdered form or seiving thereof to bring them to the required fineness did not involve any manufacturing activity, which postulated that some chemical change is brought about in the articles. He accordingly cantended that goods could not be characterised as fertilizers within the meaning of Item 14HH of CET, inasmuch as mere physical activity of powdering the rocks did not entail any chemical treatment, and being the product of the mines they are to be treated as excluded from this Tariff Entry; being: "natural fertilizers-- ...---not chemically treated".

11. After the arguments were addressed at some length, Shri K.D. Tayal, SDR, appearing for the Revenue requested for some time for reply arguments, particularly to meet the contention that these were to be treated as a category, excluded from the definition of 'fertilizers' as contained in Item HH. In view of this request of the learned departmental representative, and in view of the fact that Shri Kampani also expressed desire to make reference to some technical data in support of this contention, it was thought fit to give about two weeks' adjournment and the matter was posted for 17-3-1983, for further hearing. On the adjourned hearing, Shri Kampani again appeared for the appellant accompanied by Shri K.L. Luthra, Group General Manager whereas Shri K.D. Tayal, SDR, appeared for the respondent. Shri Kampani reiterated his arguments contending that the crushing activity by itself did not amount to "manufacture" so as to make the goods excisable and further that this article known as rock phosphate could not be termed as fertiliser within the meaning of Entry 14HH of the CET for the reason that this being a direct product from the mines was a natural fertilizer and as such excluded from the definition of the term "fertiliser" as contained in Item 14HH, which reads as follows : "14HH. Fertilizers all sorts, but excluding Natural Animal or Vegetable fertilisers when not chemically treated." He also made reference to certain literature filed during the interval between the first hearing and the adjourned hearing comprising of some extracts from technical books in which the rock phosphates is described to be a mineral, and primary source of phosphatic fertilisers.

12. Shri Kampani also referred to a Bench decision of this Tribunal in Appeal No. ED(SB)(T) A. No. 134/82(B) decided, on 11-2-1983 relating to this very appellant though concerning a different product, known as "pyrites" in the Bihar Unit, in support of his plea that mere crushing activity did not amount to manufacture.

13. Shri K.D. Tayal, emphatically controverted both the pleas pressed on behalf of the appellant. He contended, in the first instance, that when there was a specific Tariff Entry giving classification of a category of goods, then the question whether any process of manufacture was involved or not became redundant, and ceased to be a relevant consideration. He placed reliance in support of this contention on a Division Bench Authority of the Bombay High Court in the case of Kores (India) Limited v. Union of India and Ors., reported in 1982 ELT 253 (Bom.) laying down that if the Parliament had specifically included a particular product in the Schedule to CET, its validity cannot be questioned on the ground that such product did not involve manufacture.

14. Shri Tayal further countered the argument that 'manufacturing' was a necessary requirement in order to treat the goods as excisable and in that connection, he referred to a Division Bench authority of Delhi High Court in the case of Hyderabad Asbestos Cement Products Ltd. and Anr. v. Union of India and Ors. (1980 ELT 735) wherein it was held, that the product known as 'asbestos fibre', prepared after powdering asbestos rocks would attract excise duty for the reason that asbestos rocks are not saleable as such, and it is only when the detailed process of manufacture has been gone through that "asbestos fibre" is obtained, which is different and distinct from asbestos rock, on which the Legislature imposed the duty of excise and their Lordships further held that it could not be said that the detailed process of converting the asbestos rocks into asbestos fibre, i e.. breaking boulders into smaller pieces and further putting them into crushers, air cleaners, hurricane mills, separating fibres from the rock, is only a process and is not manufacture, and that in such cases, the two expressions are synonymous.

15. Shri Tayal sought to repel the second part of the arguments, advanced by the learned Consultant for the appellant, namely, that this fertilizer prepared directly from the rock phosphate mine by the appellant stood excluded from the definition of "fertilisers" as given in Tariff Entry 14HH and as such was not excisable with reference thereto, by pinpointing the fact this exclusion clause in Item 14HH, related only to "Natural Animal" or "vegetable fertilisers, when not chemically treated". He contended that the absence of a "," (comma) in between "natural" and "animal", was very significant and unmistakably indicated that what was sought to be taken out of the definition of "fertilisers'", were natural fertilizers of animal source. He fortified his contention by referring to the corresponding entry in the Customs Tariff vide Item 31.01, and also placed reliance on the Explanatory Notes to CCCN vide Chapter 31 which contained different headings relating to fertilisers.

16. Shri Tayal built up his arguments in this regard by reading out extensively from CCCN Notes particularly Chapter 31.01, Section VI, and contended that the term "natural animal fertiliser" had reference only to 'Guano' which was an accumulation of the excreta and remains of sea birds and is found in large quantities on certain islands and coasts and further that this heading included, inter alia, Excreta, dung, soiled fleece waste and manure unsuitable for use other than as fertilisers. He thus argued that mineral fertiliser could not thus be within the contemplation of the exclusion clause.

17. We have given our earnest consideration to the respective contentions canvassed on both sides. We find that appellant's challenge is to the levy of this product known as Mussoorie Phos (Rock phosphite) by treating it to be a fertiliser falling under Item 14HH of the CET.They further contend that not only this Item does not fall under this Tariff Entry but that it cannot be subjected to any excise duty as it did not amount to "excisable goods" as no manufacturing activity was involved.

18. We have, no doubt, been made aware of a Tribunal decision (Special Bench B) in this regard to support Appellant's contention which happened to be in this very appellant's case with reference to another product in another region. But on going through the judgment, copy whereof has been furnished by the appellant, we find that the emphasis in that case was on the fact that the goods having been treated to be falling under residuary Tariff Entry No. 68, which were not produce of the factory as contemplated in the Factories Act, and being a product of the mine were excluded from the definition thereof and thus not being goods as produce in a factory, they could not be treated as excisable, and while upholding this contention, it was observed in passing that mere 'crushing' did not amount to manufacture as defined in section 2(f) of the Central Excises Act.

19. We, however, find that on the admitted facts of the case before us, the process which has been described, namely of breaking of the rocks into small pieces and then powdering them and then seiving them in specified meshes and bring them to a given fineness certainly brings the case on all fours to Divisional Bench authority of Hon'ble High Court of Delhi referred to above, namely, Hyderabad Asbestos Cement Products Ltd. and Anr. v. Union of India and Ors.. It has been categorically held in the aforesaid case that the detailed process of converting the asbestos rocks to asbestos fibre by breaking boulders into smaller pieces and after putting them into crushers, air cleaners, separating fibres was something more than a mere process, and that in such situations, the process of treatment, labour and manipulation and conversion of raw material into a different article having a distinct name, character, and use, did amount to manufacture, so as to make the goods liable to levy of excise duty.

20. Their Lordships highlighted the facts that asbestos rocks as such are not saleable and it is only when the detailed process of manufacture has been gone through that this product known as "asbestos fibre" is obtained, which is different and distinct from asbestos rocks, and consequently the imposition of excise duty on this product by insertion in Tariff Entry 22F in the First Schedule to the Central Excises Act, was fully sustainable.

21. In the case before us also, various process have been described in the write-up filed by the appellant, and also in the booklet published by the Ministry of Agriculture and Irrigation recommending use of Mussoorie Phos, whereas this has been described positively as a fertiliser and at page 13 of this booklet entitled "Recommendation of Mussoorie Phos" it has been expressly mentioned that under Item 23 of the Schedule I of the Fertiliser (Control) Order, rock phosphate has been declared as a fertiliser in the aforesaid Order operated under the Essential Commodity Act. Its composition has also been given at page 20 as follows : "Mussoorie Phos contains micro nutrients like zinc, copper and molebdenum besides micro plant, nutrients, i.e., Phosphorous, calcium, magnesium and sulpher." 22. It is thus obvious beyond a shadow of doubt that this product known as Mussoorie Phos is a mineral product and has been treated for all purposes to be a phosphatic fertiliser which the appellant has described repeatedly in the papers submitted by them as mineral fertiliser and is composed of various ingredients. It is also to be assumed that rock phosphate as such is not marketed. It is only after the process of breaking, powdering, seiving and bringing it to a specified fineness that it becomes fit for use as a fertiliser, and is publicised as a fertiliser specifically brought under the Fertilizer (Control) Order. It is also pertinent to note that the Appellate Collector has given partial relief to the appellant by taking out the 'run of mine' in its virgin form from liability to excise duty. The plea in the appeal in respect thereto is, therefore, manifestly redundant as what has been held to be excisable is only this finished product after undergoing various processes, and which is marketed as a phosphatic or mineral fertiliser.

23. We have, therefore, no hesitation in upholding the Appellate Collector's order that this product known as "Mussoorie Phos" which is the trade name given to the rock phosphate and which is being publicised as a fertiliser, is to be treated as such within the meaning of Tariff Entry 14HH.24. This would be so, in spite of the argument that "Natural Animal fertiliser" are excluded from this entry when not chemically treated because we find the absence of a "," as pointed out by the Senior Department Representative to be very significant, because had it been there, "natural fertiliser" would have been a class separate from "animal fertiliser" and then it could be urged on behalf of the appellant that this being mined product and not being subjected to any chemical activity could be treated as natural mineral product, not chemically treated. The entire complexion, however, changes when we rind the category of fertiliser which has been excluded is not simply 'natural fertiliser' but 'natural animal fertiliser'.

25. The fact that this term has a definite meaning and connotation is apparent on a reference to the Explanatory Notes given to the CCN. We are alive to the' fact that these Notes do not furnish any binding definitions, nevertheless they do provide guidelines which can be borne in mind, when the Tariff Entry does not contain any express definition, and it becomes necessary to appreciate the import of a given expression, as understood commonly. It goes without saying that these definitions and clarifications as interpreted in the Explanatory Notes to the CCCN represent the internationally understood meaning of a category of items and are thus valuable guidelines as to understand meaning of a particular item in common trade parlance or its conventional meaning as generally understood.

26. The Tariff Entry 14HH, though not happily worded but when read alongside the CCCN Notes and the Tariff Entry in the Customs Tariff, namely, 31.o1, it becomes manifest that mineral fertilisers, as this rock phosphate is, could not be within the contemplation of exclusion Clause 14HH because the. term "natural animal fertiliser" has a definite meaning, as reproduced in the preceding portion of the judgment.

27. We find this inference possible from the fact that mineral or chemical fertilisers, nitrogenous phosphatic or potassic and other fertilisers have been treated, as a separate heading in the Customs Tariff which is 31.02/05. This is an unambiguous indication of the fact that the fertilisers falling in the category of "mineral" or phosphatic are treated under separate heading than "natural animal fertilisers".

This type of distinction would have added to clarity, if reproduced in the Central Excise Tariff also, but its absence does not mean that different meanings can be attributed to the same term. We are thus of our firm view that the exclusion clause in Entry 14HH would not cover these fertilisers and they ought to be treated as fertilisers, particularly when this Entry 14HH is of wide amplitude taking in its purview fertilisers of all sorts.

28. Before parting, we would also like to dispose of an interesting point, introduced in rejoinder arguments by Shri Luthra, Group General Manager of the appellant-company, by reference to research contained in a volume published by Geological Survey of India, that the rock phosphates have also their origin to bones or fossils of dead sea animals and taking that source of these rock phosphates, these could also be termed as "natural animal fertilisers". We are afraid that it is not possible to accept such a farfetched argument. We draw support for this view from observations of their Lordships of the Supreme Court, made in the case of Madras Rubber Factory Ltd. v. Union of India and Ors. (A.I.R. 1977 S.C. 597) emphasising that once the articles are in circulation and come to be described and known in common parlance then there is no difficulty for statutory classification under particular entry. Their Lordships further observed that Courts are "not required to consider the history and chemistry of a particular item", and reproduced remarks from a judgment of the Exchequer Court in England also in an Excise Tax Act Case, holding that- "Now the statute affects nearly everyone, the producer or manufacturer, the importer, wholesaler and retailer, and finally, the consumer ....Parliament would not suppose in an Act of this character that manufacturers, producers, importers, consumers, and Ors. who would be affected, by the Act, would be Botanists" and that the purpose was only to "class substances according to the general uses and known denominations of trade" and that it was not 'the Botanist' conception as to what constitutes a 'fruit' or 'vegetable' which must govern the interpretation to be placed on the words, but rather what would ordinarily in matters of commerce be included therein".

29. On parity of reasoning, one could say that the history of the product as stated by the geologists cannot be the guiding factor but the product as understood, and circulated in the market. This being given the nomenclature as fertilisers, we do not think that such strained and remote meaning like the geological origin of the rock phosphate, centuries back, would be relevant consideration.

30. We, therefore, uphold the classification as done by the Excise Authorities, i.e., under Item 14HH of the Central Excise Tariff. The Appellate Collector by means of his impugned order has already allowed the plea that run of mine was not leviable to any excise duty. The concerned authorities shall, therefore, receive documentary evidence as to the respective quantity of the two products and determine the quantity of this rock phosphate fertiliser only for the purposes of excise duty.

31. We further find that Appellate Collector also rejected the plea of the appellant for allowance being given on account of losses during storage and removal, etc. This request was turned down only on the ground that no material had been placed on record to determine the quantity of such losses. Since the matter will go back to the Appellate Collector for the purpose of determining the quantity of rock phosphate fertiliser falling under Item 14HH it is directed that the appellant may be allowed to produce documentary evidence in this regard and given relief accordingly, in case they are able to establish definite quantity by satisfactory evidence of such losses.

32. We further find that appellant's contention that rule 10A had been wrongly invoked by the Appellate Collector, has substance because it has been categorically held by Hon'ble Supreme Court in the case of M/s Rayala Corporation (P) Ltd. v. Director of Enforcement, New Delhi (A.I.R. 1970 SC 494) that proceedings initiated after repeal of some rules cannot be sustained. It is a matter for judicial notice that rule 10A was repealed with effect from 6-8-1977. It is also on record that the notice to show cause was issued on 14-9-1977. In view of the Supreme Court authority referred to above and cited by the learned Consultant for the Appellant, we hold it to be a case where rule 10A has been wrongly invoked by the Appellate Collector. We also find that by taking resort to rule 10A, the Appellate Collector impliedly conceded the contention of the appellant that action could not be taken under rule 9(2) for the reason that there was no clandestine or suppressions removed and that it was a case of bona fide belief that the product was not excisable. This stand of the appellant about applicability of rule 9(2) of the Central Excise Rules is also fortified by Supreme Court judgment in the case of N.B. Sanjana, Assistant Collector of Central Excise, Bombay and Ors. v. The Elphinstone Spinning and Weaving Mills Co. Ltd. (A.I.R. 1971 SC 2039).

We thus find this contention of the appellant justified and as a result, demand could be enforced only for the period allowed by rule 10, as it then prevailed, which according to the appellant, was that of six months, preceding the date of demand. In this view of the matter, it is directed that so far as previous clearances are concerned, excise duty could be levied only with reference to Item 14HH of the C.E.T., on this product known as rock phosphate (Mussoorie Phos) for the period of six months only preceding 14-9-1977.

33. We allow appeal accordingly to this limited extent, namely, relating to the period of excisability.

34. While I agree with my learned colleagues on the Bench that there has been no wilful suppression on the part of the appellants and that, therefore, Rule 10-A was not applicable to the facts of the case, I have to differ from them on their conclusion regarding the operation of the time-bar under the provisions of Central Excise Rules with regard to the demand notice issued by the Central Excise authorities "on 14-9-1977 on the appellants. I find that a similar issue came up before Special Bench 'B' in the case of M/s Anna Aluminium Co., Alwaye, Kerala v. Collector of Central Excise, Cochin, disposed of by the Bench by its Order No. B-67/83. This decision of the Tribunal had not been referred to by either the appellants or the Departmental Representative in the course of hearing and had come to my notice subsequently. The point involved in that case was that a notice under Rule 10 read with Rule 173-J of the Central Excise Rules with reference to the period 28-4-1977 to 28-5-1977 was issued on 6-1-1978. Thus the notice dated 6-1-1978 was within time with reference to Rule 10 as it existed prior to 6-8-1977, but it was outside the time-limit of six months with reference to the Rule as it stood on the date of issue of the notice.

The Bench considered the matter at length and by a majority of 2 to 1 came to the conclusion that the repealed Rules 10 and 173-J would be available to the Government in respect of rights, obligations and liabilities acquired, accrued or incurred under these 2 Rules. In order to appreciate the logic of this decision it would be appropriate to set out the relevant portions of the judgment :- "As regards the third point relating to the limitation, we do agree that section 6 of the General Clauses Act would not be applicable to the subordinate legislation, namely, rules, regulations etc. (Re : Rayala Corporation v. Director of Enforcement AIR 1970 SC 494 P. 503). However, apart from the (1 Decision of the Supreme Court in the State of Punjab v. Mohar Singh, AIR "but when the repeal is followed by fresh legislation on the same subject, the court would undoubtedly have to look to the provisions of the new Act but only for the purpose of determining whether they indicate a different intention."State of Orissa v. M.A. Tulloch & Co., AIR "The principle on which the saving clause in section 6 of the General Clauses Act is based is that every later enactment which supersedes the earlier one or puts an end to an earlier state of law is presumed to intend the continuance of rights accrued and liabilities incurred under the superseding enactment unless there were sufficient indications express or implied in the latter enactment designed to completely obliterate the earlier state of the law.")decisions relied upon by Shri Raghavan Iyer, it is also made clear in Jayantilal's case (AIR 1971 SC. 1193) that: "In order to see whether the rights and liabilities under the repealed law have been put an end to by the new enactment, the proper approach is not to enquire if the new enactment has by its new provisions kept alive the rights and liabilities under the repealed law but whether it has taken away those rights and liabilities.

The absence of a saving clause in a new enactment preserving the rights and liabilities under the repealed law is neither material nor decisive of the question".

The principle laid-down in the said case applies to the subordinate legislation with greater force since they are framed within the restricted frame work of the statutes under which such legislation is made. The subordinate legislation being delegated legislation could not create any substantive rights, obligation' or liabilities with retrospective effect. In the Income-tax Officer, Allepy v. M.C. Pommoose and Ors. (AIR 1970 SC 385) the Supreme Court observed as under :- "The Parliament can delegate its legislative power within the recognised limits. Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the legislature, it may or may not be possible to make the same so as to give the language employed in the statutory provision which may in express terms or by necessary implication empower the concerned to make a rule or regulation upon which the doctrine of implied repeal is founded. There can be no incongruity in attributing to the latter legislation, the same intent which section 6 presumes whether the word "repeal" is expressly used." 35. Section 37 of the Central Excises and Salt Act, 1944 does neither expressly nor implicitly empower the Central Government to make rules with retrospective effect. Hence we cannot give any retrospective effect to the amended rules wherein the period was revised to 6 months.

Thus even after 6-8-1977 recourse to the repealed rule 10 read with rule 173J is legal and permissible. Now we have to consider whether the amendment notification had effected any legal proceedings in respect of any such right, obligation or liability accrued under repealed rule 10.

Even in this case we do not find anything in the amending notification to show any intention to destory them. Even if it is taken that the rules are partly procedural, in so far as the amendment would have the result of making demands which otherwise be in order, time-barred, as soon as the amendment comes into force, reliance can be placed on the Full Bench Judgment of the Rajasthan High Court in Government of Rajasthan v. Sangram Singh-AIR 1962, Raj. 43 that when the remedy to enforce a vested right is altogether barred on the date when the new law comes into being without providing any breathing time to a litigant then the remedy must continue to be governed by the old law of limitation. "If a right had vested in the Government to recover dues short levied or erroneoulsy refunded within one year prior to 6-8-1977 both the repealed rules 10 and 173J would be available in respect of rights, obligations and liabilities acquired, accrued or incurred under the two rules. Thus prior to 6-8-1977, the Government's right to recovery of dues short levied in respect of excisable goods specified under rule 10 read with rule 173J could be executed within one year from the date on which the duty was paid, or adjusted in the owner's account-if any, or from the date of refund. Hence we reject the third point put forward by the appellants and hold that the demand was not hit by limitation of time." 36. Apart from the judicial pronouncements referred to in the majority judgment of the 'B' Bench, the observations of Justice Sir Asutosh Mookerjee of the Calcutta High Court in Manjuri Bibi v. Akkel Mahmud [19 I.C. 793 at p. 813 (Cal.)] are also relevant to the present issue : "No doubt, we find it frequently asserted in judicial decisions that a Statute of Limitation embodies merely a rule of procedure; but this statement is only general and not universally, true. The essence of the matter is that when a new Statute of Limitation, which shortens the period for institution of suits and comes into force the moment it becomes law, is sought to be made retrospectively applicable to causes of action which have accrued earlier than the length of the time prescribed, it ceases to be a statute of mere procedure and serves to destroy pre-existing and enforceable rights. Under circumstances like these the Court, when Invited to hold that the new statute has retrospective operation, will struggle against the acceptance of such interpretation, unless there is the clearest indication that the Legislature intended to destroy existing rights without notice and thus to penalise innocent litigants." Reference could also be made to the view expressed in a full Bench judgment of the Rajasthan High Court in Jethmal v. Ambsingh [AJR 1955 Raj. 97-61 L.R. (1955) 5 Raj. 334] to the following effect :- "It is only in rare cases the law shortening the period of limitation neither provides a saving clause, nor is there an interval between the publication of the law, and its coming into force. Where this happens, it has generally been held by the courts that suits or applications, which are barred before the new law comes into force, are governed by the old law of limitation, for the new law, under these circumstances, does not remain a mere procedural law, but destroys the substantive right to file a suit or make an application." 37. Keeping in view the judicial pronouncements referred to above and agreeing with the reasoning adopted by Special Bench 'B' of this Tribunal, I have come to the conclusion that in the present case though the notice was issued on 14-9-1977, i.e. after substitution of Rule 10 as it stood before 6-8-1977 by a fresh Rule 10, in so far as it seeks to recover Government dues which arose in a period prior to 6-8-1977, i.e. the date of substitution of the Rule, the time-limit applicable would be one year as was the case in Rule 10 read with Rule 173J prior to 6-8-1977. In this view of the matter I hold that the Central Excise authorities are entitled to recover the excise duty with reference to Item 14HH of the Central Excise Tariff on the product known as "rock phosphate (Musroorie-Phos)" for the period of one year preceding the date of the notice, namely, 14-9-1977. The appeal is accordingly allowed to this limited extent.


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