1. Appeal under Section 35-E of the Central Excises and Salt Act, 1944 praying that in the circumstances stated therein the Tribunal will be pleased to restore the Order Original C. No. V/34/3/186/79-MP III dated 22-2-82 of the Assistant Collector of Central Excise, Mysore Division.
2. This appeal coming up for orders upon perusing the records and upon hearing the arguments of Shri S.K. Choudhury, Senior Departmental Representative for the appellant and upon hearing the arguments of Shri A.K. Raghavendra Rao, Advocate for the respondent, the Tribunal makes the following.
3. This is an appeal by the Collector of Central Excise, Bangalore against the Order-in-Appeal No. V/34/1/82 dated 9-6-82 against the Order No. V/34/3/186/79-MP III dated 22-2-82 passed by the Assistant Collector of Central Excise, Mysore Division. In his original order the Assistant Collector required M/s. Karnataka Scooters Ltd., Somanahally to pay a sum of Rs. 1,36,906.18 being the Central Excise duty short-paid by them during the period August, 1977 to April, 1978, February, 1979 and March 1979 as mentioned in the R.T. 12 returns for.
the respective months under Rule 10 of the Central Excise Rules, 1944, read with Section 11A of the Central Excises and Salt Act, 1944. The events relating to this order may be summarised as follows: 4. The respondent had been obtaining Internal Combustion Engines, on which duty had been paid, for the manufacture of scooters and deducting the arnount of duty paid on such Internal Combustion Engines, while arriving at the amount of duty payable on the scooters manufactured and cleared by them. They were also availing of the exemption contained in Notification No. 198/76-C.Ex. dated 16-6-76 according to which certain class of scooters had been exempt from payment of duty leviable on them, as is in excess of 75% of the duty, subject to certain conditions. While clearing the scooters the respondent had not taken into account the net duty leviable on the scooters i.e. the duty normally leviable under the Central Excise Tariff; subtract the amount of duty paid on the Internal Combustion Engines and then reduce the figure by 2596. This had resulted, according to the appellant, in the short-payment of the duty to the extent of Rs. 1,36,906.18. When the monthly R.T. 12 returns were seen by the concerned Superintendent of Central Excise, he noticed, the short-payment and made a suitable endorsement to that effect on the relevant R.T. 12 returns in terms of Rule 173(I) of the Central Excise Rules, 1944. The amount indicated as short-paid was not debited by the respondent in the Personal Ledger Account. Thereupon the Superintendent of Central Excise, I.D.O. Mysore issued a show cause notice under C, No. V/34/3/139/79-M.P.II dated 24-5-79 to the respondent referring to demands raised in terms of Rule 173(0(2) in the respective monthly R.T. 12 returns submitted by the assessee (respondent) in terms of Rule 173G(3) of the Central Excise Rules, 1944 and calling upon the respondent to show cause to the Assistant Collector of Central Excise as to why the demand raised by the Superintendent of Central Excise, M.O.R. Mandya and R.B.C. Units, Mysore should not be confirmed, as the correct procedure in availing of the concession in Notification No. 198/76 had not been followed. After hearing the party, the Assistant Collector passed the order referred to earlier which reads as follows: "I hereby require M/s. Karnataka Scooters Limited, L.4 No. 1/76, Somanahally, Maddur Taluk, Mandya District, to pay a sum of Rs. 1,36,906.18 (Rupees one lakh thirty six thousand nine hundred six and paise eighteen only) being the Central Excise duty short-paid by them during the period August, 1977 to April, 1978, February, 1979 and March, 1979, as mentioned in the R.T. 12 returns for the respective months, and also quantified in this office show cause notice C. No. V/34/3/139 M.P.II dated 24-5-79, under Rule 10 of the Central Excise Rules, 1944, read with Section 11A of the Central Excises and Salt Act, 1944".
The respondent appealed to the Appellate Collector of Central Excise, Madras and raised inter alia the propriety of the demand claiming that Rule 10 of the Central Excise Rules, 1944 was not applicable, as by that time it had been deleted. Overruling this objection, the Appellate Collector found as follows: "Mere omission of a correct rule or addition of a rescinded notification in show cause notice dated 24-5-79 does not vitiate the proceedings. As the impugned order is made under Section 11A of the Central Excises Act, 1944, the normal time limit of six months alone however applies to this case; and accordingly the demand is sustainable for the period of six months prior to the date of receipt of show cause notice dated 24-5-1979".
The appellant's contention before us is that the decision of the Superintendent indicating short-payment of duty which requires to be made good by the respondent is not hit by any provision of limitation under the Act or the Rules.
5. The Senior Departmental Representative explained the basic scheme of assessment under the Self Removal Procedure and pointed out that when an R.T. 12 return is filed by the respondent in terms of Rule 173G(3), the proper officer makes an order of assessment under Rule 173(1). In terms of Rule 173(I)(2) "where the duty so assessed (by the proper officer) is more than the duty determined and paid by the assessee, the assessee shall pay the deficiency by making a debit in the account current within 10 days of receipt of the copy of the return (R.T. 12) from the proper officer...". He therefore argued that the liability to pay the difference arises in terms of Rule 173(I)(1) read with Sub-clause (2). There is no need for any demand being issued under Rule 10 of the Central Excise Rules, 1944 as they existed at the relevant time, or in terms of Section 11A of the Act which contains the provisions relating to short-levy when the rule was deleted. In effect, his contention is that the assessment is made by the proper officer and what is paid by the assessee is an amount determined by the assessee himself in terms of certain guidelines provided to him earlier and the amount determined by the assessing officer is the correct one which has to be paid, by way of the sum paid earlier by the assessee, at the time of removal of the goods from the factory and by suitable debits in the Personal Ledger Account, on receipt of the R.T. 12 duly assessed and completed. The issue of a show cause notice by the Assistant Collector at a later point of time is by way of abundant caution and does not alter this basic position. In this view, the order of the Appellate Collector about the applicability of Section 11A of the Act is also not maintainable.
6. On behalf of the respondent, it is urged that there would be denial of natural justice, if the amount indicated in the R.T. 12 as short-payment is to be complied with by the assessee, he is entitled to notice, hearing and a formal decision before any such short-payment can be recovered from him.
7. The correct legal position in respect of situation like this prior to the introduction of Section 11A of the Central Excises and Salt Act, 1944 has already been settled by the Madras High Court in the case of Binny Ltd., Madras v Superintendent of Central Excise, Group XIV, Guindy, Madras and Anr. - 1979 Tax L.R. 2440 (Madras High Court) at page 2445. In that case his Lordship has observed : "Any payment or collection of tax made on the basis of returns submitted under the self-removing procedure cannot be construed as a complete assessment and, as long as a completed assessment had not taken place there is no necessity for the department to resort to its powers under Rule 10 for recovery of short-levied duty surcharges. In my opinion, the second contention has been raised solely because the department had committed the mistake of issuing notices under Rule 10 and withdrawing them subsequently. The mistake committed by the department is clutched at by the petitioner to project a contention that a completed assessment had taken place and as such, it was entitled to a show cause notice before the differential duty can be claimed".
In view of the above, there was no need for the Assistant Collector to have passed a formal order after the Superintendent had made an endorsement on the R.T. 12 regarding short payment. The invocation of Rule 10 read with Section 11A in that order is redundant. Hence, that part of the Appellate Collector's order which deals with the issue of time bar also does not arise for consideration. To this extent, those orders are set aside.
8. For, an act of classification done in terms of Rule 173(1), there is no need of issue of formal notice. If the assessee does not agree with the classification done by the proper officer, it is open to him to avail of remedies provided for in the Act by way of a claim for refund or an appeal to the appropriate appellate authority and the like. We note that in the unnecessary show cause notice of the Superintendent of Central Excise issued on behalf of the Assistant Collector, reference has already been made to the assessment of the Superintendent of Central Excise, Mandya, indicating short-payment of duty under Rule 173(I)(2) of the Central Excise Rules, 1944 in the respective monthly R.T. 12 returns. In our view, the amount indicated by the Superintendent is payable and should have been debited to the Personal Ledger Account within ten days of the receipt of the R.T. 12 by the respondent. The respondent is hereby directed to comply with the requirements of Rule 173(I)(2) within ten days of the receipt of this order by him.