1. This appeal is directed against the order of the Collector of Central Excise (Appeals), Madras dated 24-10-84 confirming the order of the Assistant Collector of Central Excise, Madras dated 7-6-84.
Maduranthagam Co-op. Sugar Mills is the appellant and the issue that arises for determination is with reference to the duty payable and paid by the appellant in respect of the clearances of sugar effected during the period from 1-3-1983 to 26-4-1983. Originally, Notification No.99/81-CE dated 3-4-1981 was in operation in respect of the basic excise duty and additional excise duty payable on levy and free sale sugar.
This notification was later amended by Notification Nos. 28 and 29/CE of 1983 dated 1-3-1983 under which the rate of basic excise duty and additional excise duty payable on the clearances of levy sugar was fixed at Rs. 19/- per quintal. It should be noted, in this context that the said two notifications, namely 28 and 29 of 1983 dated 1-3-1983 dealt only with the basic excise duty and additional excise duty on clearances of levy sugar and did not deal at all with the clearance of free sale sugar. In respect of the free sale sugar, the original notification No. 99/81 dated 3-4-1981 referred to supra under which 8.50% ad valorem and 4.25% ad valorem respectively by way of basic excise duty and additional excise duty leviable continued to remain in operation. The appellants, presumably, on a misapprehension that the rate prescribed in respect of clearances of levy sugar under Notification Nos. 28 and 29 of 1983 dated, 1-3-1983 covered also the clearance of free sale sugar, filed the monthly returns before the Central Excise authorities. The Central Excise authorities also approved of the correctness of the appellant's stand in the said monthly returns and finalised RT 12 assessment in April and May 1983 in respect of the returns filed for March and April 1983. Subsequently, the Department, finding that the appellant was liable to pay more by way of duty on the clearances of free sale sugar in terms of Notification No. 99/81 referred to supra issued a notice of demand on 12-8-83 demanding a sum of Rs. 9046.14 as short levy due from the appellant in respect of basic excise duty. The appellant responded to the said demand stating that if the Department were to claim Rs. 9046.16 from the appellant as alleged short levy towards basic excise duty, the Department should refund the excess amount paid by the appellant in a sum of Rs. 8339.93 by way of additional excise duty in respect of the clearances effected on free sale sugar. The Department without adjusting the excess amount paid by the appellant rejected the appellant's plea after some correspondence and then issued a show cause notice dated 16-12-83 under Section 11A of the Act. The contention of the appellant to the show cause notice was not accepted by the Department and ultimately the original order was confirmed under the impugned order out of which the present appeal arises.
2. The learned Counsel for the appellant Shri Narasimhan contended that under the law, the Department cannot issue a notice of demand without assessment. The Show Cause Notice of the Department dated 16-12-83 is clearly barred by limitation within the meaning of Section 11(A) of the Act. Having regard to the fact that the amount claimed as duty from the appellants relates to the period 1-3-83 to 26-4-83, if the Department on consideration of equity is not inclined to adjust the excess amount paid by the appellant towards the amount due from the appellant to the Department, then the Department should have issued a show cause notice within the statutory period of limitation and proceeded against the appellant in accordance with law. It was therefore, urged that the very Show Cause Notice itself is legally not sustainable on grounds of limitation and consequently it was contended that the impugned order would stand vitiated.
3. The learned SDR urged that the notice of demand issued under Rule 9(2) of the Central Excise Rules, 1944 is valid in law and even for any reasons, Rule 9(2) is made inapplicable to the facts of the case, the notice of demand should be construed to be a Show Cause Notice within the meaning of Section 11(A) of the Act and in this view of the matter, the show cause notice is within the period of limitation. In respect of the amount due to the appellant, it was urged that it is for the appellant to take out an application as per law for refund of the same and not having done so, it is not open to the appellant to claim set off or adjustment in the proceedings instituted by the Department against the appellant for short levy.
4. I have carefully considered the submissions of the parties herein.
In respect of the amount paid in excess by the appellant and in respect of the amount short levied by the department, there does not appear to be any controversy between the parties. In respect of the short levy, the fact remains that show cause notice was issued by the Department for the first time only on 16-12-1983 in respect of the amount due from the appellant from 1-3-1983 to 26-4-1983 Section 11A of the Act is very clear and categorical that when any duty of excise has been short levied, the Central Excise Officer may within six months from the relevant date serve a notice on a person chargeable with the duty which has been short levied requiring him to show cause why he should not pay the amount specified in the notice. 'Relevant date' has also been defined as the date on which the duty is to be paid under this act. So far as Rule 9(2) is concerned, it reads : "if any excisable goods are in contravention of Rule 9(1) removed from any place specified therein, the producer or manufacturer thereof shall pay duty leviable on such goods upon written demand made within the period specified in Section 11A of the Act by the proper officer and the goods shall also be liable to a penalty which may extend to two thousand rupees besides confiscation".
Rule 9(2) has no application at all to the facts of the present appeal.
Rule 9(2) would appear to deal with a situation where the goods are removed clandestinely and without assessment. Apart from it, this Tribunal in considering the scope of Rule 9(2) of the Central Excise Rules as a Bench taken the view that Rule 9(2) will come into operation only when the goods are cleared without payment of any duty whatsoever and if some duty is paid and the goods are cleared with the knowledge of the authorities, Rule 9(2) will not come into operation at all. In the present case, the appellant as well as the Department would appear to have been labouring under a mis-conception or misapprehension with reference to the amount of duty payable on free sale sugar by the appellant. It is obvious that the Department as well as the appellant have been under a mis-apprehension that notification Nos. 28 and 29 of 1983 dated 1-3-1983 referred to supra were applicable in respect of free sale sugar as well when as a matter of fact those notifications did not at all have anything to do with the levy on free sale sugar. It should also be noted in this context that the monthly RT 12 returns for March and April 1983 filed by the appellant have been accepted and assessed by the authorities on 19-4-83 and 12-5-1983 respectively.
5. The Department waking up to a situation of short levy for the first time chose to initiate action by means of notice of demand purporting to be under Rule 9(2) for the first time on 12-8-1983. It is common knowledge that a demand can be made only in pursuance of a valid order of assessment except in a situation where the party has clandestinely removed excisable goods without payment of excise duty in which case Rule 9(2) and procedure thereunder can be invoked by Department which may on proper legal proof also entail confiscation, and penalty besides duty. Here except RT 12 assessments referred to supra, there has been no subsequent or further assessment at all. The Show Cause Notice issued by the Department dated 16-12-1983 is clearly barred by limitation envisaged under Section 11A of the Act. The contention of the learned SDR that the notice of demand dated 12-8-1983 should be construed to be a Show Cause Notice within the meaning of Section 11A of the Act is clearly misconceived in law. Though the Department might be within its right to contend that the amount due to the appellant need not be adjusted and given a set off, the Department will not legally be in a position to demand the amount due from the appellant since the same, as stated above, is clearly barred by limitation under Section 11A of the Act. Even though, the issue has not been approached in this perspective by the authorities below, since the question relating to limitation is a question of law, it is perfectly open to the appellant to plead the same in defence to the demand of short levy by the Department. I, therefore, hold that the demand of short levy by the Department is not legally sustainable and the Show Cause Notice issued by the Department and referred to above is clearly barred by limitation under Section 11A of the Act. In this view of the matter, I hold that the impugned orders appealed against are not legally sustainable and the same are set aside and the appeal is accordingly allowed.