1. The above two appeals (both arising out of the same order-in-original and order-in-appeal), were heard by the West Regional Bench, Bombay, comprised of Shri S. Venkatesan, Sr. Vice President and Shri K. Gopal Hegde, Member. Since there was a difference of opinion between the two Members on a particular point, the President, on the matter being placed before him, referred the point to me, vide his order of 25-6-1985, for further proceedings according to law in terms of Section 129C (5) of the Customs Act, 1962 read with Section 35 (D) of the Central Excises & Salt Act, 1944.
2. Copies of the separate orders written by the two Members were supplied to the two parties. They were also heard by me. Shri S.P.Kampani, Consultant, represented M/s. Siemens (India) Ltd. while Shri N.V. Raghavan Iyer Jt. C.D.R., the Collector.
3. The facts of the case have been spelt out in Shri Venkatesan's order and, hence, do not need to be repeated.
4. The point on which the difference of opinion arose has been formulated thus : "What was the starting point for limitation (the date of payment of duty, or the date of assessment of the RT 12 return)?"(as formulated by the Shri Venkatesan) "Whether, in the case of assessees governed by S.R.P., the date of debit entry in the P.L.A. is to be reckoned as the reference date for the computation of the period of limitation prescribed in Rule 11 or the date of adjustment which the assessee makes in the P.L.A. on receipt of a copy of the R.T. 12 returns from the proper officer?" (as formulated by Shri Hegde) 5. Whereas Shri Venkatesan has taken the view that the limitation with reference to each clearance started running from the date of payment of duty, whether in cash or by debit in the Personal Ledger Account (P.L.A.) and not from the date of assessment by the proper officer on the R.T. 12 return, Shri Hegde has taken the opposite view, viz. that the reference date for the purpose of computation of the period of limitation prescribed in Rule 11 would be the date of adjustment which the assessee makes in the P.L.A. as required under Rule 173.1 on receipt of a copy of the RT 12 return from the proper officer.
6. Before me, Shri Kampani, on behalf of Siemens, supported the view taken by Shri Hegde, relying in this connection on the observations of the Patna High Court in Rohtas Industries Ltd. v. Superintendent of Central Excise (AIR 1973 Patna 446) extracted in para 31 of Shri Hegde's order. The learned Consultant argued that only when the RT 12 return was filed by the assessee and it was assessed by the proper officer, the duty payment made earlier by the assessee at the time of removal of the goods became final. The payment of duty by debit in the P.L.A. at the time of removal of the goods, being a debit prior to the final assessment, was neither a provisional nor a final payment of duty and was merely in the nature of a debit entry. In this context, the decisions in 1977 ELT 127 and in particular 1982 ELT 478 were cited.
The physical control system still survived. The reference in Rule 9 was to payment of duty after assessment by the proper officer. This concept was relevant also for the Self Removal Procedure (S.R.P.) under which the present assessee worked. Under the latter procedure, the assessee no doubt determined the duty liability in accordance with the approved classification and price lists but the debit adjustment in the P.L.A.at that stage was not in the nature of a final assessment which could be said to take place only when the RT 12 return was assessed by the proper officer. However, in response to a query from the Bench, Shri Kampani said that he would not go so far as to say that the reference date for limitation purposes should be the date of adjustment, if any, in the P.L.A. as a consequence of the assessment by the proper officer.
It should be taken as the date of assessment by the proper officer.
7. Replying to the above contentions on behalf of the Collector, Shri N.V. Raghavan Iyer, learned D.R., submitted that in Rule 11, there was no reference to the process of assessment or the payment of duty as a culmination of the process of assessment. Under the Physical Control System, duty payment followed assessment by the proper officer. Under the S.R.P., it followed the self-determination of duty due by the assessee on the basis of the approved classification and price lists.
This was by debit in the P.L.A. The term "paid" in' Rule 11 thus did not mean the assessment process but the fact of payment of duty by debit in the P.L.A.8. Nor did Rule 9 have a reference to the assessment process. The term "adjustment" in the said Rule clearly referred to the adjustment consequent on finalisation of a provisional assessment in terms of Rule 9B. The term was to be found also in Rule 173 I where it meant the adjustment consequent upon the assessment process; it referred to the adjustment of the duty actually paid by debit with a view to making good any deficiency in the duty paid or taking credit of any excess duty paid.
9. Shri Iyer contended that if the Calcutta High Court decision in 1978 ELT 568 CAL was read closely, it would be clear that the ratio of that decision was of no help in the present situation. Nor was the ratio of the Supreme Court decision in 1978 ELT 416 (S.C.) 1972 SC 2563 in the National Tobacco Co. case or the Patna High Court decision in AIR 1973 Patna 446 in the Rohtas Industries Ltd. case. These cases involved provisional assessment unlike in the present case.
10. Concluding, Shri Iyer submitted that limitation ran from the date of payment of duty whether the payment was the culmination of assessment of the duty due by the proper officer or of self-determination of the duty due by the assessee himself. In this view, the opinion recorded by Shri Venkatesan was the correct one.
11. I have carefully considered the matter taking into account the views recorded by my learned Brothers in their orders and the submissions before me. I would like to first consider the matter from first principles before coming to the authorities cited.
12. First of all, I would refer to Rule 9B which provides for provisional assessment of goods in certain circumstances, followed by final assessment and adjustment of the duty provisionally assessed against the duty finally assessed. This Rule is independent of and not influenced by Rule 9 or Rule 11 as its very opening phrase shows : "Notwithstanding anything contained in these Rules - ". The word "adjustment" here has a special connotation and obviously refers to the adjustment process consequent upon finalisation of a provisional assessment i.e. setting off the duty provisionally assessed against the duty finally assessed. The meaning of the word "adjustment" in Rule 11 has to be gathered from its own setting and not by reference to Rule 9B. That this is the clear intention can be gathered from the fact that the assessee is obliged to pay the deficiency in duty, if any, consequent upon the adjustment contemplated in Rule 9B or, as the case may be, is entitled to refund of the excess duty paid, if any. No application for refund of the excess duty is envisaged nor does any time limit for claiming such refund exist. The refund is automatic and must be paid by the department. (The picture is different after the insertion of Section 11B in the Central Excises and Salt Act). We are not considering here a situation in which the assessee may contest the very assessment and claim refund of the whole or part of the duty paid even on provisional assessment or of the extra duty he is called upon to pay in pursuance of the final assessment order. In such a case Rule 11 may apply. In contrast, Rule 11 (at the material time) provided inter alia the date of "adjustment" as a reference date for the computation of limitation for claiming refund. Evidently, therefore, the "adjustment" in Rule 11 is not the "adjustment" in Rule 9B.13. What, then, is the "adjustment" in Rule 11 As the Rule itself makes it clear, the term refers to adjustments in the account-current maintained with the Collector under Rule 9. This latter Rule contemplates payment of duty in cash or through on account-current maintained with the Collector. In the Physical Control situation, the assessee is required, in terms of Rule 52, to apply to the proper officer in the prescribed form for removal of goods. The officer assesses the amount of duty due on the goods and on production of evidence of payment of the duty, allows the goods to be cleared. The payment could be by cash or through adjustment in the account-current as required in Rule 9. It is true that this payment of duty follows the assessment process here. The reference date in Rule 11 for commencement of the limitation is the date of such payment or such adjustment. There is no "provisional" (not in the Rule 9B sense), or "final" assessment here. There is only one assessment and that is by the proper officer.
14. Now, let us look at the S.R.P. situation. Under this procedure, the assessee is required to file a classification list for approval of the proper officer (Rule 173-B) and, likewise, a price list of goods assessed ad valorem (Rule 173-C). The approved classification and price lists serve as the basis for the self-determination by the assessee of the duty liability on goods intended to be removed (Rule 173-F). The Rule prohibits removal of the goods "unless he has paid the duty so determined". The assessee is obliged to keep an account-current with the Collector (Rule 173-G). The duty determined in terms of Rule 173-F shall be paid by debit to the account-current before removal of the goods. Thus it may be said that while under the Physical Control procedure, payment of duty by cash or debit in the P.L.A. follows the assessment of the duty due by the proper officer, in the S.R.P. the payment of duty by debit in the P.L.A. follows the elf-determination of the duty due on the goods by the assessee. In both procedures, payment of duty is a condition precedent to removal of the goods from the place of manufacture or storage. The position that in the S.R.P. assessment by the proper officer in terms of Rule 173-1 is carried out later on the RT 12 return submitted by the assessee does not in any way detract from the position that what was paid by the assessee on his own self-determination of the duty liability on the goods is nonetheless payment of duty on the goods for the purpose of Rule 9 (without payment of duty goods cannot be removed under this Rule) in the manner prescribed under the Rules, to wit, Chapter VII A of the Rules. [There is internal evidence in the shape of express words in Rule 173(G)(3) to show that such removals on payment of duty are considered as removals on payment of duty in terms of Rule 9]. It is also payment of duty or, more appropriately, "adjustment" of the account-current for the purpose of Rule 11 read with Rule 173-J.15. Rule 173 (G)(3) requires the assessee, working under the S.R.P., to submit a monthly return (RT 12 return) showing the prescribed particulars of every removal of the goods during the month etc.
including particulars of duty payment. Rule 173-1(1) requires the proper officer to assess the duty due on the goods removed and complete the assessment memorandum on the RT 12 return [submitted by the assessee under Rule 173(G)(3)] on the basis of the information contained in it and after such further inquiry as he may consider necessary. He is to send a copy of the completed return to the assessee.
16. Sub-rule (2) of Rule 173-1 provides that the duty determined and paid by the assessee under Rule 173-F shall be adjusted against the duty assessed by the proper officer under Sub-rule (1) and when the duty so assessed 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 the receipt of the copy of the completed RT 12 return from the Proper Officer, and when such duty is less, the assessee shall take credit in the account-current for the excess on receipt of the assessment order in the copy of the return, duly countersigned by the Superintendent of Central Excise.
17. A harmonious way of construing the different relevant provisions, especially Rules 9, 173-G, 173-I and 11, in the context of S.R.P., would appear to be to take the view that the date of payment of duty or adjustment in the account-current which is specified as the date of commencement of limitation in Rule 11 is the date of payment of duty by book-debit on self-determination of the duty liability by the assessee in terms of Rule 173-F read with Rule 173 (G). If, on assessment of the RT 12 return by the proper officer in terms of Rule 173-I, the assessee is required to pay a further sum by way of deficiency in duty, then, the date of payment of such duty by debit in the P.L.A. would constitute a second reference date for the computation of limitation for the purposes of Rule 11, but strictly limited to the additional sum so paid in terms of Rule 173-1(2).
18. Much reliance has been placed by Shri Kampani on the Calcutta High Court decision in Krishan Lal Thirani & Co. Ltd. and Anr. v. Collector of Central Excise and Ors. 1978 ELT (568)], in support of the contention that the date of assessment by the proper officer under Rule 173-1 is the relevant date for commencement of the limitation under Rule 11. For the reasons set out in para 28 of learned Brother Sri Venkatesan's order, with which I am in agreement, the above decision does not support Shri Kampani's contention. In the facts of that case, the Court found that the assessment made prior to the final assessment (made under Rule 173-I) were only provisional assessments. As discussed by Brother Sri Venkatesan, the facts of that case were peculiar. There were apparently three orders of assessment, one by the Assistant Collector, followed by another order for the same period passed by the Superintendent, followed by yet another order of the Superintendent.
Such is not the situation in the present case where nothing has been shown to have happened which could be said to have imparted a provisional character to the self-assessment made by the assessee - not in the sense of provisional assessments under Rule 9B, but in the sense of provisional assessment as construed by the Calcutta High Court in the peculiar facts of the case before it. The facts of the present case being distinguishable from the Krishan Lal Thirani case, I do not think the ratio of the decision in that case has any application to the present case.
19. In the Rohtas Industries Ltd. (supra), there was a difference of opinion between the assessee and the Superintendent of Central Excise regarding the assessable value of the caustic soda lye as and when the monthly return in RT 12 was submitted. According to the latter, there was short payment of duty and he made an endorsement on the RT 12 return directing the former to pay the deficiency in duty. One of the points taken up by the petitioner before the Court was that no demand for excess duty could be finalised without a show cause notice. It appears that the Superintendent visited the factory, called for the P.L.A. and debited the amount and the petitioner took objection to this action also. The questions falling for decision, as set out by the Court in para 4 of the judgment, were : "(i) whether the debit entries (annexures 3 to 6) could be made by respondent No. 1 in the accounts maintained by the petitioner in its various factories in exercise of his power under Section 11 of the Act (ii) Whether the demand in respect of the Chemical Factory could be realised by adjustment and the making of the debit entries in the accounts of the other three factories " The Court found that "for failure of the assessee to pay the deficiency by making the debit entry in the account-current, whatever else may follow, but certainly it does not follow that the proper officer himself can make the debit entry in the accounts". Consequently, the Court quashed the debit entry made by the Superintendent. (The second question is not relevant for the present case).
The above is the ratio of the judgment. It is not an authority for the proposition that for purpose of Rule 11, the date of assessment by the proper officer on the RT 12 return the date of adjustment of the excess duty in the P.L.A. on such assessment, is the relevant date for computation of limitation.
20. In the National Tobacco Co. (supra), the Court was not concerned with Rules 11 to 14, as mentioned by the Court itself in para 14 of the judgment. (We are concerned in the present case with Rule 11). The period of the dispute in the case before the Supreme Court was one prior to 21-4-1960, the date of notice of demand. The Self Removal Procedure contained in Chapter VII A of the Rules, was introduced only in the year 1969. The procedure of self-determination of the duty based on classification and price lists filed by the assessee and approved by the proper officer was not in force during the relevant period. During the period in that case, the goods could be cleared only after their assessment by the proper officer in terms of Rules 52 and 52A. In that case, there was no provisional assessment as contemplated in the Rules.
Yet the department contended that the price lists were only approved provisionally, pending acceptance of their- correctness after due "verification. This, the department contended, was substantially provisional assessment as envisaged in the Rules. The Court did not accept this contention. Against this background, the Court analysed the import of several provisions of the Rules and made the observation extracted in para 30 of learned Brother Shri Hegde's orders (para 21 of the report at page 2571). But it must be noted, as set out earlier, the situation after the introduction of the Self Removal Procedure was entirely different. In terms of express provisions of the Rules, there is a self-determination by the assessee of the duty liability on his goods based on the approvals given by the proper officer of classification and price lists filed by the assessee, after due inquiry. These approvals are quasi-judicial orders and, in disputed cases, the principles of natural justice have to be followed. Once the approvals are given, the self-determination by the assessee of the duty liability is more or less a mechanical or arithmetical application of the approved rate of duty and approved assessable unit value to the goods sought to be removed. The self-determination of the duty liability is thus preceded by all the essential ingredients of a proper assessment. The completion of the assessment memorandum on the monthly return in RT 12 form by the proper officer is more or less an arithmetical check on the correctness of the computations and payments by debits made by the assessee himself and is not designed, at that stage, to take the shape of a quasi-judicial assessment process. If the proper officer, for whatever good reason, is not in a position to make up his mind and accord approvals for the price lists and classification lists, he may order assessment under the provisional assessment procedure, but in a case where no provisional assessment has taken place, and the approvals have been given without any reservation, I think the self-determination of the duty by the assessee on the basis of price lists and classification lists approved by the proper officer is, to all intents and purposes, an assessment, subject, of course, to correction of arithmetical errors on completion of the assessment memorandum by the proper officer. With great respect, I am of the opinion that the S.R.P. situation being vastly different from the physical control situation, the ratio of the Supreme Court's decision does not apply to the facts of the present case.
21. Shri Kampani has relied upon the Government of India's order in Revision No. 272 of 1977 1977 ELT (J 127). The Government held that debit to the P.L.A. was in the nature of a deposit and the date of assessment of the monthly return by the proper officer was the date of commencement of limitation under Rule 11. He has also cited another order in Revision of the Government, No. 1155/80 (1982 ELT 478), which merely followed the earlier decision. These orders do not set out in detail the reasoning leading to the conclusions, and, as such, are of no help in resolving the present dispute. Another decision cited is of this Tribunal in Castrol Ltd., Calcutta v. Collector of Central Excise, Calcutta 1985 (20) ELT 102. That case involved provisional assessment unlike in the present case before me. The discussions and the conclusions in the Castrol case are, therefore, not relevant for the present case.
22. Summing up, I am of the opinion that, in the present case, where goods were being cleared under the self-removal procedure, the date of payment of duty by debit entry in the Personal Ledger Account by the assessee was the reference date for the computation of the period of limitation prescribed in Rule 11, read with Rule 173-J. The date of adjustment of the P.L.A. (if any such adjustment took place) consequent on the receipt of a copy of the RT 12 return with the assessment memorandum completed by the proper officer could be another reference date for computation of limitation, but strictly limited to the additional sum of duty, if any, paid as a result of the direction in the assessment memorandum.
23. The papers may now be placed before the learned Members of the Bench, who heard the case, for final disposal of the appeals.
24. In view of the majority opinion we dismiss Appeal No. 1/85 filed by M/s. Siemens (India) Ltd. 25. The Appeal No. 6/85 filed by the Collector of Central Excise, Thane, is allowed in part. The refund claim for the period of one year prior to 5-4-1977 i.e. from 6-4-1976 to 5-4-1977, should alone be considered as not being barred by limitation.