1. This order-in-appeal No. A-721/BI-150/ 83 dated 31.3.1983 of the Collector of Central Excise, Bombay is the subject of an appeal which was heard by this Tribunal on 11.9.1985. Much arguments were presented on behalf of the two sides. We notice that the Collector (Appeals) in para 5 of his order held that in terms of rule 10 read with Rule 173PP(10) of the CE Rules as in force at the time duty demanded for the period prior to 1.7.1977 was not sustainable and was hit by the time limit. He supported the demand for the period after 1.7.1977.
2. Rule 173PP(10) required that the duty on item 68 goods would be assessed at the close of the accounting year followed by the assessee on the basis of their return submitted by him in Sub-rule (9) and that the officer, after making such checks as he deems fit, may make debit or credit entries in the account current of any duty that has fallen short or is in excess of the amount payable. It further provides that the provisions of rule 10 and 11 would apply so that the words six months or five years in Rule 10 and in Rule 11 should be computed from the close of the accounting year followed by the assessee. This is how rule 173PP(10) read at the time of issue of show cause notice : "The duty due on the excisable goods shall be assessed at the close of the accounting year followed by the assessee on the basis of the return referred to in Sub-rule (9) and on the basis of such other information as the assessee may have furnished or which may be collected by the proper officer; Provided that the assessee shall, if the proper officer, after carrying out such checks as he may think fit, of the return referred to in Sub-rule (9) so requires, make debit or credit entries., the case may be, in the account - current in respect of any duty that has been paid falls short or is in excess of the amount payable by such assessee : Provided further that the provision of rules 10 and 11 shall apply, subject to the modification that the period of six months or five years, as the case may be, shall be computed from the close of the accounting year followed by the assessee." 3. We have been told by the Assistant Collector that the accounting year followed by the assessee is July to June : the Collector (Appeals) ruled that the duty prior to 1.7.1977 was not sustainable,; meaning that the demand after 1.7.1977 was sustainable. The period was 1.3.1976 to 23.11.1978 and the show cause notice was issued on 27.3.1979.
4. We are informed by the Appellate Collector that the department was aware of the appellant's activity of manufacturing stranded steel wires. This would mean that there had been no suppression to bring in the longer time limit. Furthermore the Assistant Collector himself did not proceed as if there had been any fradulent suppression of vital facts, although he says there was such a suppression : he does not impose any penalty as he ought to have done, had vital facts been withheld and suppressed to cause loss of duty. This brings us to one difficulty in following the Collector (Appeals) orders regarding the duty to be recovered.
5. Rule 173PP(10) as it stood at the time allows for a period of 6 months from the close of the accounting year followed by assessee which in this case would be 30th June. Since there was no suppression in this case, only 6 months could be allowed from the end of the accounting year. When the show cause notice was issued on 27.3.1979, the nearest year of account was the year ended 30th June, 1978; if we take this 6 months from this date, the show cause notice issued on 27.3.1979 was clearly time barred for that year of accounting, and would naturally be time barred for all years before it. As for the next year of accounting which ended on 30th June, 1979, the show cause notice of March, 1979 would not be valid because this accounting year had not ended and, therefore, the assessment was not ready to be made. Demand for any duty short recovered in this year could not be issued before 30th June, 1979. The demand is invalid.
6. The Collector was therefore incorrect when he held that the demands after 1.7.1977 would be in time. Unfortunately neither he nor the Assistant Collector have recorded details about the operation of rule 173PP(10) and how it acted upon the demand. The Collector in fact appears to have taken that the period for demand under the rules was one year whereas by the time the show cause memo was issued the time had come down to six months. The learned counsel for the appellants did argue the demand was out of time except for a short period; he too evidently thought one year was the limit but he was unable to account for the date 1.7.1977 in para 5 of the Collector's order. The learned Counsel for the department also expressed incomprehension over the period taken by the Collector to fall within time. However, if the Collector took one year to be the time limit, then 1.7.1977 would be the correct dividing date, because when the show cause notice was issued on 27.3.1979, one year can reach back to the beginning of the accounting year ended on 30.6.1978; this year began on 1.7.1977.
7. But as we have said, the time limit, at the time of issue of the show cause notice, was six months, not one year, from the close of the financial year. And whether, it is one year or six months, the notice of 27.3.1979 will not be operative for the year ended 30.6.1979.
8. Though the two opposing counsels spent little time on the time bar, the above facts dominate all other arguments on merits that they advanced at the hearing.
9. The demand being invalid, shall be void and of no effect and the appellants M/s. Special Steels Limited shall not be required to meet it.