1. The petitioners manufacture chewing tobacco at Sholapur. They are liable to excise in respect thereof under item 4(II) 5 of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act).
2. On 29th September, 1975 a price list furnished by the petitioners was approved by the Assistant Collector of Central Excise, Sholapur. On 10th March, 1976 the Superintendent, Central Excise, Sholapur, wrote to the petitioners that the said price list, originally approved under the category of price not exceeding Rs. 10.00 per kg., had been revised and approved under the category of price exceeding Rs. 10.00 per kg. effective from 1st October, 1975. The letter stated that the reasons for revising the assessable value and rate of duty were that, on scrutiny and investigation, it had been ascertained that gross weight had been considered instead of net weight and the price of the gunny bag had not been included. It may be noted in this connection that under a notification dated 1st March, 1975 issued under the Central Excise Rules, 1944, tobacco falling under Item 4(II)5 of the First Schedule to the Act of which the value did not exceed Rs. 10.00 per kilogram was exempted from so much of excise duty leviable thereon as was in excess of 5% ad valorem.
3. On 12th March, 1976 the excise authorities wrote to the petitioners demanding the difference in excise duty on the basis of the revised price list from 1st October, 1975 onwards. The petitioners preferred an appeal against the order revising the price list. After hearing the petitioners the Appellate Collector observed '.....Keeping in view the fact that duty is on the branded tobacco, packing is a must and so its weight as accepted necessary has to be included to arrive at the value of chewing tobacco. If the goods are cleared on gate passes with bags, then the cost of packing has to be included in the assessable value. The Assistant Collector will please look into the matter and rate of duty may be fixed after taking into consideration the abovementioned facts. Without prejudice I remand the case to the Assistant Collector for de novo adjudication'.
4. On 18th September, 1976 the petitioners were served with a show cause notice further to a show cause notice issued on 12th July, 1976. They were informed that certain new points had come to the notice of the investigating officer which had a direct bearing on the case. These points were set out in an annexure to the notice. A date of hearing was fixed to enable the petitioners to produce such evidence as they desired upon these points. The said annexure is not annexed in the petition. We have, however, obtained a copy thereof from the respondents. We find that the petitioners were by the said annexure called upon to explain why they had sold 71.8% of their production of jarda (a form of tobacco) through a relative; what the charges of Rs. 20.00 per bag were which had been described by the petitioners as post-manufacturing charges and why a higher price had sometimes been charged by the petitioners. The annexure stated that the queries were based upon the petitioners' records. On 26the September, 1976 the petitioners submitted a reply wherein they questioned the right of the authorities to raise any new points and declined to give any clarification in respect thereof. On 21st February, 1977 the Assistant Collector, after hearing the petitioners passed an order holding that he was 'not inclined to agree to the assessee's plea, that the scope of this case is restricted to the first two points only on the basis of which the demand is originally issued. This is a case of valuation, wherein we are trying to arrive at the correct amount of duty leviable from the assessee. This holds good even if the fresh points would have been in the assessee's favour. What is important is whether the fresh points raised are relevant to the case or not, and whether the assessee was given a reasonable opportunity to explain their stand in respect of these points or not, before a final decision is taken as discussed above. Both the abovementioned fresh points are relevant to the case, and the assessee was given a reasonable opportunity to explain their stand. Since the party as per their reply letter dated 26-10-76, declined to explain for the fresh two points. I have no other alternative before me than to take a decision on the basis of evidence on record.
5. I find that the party has not been able to explain satisfactorily regarding the post-manufacturing charges recovered by them from the customers, at the rate of Rs. 20.25, Rs. 18.25 and Rs. 14.00 per bag in respect of Kisan Tota, Vijay Tota and Kisan TLD varieties of jarda respectively. This is obviously a vain effort on the part of the assessee to manipulate the price on a higher side for their own benefit. Hence I hold that these post-manufacturing charges should be included in the assessable value for the purpose of assessment. He stated that the question as to whether gross weight had to be taken for the purpose of determining the assessable value had become insignificant; that the price of gunny bags was not to be included in the assessable value of the goods; and that the price at which the goods had been sold through a relative was the same as that at which they had been sold to others. He went on to say that '.....due the fact that a portion of revised demand amounting to Rs. 14,712.80 is hit by time bar under Rule 10 of Central Excise Rules, 1944, I reduce the demand by that much amount, and order that M/s P.P. Patel & Co., Sholapur, shall pay remaining amount of Rs. 22,726.23 being differential duty on branded jarda manufactured and cleared by them during the period from 10-12-75 to 10-3-76.....'
6. Against this order of the Assistant Collector the petitioners preferred an appeal. On 22nd August, 1977/15th September, 1977, the Appellate Collector of Customs and Central Excise passed an order in the appeal. He observed that the only question to be decided by him was whether the post-manufacturing charges recovered by the petitioners should be included in the assessable value of their goods. He found that the post-manufacturing charges were on account of interest charges for delayed payments; handling charges in duty paid godown; rent of duty paid godown; advertisement charges, like supply of stickers, actual transport charges after clearance from the factory; and extra packing as desired by buyers. He held that these charges were optional and only the actual charges on account thereof were recovered. He ordered that all charges recovered over and above the price charged at the factory gate which pertained to post-manufacturing operations should not be included in the assessable value, and the order passed by the Assistant Collector stood modified to that extent.
7. On 6th September, 1978 the Additional Secretary to the Government of India in the Ministry of Finance issued to the petitioners a notice under Section 36(2) of the Act. The Additional Secretary observed that the Central Government was tentatively of the view that in determining the value of the goods the various charges which the Appellate Collector had held to be irrelevant were in fact required to be considered. The view of the Appellate Collector that these charges were optional had to be ignored and appeared to be incorrect and not based on facts. In that view of the matter the Central Government proposed to set aside the Appellate Collector's order. Notice was given to the petitioners to show cause why it should not be set aside and the order of the Assistant Collector be not restored or any other order as deemed fit be not passed. The petitioners replied to the said show cause notice on 16th October, 1978. On 2nd August, 1980 the order in revision was passed. It was held that the Appellate Collector had erred in allowing the appeal against the decision of the Assistant Collector on the ground that the post-manufacturing expenses were optional and did not form part of the assessable value. Having come to that conclusion the Government set aside the order in appeal and restored the order of the Assistant Collector.
8. Against this order in revision the petitioners have filed the present petition.
9. It was suggested by Mr. Parekh, learned counsel for the petitioners, that the revision by the Central Government was not computed in time. To understand that it is necessary first to set out Section 36, sub-section (2) as it existed at the relevant time. It reads thus :
The Central Government may, of its own motion or otherwise, call for and examine the record of any proceeding in which any decision or order has been passed under Section 35 or Section 35A of this Act for the purpose of satisfying itself as to the correctness, legality or propriety of such decision or order and may pass such order thereon as it thinks fit :
Provided that no decision or order shall be varied so as to prejudicially affect any person unless such person is given a reasonable opportunity of making a representation and, if so desires, of being heard in his defence :
Provided further that no proceedings shall be commenced under this sub-section in respect of any decision or order (whether such decision or order has been passed before or after the coming into force of this sub-section) after the expiration of a period of one year from the date of such decision or order :
Provided also that where the Central Government is of opinion that any duty of excise has not been levied or has been short-levied or erroneously refunded, no order levying or enhancing the duty, or no order requiring payment of the duty so refunded, shall be made under this section unless the person affected by the proposed order is given notice to show cause against it within the time-limit specified in Section 11A.
It was contended that the one year in the second proviso to sub-section (2) of Section 36 had to be calculated from 22nd August, 1977 and not 15th September, 1977, both being the dates of the order in appeal. We are told that the latter is the date of its despatch. It has been held that for the purposes of limitation the date of an order is the date on which it is communicated to the party affected by it. [Vide Harish Chandra vs . Deputy Land Acquisition Officer, : 1SCR676 ]. There is nothing on record to indicate when the order was communicated but it was, obviously, not before 15th September, 1977, the date of its despatch. Even qua the Central Government no date earlier than 15th September, 1977 can be considered. Computing the period of 1 year mentioned in the second proviso of sub-section (2) of Section 36 from 15th September, 1977 the revision was in time, the notice to show cause why the appellate order should not be revised having been issued to the petitioners on 6th September, 1978.
10. It was contended on behalf of the petitioners that the revision of the approved price list was illegal inasmuch as it was revised retrospectively and without giving the petitioners a hearing. The grievances of the petitioners in regard to lack of hearing was heeded and the matter was remanded by the Appellate Collector on 29th May, 1976. They were then heard. That grievance does not survive.
11. In so far as the grievance as to retrospectively is concerned, it is necessary to set out Rule 10 of the Central Excise Rules, 1944, which was then in operation. It read thus :
'Recovery of duties or charges short-levied, or erroneously refunded.
(1) When duties or charges have been short-levied through inadvertence, error, collusion or misconstruction on the part of an officer, or through mis-statement as to the quantity, description or value of such goods on the part of the owner, or when any such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded, the proper officer may, within three months from the date on which the duty or charge was paid or adjusted in the owner's account-current, if any, or from the date of making the refund, serve a notice on the person from whom such deficiency in duty or charges is or are recoverable requiring him to show cause to the Assistant Collector of Central Excise why he should not pay the amount specified in the notice.
(2) The Assistant Collector of Central Excise, after considering the representation, if any, made by the person on whom notice is served under sub-rule (1), shall determine the amount of duty or charges due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined within ten days from the date on which he is required to pay such amount or within such extended period as the Assistant Collector of Central Excise may, in any particular case, allow'.
12. Under the terms of rule 10 it was open to the excise authorities to issue to the person from whom duty had been short-levied a notice within three months from the date on which the duty was paid. The Assistant Collector, after hearing the matter on remand, excluded the demand for the period prior to three months of the date of the notice and held the petitioners liable for differential duty only for the period 10th December, 1975 to 10th March, 1976. In view thereof this grievance too does not survive.
13. It was suggested that since the notice included a demand for differential duty for a period prior to three months of the date of the notice, the entirety of the demand was bad and unenforceable. There is no merit in the suggestion.
14. It was contended that, inasmuch as the petitioners' goods were covered by the provisions of physical control no classification list need have been filed by them at all, and, consequently, there was no power to revise it. In fact, the petitioners had filed a clarification list. That had been approved. The authorities could, therefore, revise it.
15. Mr. Parekh argued that the notice dated 6th September, 1978 asking the petitioners to show cause why the appellate order should not be revised should have been issued within three months of the date of that order. To understand the argument it is necessary to refer to certain provisions of the Act which came into force after the period with which we are here concerned. When these provisions came into force is most material. Rule 10 was omitted from the Central Excise Rules, 1944 with effect from 17th November, 1980 by virtue of a notification dated 12th November, 1980. By that notification Section 11A of the Act was brought into force. Section 11A had been introduced by the Customs, Central Excises and Salt and Central Boards of Revenue (Amendment) Act, 1978 (Act No. 25 of 1978). By the same Amendment Act the third proviso was added to sub-section (2) of Section 36.
6. The portion of Section 11A material for our purpose reads as follows :
'Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.
(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer, may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice :'
17. Reference was made by Mr. Parekh to a Division Bench Judgment of the Delhi High Court in Associated Cement Companies Ltd. vs. Union of India - 1981 E.L.T. 421. In that case the Superintendent of Central Excise issued demand orders dated 23rd October, 1976 and 27th August, 1977 to the petitioners therein in respect of short-levy of excise duties. Appeals were preferred and the demands made in the said orders were therein ordered to be withdrawn. The Central Government issued the two impugned notices on 12th November, 1979 and 17th November, 1979 under Section 36(2) of the Act calling upon the petitioners to show cause why the orders of the Appellate Collector should not be reviewed. The impugned notices were issued after the expiry of six months but within a period of one year after the orders of the Appellate Collector were passed. It appears that it was not pointed out to the court that during the period relevant to the matter before it Section 11A had not come into force; the court proceeded upon the basis that both the third provision to sub-section (2) of Section 36 and Section 11A were then in force. The court held that the said third proviso provided a special period of limitation, with reference to duties short-levied and no notice to revise an appellate order could be issued by the Central Government in a case involving short levy of duty unless it was done within the period of six months specified in Section 11A, which they understood to mean a period of six months from the date of the appellate order.
18. It was contended by Mr. Parekh, relying upon the said decision, that in the instant case no notice to revise the appellate order could have been issued after the expiry of the period of three months specified in Rule 10.
19. The third proviso to sub-section (2) of Section 36 provides a special period of limitation for the exercise of the Central Government's revisional powers in cases of short levy of excise duty. That special period is to be computed by reference to the provisions of Section 11A. During the period with which we are here concerned Section 11A was not in force. There was, therefore, no provision in force by reference to which the special period of limitation could be computed. The effect, consequently, was that, at the relevant time, there was no special period of limitation for the exercise of revisional jurisdiction in cases of short levy of excise duty but only the general period of 1 year specified under the second proviso of sub-section (2) of Section 36. This argument, therefore, also fails.
20. Mr. Parekh urged that no new ground could be taken by the Assistant Collector on remand. This ignores the fact that a notice had been served upon the petitioners on 18th September, 1976 informing them that they would have to answer the queries set out in the annexure to that notice and could lead such evidence as they desired in respect thereof. The proceedings before the Assistant Collector were de novo proceedings. It was open to him, having given notice of the points upon which he proposed to hear the petitioners, to take these into account. He rightly observed in his order that the scope of the matter before him was not restricted to the points upon which the original demand was made; what was important was whether or not the fresh points were relevant to the case and whether reasonable opportunity had been given to the petitioners to explain their stand in that regard.
21. It was lastly contended that the demand was beyond the scope of Section 4 of the Act because post-manufacturing charges had been added to the assessable value of the goods. There was no material before the Assistant Collector upon which he could judge whether any post-manufacturing charges had or had not, in fact, been incurred. He, therefore, held that showing an amount as post-manufacturing expense was 'obviously a vain effort on the part of the assessee to manipulate the prices on a higher side for their own benefit'. It was admitted before us that no material was filed by the petitioners upon which the Assistant Collector or the Appellate Collector could judge whether the post-manufacturing expenses which the latter itemised had in fact been incurred by the petitioners. There can be no doubt that the heads of expenses itemised are post-manufacturing expenses. But there was, and is, no material upon which it could be said that these expenses had in fact been incurred by the petitioners and to what extent. In that view of the matter, the Central Government's order in revision setting aside the Appellate order and restoring the order of the Assistant Collector cannot be questioned.
22. Mr. Parekh sought remand of the mater to enable the petitioners to adduce evidence to show that they had incurred post-manufacturing expenses and the amount thereof. Despite having been invited to do so by the notice dated 18th September, 1976, the petitioners furnished no material to the Assistant Collector, to the Appellate Collector and to the Central Government in revision. The petitioners having squandered their opportunity, no case for remand exists.
23. There is no merit in the contentions raised by the petitioners. The petition is, therefore, dismissed with costs. Rule discharged.
24. Mr. Parekh applies orally for leave to appeal to the Supreme Court. Leave refused.