1. In this Revision application to Central Government transferred to the Tribunal to be disposed of as an appeal, question for decision is correctness and legality of five demands totalling Rs. 44,188.76 raised by Superintendent of Central Excise, Rourkela, confirmed by the Asstt.
Collector of Central Excise, Rourkela and upheld by the Appellate Collector of Central Excise, Calcutta.
2. The appellants on Budget day 28-2-1973, made clearance of G.P.Sheets/G.C. Sheets, Plates/H.R. Strips and C.R. Strips under the supervision of Central Excise authorities. This went on till S.P.M. of 28-2-1973. Thereafter, the appellants' despatches were suspended. The goods were assessed to duty at the rates, as in force on 28-2-1973. It appears that on midnight of 28-2-1973 duty on these goods were enhanced w.e.f. 1-3-1973. The Railway authorities issued Railway receipts bearing date 28-2-1973/1-3-1973 to the appellants. Later, the Superintendent of Central Excise, Rourkela served demands dated 6-7-1973, 12-7-1973, 12-7-1973, 12-7-1973 & 2-4-1974. It appears these demands were refused by the appellants and they declined to receive the papers. It further appears that the demands were confirmed by the Asstt. Collector of Central Excise, Rourkela by his order dated 24-3-1976. The appellants filed an appeal to the Appellate Collector of Central Excise, Calcutta, who by his order dated 15-3-1979 upheld the order passed by the Asstt. Collector. Hence this revision to be disposed of as an appeal.
3. At the hearing on 13-7-1983, Shri S.P. Kampani, Consultant first tried to show that the demands were time-barred but later maintained that 5th demand dated 2-4-1974 for Rs. 2813.50 was only time-barred. On behalf of Respondent, Shri Laxmi Kumaran, SDR frankly conceded that 5th demand mentioned aforesaid was time-barred. This demand would therefore, have to be set aside only on this ground.
4. Shri Kampani, learned consultant for the appellants submitted that in this case at the material time Rule 173J required issue of Show Cause Notice to the assessee before any differential demand was made.
The Superintendent of Central Excise did not issue any Show Cause Notice but straightaway made demands calling upon the appellants to pay the amount within 10 days. On behalf of the respondent, Shri Kumaran submitted that demands were accompanied by statements showing why the demands were made. Even if the words calling upon the appellants to Show Cause against the demands were not there, nothing prevented the appellants from representing to the Asstt. Collector of Central Excise, Rourkela against the demand. There was sufficient compliance with the requirements of Rule 173J as it then existed (the rule has now been deleted). The Asstt. Collector of Central Excise in fact confirmed the demands much later on 23-4-1976.
5. We are not impressed with the arguments advanced by Shri Kumaran ; show cause notice to the appellants about the demands was a statutory requirement. Having not done so, the Excise authorities without following the required procedure could not have straightaway made the demand. The argument that such a practice is continuing since long would not make something which is illegal, legal. On this count alone the four demands would as a matter of fact deserve to be set aside and the appeal allowed.
6. Shri Kampani during arguments, filed before us copy of the packing register of H.O.I. Department of the appellants. From the perusal of the same, it is seen that all the goods were loaded in Railway wagons in the presence of Excise authorities, who had themselves verified this loading on 28-2-1973 and certified the clearances. The Excise authorities for demanding differential duty and treating 1-3-1973-the date shown on the railway receipt as the date of removal of the goods, have relied on Explanation (iii), Rule 9A (i) & (ii) of the Central Excise Rules, 1944. For proper appreciation, material portion of Rule 9A (i) & (ii) and the Explanation (iii) at the material time are extracted below.
"9-A. Date for determination of duty and tariff valuation.-(1) The rate of duty and tariff valuation, if any, applicable to any excisable goods shall be the rate and valuation in force, (i) in the case of goods cleared from the premises of a curer on payment of duty, on the date on which the duty is assessed ; and (ii) in the case of goods cleared from a factory or a warehouse, subject to Sub-rules (2), (3) & (3A), on the date of the actual removal of such goods from such factory or warehouse.
(2) If the goods have previously been removed from a warehouse under bond to be rewarehoused, and the duty is paid on such goods without their being rewarehoused, the rate and valuation, if any, in force on the date on which duty is paid or, if duty is paid through an account current maintained with the Collector under Rule 9, on the date on which an application in the ropper form is delivered to the Officer-in-charge of the warehouse from which the goods were removed.
(iii) for which the railways or the transport agency, as the case may be, has issued a receipt in favour of the purchaser of the said goods, shall be deemed to have been removed from the factory or warehouse, as the case may be, even though the wagon of other vehicle laden with the said goods may continue to be stationed within the factory or warehouse premises." 7. From the wording of Explanation (i) & (ii), it would be seen that the Explanation is to apply to goods on which duty has been paid and which has been loaded in railway wagons or other vehicles. Explanation (iii) is applicable when the railways or the transport agencies have issued a receipt in favour of the purchaser of the goods even though the wagon or other vehicle loaded with the said goods may continue to be stationed within the factory or warehouse premises.
In this case, it is no body's case that .the railways are part of appellants' factory. Railway receipts have not been placed before us.
We do not know in whose favour the railway receipts were issued, whether they were issued in the favour of the purchaser. Explanation creates a fiction whereby even if the goods are lying within the factory or warehouse premises and there is a receipt in favour of the purchaser issued by the railways or transport agency, such goods are deemed to have been removed from the factory or warehouse premises.
8. The Explanation was not intended to apply in cases like the present, where the goods have in fact been cleared and removed from the factory in the presence of the Excise authorities, loaded in the wagons belonging to railways, and the same certified by excise and railways authorities, though for some reason the receipt could not be issued on the day of loading itself but it was issued on the next day bearing the date of loading as also of the next day namely 28-2-1973/1-3-1973. In a situation like this the date on railway receipt is not important and cannot be taken as the date of removal from the factory.