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The Marsden Spg. and Co. Ltd. Vs. L.V. Pol, Supdt Central Excise (Tex.) - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtGujarat High Court
Decided On
Judge
Reported in(1965)6GLR350
AppellantThe Marsden Spg. and Co. Ltd.
RespondentL.V. Pol, Supdt Central Excise (Tex.)
Cases ReferredCollector of Central Excise Madras v. V.K. Palappa Nadar
Excerpt:
.....mills-company was not given an opportunity to explain the charge under rule 9 in the show cause notice and do the notice was clearly defective. therefore it is clear that the said rule is concerned only with the question of maintaining proper registers and and dealt with cases of failure to maintain those registers as prescribed therein. 1 under rule 9(2) under the provisions contained in section 35 for the simple reason that the said notice was not merely one asking to show cause but was clearly demanding a definite duty itself and which under rule 9(2) was effective from the date it was served on the petitioner in so far as it created a liability to pay and under which recoveries of moneys could be ordered. by such communication the petitioner would be clearly misled and he might..........the petitioner has prayed for an appropriate writ or order to quash the fresh notice of demand for excise duty dated november 13, 1961 issued by the superintendent of central excise after the disposal of the petitioners appeal.2. the petitioner-mills-company owns a cotton textile mill at ahmedabad. the petitioner was served with a notice dated february 23 1960 to show cause why penalty should not be imposed for contravention of rule 226 of the central excise rules 1944 (hereinafter referred to as the rules) on the ground that it had not written correct accounts in r.g. 1 register and that the said r.g. 1 record and the folding reports of cloth folded in the mills disclosed variations as per the details supplied in the said notice. the mills-company in its explanation dated march 2 1960.....
Judgment:

J.B. Mehta, J.

1. In this petition under Article 226 of the Constitution the petitioner has prayed for an appropriate writ or order to quash the fresh notice of demand for excise duty dated November 13, 1961 issued by the Superintendent of Central Excise after the disposal of the petitioners appeal.

2. The petitioner-Mills-company owns a cotton textile mill at Ahmedabad. The petitioner was served with a notice dated February 23 1960 to show cause why penalty should not be imposed for contravention of Rule 226 of the Central Excise Rules 1944 (hereinafter referred to as the rules) on the ground that it had not written correct accounts in R.G. 1 register and that the said R.G. 1 record and the folding reports of cloth folded in the mills disclosed variations as per the details supplied in the said notice. The mills-company in its explanation dated March 2 1960 explained the said variation on the ground that 63452 length yards being not properly processed were sent for rebleaching and refolding and they had got mixed up with other processed goods and were again brought over the folding department and so the folding reports were made twice over by the folders. It also produced all its relevant books to show how the mistake had occurred. Respondent No. 1 who is the Superintendent of Central Excise by his decision dated April 16 1960 came to the conclusion that the mills-company had not satisfactorily accounted for the variation of 63452 length yards and taking all the facts into consideration he held the mills-company guilty of the offences with which it had been charged and by his order of the same date he imposed a penalty of Rs. 100/- for breach of Rule 226 for writing incorrect account in R.G. 1 and he also demanded duty amounting to Rs. 7298.51 nP. under Rule 9(2) of the Central Excise Rules 1944 on 63452 length yards which were not accounted for. The mills-company filed an appeal on July 7 1960 and the Deputy Collector of Central Excise who heard the said appeal passed the following order on Nov. 2 1960:

Having regard to all the facts of the case and taking into account the contentions put forth by the appellants I hereby order that the decision of the Superintendent Central Excise (Tex.) Ahmedabad shall be sot aside.

2. The amounts of excise duty and penalty recovered from the appellants in pursuance thereof shall be refunded to them.

After concluding the said order there was a further post-script dated November 5 1960 to the effect that by registered post A.D. a copy was sent to the petitioner-mills-company. It was also mentioned in the said order that any person aggrieved by that order could prefer a revision application to the Central Government under Section 36 of the Central Excise and Salt Act 1944 (hereinafter referred to as the Act) as early as possible but not later than within 180 days from the date of the receipt of that order and that the application should be accompanied by a copy of the said order. Thereafter another notice was issued to the mills-company on December 30, 1960 by respondent No. 1 on the same ground of variations between R.G. 1 record and the folding reports to the extent of 63452 yards. But this time the mills-company was asked to show cause why penalty should not be imposed under Rule 226 and why duty should not be demanded under Rule 9(2) of the rules. After the letter of the mills-company dated January 10 1961 respondent No. 1 cancelled the said notice and issued a fresh notice which is the impugned notice on January 13, 1961 on the grounds that there were variations between the R.G. 1 records and the folding reports to the extent of 63452 yards and that the mills company had contravened Rule 9(2) of the rules inasmuch as it had removed the quantity shown therein and therefore the mills-company was asked to show cause against the penalty under Rule 226 and for the duty demanded under Rule 9(2). The petitioner mills-company has challenged the said notice dated January 13 1961 on the ground that it was without jurisdiction as the appellate order was passed on merits and had become final and in the absence of any remand order respondent No. 1 could not legally issue any such notice on the same grounds of the presumption of clandestine removal on the basis of the variations shown between R.G. 1 records and the folding reports on which ground the petitioners appeal was already allowed. The stand of respondent No. 1 in his affidavit is that the Deputy Collector of Central Excise had by his order directed him to adjudicate the case de novo as Rule 9 was not included in the show cause notice and the party was not given an opportunity to be heard on that important point. He has produced a copy of the order received by him dated November 5 1960 which also contains a post-script as under:

Copy to: (1) The A.C.C. Ex. Ahmedabad. (2) the Supdt. C. Ex. (Tex.) Abad with case record. Please acknowledge receipt. He has not included Rule 9 in chargesheet. Party has not been given opportunity to reply on this important point. He may adjudicate case de novo. (3) The C.A.O.C. Ex. Baroda.

The Deputy Collector of Central Excise Baroda who heard the appeal Shri C.L. Nangia has also filed an affidavit along with the return of the respondents and his stand is that it was urged before him that the duty had been charged under Rule 9 but the mills-company was not given an opportunity to explain the charge under Rule 9 in the show cause notice and do the notice was clearly defective. He has stated in para 3 of his affidavit as under:

Hence it was not necessary to go in the merits on the case. The party was not given opportunity to reply on this important point hence I decided to quash the order passed by the Superintendent Central Excise (Tex.) Ahmedabad and ordered do get the case adjudicated de novo. My decision was not on merits of the case. Accordingly the order was passed by me on 2nd November 1960 herewith produce the copy of she order passed by me from my file. The same was signed by me at the same time when I directed the Superintendent. Central Excise(Tex.) Ahmedabad to adjudicate de novo. I say that the portion of the order relating to the petitioner was communicated to the Superintendent Central Excise (Tex.) Ahmedabad.

Along with his affidavit he has filed a copy of the order passed by him dated November 2 1960 which in the operative part is the same as the one produced by the petitioner and in the post-script the copy was to be sent to the Superintendent Central Excise along with the endorsement which has been referred to in the affidavit of respondent No. 1. It was therefore contended by the respondents that the fresh notice was legal and competent.

3. Mr. Oza has contended that after the final order on merits had been passed under Section 35 of the Act it was not open to respondent No. 1 to issue a fresh notice in absence of any remand order made by the appellate authority and the alleged order of remand which is not said to have been passed at the same time in the copy sent to the department and which was never communicated to the mills-company is contended to be a clear afterthought or a secret departmental communication not binding on the petitioner Mr. Nanavati's stand is:

(1) that the said order was a composite order and in 50 far as a mere demand of duty was made it was a mere notice and not a final order.

(2) that no appeal lay against such a demand notice under Section 35 and

(3) that in any case respondent No. 1 was entitled to issue a fresh notice after the remand order which was really passed at the same time and conveyed to respondent No. 1.

4. Before considering these rival contentions it would be proper to consider at the outset the scheme of the relevant sections. Rule 226 deals with the manner in which the entry books stock register and the warehouse register should be maintained and it also provides for a penalty upto Rs. 2000/and for confiscation of the goods if the proper entry has not been made in such books accounts or registers required to be maintained under the said rule. Therefore it is clear that the said rule is concerned only with the question of maintaining proper registers and and dealt with cases of failure to maintain those registers as prescribed therein. Rule 9(1) provides that no excisable goods shall be removed from any place were they are produced cured or manufactured or any premises appurtenant thereto which may be specified by the Collector in this behalf whether for consumption export or manufacture of any other commodity in or outside such place until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these rules or as the Collector may require and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form. Then there are certain provisos with which we are not concerned. The scheme of these rules has been interpreted by a decision of the Division Bench consisting of the present Chief Justice and my learned brother in Special Civil Application No. 751 of 1961 decided on July 31 1964 Chhotalal v. C.L. Nangia (1965) VI G.L.R. 137). In the judgment of the present Chief Justice it is pointed out that there is a clear difference between proceedings for assessment under Rule 52 and the proceedings by way of penalty under Rule 9(2). The first clause of Rule 9 only means that no person shall remove the goods from any of the places mentioned in this part of the rule unless an application under Rule 52 is made in the form prescribed thereunder and an assessment under that rule is made and duty so assessed is paid and permission to remove them is granted. The first clause of the rule therefore lays down a prohibition against removal without payment of duty and it has nothing to do with assessment which is made under Rule 52. Clause (2) was held to be a penal provision making a producer or a manufacturer liable to duty and confiscation of goods removed in contravention of the ban laid down in the first clause. It was observed that the liability to pay duty leviable on the goods under this clause arises from two factors: (1) an illegal removal thereof and (2) consequent thereupon the authority making a demand of duty chargeable thereon. There was no assessment on these goods provided in this part of the rule and there could be none because the goods were not there to be assessed as they were in fact surreptitiously removed without an application under Rule 52 having been made and without any assessment or payment of such assessment and the permission to remove having been obtained. Therefore there could be no assessment in a case where the authority discovering that the goods had been removed without payment of duty made a demand of duty leviable thereon from such information as he might have collected and which empowered him to impose penalty and order confiscation of the goods. After considering the scope of the said Rule 9(2) along with the scheme of Sections 33 to 36 it was held that the authority was exercising a quasi-judicial function under Rule 9(2) and was bound to follow the principles of natural justice. Finally it was held that after the authority made a demand under Rule 9(2) the producer or the manufacturer who has removed the goods in contravention-of Clause (1) of the rule has the opportunity to raise an objection either on the ground that he is not liable or on the quantum of duty and that objection has to be heard consistently with the principles of natural justice. It was also equally made clear that it is only when a demand is made under that part of the rule that the liability to pay arises and not otherwise. Therefore the right to hold property as safeguarded under Article 19(1)(0 and (g) is affected as from the time the demand was made. The effect of this decision is that from the time of the demand the liability of the manufacturer to pay the duty arises. It is true that the manufacturer has a right to object and to be heard it being a quasi-judicial order but that does not mean that the demand is a mere notice to show cause which does not create any binding obligation. Mr. Nanavati contended that unless there was an order of final adjudication the notice was really ineffective. In view of the clear pronouncement of this Court we cannot agree with that contention. It is a binding order as soon as the duty is demanded under Rule 9(2) although in the first instance it is made ex-parte as in cases of other judicial orders where are made ex-parte or then delay is condoned ex parte. Such orders which create binding obligations from the date of the initial order itself do not cease to be binding orders merely because the other side has a right to appear or get the same set aside in the said proceeding or in an appeal.

5. We also cannot agree with Mr. Nanavati that no appeal lay against the demand of duty made by respondent No. 1 under Rule 9(2) under the provisions contained in Section 35 for the simple reason that the said notice was not merely one asking to show cause but was clearly demanding a definite duty itself and which under Rule 9(2) was effective from the date it was served on the petitioner in so far as it created a liability to pay and under which recoveries of moneys could be ordered. Rule 9(2) requires that if any excisable goods are removed in contravention of Rule 9(1) the manufacturer shall pay the duty leviable on such goods upon written demand made by the proper officer. The term; proper officer is defined in Rule 2(xi) as the officer in whose jurisdiction the land or premises of the producer of any excisable goods are situated and the term officer is defined in Section 2(A) as the Collector of Central Excise Baroda. Section 35(1) then provides that any person deeming himself aggrieved by any decision or order passed by a Central Excise Officer under the Act or the rules made thereunder may within three month from the date of such decision or order appeal therefrom to the Central Board of Revenue or in such cases as the Central Government directs to any Central Excise Officer not inferior in rank to an Assistant Collector of Central Excise and empowered in that behalf by the Central Government. Such authority or officer may thereupon make such further inquiry and pass such order as he thinks fit confirming altering or annulling the decision or order appealed against. The proviso only enacts that no such order in appeal shall have the effect of subjecting any person to any greater confiscation or penalty than has been adjudged against him in the original decision or order. Sub-section (2) of Section 35 provides that every order passed in appeal under this section subject to the power of revision conferred by Section 36 shall be final. Section 36 then provides that the Central Government may on the application of any person aggrieved by any decision or order passed under this Act or the rules made thereunder by any Central Excise Officer or by the Central Board of Revenue and from which no appeal lies reverse or modify such decision or order. In view of this clear language of Section 35(1) it cannot be doubted that appeal lies against the decision or order passed by any Central Excise Officer It is not disputed that the Deputy Collector who had heard the appeal was properly appointed to hear such appeal under Section 35. Once therefore a notice of demand was issued under Rule 9(2) by the Central Excise Officer the appeal was competent under Section 35 and we cannot agree with Mr. Nanavati that the appeal was wholly incompetent.

6. The main controversy which is therefore to be resolved is as to the effect of the appellate order. Section 35 makes the order passed in appeal under Section 35 final subject to the power of revision conferred on the Central Government under Section 36. It is not in dispute that no revision application whatsoever was filed by any party and so the order passed by the appellate authority in the present case had become final. Mr. Nanavati contended that the effect of the post-script dated November 5 5 1960 was of incorporating a remand order in the original order itself dated November 2 1960 The words of the post-script leave no doubt that it was merely a departmental communication intended to reach the officer concerned. It was really the view expressed by the appellate authority as to the legal effect of his appellate order intended to be conveyed to his department. The appellate authority who has passed the order has himself stated in his affidavit that the portion of the order relating to the petitioner was communicated to him and the whole order including the direction to adjudicate de novo was communicated to the Superintendent Central Excise(Tex.) Ahmedabad. Therefore it is clear that what was material for the petitioner had been conveyed to him and the rest of the communication in a copy sent to respondent No. 1 was a mere departmental communication which could not be treated as a part of the judicial order itself. A judicial order once passed can be amended modified or changed only by a judicial process. Although the appellate authority stated that he had passed the post-script order at the same time we do not find this part having been incorporated in the original order dated November 2 1960 and even in the original record nothing is shown to indicate that this formed part of the original order itself. If it was really so it would have been conveyed to the petitioner when he was informed that if aggrieved by the order passed, which was sent to him he could file a revision application by enclosing a copy of the order sent to him. At no time the petitioner was informed that there was any other order passed than the one sent to the petitioner. By such communication the petitioner would be clearly misled and he might have chosen not to file any revision application as the order sent to the petitioner on a bare perusal shows that it was passed on merits and not on any preliminary point. The whole decision against the petitioner had proceeded on the ground that the petitioner had not satisfactorily accounted for 63452 length yards on the basis of the variations in R.G. 1 register and the folding reports and it was only on this ground and not on any other information that Rule 9(2) was invoked on the basis of contravention of Rule 9(1). The appellate authority having examined the whole case and having regard to all the facts of the case and taking into account all the contentions put forth by the petitioner had set aside the original decision and had ordered that the amount of excise duty and penalty recovered from the petitioner in pursuance thereof should be refunded. It was thereafter not open to respondent No. 1 to allege again the same contravention of. Rule 229 and on the basis of any supposed variation to issue a demand notice under Rule 9(2). In terms the duty had been ordered to be refunded. In view of the finality conferred by Section 35(2) of the Act to the appellate decision the petitioner mills-company could not be vexed twice.

7. Mr. Nanavati urged that this notice issued in January 61 shows that besides variations there was an additional ground that Rule 9(1) had been contravened inasmuch as the mills-company had removed the same length yards 63452. This was clearly an afterthought and that is why the notice dated December 30 1960 was cancelled and the impugned notice was issued on January 13 1961 This is clear from the fact that the stand in the return is that the fresh notice was issued and the proceedings were started de novo in view of the remand order by the appellate authority. If in fact there was no remand order made by the appellate authority respondent No. 1 would have no jurisdiction to start de novo proceedings in this manner. If there was any error in the final appellate order it could have been corrected in revision only under Section 36. That remedy having not been invoked the order had become final and the matter could not be reopened by respondent No. 1 by issuing a demand notice. Mr. Oza rightly relied on a decision of the Madras High Court in the Collector of Central Excise Madras v. V.K. Palappa Nadar : AIR1964Mad111 . In that case the order of the appellate authority was that having regard to the circumstances of the case the order passed by the Collector shall be vacated. Even though the words without prejudice to the merits of the case had been used the Madras High Court came to the conclusion that in view of the finality conferred by Section 35(2) unless a revision application was filed under Section 36 after the disposal of the matter by the appellate tribunal jurisdiction could be revived in the original tribunal only if there were specific directions in the appellate order to that effect. If the appellate order merely annulled the original order without containing any other directions there was no power in the original tribunal to initiate de novo proceedings and impose a fresh penalty and in the words without prejudice to the merits of the case were held to make no difference on the ground that final communication was merely an interpretation by the officer who wrote that letter upon the order of the appellate authority and such interpretation in a communication could not be treated as a part and parcel of the appellate order. Respondent No. 1 had therefore no jurisdiction to issue the impugned notice.

8. In the result the writ of certiorari shall issue quashing the impugned notice dated January 13 1961 Respondent No. 1 is prohibited from holding any proceedings in pursuance thereof. The petition accordingly allowed and the rule made absolute with costs.


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