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Seshasayee Paper and Boards Limited Vs. the Assistant Collector, Central Excise - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtChennai High Court
Decided On
Case NumberW.P. 3103 of 1976
Judge
Reported in1979CENCUS280D; 1979(4)ELT238(Mad)
ActsCentral Excise Rules, 1944 - Rules 9(1), 9(2) and 10A; Constitution of India, 1950 - Article 226
AppellantSeshasayee Paper and Boards Limited
RespondentThe Assistant Collector, Central Excise
DispositionPetition allowed
Cases ReferredKarnal v. State of Haryana
Excerpt:
central excise rules, 1944 - rule 9(2)--item 17--packing & wrapping paper cleared on a.r.i's for packing of printing and writing paper at the rate applicable to printing & writing paper--notice issued for demand of differential duty under rule 9(2)--held that differential duty is not contemplated under rule 9(2); the show cause notice shows total lack of elementary knowledge of excise law and there was total lack of jurisdiction under rule 9(2). - .....that m/s. seshasayee paper and boards ltd., pallipalayam have contravened rule 9(1) of central excise rules 1944, in as much as they failed to pay appropriate central excise duty on the goods cleared from their factory. m/s. seshasayee paper and boards ltd. pallipalayam are manufacturing different varieties of paper including packing and wrapping paper. they were some times using the packing and wrapping papers for internal use, viz., for the purpose of wrapping the other varieties. they were paying duty on such packing and wrapping paper used internally at the same rate as was applicable to the packed contents of paper.2. as this procedure was considered to be incorrect the inspector of central excise komarapalayam issued show cause notices no. 1/72, dated 4-5-1972 and no. 3/72,.....
Judgment:

Mohan, J.

1. This writ petition is for prohibition to prohibit the respondent from proceeding with the impugned show cause notice, dated 12-7-1976. A preliminary objection was taken by Mr. U.N.R. Rao, the learned Senior Central Government Standing Counsel stating that the petitioner has come at the threshold of the matter only against the mere show cause notice. Whatever objections he has, he can well maintain them before the authorities, more so when a heirarchy has been constituted. The effective argument of Mr. Dolia which merits acceptance in my view is when there is total lack of jurisdiction there is no reason why the petitioner should be called upon to answer a show cause notice, which on the face of it shows lack of jurisdiction. What he means by this argument is, originally levy was sought to be made under Rule 10A. But that levy was set aside by the Collector on appeal. However, strangely he directed proceedings to be taken under Rule 9(2) to collect the differential levy, Rule 9(2) cannot be invoked in cases where the removal was with the consent and knowledge of the department. In the instant case, it is not denied that there was no clandestine removal. On the contrary the removal was after filing A.R.I. forms. In such cases there is total lack of jurisdiction. In support of this submission the learned counsel cited N.B Sanjanna v. E.S. and V. Mills : 1973ECR6(SC) , a judgment of the Division Bench of this Court in W.P. No. 265 of 1969 Agarwal Bros. v. Union of India, 1973 T.L.R. 2213; M. Store Depot, Karnal v. State of Haryana 1977 T.L.R. 1713. The learned counsel after citing these decisions submits that no doubt these cases related to demands but nevertheless the law has been categorically laid down that there is total lack of jurisdiction to invoke Section 9(2) in case where the removal has not been clandestine. Therefore on the ratio of those decisions, if they were to be applied to the admitted facts of the case, there is no need why the petitioner should be called upon to answer the show cause notice.

2. In order to appreciate the controversy between the parties the show cause notice is a extracted in full --

'Whereas it appears that M/s. Seshasayee Paper and Boards Ltd., Pallipalayam have contravened Rule 9(1) of Central Excise Rules 1944, in as much as they failed to pay appropriate Central Excise duty on the goods cleared from their factory. M/s. Seshasayee Paper and Boards Ltd. Pallipalayam are manufacturing different varieties of paper including packing and wrapping paper. They were some times using the packing and wrapping papers for internal use, viz., for the purpose of wrapping the other varieties. They were paying duty on such packing and wrapping paper used internally at the same rate as was applicable to the packed contents of paper.

2. As this procedure was considered to be incorrect the Inspector of Central Excise Komarapalayam issued show cause notices No. 1/72, dated 4-5-1972 and No. 3/72, dated 10-7-72, calling upon them to show cause why the packing and wrapping paper cleared for packing, printing and writing paper not exceeding 75 GSM, viz., 407698 Kg. during the period from 27-7-1970 to 31-3-1972, and 53033 Kg. during the period from 1-4-1972 to 31-5-1972 should not be assessed at 45 paise per Kg. as applicable to packing and wrapping paper instead of at the rate of 15 paise less 3.3 paise as applicable to printing and writing paper. They were asked to show cause why the differential duty of Rs. 1,00,043-99 and Rs. 17,669-98 involved during the above period should not be demanded from them under Rule 10A of Central Excise Rules.

3. In their reply dated 15-5-1972 and 13-7-1972, to the show cause notices, they have contended that the practice of assessing the container at the same rate as that contents has been existing for a long time and they were not aware of any rule changing the procedure. They submitted that differential duty cannot be demanded retrospectively from their earlier date or from 27-7-1970. They also pleaded that the show cause notice indicates only the differential duty to be collected from them and there is no provision for refund where the packing and wrapping paper has been assessed at higher rates. As desired by them a personal hearing was granted on 14-8-1972.

4. The Assistant Collector of Central Excise, 100, Salem, passed an appealable order C No. V/17/B/14/71, dated 20-4-1973, under Rule 10A of the Central Excise Rules, 1944, that the firm should pay differential duty of Rs. 1,00,043-99 and Rs. 14,080-26 on written demands raised by the Range Officer Komarapalayam. M/s. Seshasayee Paper and Boards Ltd. Pallipalayam had preferred an appeal against the order in original and the appellate Collector of Central Excise, Madras has in his order in App. A No. 823 of 1973 (N), dated 31-8-1974, observed that as the merits as for as C No. V/17/2/13/73, the appeal are concerned, there is no doubt, that the wrapping paper and its contents are to be assessed separately as they fall under different sub-items of the Tariff, but involving Rule 10A in demanding the differential duty amount by the lower authority is not valid. As such the Appellate Collector vacated the orders passed and directed for taking fresh action under appropriate rules.

5. Messrs. Seshasayee Paper and Boards Ltd, Pallipalayam, are hereby required to show cause to the Assistant Collector of Central Excise JDO Salem 0) why the differential duty of Rs. 1,00,043-99 and 14.080-26 involved during the period from 27-7-1970 to 31-3-1972, and 1-4-1972 to 31-5-1972 should not be demanded under Rule 9(2) of Central Excise Rules 1944, vide classification lists, dated 27-10-1969 and 20-3-1972, covering the period from 27-7-1970 to 31-5-1972.

6. Messrs. Seshasayee Paper and Boards Ltd., Pallipalayam are directed to produce at the time of showing cause all the evidence upon which they intend to rely in support of their defence.

Messrs. Seshasayee Paper and Boards Ltd.. Pallipalayam arc further requested to state whether they would like to avail of the opportunity to be heard in person before the case is adjudicated. If no mention is made about this in their written explanation it would be presumed that they do not desire a personal hearing.

If no cause is shown against the action proposed to be taken within ten days of receipt of this notice or they do not appear before the adjudicating officer when the case is posted for personal hearing, the case will be decided ex-parte'.

3. I am somewhat surprised at paragraph 5 of the show cause notice which shows total lack of elementary legal knowledge. There is no question on differential duty involved in Rule 9(2). That is evident by reading the following : --

'Rule 9(2) : If any excisable goods arc. in contravention of sub-rule (1) deposit in or removed from, any place specified therein, the producer or manufacturer thereof shall pay duty leviable on such goods upon written demand made by t! . proper officer, whether such demand is delivered personally to him or is left at his dwelling house, and shall also be liable to a penalty which may extend to two thousand rupees and such goods shall be liable to confiscation.

4. The contravention of sub-rule (1) would mean payment of duty in case of self removal or even otherwise. In this case, one fact is clearly admitted by the department and that is the earlier removal was after filing necessary A.R.I, forms and therefore excise duty was collected. What is sought to be collected now is differential duty. Such duty is not contemplated anywhere under Rule 9(2). This is the reason why I characterised the show cause notice shows total lack of elementary knowledge of law relating to excise. Therefore, the petitioner cannot be called upon to show cause against the action proposed when there was total lack of jurisdiction under Rule 9(2). In as much as the lack, of jurisdiction has been fully established there could be no valid bar for the issue of writ of prohibition and in fact the jurisdiction to issue writ of prohibition is intended to be exercised only in such cases. Accordingly I overrule the objection of the department. No other point is argued before me. The writ petition will stand allowed with costs. Counsel's fee Rs. 150/-.


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