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Jayashree Textiles and Industries and ors. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtKolkata High Court
Decided On
Case NumberC.R. No. 9594 (W) of 1976
Judge
Reported in1985(4)ECC22,1985(22)ELT708(Cal)
ActsCentral Excise Rules - Rules 9, 9(1), 9(2), 10, 10A, 56A, 56A(4), 56A(5), 173G and 173Q
AppellantJayashree Textiles and Industries and ors.
RespondentCollector of Central Excise
Appellant AdvocateB.P. Gupta and ;R. Chaudhri, Advs.
Respondent AdvocateS.N. Banerjee, Adv.
Cases ReferredC) (Assistant Collector of Central Excise v. National Tobacco Co. of India Ltd.
Excerpt:
central excise - assessment--short payment--notice--assessee manufacturing cotton fabrics out of yarn purchased as well as yarn manufactured by assessee---assessee permitted to avail of procedure under, rule 56a--maintenance of necessary records and submission of rt 12 returns by assessee--acceptance of returns by authorities and no demand for duty--subsequent notice for demand of duty and levy of penalty under rules 9(2), 56a, 173q--validity--conditions necessary for applicability of rule 9(2)--central excise rules, 1944, rules 9, 10, 10a, 56a, 173g, 173q. - .....as to why a penalty should not be imposed on it under rules 9(2), 56a(4) and 173q of the central excise rules and as to why central excise duty should not be demanded under rules 9(2) and 173q of the central excise rules. to appreciate the alleged violation of the aforesaid rules committed by the petitioner, it is necessary to state certain facts leading to the issuance of the aforesaid impugned show cause notice. the petitioner manufactures cotton fabrics from cotton yarn. the said yarn is obtained from the sources (a) from open market and (b) from yarn manufactured in the petitioner's own factory. so far as the yarn obtained from open market is concerned, the petitioner was permitted to avail of the special procedure under rule 56a of the central excise rules. the petitioner had been.....
Judgment:

S.K. Mukherjee, J.

1. The petitioner in this case has challenged a notice dated 12th January, 1973, issued by the Assistant Collector, Central Excise, Calcutta IV Division. By the said notice the petitioner has been asked to show cause as to why a penalty should not be imposed on it under Rules 9(2), 56A(4) and 173Q of the Central Excise Rules and as to why Central excise duty should not be demanded under Rules 9(2) and 173Q of the Central Excise Rules. To appreciate the alleged violation of the aforesaid rules committed by the petitioner, it is necessary to state certain facts leading to the issuance of the aforesaid impugned show cause notice. The petitioner manufactures cotton fabrics from cotton yarn. The said yarn is obtained from the sources (a) from open market and (b) from yarn manufactured in the petitioner's own factory. So far as the yarn obtained from open market is concerned, the petitioner was permitted to avail of the special procedure under Rule 56A of the Central Excise Rules. The petitioner had been maintaining subsisting the necessary registers and other books and forms in terms of the said Rule 56A and making adjustments by way of proforma credit. During the period from June, 1968, to August, 1972, the petitioner purchased cotton yarn from the market, manufactured cotton fabrics from purchased cotton yarn as also from what was produced in the petitioner's own factory. In the personal ledger account the accumulated credit on account of purchased cotton yarn from outside market had been adjusted against Central excise duty payable on cotton yarn manufactured and utilised for weaving by the petitioner. The said adjustments had been made by the petitioner within the knowledge of the excise authorities, who made assessment and allowed the petitioner to clear the finished products from the said factory.

2. Mr. Bhaskar Prased Gupta appearing on behalf of the petitioner in support of the rule has contended that Rule 9, Sub-rule (2), of the Central Excise Rules is attracted, when there is a violation of Rule 9. Sub-rule (1), of the said Rules. To constitute again a violation of Rule 9, Sub-rule (1), there must be clandestine removal of excisable goods by the assessee concerned with intention to evade payment of excise duty. Where goods have been removed within the knowledge of excise authorities and with their consent, it cannot be said that the aforesaid element is present. In the instant case, Mr. Gupta has contended that the facts and materials show that removal of the goods was made with the knowledge and approval of excise authorities and R.T. 12 forms had been duly submitted. Mr. Gupta, in this connection, has pointed out that the R.T. 12 forms contain a part known as 'assessment memorandum'. If there was any short payment of duty by the petitioner, the memorandum empowered the authorities to demand the duty short paid but it is not the case of the respondents that the memorandum in this case really indicated any such short payment by the petitioner. In fact, in the impugned show cause notice also, it has been admitted that R.T. 12 forms had been submitted. Moreover, there is no allegation in the said show cause notice that goods were clandestinely removed. In support of his above contention, Mr. Gupta referred to the decision of the Supreme Court in the case of N.B. Sanjana v. Elphinstone Spinning and Weaving Mills reported in : 1973ECR6(SC) , a decision of the Bombay High Court in the case of Acme Metal Industries Private Ltd. v. S.S. Pathak, The Inspector, C.E. reported in 1980 E.L.T. 156, a decision of the Madras High Court in the case of Seshasayee Paper Board Ltd. v. Assistant Collector, C.E., reported in 1979 E.L.T. 238 and one of the Calcutta High Court in the case of Union Carbide Company Ltd. v. Assistant Collector of Central Excise, reported in 1978 E.L.T. 180. In the last mentioned decision, it was laid down that even in a case where goods were removed without payment of duty but within the knowledge of the Department, Department cannot escape its responsibility by alleging that manufacturer has misdeclared the goods; if the assessee is supposed to know the law, the excise department is also supposed to know the law. Secondly, Mr. Gupta has contended that if there has been any violation of the terms on which the permission had been granted to his client under Rule 56A, the respondents, at best, were empowered to discontinue the proforma credit facility but at the relevant point of time, had no authority to make financial recovery. He doubts, the said Rule 56A by its Sub-rule (5). as it stands now, authorises the respondents to make financial recovery but the said Sub-rule having been introduced after 14th August, 1976, and not being in existence on the date of issuance of the notice, it cannot be permitted to be taken recourse to by the respondents to sustain the impugned notice. In support of his above contention, Mr. Gupta has referred to a decision in the case of Universal Cables Ltd. v. Union of India, reported in 1978 E.L.T. (J 632), wherein it was laid down that if the period of limitation for issuance of notice, for disallowance of credit under Sub-rule (5) of Rule 56A had already expired on the date when the said rule was added, no notice could be issued under the aforesaid Sub-rule disallowing the credit and for recovery of equivalent amount. Lastly, Mr. Gupta has contended that the order passed by the revisional authority is not a speaking order. It rejects the revisional application even without recording any finding as to the basic requirement for application of Rule 9, Sub-rule (2), of the Central Excise Rules, namely, removal of excisable goods in a clandestine manner. Mr. Gupta in the context of the aforesaid state of affairs, has argued that at any rate, the revisional order is liable to be quashed. In the view, however, which I am taking, it is not necessary for me to consider this argument of Mr. Gupta.

3. Mr. Banerjee, appearing for the respondents, has contended that there was no assessment and as such the (respondents are not debarred from taking recourse to Sub-rule (2) of Rule 9 of the Central Excise Rules. Question as to clandestine removal is not relevant. Mr. Banerjee has relied upon the principle land down in Assistant Collector of Central Excise v. National Tobacco Co. of India Ltd. : 1978(2)ELT416(SC) and argues that mere adjustments of debit and credit entries without following the procedure for assessment does not result in assessment. It has been contended by Mr. Banerjee that in view of the fact that there has been no assessment, neither the principles laid down in the different cases, cited on behalf of the petitioner apply not the question of clandestine removal would fall for consideration. Regarding the effect of R.T. 12 forms, Mr. Banerjee submits, that the approval of the said forms is more or less mechanical and at best the assessment made therein can be termed a provisional assessment.

4. In my view, the contentions of the respondents cannot be accepted for a number of reasons. First, the R.T. 12 form is required to be submitted in terms of Rule 173G of the Central Excise Rules, which is again one of the rules within Chapter VIIA of such Rules. On a proper reading of the different rules covered by the said Chapter VIIA, it becomes clear that the assessment memorandum, which is a part of the printed R.T. 12 form, is intended to give finality to the assessment on the basis of R.T. 12 return. The said memorandum clearly indicates that the excise authorities are empowered to demand any duty short paid by the assessee. Secondly, in the present case, the contention that there was no assessment is also contrary to what is stated in the impugned show cause notice itself. A careful reading of the show cause notice amply indicates that the fact of assessment having been completed was accepted also by the statutory authority. Mr. Banerjee's submission, that R.T. 12 form having related to finished products could not fetter the powers of the respondents to claim excise duty on its components, cannot be accepted. According to Mr. Banerjee, whatever assessment was made on the basis of R.T. 12 form was not an assessment in the eyes of law inasmuch as the assessee wrongly showed in the said form the quantum of duty already paid without mentioning that the yarn produced in its own factory was liable to separate assessment. Such contentions of Mr. Banerjee have no substance for the simple reason that if the same are accepted that would result in exonerating the statutory authorities from performing their statutory duties in connection with R.T. 12 forms and further because all assessments would become liable to be reopened at any stage and at any point of time, obviating the necessities of introduction of certain statutory prerequisites to such reopening of completed assessment through the Central Excise Rules. From the show cause notice itself, it is clear that the respondents do not dispute the claim of the petitioner that R.T. 12 forms had been submitted nor is it the case of the respondents that the assessment memorandum required the petitioner to pay further duties. The categorical averments in the application for writ in this behalf have not been effectively controverted so as to enable me to hold the contrary.

5. Even assuming that there has been no assessment Rule 9(2) could not apply to the instant cage as, at any rate, this is admittedly not a case of clandestine removal and under the decision of the Supreme Court in Sanjanan's Case- : 1973ECR6(SC) , this element of clandestine removal is essential for attracting Rule 9(2). That decision makes it clear that for the application of Rule 9(2) two elements are necessary : (i) clandestine removal of the goods and (ii) non-assessment; and the absence of either will preclude its application.

6. It is significant to note in this connection that the Assistant Collector, who has affirmed the affidavit-in-opposition on behalf of the respondents, is the statutory authority to assess the excise duty with regard to the goods, which are the subject-matter of the present list. Moreover, in the case reported in : 1978(2)ELT416(SC) (Assistant Collector of Central Excise v. National Tobacco Co. of India Ltd.), the basis of the entire dispute was the price lists submitted by the assessee for deternmining the correct assessable value and as such distinguishable on facts from the present case of a complete assessment. The respondents having taken a definite stand not to take recourse to either Rule 10 or 10A but to Rule 9 and Rule 56A of the Central Excise Rules and having sought to sustain the notice on the basis of violation of such rules, the impugned notice cannot be allowed to stand. Rule 9 (2) cannot apply, as already stated, there has been no clandestine removal of the goods and there has been no deliberate evasion of excise duty payable. Rule 56A, as it stood on the date of issuance of the show cause notice, does not authorise the respondents to take steps for financial recovery. I direct accordingly that a writ of certiorari should issue quashing the impugned show cause notice and the orders passed in the proceeding pursuant thereto. I direct that a writ of mandamus should also be issued commending the respondents to forbear from making any demand pursuant to the said notice and the said orders.

I accordingly make the rule absolute to the extent indicated above.

There will, however, be no order as to costs.


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