1. M/s. Asian Paints (India) Ltd. have filed this appeal under Section 35-B of the Central Excises and Salt Act, 1944 against the order No.A-1236/B-II-137/82 dated 5-8-1982 [F. No. V-2(15A) 1659/79] passed by the Collector of Central Excise, (Appeals), Bombay under which he confirmed the order No. V (15A) 2-3/77/7631 dated 14-8-1979 of the Asstt. Collector of Central Excise Division T demanding duty amounting to Rs. 5,49,925.04 under Rule 10-A of the Central Excise Rules, 1944 from M/s. Asian Paints (India) Ltd., Bhandup, Bombay-78.
2. The facts of the case are that M/s. Asian Paints (India) Ltd. are manufacturers of paints and varnishes and for the manufacture of these items they require resins which they procure either from the market or by direct import from abroad. M/s. Asian Paints (India) Ltd, also manufacture certain types of synthetic resins from the materials purchased locally or imported which are classifiable under item 15A of the central excise tariff. They had obtained permission to avail of the concession under Rule 56-A to pay duty on the aforesaid manufactured products by utilising the credit of duty paid on raw materials brought by them in their factory. However, the Central Excise Officer observed in 1970 that M/s. Asian Paints (India) Ltd. bad utilised the pro forma credit under Rule 56A for paying duty on certain synthetic resins, in the manufacture of which no duty-paid raw, material was used as required under Rule 56A. This misutilisation of credit took place during the period October, 1969 to August, 1973. Accordingly, the Asstt. Collector of Central Excise took steps to recover the duty in cash which had been paid by the appellants through their pro forma credit account maintained in the form R.G. 23. On the first appeal to the Appellate Collector, the matter was remanded to the Asstt.
Collector who once again confirmed his predecessor's order vide the Asstt. Collector, Bombay T-Divn's order dated 14-7-1979. Against this order of the Asstt. Collector, M/s. Asian Paints (India) Ltd. filed the appeal to the Collector of Central Excise (Appeals) who confirmed the decision vide his order dated 5-8-1982. Accordingly, M/s. Asian Paints (India) Ltd. have approached the Tribunal by way of the present appeal.
3. On behalf of the appeallants, Shri K. Rajagopalachari first briefly set out the facts of the case. He contended that the main charge against the appellant was that they produced goods and paid duty thereon through their pro forma credit account even when the goods did not contain the duty-paid raw materials. Shri Rajagopalachari added that during the relevant time Rule 56-A stipulated this condition. This condition was deleted through an amendment to Rule 56A made on 27-7-1974. Shri Rajagopalachari further contended that the proviso to Rule 56-A(3) has to be read with the proviso to Rule 56A(2). The proviso to Rule 56A(2) required that the raw materials and the finished excisable goods should fall under the same item of the central excise tariff. Referring to the aforesaid provisions of the proviso to Rule 66A(2), Shri Rajagopalachari observed that the wordings of the proviso.
...no credit of duty shall be allowed in respect of any material or component parts used in the manufacture if finished excisable goods were different from the requirements of finished excisable goods being manufactured from any raw materials or components. He further contended that the payment of duty through pro forma credit account admissible under Rule 56-A was amounting to set-off and therefore, it was an Act of assessment. The manufacturer paid the duty on the finished products by debiting the amount to the R.G. 23 account instead of the PLA.Therefore, in case there was any shortage in the payment of duty, such short-levy would be governed by Rule 10. Shri Rajagopalachari next contended that the Collector (Appeals) in his order dated 16-12-1978 remanded the matter to the Asstt. Collector for de novo consideration by the Asstt. Collector. This entailed that the Asstt. Collector should have issued a fresh show cause notice. Instead the Asstt. Collector issued an amendment to the original show cause notice invoking Rule 10A against the appellants. This was done at a time when Rule 10A was not in force. Rule 10A had been held ultra vires and this had been admitted by the Govt. of India. Even if it be conceded for the sake of argument that the Rule 10A was correct, it would not apply to the appellants' case as Rule 10A covered duty which has escaped assessment earlier. In the present case there was no question of escaped assessment as the amount of duty had been paid all through the R.G. 23 account. The next point which fell for consideration was the order of the Collector (Appeals) dated 5-8-1982 which was the subject-matter of the present appeal. Under this order, the Collector (Appeals) had ordered recovery of duty demanded by the Asstt. Collector simultaneously with affording an equivalent credit to the appellants in their R.G. 23 account. Shri Rajagopalachari contended that first the credit should be given to the appellants in their R.G. 23 account and then the demand could be made for payment of duty by cash. The next point was that the proceedings taken against the appellant against the show cause notice dated 16-10-1978 were time barred under Section 40(2) of the Central Excises and Salt Act, 1944 as was existent at that time. Hence the demand was barred and the amount cannot be recovered from the appellants.
4. Shri Rajagopalachari developed the aforesaid points at length in the course of his arguments. He referred to the paper book filed in the appeal and to the show cause notice dated 16-3-1974 issued by the Asstt. Collector of Central Excise, Bombay Division VI. He referred to the two annexures to the show cause notice which set out in detail the description of the raw materials brought inside the factory under Rule 56A and the quantity so used in the manufacture of the finished products. Ha contended that the company had taken the credit correctly.
Both the raw materials and the finished products fell under the same item of the central excise tariff. Hence as per Rule 56A(3)(vi), the credit was allowed correctly and utilised properly for the payment of duty on the finished goods. In this behalf, Shri Rajagopalachari referred to the decision reported in 1982 ELT page 347. He drew our attention to para. 4 of the Collector (Appeals)'s order dated 5-8-1982 which reproduced Rule 56A(3)(vi) as prevailing at that time. Shri Ragagopalachari submitted that paras. 36 to 39 of the appeal memorandum answered the aforesaid contention of the Collector (Appeals). Shri Rajagopalachari next argued that the set-off of duty by debit to the R.G. 23 account was an act of assessment. In this behalf, he relied on the Andhra Pradesh High Court's judgment as reported in 1979 ELT 307 (para. 13). He further contended that the same contention had been raised before the Asstt. Collector but his order was silent in this behalf. He criticised the Asstt. Collector's order and added that the same had not been written as per the directions of the Supreme Court as contained in their decision reported in AIR 1984 SC 736 which laid down as to how a judgment is to be written. As per the decision of the Supreme Court, all the points raised before a Judge have to be covered in the order. Shri Rijagopalachari submitted that the CPC procedure was not applicable to the decisions under the Central Excise Act and the Rules and the orders passed thereunder have to be made speaking orders.
The same would also apply to the orders passed by the Tribunal. He further contended that Rule 10 would be applicable in the present circumstances of the case even if the manufacturer had made a mis-statement. Since the demand was made beyond the time limit of Rule 10, he argued that the recovery was time barred. As regards the correct meaning of de novo proceedings, Shri Rajagopalachari contended that it had had to be a new proceeding and not a continuation of the original proceedings. He referred to Mosley and Whitley's Law Dictionary 1970, 8th Edition, page 105 for the true meaning of "de novo" proceedings.
Relying on this authority, Shri Rajagopalachari contended that it was necessary that a fresh show cause notice should be issued to the appellants. On the other hand, there was only an amendment to the old show cause notice and the order passed thereon was silent on the manufacturers' several contentions which had been raised before the Asstt. Collector during the course of the proceedings. As regards Collector (Appeals)'s reliance on the Supreme Court's decision in para.
6 of his order dated 5-8-1982, Shri Rajagopalachari submitted that this judgment would apply if the proceedings are treated to be continuous.
But the contention of M/s. Asian Paints (India) Ltd. was that de novo proceedings cannot be treated as a continuing proceeding and hence the Supreme Court's judgment relied on by the Collector (Appeals) was not relevant. He further contended that Rule 10A would not apply as it covered only an escaped assessment. In this behalf, he relied on the judgment of the Madras High Court in the case of Citadel Fine Pharmaceuticals Pvt. Ltd., Madras v. District Revenue Officer, Chinglepet and Ors. and he submitted a copy of this judgment. He further relied on 1973 TLR page 2213 in the case of Agarwal Bros. v.Union of India to contend that the Govt. of India had admitted that Rule 10A was ultra vires. In these circumstances, the same could not be invoked against the present appellants. He further repeated the contention that the demand was time-barred under Section 40(2) and hence the recovery could not be made from the appellants. In view of the circumstances, Shri Rajagopalachari prayed that the appeal should be allowed.
5. On behalf of the Collector, Shri Pattekar contended that no valid permission was granted to M/s. Asian Paints (India) Ltd. for availing of the benefit of Rule 56-A for the payment of duty on the finished product by availing of credit of duty paid on the raw materials. As per their own submission, the company applied for such permission on 10-4-1964 and this was rejected. In this behalf, he drew our attention to the copy of Asstt. Collector's letter dated 10-4-1964 (page 3) in the paper book. There was no record to show that thereafter the appellant had renewed their request; hence they cannot avail of the benefit of Rule 56A without any approval from the Asstt. Collector.
Hence the department asked them to repay the amount of duty which they have not paid in cash but only through the pro forma credit. In view of these circumstances, Shri Pattekar contended that the order of the Asstt. Collector of Central Excise, Division VI dated 20-4-1977 was correct. Shri Pattekar further argued that since the goods have been removed without payment of duty, the non-levy of duty would attract Rule 9(2). In that case, there was no need for the department to take recourse to Rule 10A. It was quite clear that the goods had been cleared without payment of duty. The utilisation of the credit was bad and hence in case of such credit being allowed through error, etc., the same could be recovered under Rule 56A(5). Shri Pattekar further argued that so long as the money was due from the assessee, it was not relevant if any wrong rule had been quoted for demanding the payment.
Therefore, this was a correct case for invoking Rule 9(2) of the Central Excise Rules. Shri Pattekar submitted that the same arguments will apply to the Collector's cross-objection in the appeal of M/s.
Asian Paints (India) Ltd. .
6. In reply, Shri Rajagopalachari contended that there was no case for filing a cross-objection. The order of the Collector (Appeals) was in favour of the department. It could not be argued that the department had a better right than M/s. Asian Paints (I) Ltd. in the present case.
He contended that the cross-objection cannot be allowed. In this behalf, he relied on Supreme Court's decision reported in AIR 1960 SC 1349. He also drew our attention to the meaning of cross-objection as contained in Sarkar's CPC (6th editition) page 122. Through the cross-objection, the Collector had requested for the remand of the case for de novo adjudication by the Assistant Collector. Shri Rajagopalachari argued that the Tribunal was competent to decide the issue and therefore there was no need for remand of the matter to the Assistant Collector. He drew support from the judgment of the Madras High Court reported in AIR 1972 Madras 316. As regards the contention of the learned Departmental Representative that Rule 9(2) would apply, Shri Rajagopalachari argued that all the removals had been made under strength of gate passes and that R.T. 12 returns have been filed showing such clearances. Hence there was no question of the company removing any goods without payment of duty. In these circumstances, Rule 9(2) would not apply. As regards the copy of the letter dated 3-12-1973 filed as annexure X to the Collector's cross-objection which reproduced the letter from the Assistant Collector, Central Excise, Bombay Division VI, addressed to M/s. Asian Paints (India) Ltd. to the effect that the permission under Rule 56A was without any prejudice to any action that might be taken for any contravention during the earlier period, Shri Rajagopalachari contended that this letter was not a part of the appeal and hence the same could not be taken note of by the Tribunal. The company had been availing of the procedure under Rule 56A for the past several years and even if the same was done without any explicit permission from the proper officer, such permission was not very critical for availing of the benefit. Shri Rajagopalachari contended that this was a procedural requirement and the company had followed all the procedure in this behalf. In this matter he drew analogy with chapter X procedure and the decision reported in (1980) ELT 358 by the Government of India which condoned procedural lapse for permitting benefit, under chapter X procedure. Shri Rajagopalachari further argued that even if Rule 9(1) was violated, there was no contravention of Rule 9(2) and in this behalf he relied on the Supreme Court's decision in the case of Sanjana v. Elphinstone Mills and 1978 ELT 180. He also relied on the decision of the Tribunal in to urge that the Collector's cross-objection was not maintainable when the impugned order was wholly in his favour. In view of these circumstances, he prayed for the dismissal of the cross-objection and allowing his company's appeal.
7. We have examined the submissions made on both the sides. The main, point involved in the appeal is whether the appellant had correctly availed of the credit of Rs. 5,49,925.04 in paying duty on finished products which did not contain the items on which duty had been paid and for which the credit had been taken. As observed by the learned representative of M/s. Asian Paints (India) Ltd., the facts of the case are not in dispute. In other words, Shri Rajagopalachari has conceded that in case the finished products did not contain the raw materials, the credit of duty paid on the raw materials was not available for paying duty on the finished products. This is the legal position in terms of Rule 56A and this has not been disputed. The only dispute which, therefore, arises is whether the amount of credit wrongly utilised can be recovered by the Assistant Collector. It is seen that under his order dated 14-8-1979 the Assistant Collector ordered the recovery of the aforesaid amount of Rs. 5,49,925.04 under Rule 10A of the Central Excise Rules, 1944. M/s. Asian Paints (India) Ltd. have contended that the invocation of the Rule 10A in the amendment dated 4-5-1979 to the notice against the appellants was made when this rule was not on the statute book and had been repealed earlier on 6-8-1977.
The same contention had been raised by the appellant before the Collector (Appeals) and the contention had been rejected by the Collector (Appeals) for the reasons mentioned in his order. It is seen that the period of short levy is from October 1969 to August 1973.
During this time, Rule 10A was very much in force. The learned representative of the appellant contended that when the Collector (Appeals) in his order dated 16-12-1978 remanded the matter to the Assistant Collector for de novo adjudication, it would imply that the matter had to be adjudicated afresh by issue of a fresh show cause notice. We have perused the Collector (Appeals)'s order dated 16-12-1978. We note the following observation of the Collector (Appeals): I find that the notice for demand of duty and also the adjudication order demanding duty, had not been issued under the correct rule, nor has it been justified in the adjudication order. The case is remanded to the Assistant Collector for de novo adjudication.
By this order, the Collector directed the Assistant Collector to decide the case afresh by invoking the correct rule. There was no order from the Collector (Appeals) setting aside the show cause notice issued to the appellants. Only the order of the Assistant Collector had been set aside. In compliance of this direction of the Collector (Appeals), the Assistant Collector cited Rule 10A and proceeded to adjudicate the liability of the appellants afresh. There is, therefore, no warrant in the interpretation put on this order of the Collector (Appeals) by Shri Rajagopalachari that a fresh notice was necessary. In fact, quoting of a wrong rule would also not have invalidated the demand as per the Supreme Court's judgment in the case of Sanjana v. Elphinstone Mills Ltd. Hence we find no justification in the contention that a fresh show cause notice was necessary. So far as the applicability of Rule 10A is concerned, Rule 10A was very much in force during the relevant time.
The Assistant Collector invoked it on direction by the Appellate Collector by way of remand. A show cause notice had already been issued to M/s. Asian Paints India Ltd. on 12-5-1976. On this date, Rule 10A was very much in existence. Through the amendment dated 4-5-1979, the Assistant Collector carried out the direction of the Appellate Collector and substituted "Rule 10A" for "Rule 56A(3)(v)". Since this was a remand case and not one of issue of a fresh show cause notice, Shri Rajagopalachari's argument that on the day in question Rule 10A had been repealed, is not relevant. From this point of view, the present case can be distinguished from the decision of the Larger Bench of the Tribunal in the case of Atma Steels Pvt. Ltd. (1984) 17 ELT 331.
Besides, quoting a different rule in the show cause notice dated 12-5-1976 does not vitiate the demand if it was legally due to the Government. Besides, Shri Rajagopalachari himself contended that the payment of duty by debit to the R.G. 23 account was after the assessment of the finished products. Therefore, in case duty on the finished products had not been paid, the question arises as to what remedy the department has for recovering this amount. Rules 9(2), 10 and 10A come up for consideration in this behalf. The learned representative of the department has contended that Rule 9(2) would apply and that the department has the right to recover the duty without any period of limitation. Shri Rajagopalachari has vehemently opposed this contention and rejected the insinuation of the learned Departmental Representative that the appellants removed the goods clandestinely. We find that there is a lot of force in the argument of Shri Rajagopalachari as the goods have not been removed clandestinely.
Therefore, we are of the view that Rule 9(2) is not attracted. As regards the application of Rule 10, the same has been discussed in the order of the Collector (Appeals) dated 5-8-1982. Rule 10, as it then originally stood, covered duties short levied through inadvertence, error, collusion or mis-construction on the part of the officer or through misstatement as to the quantity, description or value of such goods on the part of the owner. The question therefore arises whether the present demand under appeal was one falling under erstwhile Rule 10 of the Central Excise Rules, 1944. So far as inadvertence, error, collusion or mis-construction on the part of the officer is concerned, it should mean an error or mis-construction, simpliciter and not one caused by any mis-statement of the assessee. This has been clarified in the case of Union of India v. Bina Mukherjee 77 TLR (NOC) 156. The demand under appeal is not therefore one which was caused through inadvertence, error, or misconstruction on the part of the officer.
There has been also no mis-statement as to the quantity, description or value of the goods on the part of the owner. Therefore, we find that Rule 10 is not applicable to the recovery of the amount which was paid through the debit entry to the R.G. 23 account. Rule 10A was applicable where other rules did not apply. In a way this was a residuary rule and this would come into operation in a case like the present one where Rule 10 was not attracted. Rule 10A has also been invoked to claim recovery of duty. However, Shri Rajagopalachari has contended that Rule 10A was held to be ultra vires as per the judgment of the Madras High Court and he has filed a copy of the judgment in support of his contention. However, the Kerala High Court in its judgment in the case of Kerala Polythene Industries v. Superintendent, Central Excise, 1977 TLR 1680 took contrary view and held that Rule 10A was valid. In such circumstances, when there are conflicting decisions of the two High Courts, the Tribunal having all-India jurisdiction is free to take one of the views as correct. This is clarified in the decision of the larger Bench of the Tribunal in the case of M/s. Atma Steels Pvt. Ltd. (1984) 17 ELT 331. Relying on the judgment of the Kerala High Court, we do not accept the contention that Rule 10A is not valid. This Rule does not prescribe any time limit, hence the demand made thereunder is in order. Furthermore, the assessee was working under the self-removal procedure under Chapter VII A of the Central Excise Rules, 1944. The debit of duty by the assessee to the R.G. 23 account does not amount to levy and collection of central excise duties as enjoined under Section 3. The assessment of such duty is made subsequently and final collection also completed later by virtue of Rule 173-1. Until and unless this is done there would be no levy and collection of duty as envisaged in Section 3. Therefore, when there is no assessment as understood in law, Rule 10A will properly apply as decided by the Supreme Court (sic) in the case Jay Engineering Co. v. Government of India (1979) ELT-J 307. The appellant has failed to bring out the full facts of the case which indicate that the assessments had been completed and so also the levy. In absence of such averment, it was not unreasonable to presume that there had not been any assessment and levy, and resort to Rule 10A would be legal. The next question which arises is whether the time bar under Section 40(2), as it then stood, would hit the recovery. Shri Rajagopalachari has repeatedly contended that the time bar does operate against the recovery of the duty from the appellants, Section 40(2) at the relevant time, read as follows:-- No suit, prosecution, or other legal proceeding shall be instituted for anything, done, or ordered to be done, under this Act, after the expiration of six months from the accrual of the cause of action or from the date of the act or order complained of.
Therefore, the question which comes up for consideration before us is whether the show cause notice was a suit, prosecution or other legal proceedings. So far as suit or prosecution is concerned, it can be said without any fear of contradiction that the show cause notice is neither a suit nor a prosecution. Therefore the only question which remains to be considered is whether it is a legal proceeding. The phrase "legal proceedings" came for interpretation in the case of Universal Cables v.Union of India 1977 TLR 1825 and (1977) ELT-J 92. It was held that legal proceedings would mean a proceeding initiated in a Court of law and did not apply to a departmental proceeding like the show cause notice. Hence the bar laid down under old Section 40(2) does not operate in the case of show cause notice. After examining the contentions of the learned representative of the appellants on the aspect of limitation, it is necessary to mention that this contention is not very valid in the facts and circumstances of the demand covered by the appeal. The Supreme Court's order in the case of Sanjana v.Elphinstone Mills Ltd. (1978) ELT-J 399 held that the quoting of wrong rule for recovery of duty which is legally due to the Government would not vitiate the demand. The same principle has been repeated by the Madras High Court in the case of Ramalingam Choodambikai Mills Ltd. . In view of the aforesaid judgments, it was not necessary for the Appellate Collector to remand the matter once again to the Assistant Collector to decide the issue of the demand in terms of the proper rule applicable. Therefore, coming back to the question as to whether the amount demanded by the Superintendent in his show cause notice dated 12-5-1976 was legally due to the Government or not, it is seen that the credit had been wrongly utilised by the appellants in paying the duty on the finished products. This has been clearly admitted by the appellants in the course of hearing of their appeal, Therefore, there is no doubt that the amount was due to the Government.
Therefore, quoting a wrong rule, namely 56A(3)(v) would not vitiate the demand. In this view of the matter, the Appellate Collector's order for remand of the case to the Assistant Collector, has no consequence.
Therefore, we find that the orders of the Assistant Collector dated 14-8-1979 and the Collector (Appeals)'s order dated 5-8-1982 are quite legal and proper in the circumstances of the case. Accordingly, we confirm the same and reject the appeal.
8. So far as the Collector's cross-objection is concerned, he has prayed that the Appellate Collector's order dated 5-8-1982 should be set aside and the matter remanded to the Assistant Collector for consideration afresh so that recourse could be taken to Rule 9(2) as it existed at that time. In Collector's view, this is necessary as the appellants never obtained permission to operate under Rule 56A. While presenting the Collector's case, Shri Pattekar reiterated the same plea. However, Shri Rajagopalachari has contended that the cross-objection is not maintainable, and in this connection he has relied on the Tribunal's decision in the case of Collector of Central Excise, Madras v. Madras Chemicals per this decision, the cross-objection is not maintainable when the order under appeal is wholly in favour of the respondents. We find that the ratio of this decision does not apply in the present case. Under his order dated 5-8-1982, the Appellate Collector inter alia directed that a credit of Rs. 5,49,925.04 be given in the R.G. 23 account of M/s. Asian Paints (India) Ltd. Therefore, the Collector of Central Excise, Bombay-II has sought relief against this order and come up in cross-objection before the Tribunal. We find that M/s. Asian Paints (India) Ltd. have accepted the fact that their application dated 10-4-1964 for availing the benefit of Rule 56A in respect of synthetic resin was rejected by the Assistant Collector, Division VI in his order No. IG/11/Asian/75/20438 dated 3-12-1974 who ordered recovery of the amount of Rs. 7,632.80 which was wrongly utilised for paying duty through pro forma account. The order records the assessee's willingness for repayment of another amount. This fact will show that the assessee did not have the requisite permission. In view of these circumstances, we set aside the part of the Appellate Collector's order dated 5-8-1982, granting credit of Rs. 5,49,925.04 in the assessee's R.G. 23 account, allow the cross-objection of the Collector, and remand the matter to the Assistant Collector for fresh consideration.
1. I have carefully gone through the order dated 27-11-1986 proposed by Brother Shri Dilipsinhji. With great respect I am unable to agree with his view that the appeal filed by M/s. Asian Paints (India) Ltd. should be rejected and the cross-objection filed by the Collector of Central Excise, Bombay-II should be allowed.
2. The facts of the appeal as well as the various contentions urged on behalf of the appellants and respondent have been set out in the order of Brother Shri Dilipsinhji. I, therefore, do not propose to set them out in detail again.
3. A show cause notice dated 12th May, 1976 was issued to the present appellants alleging that they have contravened the provisions of Rule 56A(3)(vi) inasmuch as they have wrongly cleared synthetic resins falling under T.I. 15A(1)(i) involving duty thereon to the tune of Rs. 5,49,925.04 during the period from October 1969 to August 1973 by adjusting the amount through pro forma account R.G. 23 Part II register maintained under Sub-rule (3) of Rule 56A instead of making payment through P.L. Account maintained under Sub-rule (3) of Rule 9 read with Rule 173G(1) of the Rules. The appellants were called upon to show cause: (i) As to why the said amount of Rs. 5,49,925.04 should not be recovered from them under Rule 56A(3)(v) of Central Excise Rules, 1944 inasmuch the raw materials received under the provisions of Rule 56A(2) have not been properly accounted for.
(ii) And why the said credit of Rs. 5,49,925.04 in R.G. 23 Part II thus wrongly utilised should not be disallowed.
(iii) And why the permission granted under Sub-rule (2) of Rule 56A of the rules should not be withdrawn in accordance with the provisions of Sub-rule (4) of Rule 56A of Central Excise Rules, 1944.
4. The appellants sent a reply dated 26th June, 1976. Among other things they contended: (i) That under Sub-rule (5) of Rule 56A(3) a demand for duty can only be raised when the materials received under the rules are not duly accounted for; (ii) That in the instant case all the materials were permitted to be brought in the factory for the finished excisable goods, i.e., systhetic resins which fall under tariff item 15A; (iii) That the materials were in fact disposed of by use in the manufacture of resinous media that fall under the same tariff item, i.e., 15A and therefore, there can be no demand under this sub-rule; (iv) That the operation of R.G. 23 maintained under Rule 56A in effect provides for set-off of duty paid in respect of raw materials against the duty payable on finished goods. The determination of the "set-off" amount is an act of assessment; (v) That assuming whilst denying that the "set-off" has been erroneously given, it is an act of erroneous assessment resulting in short or non-payment of duty and a demand in this respect can only be raised in accordance with Rule 173J of the Central Excise Rules read with Rule 10 of these Rules; (vi) That the proposed recovery for duty is therefore clearly hit by the limitation prescribed in Rule 173J read with Rule 10 of the Rules.
5. The Assistant Collector, Central Excise, Bombay Division VI who held the inquiry recorded a finding that the assessee has cleared synthetic resins falling under T.I. 15A 1(1) involving duty of Rs. 5,49,925.04 during the period from October, 1969 to August, 1973 by debit of duty through pro forma credit maintained under Sub-rule (3) of Rule 56A instead of debiting the same in personal ledger account. The synthetic resins so cleared did not contain the material received under Rule 56A and during the material period the provisions of Rule 56A3(vi) envisaged that credit allowed in respect of any component parts of raw materials under Sub-rule (2) of Rule 56A could be utilised towards payment of duty on finished excisable goods in the manufacture of which such materials or component parts were used. He further held that the pro forma credit to the extent of Rs. 5,49,925.04 has been wrongly utilised inasmuch as the raw materials in question received under Rule 56A were not actually used in the manufacture of finished goods in question as pointed out by the Range Superintendent under Rule 56A3(v) is justifiable and correct in law. He however rejected the contention of the appellants regarding the applicability of Rule 10 or Rule 10A by holding that the instant case is neither a short levy or deficiency of duty due to escaped assessment.
6. Having regard to his finding the Assistant Collector confirmed the demand of the sum of Rs. 5,49,925.04. He however allowed equivalent pro forma credit to be raised in the pro forma account of the assessee.
Against this order, the present appellants preferred an appeal before the Appellate Collector. The Appellate Collector by his order dated 16th December, 1978 recorded a finding that the notice for demand of duty and also the adjudication order demanding duty had not been issued under the correct rule, nor has it been justified in the adjudicating order. He however remanded the case to the Assistant Collector for de novo adjudication. In this order, the Appellate Collector had referred to the order issued by the Assistant Collector of Central Excise, Order No. IG/II/Asian/ 75/20438 dated 3-12-1974 and observed: This order, I find, was issued on certain charges levelled against the appellants in the year 1974, for not accounting for the entire quantity of raw material obtained by them after taking pro forma credit. Although the order does not clearly specify it, it appears that the period under question had been the period for which the Assistant Collector had issued this order. The Assistant Collector had held them responsible only for not accounting of 733 kg. of synthetic resins brought under Rule 59A, and had demanded duty for this quantity, for which a credit in their pro forma credit account had been allowed for the duty paid on it. The Assistant Collector has also stated that, besides this, there was some more quantity which was not accounted for properly, and on which a sum of Rs. 1,43,396.71 being the duty involved, had been paid by the appellants voluntarily. The appellants' contention, that the question of misutilisation of raw material had already been decided and duty on the raw material not satisfactorily accounted for had already been recovered from them and the question of recovering further duty should not arise, is thus justified.
7. After the remand on 4th May, 1979, the Asstt. Collector issued an amendment to the earlier show cause notice dated 12-5-1976. The amendment made was substitution of Rule 10A for Rule 56A(3)(v).
8. The appellants sent their reply dated 20th July, 1979 to the amended show cause notice. Among other things they contended that in de novo proceedings the department cannot press into service a non-existent rule or a rule deleted since the cause of action arose. They repeated their contention that Rule 10A is also not applicable. They also contended that Rule 10A is ultra vires.
9. After the issue of the amended show cause notice, the Asstt.
Collector of Central Excise, Bombay Division "T" held the adjudication proceedings. He recorded a finding that the case on hand was a case of removal of excisable goods without payment of proper duty thereon. The correct rule to be invoked was Rule 10A which was in force at the time of occurance of the act as well as at the time of initiating the proceedings. He further recorded a finding that though the goods were cleared by debiting duty in the account, they were not eligible for such debit. Thus according to the Asstt. Collector the dues are due to the Govt. and as it is not covered by any specific provision, Rule 10A is the correct rule applicable in this case. Having regard to his finding, the Asstt. Collector confirmed the demand under Rule 10A.10. Being aggrieved with the order of the Asstt. Collector the appellants preferred an appeal before the Appellate Collector and the Appellate Collector by his order dated 5-8-1982 issued on 11-8-1982 confirmed the order of the Asstt. Collector but he however directed that equivalent credit in the RG-23 account shall be taken simultaneously with the recovery of the duty demanded. It is against this order the present appeal was filed by M/s. Asian Paints (India) Ltd. 11. The Collector of Central Excise, Bombay-II filed a cross-objection.
In this cross-objection it was stated: It also appears that the Appellate Collector while hearing the appeal against de novo adjudication of the A. C. seems to have erred in upholding that the duty was sustainable under Rule 10A of the Central Excise Rules.
It is submitted that since no permission under Rule 56A(2) of C. Ex.
Rules was ever accorded to Asian Paints (India) Ltd. to avail of pro forma credit during the period October, 1969 to August, 1973 and since they availed of such credit during that period and cleared certain finished goods in which such raw materials on account of which they took credit were not intended to be utilised, they removed the finished products without payment of appropriate duty.
They therefore seem to have removed the excisable products without the payment of appropriate duty by virtue of taking such unauthorised credit and utilising such credit towards the payment of duty wrongly. In view of this, the demand for duty was sustainable under Rule 9(2) of C.Ex. Rules as it stood at the material time of such removal. Therefore, it is prayed that the Tribunal will be pleased enough to set aside the Appellate Collector's order to the extent of sustainability of demand upheld by him under Rule 10A of the C. Ex. Rules, 1944 and should be pleased enough to remand the case for further adjudication by the said authority de novo so that the demand can be held sustainable under Rule 9(2) as it existed at the material time, when there was no time limit for issuance of such demand. This is considered necsssary in view of the fact that the assessee was never authorised to take credit of duty paid and utilise it towards the payment of duty on finished products. Since no permission, in fact, to operate under pro forma credit procedure was accorded to them by the concerned A.C. at the material time under Rule 56A(2) of the C.Ex. rules, we seek relief to the extent as above by the present memorandum of cross-objection.
12. During the hearing of the appeal and the cross-objection, Shri Pattekar appearing for the Collector reiterated the contention raised in the cross-objection.
13. From the arguments of Shri Pattekar and the contentions raised in the cross-objection it is clear that according to the department, Rule 10A was not applicable to the demand in question. If that be so, the order passed by the Appellate Collector dated 5-8-1982, insofar as it relates to the confirmation of demand shall have to be set aside but then Brother Dillipsinhji in his order had upheld the demand under Rule 10A. He however set aside that part of the Appellate Collector's order dated 5-8-1982 granting credit of Rs. 5,49,925.04 and again remanded the matter to the Asst. Collector for fresh consideration. It is not clear from the order of Brother Dilipsinhji that on what matters the Asstt. Collector is required to consider afresh. As stated earlier, he had upheld the demand [and] thereby upheld the order of the Appellate Collector. He had set aside the credit granted by the Appellate Collector on the ground that the appellants did not have the requisite permission to avail of the credit during the relevant period. When that be so I do not see any matter which requires fresh consideration by the Asstt. Collector.
14. The points that appropriately arise for consideration in this appeal and cross-objection are: (2) Whether the demand is governed by Rule 10A as has been held by the Asstt. Collector and upheld by the Appellate Collector (3) Whether it is impermissible to invoke Rule 10A after it has been repealed (4) Whether the Rule 10A which had been held to be ultra vires of the Act can be invoked (5) Whether Rule 9(2) as it then stood is attracted and if so no portion of the demand is barred 15. As has been seen earlier in the show cause notice dated 12th May, 1976, the appellants were called upon to show cause against the following: (i) As to why a sum of Rs. 5,49,925.04 Ps. should not be recovered from them under Rule 56A(3)(v) of Central Excise Rules, 1944 inasmuch as the raw materials received under the provisions of Rule 56A(2) have not been properly accounted for. In so far as this allegation is concerned, neither the Asstt. Collector nor the Appellate Collector recorded any finding. Their orders do not contain any discussion regarding non-accounting of the raw materials received. Therefore it has to be held that this charge had not been established. It may be stated here in the order of remand dated 16th December, 1978 the Appellate Collector Shri V. K. Ashtana observed: In the impugned order, the Assistant Collector has demanded the amount of duty under Rule 56A(3)(v), which only empowers him to demand duty if the raw material on which pro forma credit had been given, has not been properly accounted for. The instant case is not covered, as far as demand of duty is concerned, under this rule.
He has also observed that the Asstt. Collector has not discussed the issue about his coming to the conclusion about the misutilisation of the raw material, which empowered him to demand duty under Rule 56A(3)(v). He has no doubt further observed that the notice for demand of duty and also the adjudication order demanding the duty, had not been issued under the correct rule, nor has it been justified in the adjudication order. He had remanded the case to the Assistant Collector for de novo adjudication. By this order, the Appellate Collector left open all the issues for consideration afresh by the Asstt. Collector.
After the remand the Asstt. Collector issued an amendment to the show cause notice and the amendment was to substitute Rule 10A for Rule 56A(3)(v) in sub-para. (1) of the second paragraph of the show cause notice dated 12th May, 1976. After the amendment, the said sub-para, would read: As to why the said amount of Rs. 5,49,925.04 Ps. should not be recoverd from them under Rule 10A of Central Excise Rules, 1944 inasmuch as the raw materials received under the provisions of Rule 56A have not been properly accounted for.
But then in his adjudication order after the remand, the Asstt.
Collector did not hold that the appellants have not properly accounted for the raw materials received under the provisions of Rule 56A(2). His finding on the other hand was that there had been wrong debit of duty and therefore duty became payable to the Govt. and as such Rule 10A became applicable.
16. As regards the utilisation of credit, the appellants were only called upon to show cause as to why wrongly utilised credit should not be disallowed. It was not alleged in the show cause notice that the appellants are required to show cause as to why wrongly utilised credits should not be recovered under Rule 10A. In the absence of such an allegation regarding recovery of wrongly utilised credit, order regarding recovery of the wrongly utilised credit is not sustainable in law. No demand which is not preceded by a show cause notice is maintainnable in law. Even the Appellate Collector in his order dated 5-8-1982 did not consider the question regarding improper accounting of the raw materials received under the provisions of Rule 56A(2). He had only dealt with the utilisation of credit and held that it had been wrongly utilised. Even assuming that it had been wrongly utilised, in the absence of show cause notice for damand of wrongly utilised credit, no order for recovery of wrongly utilised credit, can be made. The invoking of Rule 10A in the show cause notice was only in respect of the charge regarding non-accounting of the raw materials received under the provisions of Rule 56A(2) and not regarding wrong utilisation. On this ground alone, the order passed by the Asstt. Collector and confirmed by the Appellatte Collector regarding demand of duty requires to be set aside.
17. At the relevant time, the appellants were operating under self-removal scheme. Under (sic) Rule 173D of the Central Excise Rules (for short, the Rules) requires the assessee to furnish the information regarding principal raw materials as well as the quantity of such raw materials required for manufacture of unit quantity of each of the excisable goods manufactured or to be manufactured by him, if so required by the Collector. Under Rule 173F, the assessee has been authorised to determine his liability for the duty due on the excisable goods intended to be removed and thereafter to remove such goods on payment of duty so determined by him. Under Rule 173G, the assessee is required to keep an account credited with the Collector separately for each excisable goods and also the account in R.G. 23 if the assessee is availing of the procedure prescribed in Rule 173K and the assessee is also required to pay the duty determined by him for each consignment by debit of such account current before removal of the goods. Under Rule 173G(3) the assessee is required to file with the proper officer a monthly return in the prescribed form within seven days after the close of each month, showing the quantity of excisable goods manufactured or received after a bond during a month, the quantity, if any, used within the factory for any commodity, the quantity removed on payment of duty from the place or premises which are from the store room or other place of storage, duty paid on such quantity, particulars of gate passes or like documents under which such quantity was removed. Every such return should also be accompanied by a duplicate copy of each of the gate passes or like documents.
(b) receipted treasury challans on which deposits in the account current were made towards Govt. treasury.
(c) original and duplicate copies of the account current and also of the cash R.G. 23, as the case may be, maintained by the assessee during the period covered by the return.
(d) Rule 173 I requires the proper officer to complete the assessment memorandum on the basis of information contained in the return filed by the assessee under Sub-rule (3) of Rule 173G and is also required to send a copy of the return so completed to the assessee.
The duty determined and paid by the assessee under Rule 173 F shall be adjusted against the duty assessed by the proper officer under Sub-rule (1) and where the duty so assessed is more than the duty paid by the assessee, the assessee shall pay the deficiency by making a debit in the account-current within 10 days of receipt of copy of the return from the proper officer and where such duty is less, the assessee shall take credit in the account-current for the excess on receipt of the assessment order in the copy of the return duly countersigned by a Superintendent of Central Excise.
18. It is not the case of the Collector that the present appellants have not complied with the abovesaid provisions. There was no charge of clandestine removal. In the show cause notice issued to the appellants there was no proposal to levy any penalty. The proposal in the show cause notice was only to recover a sum of Rs. 5,49, 925.04 Ps. for not properly accounting for the raw materials received under the provisions of Rule 56A(2). The second proposal was to disallow the credit of Rs. 5, 49,925.04 as the same has been wrongly utilised. On the face of the show cause notice it is clear that the assessee was working under SRP.They did determine the duty liable to be paid and also made debit entry instead of in the P.L. account in the R.G. 23 by utilising the credit.
There was no allegation in the show cause notice nor there is any proof that the assessment contemplated by Rule 173 I had not been done in the case of the assessee. If there has been assessment and payment of duty may be by adopting utilisation of credit there is no scope to invoke the provisions of Rule 10A. The proper rule that would apply if at all is Rule 10. In this connection I may usefully refer to the judgment of the Supreme Court in N.B. Sanjana, Asstt. Collector of Central Excise, Bombay v. The Elphinstone Spinning and Weaving Mills Co. Ltd. (1978) ELT J 399. The facts of that case are that the respondent the Elphinstone Spinning and Weaving Mills. Co. Ltd. removed grey cloth manufactured by them between September 30,1959 and July 1960 and kept in the bonded godown after obtaining necessary permission. The grey cloth after it was processed and made into leather cloth or imitation leather cloth was again stored in another bonded godown in the factory and they were removed by the company as finished products after filling in form A.R 1 prescribed by the rules. There is again no dispute that in each of these A.R 1 forms the company had shown and made a declaration that the excise duty payable on the goods governed by the forms was "nil". The Excise Inspector in charge of leather cloth division had made assessment in the appropriate portion of those forms showing the rate of duty and the amount of total duty payable as "nil".
Later on, the excise authorities entertained some doubts as to whether the goods covered by A.R 1 forms were of the description exempted under item No. 2 of the notification, and after some correspondence on November 3rd, 1961, two notices were issued to the mills. The first notice issued under Rule 10A required the respondents to pay a sum of Rs. 1,07,146.39 representing the duty on leather cloth manufactured out of (i) non-duty-paid cloth and (ii) duty-paid cloth cleared without payment of duty from October 1, 1959 to March 31, 1960. The second notice was issued under Rule 9 and the mills were called upon to pay a sum of Rs. 1,502.24 representing the extra processing duty on leather cloth manufactured out of duty-paid cloth from July 4, 1957 to September 30, 1959. The notices were subsequently followed by demands.
The mills objected to the demands on the ground that the notices were illegal and neither Rule 9 nor Rule 10-A gave a power to the authorities to issue such notices. They further contended that the demands were barred by time. When the mills did not receive any favourable reply they filed writ petition and in the writ petition they contended that if at all, it was Rule 10 that applied and as the demands had been made long after the period of three months, prescribed in the said rule, the notices were illegal and void. On behalf of the department it was contended that Rule 10 has no application as that rule will apply only when duties and charges have been short levied.
Since no amount has been levied initially, Rule 10 has no application.
The High Court held that Rule 10 applied and demand notices had been issued long after the expiry of three months, the notices were illegal and void.
20. When the matter came up before the Supreme Court, on behalf of the department the following contentions were urged: (a) when an assessment had been made and that some amount is due as duty and (b) and when the said amount so assessed has been paid or adjusted by the party.
It was further contended that when later on it was found that the amount so levied and paid falls short of the correct amount that ought to have been levied and paid by the party, Rule 10 will stand attracted. It was further submitted that Rule 10A covers all cases of levy or non-levy for any reason whatsoever. Finally it was urged that even if it is held that Rule 10A does not apply, the notices could be sustained under Rule 9(2) inasmuch as the respondents have removed the goods without payment of duty in contravention of Rule 9(1). The Supreme Court construed Rule 10 and held the expression "paid" in Rule 10 should not be read in a vacuum and it will not be right to construe the said word literally, which means actually paid. That word will have to be understood and interpreted in the context in which it appears in order to discover its appropriate meaning. The Supreme Court further observed: It must be remembered that Rule 10 deals with recovery of duties or charges short-levied or erroneously refunded. The expression 'paid' has been used to denote the starting point of limitation of three months for the issue of a written demand. The Act and the Rules provide in great detail the stage at which and the time when the excise duty is to be paid by a party. If the literal construction that the amount should have been actually paid is accepted, then in case like the present one on hand when no duty has been levied, the department will not be able to take any action under Rule 10. Rule 10A cannot apply when a short-levy is made through error or mis-construction on the part of an officer, as such a case is specifically provided by Rule 10. Therefore, in our opinion, the proper interpretation to be placed on the expression 'paid' is 'ought to have been paid'.
in order to attract Rule 10 it is not necessary that some amount of duty should have been assessed and that the said amount should have also been actually paid. That provision will apply even to cases where there has been a nil assessment in which case the entire duty later on assessed must be considered to be the duty originally short-levied. There is also no difficulty in calculating the period of three months. As pointed out above, the Act and the Rules provide very elaborately the stage and the time when the duty is to be paid and if that is so, that must be considered to be the stage or time when the duty ought to have been paid and if so the period of three months will run from the time when the duty ought to have been paid.
21. Even if it is to be assumed that wrong utilisation of credit amounts to non-payment of duty, the rule that would apply is Rule 10.
Having regard to the decisions of the Supreme Court the appellants ought to have paid the duty when they removed the goods. If so, the period of limitation provided under Rule 10 read with Rule 173J runs from the time when the duty ought to have been paid. But the view taken by the lower authorities and Brother Dilipsinhji that because the appellants had not paid duty the rule applicable is Rule 10A and not Rule 10 is erroneous having regard to the judgment of the Supreme Court.
22. Having regard to my above finding, it is not necessary to consider the contention that a rule which had been repealed cannot be invoked or that a rule which was held to be ultra vires cannot be invoked.
23. What remains for consideration is the cross-objection filed by the respondent-Collector. According to the Collector the Appellate Collector committed an error in holding that Rule 10 A was applicable.
This contention of the Collector appears correct and I have held so.
The Collector however contends that the proper rule that is attracted is Rule 9(2) as it then existed. The reason given by the Collector for the applicability of Rule 9(2) is that there had been no permission under Rule 56A(2) of C. Ex. Rules [which] was ever accorded to the appellants to avail of pro forma credit during the period October, 1969 to August 1973 and since they availed of such credit during that period and cleared certain finished goods in which such raw materials on account of which they took credit were not intended to be utilised, they removed the finished products without payment of appropriate duty.
There is no substance in the contention that Rule 9(2) is applicable.
The contention of the Collector that no permission under Rule 56A(2) was ever accorded to Asian Paints (India) Ltd. has not been established or alleged in the show cause notice. On the other hand, one of the allegations in respect of which the appellants were called upon to show cause was as to why the permission granted under Sub-rule (2) of Rule 56A should not be withdrawn in accordance with the provisions of Sub-rule (4) of Central Excise Rules, 1944. That apart, earlier to the show cause notice dated 12th May, 1976 a show cause notice dated 16th March, 1974 was issued to the appellants. In that show cause notice it was specifically alleged that the appellants have contravened the provisions of Rule 56A read with Rule 173K of Central Excise Rules, 1944, inasmuch as they have failed to obtain necessary permission from the department before following the procedure prescribed under Rule 56A. Therefore they were called upon to show cause why the central excise duty to the extent of Rs. 2,99,389.62 should not be recovered from them under Rule 56A(3)(v). There were two other allegations besides the said allegation which were later accepted by the appellants. There was an adjudication by the Asst. Collector. The Asstt. Collector by his order dated 3rd December, 1974 exonerated the appellants as to the contravention of Rule 56A. In that connection, the Asstt. Collector observed: I have carefully gone through the record of the case and party's letter dated 25-6-1974 and also the arguments made during the personal hearing on 29-10-1974. It is true that many of the officers of the department in charge of the factory have permitted the assessee to bring the sy. resins into the factory under Rule 56A and allowed to raise the quantity and duty credit in their R.G. 23 register part 1 and 2 respectively, as evidenced from the documents produced before [me] during the personal hearing.
The department did not prefer any appeal against that part of the order of the Assistant Collector. The subsequent show cause notice dated 12th May, 1976 also confirms that the appellants were availing pro forma credit under Rule 56A. If that be so, the very basis or the foundation laid by the Collector for the applicability of Rule 9(2) crumbles.
24. To attract Rule 9(2), the goods should have been removed clandestinely and without assessment. In the instant case, the removal was not clandestine and without assessment. On the other hand the appellants have removed the goods with the knowledge of the department and they even paid the duty by adjusting the credit and the asssesment returns were finalised by the proper officer under Rule 173 I. Further, in the show cause notice there was no allegation of clandestine removal or even non-payment of duty. It is settled law that no demand of duty is sustainable which is not preceeded by a show cause notice. On this ground also the cross-objection of the Collector is liable to be rejected. Having regard to my finding that the rule that is applicable is Rule 10 of the Rules, the demand made in the show cause notice dated 12-5-1976 for the period October 1969 to August 1973 is clearly barred by limitation having regard to the period of limitation prescribed under Rule 10 read with Rule 173J. 25. On careful consideration of all the aspects, I allow the appeal and set aside the order passed by the Appellate Collector. I, however, reject the cross-objections filed by the Collector.
Since there has been a difference of opinion between the Member (T) and the Member (J), the following points of difference are refered to the President in terms of Section 35D of the Central Excises and Salt Act, 1944 read with Section 129C(5) of the Customs Act:-- (1) Whether on the facts and circumstances of the case, the appeal of M/s. Asian Paints (India) Ltd. has to be rejected as held by M(T) or whether the same is to be allowed as held by M(J) for the reasons mentioned by them respectively.
(2) Similarly, whether the cross objection filed by the Collector requires it to be allowed and the matter to be remanded for fresh consideration to the Assistant Collector as held by M(T) or whether the cross-objection has to be rejected as held by M(J).
1. These matters were heard by learned brothers S/Shri Dilipsinhji, Member (Technical) and K. Gopal Hegde, Member (Judicial). As there was difference of opinion between them, the matters have been referred to me under Section 35-D of the Central Excises & Salt Act, 1944 read with Section 129-C(5) of the Customs Act, 1962. The points of difference have been mentioned in the refering order.
2. I have heard Shri K. Rajagopalachrri, learned advocate, for M/s.
Asian Paints (India) Ltd. (hereinafter referred to as the appellants) and Shri N.K. Pattekar, learned JDR, for the Collector of Central Excise, Bombay-II (hereinafter referred to as the respondent).
(i) "Proviso" (vi) to Sub-rule(3) of Rule 56-A is to be read in conjunction with proviso (ii) (a) to Sub-rule (2) of Rule 56A of the Central Excise Rules. It is not necessary that the raw materials used in the manufacture of the excisable finished product should be duty-paid. Pro forma credit in R.G. 23 Part II could be utilised if the raw material and the finished product fell under the same tariff item. If internally manufactured raw material was used in the manufacture of the finished product falling under the same tariff item, then also the pro forma credit could be used to clear the finished product.
(ii) There is a difference in the meaning of the expression "used in the manufacture of" and "manufactured from". In the first case, it is not necessary that the input materials should constitute a component part of the output goods while in the second case, it is essential that the output goods contain the input materials. In support of this contention, reliance is placed on the decision in the case of Standared Alkali Chemicals reported in (1982) ELT 347.
(iii) In the operation of Rule 56-A, the determination of set-off amount is an act of assessment. Paragraph 13 of the judgment of Andhra Pradesh High Court in the case of Jay Engineering Works Ltd. Hyderabad v. Govt. of India, reported in (1979) ELT-J 307 is relied upon for this contention. Duty was assessed, but instead of paying duty by debit to P.L.A., duty was debited to R.G. 23 through inadvertence and therefore the demand was hit by limitation of six months under Rule 10 of the Central Excise Rules. This contention was raised in the reply to show cause notice vide paragraphs 8 and 11 of the reply at page 48 annexure 17 to appeal memorandum. It was also raised in paragraph 34 of the memo of appeal dated 11-9-1979 filed before the Appellate Collector of Central Excise, vide annexure 19 to the present appeal (page 58 of the paper book). The duty was debited in R.G. 23 through inadvertence instead of through PLA. Debit in R.G. 23 is an assessment. This point was raised before the Assistant Collector, but he has not dealt with this. According to paragraph 27 at Page 741 of the Supreme Court judgment reported in AIR 1985 SC 736, the Assistant Collector was required to examine all the points raised before him and give findings.
(iv) Rule 10 of the Central Excise Rules as it existed during the relevant time covers even erroneous assessment caused by mis-statement of the assessee. It also applies to fraudulent mis-statement. In (1978) ELT-J 515 Inspector of Central Excise v. Bengal Paper Mills Ltd., fraudulent and false mis-statement is covered by Rule 10.
(v) De novo proceedings are not continuous proceedings. De novo means "anew", "from the begining". Legal consequence of quashing an order is that the entire proceedings including show cause notice is set aside. Supreme Court decision reported in AIR 1967 SC 1318 is relied upon. A fresh show cause notice is necessary. In the present case, a fresh show cause notice was issued on 4-5-1979 vide annexure 16 to the appeal memorandum placed at page 46 of the appeal paper book. Hence it is not a continuous proceeding.
(vi) Rule 10A of the Central Excise Rules is ultra vires of the Central Excises & Salt Act, 1944. On this point the following decisions have been cited: (b) Citadel Fine Pharmaceuticals Ltd., Madras v. The District Revenue Officer, Chingleput and Ors.
(c) 1973 T.L. Rule 2213 (Madras)--Agarwal Brothers Ltd. v. The Union of India and Others (Paragraphs 2 & 3).
(d) 1982 ELT 49 (Madras)--S. Sornam v. Inspector of Central Excise, Sivakasi and Ors. (Para. 7 at page 52).
Member (Technical) has followed a contrary decision of Kerala High Court reported in 1977 TLR 1680 following the ratio laid down by the larger Bench of this Tribunal in the case of Atma Steels Pvt. Ltd., reported in (1984) 17 ELT 331, but he has not given any reason why he has followed Kerala High Court decision in preference to Madras High Court Decisions. Rule 10A is a residuary item and it is inapplicable.
(vii) There is no escaped assessment in this case and hence there cannot be any demand for duty. In his letter No. C Ex (56A)/75/213 dated 4-2-1976 addressed to the appellants, the Superintendent of Central Excise, Range II,. Division Bombay II stated that his letter of even number dated 24-6-1975 was not a demand at all. The lower authorities have not said that there was no assessment as the assessment was not complete. Quoting the decision in Jay Engingeering Co. case (1979) ELT-J 307, Member (Technical) has held that it is not an assessment and hence Rule 10-A is applicable.
Assessment in this case was complete and the proper officer completed the assessment memorandum in the RT-12 returns. (In reply to query from the Bench during the hearing on 14-7-1987, the learned Departmental Representative confirmed that the assessment in RT-12 returns was finalised). On the point whether the assessment is complete when assessment memorandum is not complete, the learned advocate has relied on the following decisions:-- (viii) Section 40(2) of the Central Excises & Salt Act, 1944, as it stood during the relevant time is a positive bar to these proceedings. In the case of Hyderabad Alwin Metal Works v. Collector of Central Excise, (1978) TLR 1959 Andhra Pradesh High Court has held that "legal proceedings" mean proceedings before a statutorily constituted authority, including proceedings initiated by issue of a show cause notice. The decision of Madhya Pradesh High Court reported in 1977 TLR 1825 (MP): (1977) ELT-J 92 in the case of Universal Cables Ltd. v. Union of India, which is contrary to the decision of Andhra Pradesh High Court has been relied upon by Member (Technical) in his order recorded in the present case. The expression "other legal proceedings" must receive their full meaning and without being bound by the word "instituted".
(ix) Before recovery of the demand, it should first be credited to the R.G. 23, otherwise there will be double payment of duty.
(x) Cross-objection filed by the department is not sustainable as the order passed by the Collector of Central Excise (Appeals) was wholly in favour of the department. In support of his contention the decision (Collector of Central Excise, Madras v. Madras Chemicals) is relied upon by the learned advocate.
It has also been argued by him that cross-objection has been filed by the department praying for upholding the demand under Rule 9(2) of the Central Excise Rules. The cross-objection fails when both the Member (Technical) and Member (Judicial) have held that Rule 9(2) is not applicable to the present case. Once the Tribunal has held that Rule 9(2) is not applicable, there is no point for reconsideration by the Collector (Appeals) or Assistant Collector of Central Excise on remand. This is not, therefore, a fit case for remand. The plea taken by the department in the cross-objection for application of Rule 9(2) of the Central Excise Rules is that there was clandestine removal of the goods without payment of duty as the Assistant Collector of Central Excise did not grant any permission to the appellants under Sub-rule (2) of Rule 56A for availing of the procedure laid down in Rule 56A of the Central Excise rules.
Although in letter No. V(15A) 56A 6/73/21507 dated 3-12-1973 the appellants were granted permission under Rule 56A this permission was effective from 11-10-1973 and was granted without prejudice to any action that might be taken for any contravention involved during the earlier period. The case booked at that time by the department against the appellants for not obtaining the permission to follow the procedure under Rule 56A from the proper authority was adjudicated by the Assistant Collector of Central Excise, Bombay, Division VI vide his order in original No. IG/11/ACN/75/20438 dated 3-12-1974 and the lapse was condoned. A copy of the said order in original has been placed by the appellants in annexure 10 (pages 12--14 of the paper book). Regarding Chapter X procedure, the learned advocate has cited the decision of the Government of India reported in (1980) ELT 358 in the revision application filed by Petco Industries in which it was held that if the requirements of Chapter X procedure were followed in substance to the satisfaction of the central excise authorities as envisaged by notification No. 154/70, there was no reason why the benefit of exemption thereunder should be denied.
4. Arguing for the respondent Shri Pattekar has reiterated what has been stated in paragraphs 5 and 7 of the order written by Member (Technical) Shri K.S. Dilipsinhji. Shri Pattekar has also argued that Rule 10 is not applicable in this case as it is not a case of short-levy. He has also reiterated the ground of cross-objection filed by the revenue stating that the appellants did not obtain the permission of the proper authority under Rule 56A(2) for availing the benefit under Rule 56A of the Central Excise Rules and consequently there was ciandestine removal of the goods without payment of duty attracting Rule 9(2) ibid.
5. The contention of the learned advocate in point No. (i) of paragraph 3 above that it is not necessary that the materials used in the manufacture of excisable finished product should be duty-paid and that pro forma credit in R.G. 23 Part II could be utilised if the raw materials and the finished product fall under the same tariff item, does not represent the correct position of law and hence it is not acceptable. The head note of Rule 56A of the Central Excise Rules reads as follows: Special procedure for removal of duty-paid materials or component parts for use in the manufacture of finished excisable goods.
The scheme of Rule 56A is that pro forma credit taken in the R.G. 23 Part II in respect of duty paid on the materials and component parts can be utilised for payment of central excise duty on finished excisable goods if duty-paid materials and component parts are used in the manufacture of the finished excisable goods and both fall under the same tariff item as required under proviso (ii) (a) to Rule 56A(2). It is not sufficient under the Rule 56A if the raw materials and finished product fall under the same tariff item. An essential requirment under this rule is that the raw materials and component parts used in the manufacture of the excisable finished product must be duty-paid. In the present case, it is an admitted fact that the raw materials used in the finished product in question were not duty-paid. In the circumstances, the pro forma credit in R.G. 23 Part II could not be utilised by the appellants towards payment of central excise duty on the finished product. The contention of the learned advocate raised in point No. (i) is, therefore, rejected.
6. The argument advanced by the learned advocate in point No. (ii) is not relevant to the issue in dispute in this case. The decision cited by him is also not relevant to the point at issue before us.
7. The main contention of the learned advocate in point No. (iii) is that the goods were assessed and the duty was debited in R.G. 23 Part II through inadvertence instead of through P.L.A. and hence Rule 10 of Central Excise Rules, which attracts limitation of six months, is applicable. I am unable to accept this contention of the learned advocate. Rule 10 as it excisted during the relevant period, i.e. , prior to 6-8-1977, reads as follows: 10. 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 misstatement 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 representatation, 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." Rule 10A of the said rules as it existed during the relevant period was as follows:-- 10-A. Residuary powers for recovery of sums due to Government.--(1) Where these Rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty has for any reason been short-levied, or of any other sum of any kind payable to the Central Government under the Act or these Rules, the proper officer may serve a notice on the person from whom such duty, deficiency in duty or sum is 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, deficiency in duty or sum 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.
It is clear from the wording of Rule 10 reproduced above that this rule is applicable when duties or charges have been short-levied through inadvertence, error, collusion, or misconstruction on the part of an officer or through misstatement as to the quantity, description or value of such goods on the part of the owner. In the present case, the appellants were working under self-removal procedure prescribed in chapter VII-A of Central Excise Rules. Assessment of duty was made and the duty was calculated by themselves. No doubt, the appellants filed R.T. 12 return and the same was approved by the central excise officer.
On a query put by me to the learned advocate at the time of hearing as to whether R.T. 12 return contained any information that the raw materials/component parts used in the manufacture of the finished product was not duty-paid, he has replied that there was no such information. In reply to another query the learned advocate has also conceded that the extract of the R.G. 23 Part II which was filed before the central excise officer did not also reflect the information that the raw materials/components used in the manufacture of the finished product were not duty-paid. There was, therefore, no inadvertence, error, collusion or misconstruction on the part of [the] central excise officer. Inadvertence, error or misconstruction, if any, was, therefore, on the part of the appellants and not on the part of the Central Excise Officer. There is also no mis-statement as to quantity, description or the value of the goods on the part of the appellants in this case. In the circumstances, this case does not fall within the scope of Rule 10 of the Central Excise Rules as it existed during the relevant period. I have also held elsewhere in this order that the provision of Rule 9(2) is not applicable in the present case.
Consequently, the provision of Rule 10A of the Central Excise Rules is applicable. In paragraph 18 of the judgment in the case of N.B.Sanjana, Assistant Collector of Central Excise, Bombay and Ors. v. The Elphinstone Spinning and Weaving Mills Co. Ltd. reported in (1978) ELT-J 399, it was observed by the Hon'ble Supreme Court that Rule 10-A cannot apply when a short-levy is made through error or misconstruction on the part of an Officer, as such a case is specifically provided by Rule 10.
The scope of Rules 10 and 10A of the Central Excise Rules was also examined by the Hon'ble Supreme Court in the case of Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd., reported in (1978) ELT-J 416. In that case the duty was provisionally debited to the current account on the basis of price list supplied by the appellants. Subsequently, demand for duty was raised on account of short-levy. In paragraph 21 of the said judgment the Hon'ble Supreme Court observed that the making of debit entries was only a mode of collection of the tax. After discussing the scope of Rule 10 and Rule 10-A, in paragraph 25 of the judgment the Hon'ble Supreme Court held as follows: We think that Rule 10 should be confined to cases where demand is being made for a short-levy caused wholly by one of the reasons given in that rule so that an assessment has to be reopened. The findings given by the Calcutta High Court do not show that in the case before us there was either a short-levy or that one of the grounds for a short-levy given in Rule 10 really and definitely existed." In paragraph 29 of the judgment the Hon'ble Supreme Court further that held:-- If the cause does not clearly come within the classes specified in Rule 10, this rule should not be invoked because, as was rightly contended for the appellant, a too wide construction put on Rule 10 would make Rule 10A uselsss. The two rules have to be read together." In the said case, Hon'ble Supreme Court held that Rule 10A was applicable for recovery the amount of duty demanded by the department.
From the judgment of the Supreme Court it is clear that Rule 10 of the Central Excise Rules can be applied only in circumstances specified in the said rules. If the short-levy is not due to any of the circumstances specified in Rule 10 and Rule 9(2) is also not applicable, then Rule 10A of the Central Excise Rules becomes applicable. In the present case, there was no error, misconstruction or inadvertence on the part of an officer. The learned advocate has stated that there was inadvertence on the part of the appellants in debiting duty to R.G. 23 Part II instead of P.L.A. The application of Rule 10A in the addendum dated 4-5-1979 to the show cause notice as per order of Appellate Collector was according to law. As there is no time-limit for demanding duty under Rule 10A, a demand for duty raised in this case under the said rule is not barred by six months' limitation. The learned advocate has relied upon para. 13 of the judgment reported in (1979) ELT-J 307 in the case of Jay Engineering Works Ltd. Balanagar, Hyderabad v. Government of India, Ministry of Finance, Department of Revenue and Insurance, New Delhi and Ors. The said paragraph is reproduced below:-- 13. Rule 10 provides for, inter alia, collection of excise duty short-levied through inadvertence, error or mis-construction on the part of an officer. Now, the allowing of credit to the appellant in this case, from 1-3-1969 to June, 1970, can be attributed to inadvertence, viz., the failure to advert to the change in law. [It can also be called an error of law.] It can perhaps be treated as a mis-construction of law also on the part of the officer. We need not express any opinion on this point. In either event Rule 10 is clearly applicable. We cannot agree with the learned Standing Counsel for the Central Government that the error referred to in Rule 10, does not include an error of law. There are no reasons to construe the words 'inadvertence' or 'error' as not including errors of law. No reasons have been brought to our notice for placing such a narrow construction, and not to adopt the plain and ordinary meaning of the said expressions. Mr. K. Subramanya Reddy, further contended that Rule 10A was conceived and enacted expressly for the purpose of providing for errors of law resulting in short-levy of excise duty, and if so, it is that provision alone which applies in cases of short-levy on account of an error of law. He sought to rely upon the context and circumstances in which Rule 10A was introduced.
This aspect needs to be dealt with in a little detail.
It appears from the above paragraph of the judgment that there was an error of law and the Hon'ble Andhra Pradesh High Court held that short-levy due to error of law was covered by Rule 10. The Hon'ble High Court did not express any opinion on the point whether error of law was on the part of the officer. The judgment cited by the learned advocate does not, therefore, help his case. The appellants used non-duty-paid materials and components for the manufacture of finished product. For payment of central excise duty they were not entitled to utilise the pro forma credit in R.G. 23 Part II. Duty was payable through the P.L.A. As the duty was not paid by them through P.L.A. as required under the law, duty will have to be collected from them and for that purpose necessary demand in the form of show cause notice was required to be issued. As such collection is not covered by either Rule 9 or Rule 10, it is to be done under Rule 10A.8. The contention raised in point No. (iv) by the learned advocate is not relevant in this case. This is not a case of erroneous assessment caused by misstatement as to quantity, description or value. There is also no dispute about the ratio of judgment laid down by Calcutta High Court in (1978) ELT-J 515 that fraudulent mis-statement is covered by Rule 10. Hence, this judgment is not relevant to the present case.
9. Arguing on point No. (v) the learned advocate has stated that a fresh show cause notice was issued on 4-5-1979. I find that on 4-5-1979 the department did not issue a fresh show cause notice, but an addendum to the earlier one dated 12-5-1976 was issued. Quoting a wrong rule in the show cause notice does not vitiate the demand, as held by the Hon'ble Supreme Court in (1978) ELT-J 399 (N.B. Sanjana, Assistant Collector of Central Excise, Bombay and Ors. v. The Elphinstone Spinning and Weaving Mills Co. Ltd.) and by Madras High Court in (Ramalinga Choodambikai Mills Ltd. v. Government of India and Ors.). Therefore the original show cause notice dated 12-5-1976 was valid although Rule 56A(3)(v) was quoted instead of Rule 10A and there was no necessity of a fresh show cause notice. The judgment cited by the learned advocate is not relevant to this point as the said judgment did not deal with "de novo proceeding". In the present case, the Appellate-Collector did not set aside the show cause notice; he remanded the matter for de novo adjudication after invoking Rule 10A instead of Rule 56A(3)(v). An addendum was, therefore, issued on 4-5-1979 substituting the correct Rule 10A in place of Rule 56A(3)(v). This addendum was not a fresh show cause notice. When the show cause notice was issued on 12-5-1976, Rule 10A was in existance and hence the show cause notice was not without jurisdiction.
10. In support of his argument that Rule 10-A of Central Excise Rules was ultra vires of the Central Excises and Salt Act, 1944, the learned advocate has relied on the judgments of Madras High Court and in the case of Citadel Fine Pharmaceuticals Ltd. The judgment reported in AIR 1967 Mad 171 relates to a case under the Central Sales Tax (Madras) Rules. It was held in that case that In the absence of an enabling power provided for by Section 13(4) of the Central Act, Sub-rule (7) of Rule 5 of the Central Sales Tax (Madras) Rules is unauthorised and is ultra vires the power of the State Government.
The facts of the present case are not similar. This judgment has not said that Rule 10A of the Central Excise Rules is ultra vires of the Act. Therefore, this judgment has no relevance to the present case. In 1973 TLR 2213 (Madras), it was held that Rule 10-A being ultra vires the Act, demand made thereunder could not be sustained. In this judgment the High Court followed their decision in writ petition 1053 of 1968, etc.--The Citadel Fine Pharmaceuticals, Madras v. District Revenue Officer, Chengleput--wherein a similar rule, Rule 12 of the Medicinal and Toilet Prepraration (Excise Duties) Rules, 1956 had been held to be ultra vires on the ground that it did not have the required statutory backing. There is, however, a contrary judgment of Kerala High Court. In Kerala Polythene Industries v. Superintendent of Central Excise, Trivandrum and Others (1977) Tax LR 1680 Kerala High Court held as follows: The scope of the rule-making power conferred by Section 3(1) of the Central Excises & Salt Act, 1944 is wide enough to embrace all matters relating to the manner in which both the levy and the collection of duties of excise on all excisable goods other than salt are to be made. The provision contained in Rule 10A is fully within the scope of the said power. Hence we are unable to accept the contention advanced on behalf of the petitioner that Rule 10A is ultra vires of the rule making power conferred by the Act on the Central Government." In paragraph 6 of the judgment the Hon'ble High Court further held: There cannot be any doubt that on the facts and circumstances of the present case, respondents 1 and 2 were perfectly justified in invoking the power conferred by Rule 10A. Admittedly the petitioner had not credited to the department the duty payable in respect of the polythene lay flat tubings cleared from the petitioner's factory during the period between 1st May, 1970 and 16th July, 1970, even though the said article was not exempt from duty during that period.
The orders Exts. P-3, P-5, P-7 and P-8 do not, therefore, call for any interference.
In the case of Atma Steels (Pvt.) Ltd. v. Collector of Central Excise, Chandigarh reported in (1984) 17 ELT 331, the five-Member Bench of this Tribunal held that this Tribunal, in view of its all-India jurisdiction, and peculiar features, cannot be held bound to the view of any one particular High Court, but has the judicial freedom, to consider the conflicting views, reflected by different High Courts, and adopt the one considered more appropriate to the facts of a given case before the Tribunal. This would be, irrespective of the fact, that one particular assessee was within the jurisdiction of a specified High Court or the original adjudicating authority was located there.
Following this decision, I hold the view that Rule 10A is not ultra vires of the Central Excises & Salt Act, 1944. No doubt, Rule 10A is a residuary rule. But this rule is meant to cover those cases where other rules cannot be applied to raise demand for recovery of duty. In the present case, Rules 9(2) and 10 are not applicable for the reasons stated by me in this order. Hence, Rule 10-A is correctly applicable.
11. The contention raised by the learned advocate in point No. (vii) is not relevant to this case. As already discussed by me, Rule 10 is applicable in the circumstances mentioned in the rule itself. If the short-levy was not caused by any of the reasons mentioned therein, Rule 10 is not applicable. I have already observed that in the present case there was no short-levy due to inadvertence, error, collusion or mis-construction on the part of the central excise officer, or due to the mis-statement as to the quantity, description or value of the goods on the part of the appellants. This being the position, Rule 10 was not applicable although the assessment was complete. In the case of N.B.Sanjana (1978) ELT-J 399 Supreme Court has held that even in cases where there has been a nil assessment due to one or other of the circumstances mentioned in Rule 10, then this rule is applicable.
12. Relying on Andhra Pradesh High Court decision reported in 1978 Tax LR 1959, the learned advocate has argued that Section 40(2) of the Central Excises & Salt Act, 1944, as it stood during the relevant time, was a bar to the proceedings initiated against the appellants. The learned advocate has argued that the term "legal proceedings" includes proceedings before a statutorily constituted authority including those initiated by issue of show cause notice. There is, however, a contrary judgment of Madhya Pradesh High Court in the case of Universal Cables Ltd. v. Government of India, reported in (1977) ELT-J 92. In paragraph 29 of the judgment the Hon'ble High Court observed as follows: Moreover, there is a basic distinction between a prosecution under Section 9 and a penalty proceeding under Rule 173-Q. A prosecution may deprive a person of his personal liberty in that he may be sentenced to a term of imprisonment. On the other hand, a penalty proceeding under Rule 173-Q can only deprive a person of his property. In our opinion, no reasonable doubt can be raised as to the validity of Section 40(2) or Rule 173-Q on the ground that no period of limitation is prescribed for proceedings under that rule, although a period of six months is prescribed for a prosecution under Section 9 of the Act. The plea for a wide construction of Section 40(2) of the Act on this ground must, therefore, fail.
In paragraph 30 of the judgment their Lordships in the Madhya Pradesh High Court held that the penalty proceeding taken by the Collector against the petitioner under Rule 173-Q of the Central Excise Rules read with Section 33 of the Central Excises and Salt Act, 1944 were not governed by the period of limitation prescribed by Section 40(2) of the Act. In the case of contrary decisions of more than one High Court, this Tribunal having all India jurisdiction, can follow the decision of one of the High Courts as held by the larger Bench of this Tribunal in the case of Atma Steels Pvt. Limited and Ors. v. Collector of Central Excise, Chandigarh and Ors. (supra). I consider the judgment of Madhya Pradesh High Court to be more appropriate to the facts of the present case. By the contrary view the Government would be debarred from recovering short-levy of duty caused by circumstances not covered by Rule 9 and Rule 10 to the detriment of public interest. Following the said decision of the Madhya Pradesh High Court I hold the view that the expression "legal proceedings" appearing in Section 40(2) of the Central Excises & Salt Act does not include adjudication proceedings under the Central Excise laws.
13. In the cross-objection the Collector has stated that the appellants did not obtain the permission of the Assistant Collector under Rule 56A(2) of the Central Excise Rules. They removed the goods in question without payment of duty. Rule 9(2) is, therefore, applicable for raising the demand for duty. It is also stated that the Appellate Collector committed an error by applying Rule 10A as that rule was not applicable. The Collector has prayed that the Appellate Collector's order be set aside and the matter be remanded to the Assistant Collector for de novo adjudication so that the demand can be held sustainable under Rule 9(2). The merit of the cross-objection has been fully discussed by my learned brother Shri Hedge and I fully agree with his analysis. To avoid repetition, I refrain from discussing the issue further. To say in brief, there was no clandestine removal of the goods in this case and hence, Rule 9(2) is not applicable. This is the view expressed by brothers S/Shri Dilipsinhji and Hegde. By his order in original dated 3-12-1974 the Assistant Collector of Central Excise exonerated the appellants from the charge of contravention of Rule 56A.In view of this position, the cross-objection filed by the Collector fails and I dismiss the same.
14. In view of the above discussion, I hold that the demand under Rule 10A of the Central Excise Rules, 1944 is sustainable in law and it is not barred by limitation. The appellants are liable to pay the demanded amount of duty which was adjusted in R.G. 23 Part II instead of debiting to P.L. A. I therefore, uphold the order of the Collector of Central Excise (Appeals) and dismiss the appeal filed by M/s. Asian Paints (I) Limited.
15. For the reasons stated earlier, the cross-objection filed by the revenue is dismissed. There is no point for remand to the Assistant Collector for fresh consideration.
16. The appeal filed by the appellants and the cross-objection filed by the revenue are dismissed.
The points of difference between the two Members of this Bench were referred by the President in terms of Section 35D of the Central Excises & Salt Act, 1944 read with Section 129C(5) of the Customs Act to the Third Member Shri D.C. Mandal, Member (Technical). Shri Mandal has recorded his findings on the points of difference. The appeal of M/s. Asian Paints (India) Ltd. and the cross-objection of the Collector of Central Excise, Bombay-II are required to be disposed of on the basis of the majority opinion, in terms of the aforesaid provisions of law. In majority view the appeal filed by M/s. Asian Paints (India) Ltd. and the cross-objection filed by Collector of Central Excise, Bombay-II are required to be rejected and we order accordingly.