Full Judgment
K.A. Swami, Acting C.J.
1. This appeal is preferred against the order dated 26th March 1992 passed by the learned Single Judge in Writ Petition 2280 of 1989.
2. Petitioner in the writ petition is the appellant before us. It has sought for quashing the show cause notice bearing OC. No. 1171/88 dated 23-5-1988 issued by the Superintendent of Central Excise, Yeshwanthpur Range, Bangalore under Section 11A(1) of the Central Excises and Salt Act, 1944 (hereinafter referred to as `the Act'). The show cause notice dated 23-5-1988 covers the period from 1-1-1988 to 30-4-1988. The same officer has also issued another show cause notice bearing OC. No. 1867/88 dated 16th September 1988 under the very same provision of the Act, which covers the period from 1st May 1988 to August 1988. The appellant petitioner has also challenged the said show cause notice. Thus, in the writ petition the Show Cause Notices dated 23-5-1988 and 16-9-1988 issued by the Superintendent of Central Excise, Yeshwanthpur Ranger, Bangalore are challenged.
3. The learned Single Judge held that as the show Cause Notice were issued within a period of six months from the date of assessment, it did not affect the jurisdiction of the Superintendent of Central Excise irrespective of the fact that the Show Cause Notices averred short levy by suppression. Accordingly, he dismissed the writ petition keeping it open to the appellant-petitioner to urge all the contentions before the authority who had issued Show Cause Notices, Aggrieved by the decision of the learned Single Judge, the petitioner has come up in this appeal.
4. Shri Chander Kumar, learned Counsel appearing for the appellant, contended that as the Show Cause Notices were issued on the ground that short levy was due to suppression they attracted the provisions of sub-section (1) of Section 11A of the Act, therefore, the authority competent to issue such notices was the Collector of Central Excise and not the Superintendent of Excise; hence, the show cause notices at Annexures C and D were issued without the authority of law - in other words, the show cause notices were issued by an officer who was not competent to issue.
5. On the contrary, it was contended by Sri Ashok Haranahalli, learned Standing Counsel for the Central Government, that as long as the show cause notice were issued within a period of six months from the date of assessment, whether it be on the ground of short levy, or whether that short levy was due to suppression or for other reasons mentioned in the proviso or it was only a pure and simple short levy, the Superintendent of Central Excise being the Central Excise Officer was competent to issue show cause notices asking the petitioner appellant to appear before the Assistant Collector. It was also further contended that the Collector of Central Excise could issue show cause notice under sub-section (1) of Section 11A of the Act only if the short levy was noticed beyond the period of six months. As long as it was noticed within a period of six months and a show cause notice was issued within a period of six months, the Central Excise Officer was competent to issue such a show cause notice. Alternatively it was submitted by the learned Standing Counsel fro the Central Government that in the show cause notices issued by the Central Excise Officer as per Annexure-C and D, if the words' and suppressed such a fact from the department with an intent to evade payment of Central Excise duty' are deleted, the intendment and integrity of the show cause notices are not affected and it will be perfectly within the jurisdiction of the Central Excise Officer, therefore, those words may be treated as deleted as deleted an the show cause notices may be allowed to be proceeded with without those words.
6. In reply to the last argument, Shri Chander Kumar, learned Counsel for the appellant, submitted that as the show cause notices were issued on the ground of short levy by way of suppression and as such they were without jurisdiction, there was no question of deleting the offending portion and validating the show cause notices so as to be within the jurisdiction of the Central Excise Officer. It was also submitted that it was not at all open to the Central Excise Officer after issuing the show cause notice to delete the offending words and proceed with the show cause notices. It was also submitted that the deletion or withdrawal of the offending words contained in the show cause notices would amount to deciding that there was no suppression, and, such decision the Central Excise Officer was not competent to take as the Collector of the Central Excise alone could decide whether there was a short levy by suppression. Therefore, it is not at all permissible to delete the offending words and proceed with the show cause notice without those words.
7. In the light of these contentions, following arise for consideration :
(1) What is the true scope of sub-section (1) of Section 11A of the Act ?
(2) Whether it is open to the Superintendent of the Central Excise (Central Excise Officer) to proceed with the show cause notice by deleting the words 'and suppressed such a fact from the department with an intent to evade payment of Central Excise duty' from the show cause notices ?
POINT NO. 1:
8. Sub-section (1) of Sections 11A of the Act with it proviso, reads thus :
'11A : RECOVERY OF DUTIES NOT LEVIED OR NOT PAID OR SHORT LEVIED OR SHORT PAID OR ERRONEOUSLY REFUNDED : (1) When any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded a Central Excise Officer may, within six months from the relevant, date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short- levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice :
Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refund by reason of fraud, collusion or any willful statement or suppression of facts, or contravention of any of provisions of this Act or of the rules made thereunder with intent to evade payment of duty; by such person or his agents, the provisions of this sub-section shall have effect as if for the words 'Central Excise Officer', the words, 'Collector of Central Excise and 'for the words 'six months, ' the words 'five years' were substituted.'
The explanation to sub-section (1) and also other sub-sections of Section 11A are not relevant for our purpose, therefore, we have not extracted them. Sub-section(1) of Section 11A specifically provides that whenever there is nod duty of excise levied or paid or there is short levy or short payment or erroneous refund of excises duty, it is open to the Central Excise Officer to issue a show cause notice within six months from the relevant date on the person chargeable with duty which has not been levied or paid or the duty of excise has been short-levied or short-paid or refunded erroneously, requiring him to show cause why he should not pay the amount specified in the notice. Therefore, in the show cause notice, the authority issuing it, is required to determine the amount due by way of duty of excise payable which is not either levied or not paid or short levied, or short-paid or there is erroneous refund. In order to attract first portion of sub-section (1) of Section 11A., of the Act,. it is not necessary that non-levy or non-payment of short levy or short payment or erroneous refund of duty of excise must be due to one or more of the reasons stated in the proviso to sub-section (1) It may be due to some other reason other than those contained in the proviso. Therefor, the first portion of sub-section (1) and the proviso operate independently and the authority empowered to exercise the power under these two provisions is also different. For exercising the power under the proviso the grounds stated in the proviso must exist. The proviso states the reasons on which there is no levy or no payment or short levy or short payment or erroneous refund of duty of excise. The reasons stated therein are 'fraud, collusion, or any wilful misstatement or suppression of facts or contravention of any of the provisions of the Act or the Rules made thereunder '. with intent to evade payment of duty. In such cases, the proviso says that for the words `Central Excise Officer', the words `Collector of Central Excise and' and for the words `six months', the words `five years' may be read or substituted. Therefore, it is clear that the proviso to sub- section (1), as already pointed out, can be enforced independent of the provisions contained in the first portion of sub-section (1) Similarly, the operation of the first portion of sub-section (1) does not depend upon the provisions contained in the proviso thereto. Though the proviso deals with non-levy or no-payment, short levy or short payment or erroneous refund of the Central Excise Duty, but the reasons on the basis of which duty of excise has not been levied or paid or there is short levy or short payment or erroneous refund of excise duty must be those as are stated in the proviso. These reasons may or may not exist for exercising the power under the first portion of sub-section (1) of Section 11A of the Act. However, if the power has to be exercised under the proviso thereto, the one or the other reasons stated in the proviso must exist. Therefore, the contention of Sri Chander Kumar, learned Counsel appearing for the appellant that when once the show causes notice states that the short levy or short payment is due to suppression, the case is taken out of the purview of the first portion of sub-section (1) of Section 11A and it attracts the proviso thereto has substance. Because the short levy or short payment or no levy or no payment or erroneous refund due to fraud, collusion or any wilful misstatement or suppression of facts can be or shall have to be determined only by the Collector of Central Excise. Therefore, an action for no payment or short levy or short payment or erroneous refund of excise duty on the rounds of fraud, collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty, can be initiated only by the Collector within a period of five years from the date of assessment.
9. Learned counsel for the appellant placed reliance on a decision of the CEGAT in Partap Rajasthan Copper Foils and Laminates Ltd. v. Collector of Central Excise [1989 (44) E. L. t. 775 (Tribunal). The decision is not by a High Court, it is by the Customs, Excise and Gold Control Appellate Tribunal. The said decision also interprets the provisions of Section 11A of the Act including the proviso thereto in the manner we have indicated above.
The other two decisions relied upon by Sri Chander Kumar, learned Counsel for the appellant, namely in Ishwerlal Thakorelal Almaula (Deceased) : [1966]1SCR367 and in S. Sundram Pillai etc. v. V. R. Pattabiraman : [1985]2SCR643 have no bearing on the interpretation of the provisions of Section 11A of the Act; but they only deal with the role of the proviso in a statute and the manner in which the proviso has to be interpreted. As we have held in the instant case that the proviso to sub-section (1) of Section 11A of the Act operates independent of Sub-section (1) and it can be enforced independently, we consider it not necessary to refer to the aforesaid two decisions.
10. Consequently, we hold that the Superintendent of Central Excise could not have issued the show cause notices on the ground that there was short levy and short-payment of central excise duty due to suppression, as it was the Collector of Central Excise alone who was competent to issue show cause notices for short levy or short payment of excise duty on the ground of suppression. Point No. 1 is answered accordingly.
POINT NO. 2
11. The next question for our consideration is whether the show cause notices are liable to be quashed in the light of the finding on point No. 1. It is contended by Sri Ashok Haranahalli, learned Standing counsel for the Central Government that as the superintendent of Central Excise had issued show cause notices within a period of six months and as there is no prohibition contained in the Act either to withdraw such notice reserving liberty to issue a fresh notice or to amend such notice or delete any portion of such notice, the offending words may be permitted to be deleted and the show cause notices may be allowed to be proceeded with in accordance with law. In other words, it is submitted by the learned Standing counsel for the Central Government that the words 'And suppressed such a fact from the department with an intent to evade payment of central excise duty', may be treated as deleted from the impugned two notices.
12. However, this contention is resisted by Sri Chander Kumar, learned Counsel for the appellant on the ground that as the authority was in competent to issue show cause notice, it cannot by amending or deleting the portion thereof, bring them within the purview of the jurisdiction of the Central Excise Officer.
13. It is not possible to accept the contention of Sri Chander Kumar. As the power to issue show cause notice includes the power to amend or delete or withdraw it, we see no justification to refuse permission to the respondent to delete the offending words from the show cause notices and to proceed with the show cause notices without those words. The argument that the Central Excise Officer has become functus officio after issuing notices as per Annexure-C and D because the said show cause notices contain the offending words, also does not find favour with us. As long as the deletion of the aforesaid offending words do not affect the integrity and intendment of the show cause notices and the show cause notices can be proceeded with without those words, there is no justification to hold that the Central Excise Officer is not competent or it is not permissible, to him to delete those words and proceed with the show cause notices without those words. The argument that the Central Excise Officer has become functus officio because the show cause notices contain the grounds stated in the proviso to sub-section (1) of Section 11A of the Act also does not hod water because within a period of six months from the relevant date no levy or no payment or short-levy or short payment or erroneous refund of duty of excise, show cause notice can be issued and amended by him, and he continues to possess jurisdiction until he decides the show cause notice. Accordingly, point No. 2 is answered in the affirmative and in favour of the respondents.
14. For the reasons stated above, this writ appeal is partly allowed. The order of the learned Single Judge dated 26th March 1992 is modified. Respondents are permitted to proceed with the show cause notices without the words 'And suppressed such a fact from the department with an intent to evade payment of Central Excise duty' contained therein.
15. The contentions of the appellant-petitioner on the merits of the case are left open.
16. The petitioner is granted 60 days from today to file objections, if any, to the show cause notices.
17. In the circumstances, there will be no order as to costs.