1. The Revision Application filed before the Central Government against the order bearing No. 44 of 1981 dated 11.3.1981 passed by the Central Board of Excise and Customs statutorily stood transferred to the Tribunal for being heard as an appeal.
2. The Collector of Central Excise, Baroda in an adjudication proceeding ordered the appellant to pay the duty of excise at the appropriate leviable rate on 15823.7 kgs. of unmanufactured tobacco stated to have been illicitly received into and removed from their L-2 premises. He also imposed a penalty of Rs. 200/- on each of the 98 sale notice under Rule 32 stating each transaction as a separate and independent transaction. He further imposed another penalty of Rs. 2,000/- under Rule 40 in respect of 2 T.P.I. dated 15.4.1978 and 4.4.1978 under Rule 40 of the Central Excise Rules.
3. Feeling aggrieved by the order, the appellants herein, preferred an appeal before the Central Board of Excise and Customs and the Board, while setting aside the demand of duty, maintained the penalties imposed on the appellant. Hence this appeal. During the hearing of this appeal, Shri Poonekar submitted that Rules 32 and 40 of the Central Excise Rules were omitted on 1.8.1979. Therefore, the show cause notice issued on 23.5.1979 invoking the non-existing Rules and the subsequent proceedings culminated in the imposition of penalties on the appellant, were all bad in law. Shri Poonekar submitted since action for imposition of penalty had not been initiated before the omission of Rules 32 and 40, no penalty can be imposed under the said Rules even if there had been any contravention by the appellant. In support of his contention, Shri Poonekar relied on the following decisions: (1) 1983 E.L.T. 1192(CEGAT) Pyrites Phosphate and Chemical Ltd., NewDelhi v. Collector of Central Excise, New Delhi.
(2) 1983 E.L.T. 1186 (CEGAT) Carew and Co. Ltd., Distt. Sahajanpur (U.P.) v. Collector of Central Excise, Allahabad.
(3) 1984 (17) E.L.T. 331 (Tribunal) Atma Steel Pvt. Ltd. and Ors. v. Collector of Central Excise, Chandigarh and Ors.M/s. Rayala Corporation Pvt. Ltd. v. The Director of Enforcement 4. Shri Senthivel, the learned Departmental Representative on the other hand, contended the violation or contravention of the Rules 32 and 40 took place before they were omitted. Therefore, there is no legal bar to proceed against the appellant for the violation even after the rules were omitted. Shri Senthivel also submitted that Rule 40 had not been omitted altogether. It was omitted only insofar as it relates to unmanufactured tobacco. Shri Senthivel relied on Section 6 of the General Clauses Act in support of his contention that action can be initiated after their repeal. The initiation of action is in respect of violation of the rules which were existing on the date of violation.
5. Shri Poonekar in reply contended that there is no scope to invoke Section 6 of the General Clauses Act. Section 6 has no applications to the Rules. It only applies to the Acts or Regulations.
6. Having regard to the rival contentions the one and the only question that arises for consideration in this appeal is whether the Collector committed an error of law in imposing penalties on the strength of the Rules which were non-existent on the date of issue of show cause notice but were existing at the time of alleged contravention.
7. The above question is no more res Integra. In the case of Pyrates Phosphate and Chemical Ltd., the Special Bench 'D' held that proceeding initiated after repeal of Rule 10(A) was invalid. The same Special Bench in the case of Carew and Co. Ltd. held that proceeding initiated under Rule 10(A) of Central Excise Rules would continue even after the omission of the said Rule provided the show cause notice was issued prior to the omission of Rule 10(A). The Supreme Court in the case of M/s. Rayala Corporation Pvt. Ltd. considered the question as to whether proceedings could be validly continued on the complaint in respect of the change under Rule 132-A(4) of the Defence of India Rules, after the said Rule was omitted. The Supreme Court held that the language con-tamed in Clause 2 of the Defence of India (Amendment) Rules, 1965 can only affirm protection to action already taken while the Rule was in force, but cannot justify initiation of a new proceeding which wilfiiot be a thing done or omitted to be done under the Rule but a new act of initiating a proceeding after the Rule had ceased to exist. On this interpretation, the complaint made for offence under Rule 132-A(4) of the D.I.Rs., after the 1st April, 1965 when the Rule was omitted, was held to be invalid.
8. The ratio of the decisions referred to above applies in all fours to the facts of the present appeal. Rule 32 of the Central Excise Rules was wholly omitted. Rule 12 was omitted so far as it relates to unmanufactured tobacco. The omission of the Rule took place on 13.1979.
The show cause notice was issued on 23.5.1979 after the Rules were omitted. It is necessary to point out while omitting the said Rules no clause was incorporated saving the operation of the said Rules in respect of acts or omissions done prior to the omission of the said Rules. In the circumstances, the ratio of the decision of the Supreme Court in the case of M/s. Rayala Corporation Pvt. Ltd. is attracted.
The issue of show cause notice on the basis of non-existing Rules as well as the imposition of penalty in pursuance of such a show clause notice is invalid in law.
9. Shri Senthivel had contended that in view of Section 6 of the General Clauses Act, the omission of Rules 32 and 40 would not qualify the show cause notice or the penalties imposed in pursuance of the show cause notice. He urged that that Section of the General Clauses Act specifically saves the acts or omissions done prior to the omission.
Shri Senthivel submitted the Rules under the Central Excise Act should be treated as part of the Act.
10. A contention similar to the contention raised by Shri Senthivel was considered by the Larger Bench of the Tribunal in 1984 (17) E.L.T. 331 (Tribunal) - Atma Steel Pvt. Ltd. v. Collector of Central Excise, the Larger Bench observed - "We also hold that the Rules, irrespective of the fact that they are framed in exercise of the statutory powers, cannot be equated with the Act, particularly after the amendment in 1973, when they are not even to be treated as if they were in the Act. The Larger Bench of this Tribunal, no doubt, in the case of 5. Kumar and Ors. (1983 E.L.T. 1057) held that the definition given in these Rules can operate for the purpose of the Act also, but that was in a wholly different context, and meant to lay down only that in the absence of any provisions to the contrary in the Act, on a particular subject, the provisions of the Rules, found to be supplementary to the provsions of the Act, would be applied for the purpose of the operation of the Act also. The view, in that case, cannot be stretched to but urged that Rules acquire the same status as that of stature, as contemplated by Section 3(19) of the General Clauses Act, 1897 or 'Regulations', as defined in Section 3(5) thereof." 11. The Supreme Court also considered the applicability of Section 6 of the General Clauses Act in the case of M/s. Rayala Corporation Pvt.
Ltd. The Supreme Court observed, "In the case before us, Section 6 of the General Clauses Act cannot obviously apply on the omission of Rule 132A of the D.I.Rs for the two obvious reasons that Section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not of a Rule." 12. Having regard to the authoritative pronouncement of the Supreme Court, the contention of Shri Senthivel, that Section 6 of the General Clauses Act is attracted to the facts of the present case, has no force and the same is rejected.
13. Since the initiation of proceeding as well as imposition of penalties on the appellants are underthe Rules which were omitted without providing for a saving clause and after the date of omission of the Rules, the whole proceeding is invalid in law. The Collector, in law, could not impose any penalty under the Rules which ceased to exist at the time of issue of show cause notice itself. The Board also committed an error in confirming the order of penalty imposed by the Collector." 14. In the result, for the reasons stated in the preceding paragraphs, I allow this appeal and set aside the penalties imposed on the appellant. The penalties, if paid, shall be refunded to the appellant.