1. In all these appeals, the controversy centers around the effect of the omission of Section 3A of the Central Excise Act, 1944 w.e.f.
11.5.2001 and also the omission of Rules 96ZO and 96ZP of the Central Excise Rules, 1944 w.e.f. 1.3.2001. According to the assessees, since there was no saving clause introduced while omitting Section 3A of the Act, the obligations and liabilities even if incurred during the currency of Rules 96ZO and 96ZP did not survive beyond 11.5.2001, being the date of the omission of Section 3A. According to the assessees, Section 6 of the General Clauses Act, 1897 cannot be invoked in these cases because it applied to 'repeal' of an enactment and not to 'omission' of a provision of the Act enacted by Parliament.
2. The Division Bench before which the matters were listed, noticing that there were conflicting views on the issues involved, has referred the following two issues for being considered by the Larger Bench: 1) Whether, having accepted the position that the protection under Section 38A of the Central Excise Act is available to action taken by the department against them under Rules 96ZO and 96ZP beyond the date of omission of these rules, the assessees are entitled to contend that similar protection under Section 6 of the General Clauses Act is not available to departmental action taken under Section 3A of the Central Excise Act after the date of its omission.
2) Whether Section 3A of the Central Excise Act, which was omitted with effect from 11.5.2001, could be considered to have been 'repealed' within the meaning of this expression used under Section 6 of the General Clauses Act, 1897.
3. The learned Counsel, Shri G. Natarajan arguing the matter on behalf of all the appellants contended that Section 3A of the said Act was omitted by the Finance Act, 2001 without any saving clause and, therefore, actions which could be taken pursuant to Section 3A were not saved after 11.5.2001. It was submitted that Section 6 of the General Clauses Act cannot come to the rescue of the Revenue because Section 3A was only 'omitted' and not 'repealed'. He also submitted that protection under Section 38A, which was simultaneously introduced by the Finance Act, 2001, was not available after Section 3A was omitted.
The learned Counsel argued that 'repeal' and 'omission' were distinct concepts and 'omission' was, therefore, not protected under Section 6 of the General Clauses Act, which applied only to 'repeals'. In support of this contention, reliance was placed on the decision of the Constitution Bench of the Supreme Court in Rayala Corporation (P) Ltd. and Anr. v. Director of Enforcement the issue involved related to omission of Rule 132A of the Defence of India Rules which precluded any person from dealing with foreign exchange if he was not an authorized dealer and provided, under Sub-rule (4), punishment for the offence of contravening the provisions of the said rule, which could extend to two years imprisonment or fine, besides providing for forfeiture of the foreign exchange in respect of which the rule was contravened. It is in the context of such a provision that the Supreme Court held in paragraph-17 that, in the case before it, Section 6 of the General Clauses Act could not obviously apply because it applied to 'repeals' and not to 'omissions' and further that it applied when the repeal was of a Central Act or Regulation and not of a Rule. Reliance was also placed on the decision of the Supreme Court in Kolhapur Canesugar Works Ltd. v. UOI , in which the Supreme Court, in the context of deletion of old Rules 10 and 10A of the Central Excise Rules, 1944, which provided for recovery of duties or charges short-levied or erroneously refunded, and regarding delegated powers for recovery of sums due to the government, held that since Rule 10 or Rule 10A was neither a Central Act nor a Regulation defined in the General Clauses Act, Section 6 thereof was not applicable. It was also held that the decision in Rayala Corporation (supra) was directly on the question of applicability of Section 6 of the General Clauses Act in a case where the rule was deleted or omitted by a notification and the question was answered in the negative by holding that Section 6 only applies to repeals and not omissions, and applies when the repeal is of a Central Act or Regulation and not of a Rule. The learned Counsel also relied upon the decision of the Supreme Court in General Finance Co. and Anr.
v. Asst. Commissioner of Income Tax, Punjab finding that the submission of the ld.counsel that 'omission' and 'repeal' had identical effect in operation of statutes had force, it was held in para-8 of the judgment that their lordships were constrained to follow the two decisions of the Constitution Bench in Rayala Corporation case (supra) and Kolhapur Canesugar Works case (supra) since the view taken therein had held the field for over three decades and was reiterated just two years before this decision.
4. The learned authorized representative for the department contended in all these appeals that the liability of all the appellants had undisputedly arisen during the currency of Section 3A of the Act and Rules 96ZO and 96ZP of the Rules and, therefore, it was saved by virtue of the provisions of Section 38A which were simultaneously introduced by the Finance Act, 2001 by which Section 3A was omitted.
Distinguishing the decision of the Supreme Court in Rayala Corporation case (supra), he submitted that the question therein involved was altogether different from the one arising in these appeals because the proceedings in that case by way of filing complaint were initiated after the rules ceased to be in operation. In the present appeals, it was nobody's case that the show-cause notices were issued after the rules were repealed or had ceased to operate. It is also contended that, in Rayala Corporation case, the Court had no occasion to hear arguments on the distinction between 'repeal' and 'omission'. Citing from the book "Principles of Statutory Interpretation", by Justice G.P.Singh, he pointed out that the observation that Section 6 applied only to 'repeals' and not to 'omissions' was a passing observation and that the stress in those cases was that the omission or repeal of a rule, not being a Central Act or Regulation as defined in the General Clauses Act, by another rule did not attract Section 6 and that the proceedings initiated under the omitted rule could not continue unless the new rule contained a saving clause to that effect. Relying upon the decision of the Supreme Court in Bhagat Ram Sharma v. UOI and Ors.
, he submitted that there was no distinction between 'repeal' and 'amendment'. He relied upon the observations made therein by the Supreme Court to the effect that there was no real distinction between 'repeal' and 'amendment' and that an amendment was, in fact, a wider term and it included abrogation or deletion of a provision in an existing statute. Referring to the decision of the Supreme Court in S.L. Srinivasa Jute Twine Mills P. Ltd. v. UOI and Anr.
, he pointed out that the provisions of Section 6 of the General Clauses Act were referred to by the Court in the context of the omission of Clause (d) of Section 16 of the Employees Provident Fund and Miscellaneous Act, 1952. The Supreme Court in the context of Section 6(c) of the Act held that the effect of the amendment was that it did not affect any right, privilege, obligation or liability acquired, accrued or incurred. It was submitted that the Court did not make any distinction between 'repeal' and 'amendment' or 'omission' because the effect was the same i.e. the provision of law in question ceased to exist. The decision of the High Court of Gujarat in Torrent Laboratories Pvt. Ltd. v. UOI was cited to point out that it was held therein that Rayala Corporation case related to a temporary statute and that there was a presumption that legislature would never intend evasion of a provision of the statue. Reliance was also placed on the decision of the Punjab and Haryana High Court in Shree Bhagwati Steel Rolling Mills v. CCE Chandigarh , in which it was held that, even by omission of Section A, liability of the assessee thereunder was not wiped out. Referring to the decisions of the Supreme Court in Rayala Corporation case and Kolhapur Canesugar Works case, the High Court held that, in view of the provisions of Section 38A, the question whether omission of a provision is at par with the repeal of a provision need not be gone into. Referring to the provisions of Section 38A, it was held that even by omission of Section 3A, the liability of the assessee thereunder was not wiped out. SDR also relied upon the decision of the Allahabad High Court in Simbhauli Sugar Mill Ltd v. UOI 2006 (205) ELT 141 (All.) in which, in the context of the provisions of Section 38A of the said Act, it was held in paragraphs 24 and 25 of the judgment that, considering the entire gamut of different meanings assigned to the words used in Section 38A (amendment, repeal, superseded and rescinded), it was apparent that, though the legislature had used the word 'amendment' which had a wide import, it had also used the words, 'repealed', 'rescinded', and 'superseded' all of which are genre of amendment. It was held that the legislature had purposely used all these words together to further enlarge the scope of Section 38A or by way of abundant caution. It was also held that insertion of Section 38A was meant to remove the defect pointed out in Kolhapur Sugarcane Works case (supra).
5. The learned Counsel for the appellants, in reply, contended that Section 6 of the General Clauses Act did not apply to rules and that Section 38A of the Central Excise Act applied only to rules. Therefore, on the omission of Section 3A w.e.f. 11.5.2001, orders issued under the Rules (96ZO, 96ZP) and pending issue were not saved by Section 38A. It was submitted that omission of Section 3A meant that, for the future, compounded levy scheme was no more applicable for ingots & billets and hot re-rolled products and that the duty will be levied on the basis of Section 3 in the normal course. It was also submitted that benefits accrued and liabilities incurred were required to be placed on the same footing in the context of the saving clause.
6. Section 3A empowered the Central Government to charge Excise Duty on the basis of capacity of production in respect of notified goods. The goods were to be notified having regard to the nature of the process of manufacture or production, the extent of evasion of duty in regard to such goods and other relevant factors which led the Central Government to form an opinion that it was necessary to do so for safeguarding the interest of the Revenue. On such goods being notified, excise duty was to be levied and collected thereon in accordance with the other provisions of Section 3A. The important provision in this regard as reflected in Sub-section (2) of Section 3A was that on the notification being issued under Sub-section (1), the Government may, by rules, provide for determination of the annual capacity of production, or factor/s relevant to the ACP, by the Commissioner. The Annual Capacity of Production so determined was to be considered to be the annual production of such goods by such factory. Under Sub-section (3) of Section 3A, the duty of excise on such notified goods was required to be levied at the rates notified in the gazette and to be collected in the manner, as may be prescribed under the rules. The operation of Section 3A(1) was totally dependent upon the manner and method of determination of the annual production capacity and the levy and collection provisions of the rules contemplated by the other provisions of Section 3A.7. Under Rule 96ZO(1), an obligation was cast upon the manufacturer of non-alloy steel ingots and billets to debit an amount calculated @ Rs. 750/ per MT at the time of clearance of ingots and billets of non-alloy steel from the factory in the "account-current" maintained by the manufacturer under Rule 173G(1) of the Rules. The manner of calculation of total amount of duty liability was indicated therein. Under Rule 96ZO(1A), it was provided that the goods shall be liable to confiscation and penalty would be imposable on the manufacturer as indicated thereunder, if non-alloy steel ingots and billets were removed without complying with the provisions of Sub-rule (1). In cases where a manufacturer was having a total furnace capacity of 3 MTs installed in his factory, he was given an option to pay Rs. 5 lacs in two instalments as indicated in Sub-rule (3) of Rule 96ZO. Provisions similar to Rule 96ZO were made in Rule 96ZP for manufacturers of non-alloy steel hot-rolled products mentioned therein.
8. In short, the provisions of Rule 96ZO and 96ZP created special obligations and liabilities on the manufacturers of ingots and billets and hot re-rolled products. Rules 96ZO and 96ZP came to be omitted by Rule 7 of Central Excise (Third Amendment) Rules, 2001, which were notified on 1st March 2001 by Notification No. 6/2001-CE (NT). As stated in the preamble of the notification, these rules were made under Section 37 of the Central Excise Act by the Central Government, "further to amend the Central Excise Rules, 1944, except as respects things done or omitted to be done before such amendment". The amendment was done by way of, inter alia, omitting Rules 96ZO and 96ZP while simultaneously providing a saving clause by incorporating the expression "except as respects things done or omitted to be done before such amendment".
9. The Finance Act, 2001 came into force on 11.5.2001 and, by Section 121 thereof, Section 3A of the Central Excise Act was omitted. By Section 131 of the Finance Act, 2001, Section 38A was added in the Central Excise Act. Section 38A dealt with the effect of amendments etc. of rules, notifications, or orders made or issued under the said Act and also of the notifications or orders issued under the rules. It was specifically provided that, where any rule under the Act was amended, repealed, superseded or rescinded, then, unless a different intention appeared, such amendment, repeal, supersession or rescinding shall not, inter alia, affect the previous operation of such rule or affect any obligation or liability incurred under the rules so amended, repealed, superseded or rescinded. Penalties, forfeiture or punishment incurred in respect of any offence committed under or in violation of such rule were also not affected. It was provided that the investigation, legal proceeding or remedy in respect of such obligation, liability, penalty, forfeiture or punishment were also not affected and that such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture, punishment may be imposed as if the rule had not been amended, repealed, superseded or rescinded.
10. There cannot be a greater all pervasive saving clause than Section 38A. When, admittedly, the obligations and liabilities were incurred under Rules 96ZO and 96ZP during their currency when Section 3A was still in force, amendments by omission, repeal etc. contemplated by Section 38A did not affect such liabilities, and the investigation, legal proceeding or remedies in respect thereof were all saved. The word "amended" in Section 38A would encompass amendments by omission also. It may be recalled that the Hon'ble Supreme Court in Kesavananda Bharati Sripadagalvaru and Ors. v. State of Kerala , in paragraph 1899 of the judgment, observing that the Constitution does not define the word "amendment" and that the General Clauses Act also does not define it, held that Section 6A of the General Clauses Act provided that, where any Central Act repeals any enactment, by which the text of any Central Act was amended by express omission, insertion or substitution of any matter, the repeal, unless a different intention appears, shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal.
It was held that: "Section 6A shows that "amendment" includes addition, substitution and omission. (emphasis added). Thus, omission being an amendment, Section 38A, which is a saving clause, will apply to omission of Rules 96ZO and 96ZP. Therefore, all the obligations and liabilities incurred by the appellants while the rules were in force are not affected by the omission of these rules and can be enforced as contemplated by Section 38A read with the machinery-provisions which continued to operate all throughout. The liabilities were admittedly incurred by the appellants under these rules while Section 3A was in force. The subsequent omission of Section 3A from 11.5.2001 did not obliterate the obligations and liabilities which had already arisen under the rules and were saved because of the saving provisions contained in Section 38A of the Act. The obligations and liabilities had arisen under the said rules as contemplated by Section 3A when it was in force and those very obligations and liabilities subsisted by virtue of the saving provision of Section 38A which was simultaneously introduced while omitting Section 3A. The omission of Section 3A was not done with any retrospective effect and therefore liabilities that had already arisen under the said rules could be enforced by virtue of Section 38A of the Act. Therefore, there is no substance in the contention that Section 3A was 'omitted' and not 'repealed' making Section 6 of the General Clause Act inapplicable, thereby abrogating the liabilities arising under the rules though protected by Section 38A. Section 38A, in our opinion, clearly governs the field and saves the obligations and liabilities that had already arisen while these rules were in operation so that they could be enforced and implemented as contemplated by Section 38A. It is therefore unnecessary to enter into the controversy surrounding the provisions of Section 6 of the General Clauses Act as to the meaning of the word 'repeal' on which diverse views have been expressed by the courts.
11. For the forgoing reasons, we answer the issues referred to the Larger Bench as under: a) The provisions of Section 38A of the Central Excise Act, 1944, inserted by Section 131 of the Finance Act, 2001, are applicable in respect of the obligations and liabilities incurred under Rules 96ZO and 96ZP before they were omitted by Rule 7 of the Central Excise (Third Amendment) Rules, 2001, notwithstanding the omission of Section 3A w.e.f. 11.5.2001 by the Finance Act, 2001.
b) This issue does not survive in view of our answer to the above issue, at (a).
12. The reference is, accordingly, answered. The appeals will now be placed before the regular bench for final hearing.