Judgment:
1. This appeal is directed against the order of the Collector of Central Excise, Hyderabad dated 18.3.1987 directing the appellant herein under Rule 57-I of the Central Excise Rules, 1944 (hereinafter referred to ait 'the Rules') to reverse the credit in a sum of Rs. 2,29,034/- on the ground that the credit in regard to the same had been wrongly availed of. The appellant availed deemed credit in respect of aluminium wire rods for the period 24.2.1986 to 1.3.1986 with the permission of the Department. The appellant's claim that they purchased aluminium rods from M/s. Sri Metal Trading Corporation, Bombay, importers of unwrought aluminium find took credit on the duty suffered by the ingot under the Modvat scheme. Proceedings were instituted against the appellant by issue of a show cause notice dated 22.8.1986 which culminated in the impugned order appealed against under which the appellant had been found to have availed erroneously Modvat credit amounting to Rs. 2,29,034/- and the same was directed to be recovered in terms of Rule S7-I of the Rules.
2. Shri K. Narayanan, the earned Counsel for the appellant at the outset submitted that he does not want to put forth any pleas on facts and assaiiled the impugned order on grounds of law and contended inter alia (1) Before the appellant was called upon to reverse the crediit under law, the appellant should have been served with a show cause notice and trie one purported to be a show cause notice dated 22.8.1986 is not a show cause notice within the meaning of the Act/Rules inasmuch as in para 5 a demand has been made.
(2) The teamed counsel further urged that the appelUint having taken the credit with the permission of the Department and when the R.T.I2 returns were also assessed, the only course open to the Department, if any erroneous credit has been taken, was to review the order of R.T. 12 assessments in a manner known to law and the Collector of Central Excise has no jurisdiction or authority in law to issue a show cause notice for reversing the credit by resorting to i independent adjudication.
(3) The earned Counsel further submitted that the only Section under which the Department would be entitled to recover the sum as short-levy or credit erroneously taken would be under Section 11A of the Central Excises and Salt Act, 1944 under which in the absence of invoking the longer period of limitation in terms of the proviso, it is only the AsstL Collector of Central Excise, who is the competent authority to initiate proceedings and the Collector of Central Excise would have no jurisdiction to initiate proceedings and, therefore, the impugned order, as a result of the proceedings initiated by an authority without jurisdiction, would stand vitiated.
(4) The earned Counsel placed reliance on the ratio of the ruling of the Division Bench of the Bombay High Court in the case of 'S.K. Manekia v. Commissioner of Sales Tax' reported in (1977) 39 S.T.C. pp. 426-442, and contended that even if the appellant had submitted to the jurisdiction of the Collector of Central Excise and participated in adjudication proceedings without making demur about want of a show cause notice, that would not validate the impugned order which is non-est for want of not having been preceded by a valid show cause notice as per law.
(5) The earned Counsel also relied upon the Special Bench ruling in the case of 'Mis. Himadri Electrical (Pvt.) Ltd. v. Collector of Central Excise, Calcutta', reported in 1987 (12) HCR 62 (CEGAT SB-B1), to contend that retrospective denial of earlier permission for availing proforma credit is not permissible and, therefore, the impugned order, directing reversal of credit is not sustainable in law.
3. Shri K.M. Vadivelu, the learned D.R. contended that the plea of the earned Counsel that permission was given to avail Modvat credit is not correct because permission was granted to avail Modvat credit for wire rods. The learned D.R. also further submitted that the appellant had given an undertaking dated 4.6.1986 in writing to the effect to reverse credit applied for by them in case the credit taken by the appellant was erroneous. The learned D.R. further urged that there was a valid show cause notice dated 22.8.1986 and the appellant did not suffer any prejudice on the ground that he was not called upon to show cause against reversal of Modvat credit and apart from it, having participated in adjudication proceedings and submitted to the jurisdiction of the Collector of Central Excise, the appellant cannot now assail the impugned order.
4. In reply Shri Narayanan, the earned Counsel submitted that if the quantum is worked out, it would be seen that the authority granted permission to the appellant to avail Modvat credit in respect of unwrought aluminium in any form.
5. We have carefully considered the submissions made before us. Since the appeal was not argued with reference to facts and the impugned order was assailed purely on legal grounds, we shall deal with the submissions made by the earned Counsel for the appellant.
6. The earned Counsel contended that the communication from the Collector of Central Excise, Hyderabad dated 22.8.1986 purporting to be a show cause notice is not a show cause notice at all in the eye of law. The learned Counsel, in support of this plea, placed particular reliance in para 3 therein amd contended that it is more a decision than an allegation against the appellant asking hirn to show cause against the reversal of credit for the said sum. It would be better in this context to extract verbatim para 5 to appreciate the contention of the learned Counsel, which reads as under 5. M/s. Gem Cables and Conductors Ltd., L. 4 No. 1/83(EWC), of Chitkul-502 329, Pataneheru Samithi are hereby informed that the credit of Rs. 2,29,034/-availed by them is erroneous and therefore disallowed. They are required to make the necessary adjustments in the credit account or the account current maintained by them or by payment of cash as stipulated under Rule 57-1 of the Central Excise Rules, 1944. Accordingly they are called upon to recredit the amount of Rs. 2,29,034/- in the aforesaid manner forthwith on receipt of this notice.
Rule 57-1 Sub-rule (2) as it then existed at the relevant time reads as under.
(2) If any inputs in respect of which credit has been taken are not fully accounted for as having been disposed of in the manner specified in this section, the manufacturer shall upon a written demand being made by the Assistant Collector of Central Excise pay the duty leviable on such inputs within 10 days of the notice of demand.
We would like to note that the communication 22.8.1986 is captioned as 'show cause notice. The appellant also understood the same as a show cause notice and gave a reply thereto and mere so participated in adjudication proceedings without any demur. No plea was taken at any time that either the communication dated 22.8.1986 was not a show cause notice within the meaning of law nor any prejudice or want of comprehension with reference to allegation contained thereunder was ever pleaded. The adjudicating authority also proceeded on the basis that the communication dated 22.8.1986 was a show cause notice as per law and as understood by the appellant herein and proceeded in adjudication after having put the appellant on notice of the allegation with reference to wrong availing of Modvat credit, The purpose of a show cause notice in law is only to put the person concerned on notice of the various charges or allegations set out thereunder and to give the affected party a reasonable opportunity of making a representation before a final decision is passed. This is one of the facets of the principles of natural justice. Here the communication is captioned as a show cause notice and the allegations are clearly set out and the fact that the appellant had taken irregular credit in a particular sum is also set out and the notice in para 7 also reads as under 7. M/s. Gem Cables and Conductors Ltd., are required to produce all the documents in support of their claim at the time of showing cause. If no reply is received within the stipulated time, it will be presumed that they have no explanation to offer and the issue will be decided ex-parte. They are also requested to indicate in their written explanation whether they wish to be heard in person before the case is decided. If no such mention is made or if they fail to appear before the adjudicating authority on the date fixed for the 'personal hearing', the case will be decided based on the evidence available on record.
It is a settled proposition of law if all the ingredients of an offence or the substance of an allegation, is set out in a communication and the affected party is put on notice and given an effective opportunity of being heard, the mere omission to specify certain Sections or law or irregularity in the wording of the communication, would not Ipso facto make it any the less a show cause notice, as understood in law, unless the appellant shows that he/she suffered prejudice on that score. In the present case, as we have stated, apart from having understood it as a show cause notice and traversing the allegations therein by way of a reply, no plea of prejudice was also pleaded and the appellant submitted to the jurisdiction of the adjudicating authority by participating in the adjudication proceedings which culminated in the impugned order. In this factual background we do not find any substance in the technical plea of the earned Counsel that what is purported to be a show cause notice is not a show cause notice in the eye of law. In this connection, we would like to advert to Sub-rule (2) of Rule S7-I, extracted above, which would show that "if any inputs in respect of which credit has been taken are not fully accounted for as having been disposed of in the manner specified in this section, the manufacturer shall upon a written demand being made by the asstL Collector of Central Excise pay the duty leviable on such inputs within 10 days of the notice of demand. Therefore, construing the purport of show cause notice dated 22.8.1986 in juxtaposition with Rule 57-1(2), we have no doubt in our mind that there is absolutely no legal lacuna and the legal requirements of law in conformity with the principles of natural justice have been satisfied.
7. We also do not find any substance in the plea of the earned Counsel that in view of finalisation of R.T. 12 assessments, there is only a power of review; if such a construction were to be adopted, it would totally render Rule 57-1(2) otiose and a dead letter. We would also like to observe in this context that R.T. 12 assessments are only for verification of duty suffered by the finished goods and the assessing officer is not called upon to go into the question as to whether the inputs in relation to the manufacture of the end-product were entitled to the Modvat credit or not.
8. The third limb of the argument that under Section 11A of the Central Excises and Salt Act, 1944 the Jurisdiction of the Collector would stand ousted if the longer period of limitation in terms of the proviso to Section 11A is not invoked is bereft of substance. It is axiomatic that a superior officer like the Collector of Central Excise can discharge all the functions of a subordinate authority and there is absolutely no prohibition or ouster of jurisdiction in regard to the same. What an Asstt. Collector can adjudicate a matter, the Collector of Central Excise can certainly adjudicate the same and there is no ouster of jurisdiction or legal bar in regard to the same as contended by the learned Counsel. In any case reference to Section 11A is of no relevance in the facts and circumstances of the case because there is no reference to Section 11A nor any jurisdiction exercised thereunder by any authority. Before parting this case, we would like to observe that to a specific query from the Bench, the earned Counsel frankly conceded that he is not in a position to show with reference to documents that wire rods emerged out of the inputs utilised by the appellant had suffered duty as unwrought aluminium at the appellant's hands.
9. On consideration of the entire materials available on record we dismiss the appeal without prejudice to the appellant's rights to the eligibility or otherwise, under law, for availing of the Modvat Credit.