Full Judgment
challenging the aforesaid duty amount directed to be paid. The Supdt.
however, did not issue any show cause notice answerable to the Asstt.
Collector. The appellant took up the matter to the Asstt. Collector on their own by addressing a letter to him on 9-9-1985. Thereupon personal hearing was granted by the Asstt. Collector and he passed the order holding that the order of assessment is appealable to the Collector (Appeals) and no appeal has been filed by the appellant and hence he has no jurisdiction to go into the merits of the assessment order passed by the Supdt. and he therefore directed the appellant to pay the duty demanded, as per the assessment order passed by the Supdt. The matter was taken up in appeals before the Collector (Appeals), who has rejected the appellant's appeal on the ground that though the order of assessment passed by the Supdt. may be a void order on account of the fact that no show cause notice has been issued, unless it is voided by a proper and a competent officer, it remains in force. Since the appeal against the RT 12 assessment order cannot be filed at this stage appeal was dismissed. The present appeal is against the said order of the Collector (Appeals.) 2. Shri V.K. Jain, the Chartered Accountant, stated that the Supdt. has made a short endorsement on the RT 12 and demanded straightaway the amount of duty alleged to be short levied. No show cause notice has been issued, though under Rule 173-I the Supdt. is required to make assessment after due enquiry. Even after they protested against the Supdt.'s direction to pay the duty, no show cause notice has been issued till date. Hence the endorsement made on RT 12 Returns cannot be enforced against them and it cannot save the limitation of time prescribed in Section 11A. In this context, he relied on the decision in Kosan Metal Products Ltd. reported in 1988 (38) E.L.T. 573 (SC) and also the decision of the Special Bench in Vipul Dyes reported in 1989 (44) E.L.T. 724. He also contended that Section 11A is the only section for recovery of short levy or non-levy and the endorsement made on RT 12 returns in pursuance of assessment made under Rule 173-I cannot short-circuit the method prescribed under Section 11A for recovery of the duty short levied.
3. Shri Mondal, the 1d. SDR on the other hand contended that assessment made under Rule 173-I is also quasi-judicial order and the order of assessment is also an appealable order. The appellants could have taken up the assessment order before the Collector (Appeals). Admittedly in this case, they have not pursued this course of legal remedy available to them. If such an appeal had been taken, if the order was a void order, that would have been set aside by the proper officer, namely the Collector (Appeals). Having failed to pursue this course of legal remedy available to them, they cannot now contend that the order is a bad order and cannot be enforced. The order has achieved finality, even if it is a bad order. Unless it is set aside, it has all the force and resort can be made to effect recovery under Section 11. In this context, he also referred to the judgment of the Madras High Court reported in 1990 (28) ECR 92.
4. After hearing both the sides, we find that in this case following the ratio of the judgment in Kosan Metal Products and also Vipul Dyes referred to above, the direction for making the payment of short levy, by way of short endorsement on the RT 12 cannot be construed to be a notice under Section 11A nor it cannot also be construed to save limitation of time. Now the issue here is slightly different. The main thrust of the argument from the department is that it may be a bad order; unless it is set aside by a proper officer, it can be enforced against the appellant. This is the issue that has to be considered by us. There is no serious dispute from the department that the short endorsement made by the Supdt. without issue of a notice and without hearing the appellants is not a valid order for demand of duty. It is also to be taken note of that the order of assessment pointing out the short levy was not accepted by the appellant and this was contested even before Supdt. When that is the position, it is incumbent on the part of the Supdt. to have issued a show cause notice answerable to the Asstt. Collector, so that the matter could have been considered by a proper adjudicating authority. This has not been done. It is also observed that the amount quantified, as short levied, does not arise on account of any arithmetical calculation based on the approved classification and price lists. The demand is reported to be the duty payable on yarn on switching over to payment of duty from fabric stage to spindle stage. This issue involves a process of adjudication. It cannot be done by a short endorsement on the RT 12 returns. We are therefore of the view that provisions of Rule 173-I cannot save the action of the Supdt. and such an endorsement does not flow from assessment of RT 12. The proper course is to issue a notice under Section 11A which reportedly has not been done. When the matter came up before the Asstt. Collector, he refused to interfere, on the ground of lack of jurisdiction. He held that the assessment order was appealable to the Collector (Appeals).
5. We are not in agreement with this position, since the issue covering the demand does not flow from assessment of RT 12 returns but relates to a different issue involving a process of adjudication by way of issue of show cause notice. In our view, the Asstt. Collector should have gone into the merits without pleading lack of jurisdiction. While, we are not disputing the department's claim that a void order is required to be voided by a competent authority, we are allowing the appeal only on the question that the amount short levied or non-levied in this case has to be demanded by following the procedure prescribed under Section 11A, which is the statutory requirement. When admittedly, such an order under Section 11A has not been passed, we hold that the demand is not enforceable. Even under Section 11 of the Central Excise Act, it can be resorted to for recovery of sums payable under the provisions of the Act or the Rules. The quantum of duty not paid is to be determined as per the provisions of the Act or the Rules. We find that in this case such determination has not been done either under Section 11A nor under Rule 173-I, after issue of a proper notice.
Hence, we allow the appeal.