V.K. Ahuja, J.
1. This is a writ petition filed by the petitioner under Article 226 and 227 of the Constitution of India for setting aside the show cause notices and the order passed by respondent No. 4 as against the petitioner.
2. Briefly stated the facts of the case are that the petitioner/Unit is a partnership firm engaged in the manufacture and sale of tread rubber, cushion compound etc. falling under Chapter 40 of the Central Excise Tariff Act, 1985.
The firm is located at Rampur Ghat, Tehsil Paonta Sahib, District Sirmour, H.P. It was alleged that on 7.1.2003, the Government of India, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, New Delhi issued various fiscal incentives for the States of Himachal Pradesh and Uttaranchal pertaining to Central Excise, Income tax and Central investment subsidy. In line with the said memorandum, the Central Board of Excise and Customs issued two notifications granting exemption to thrust industries which could be established in these States. The notifications also stipulated exemption to the specified industries located in khasra numbers specified in the said notifications. Under the notifications, area based exemption from payment of Central Excise Duty was granted for a period of 10 years from the date of commencement of commercial production to new industrial units set up after 7.1.1003 and to those existing industrial units which have increased their installed capacity by a minimum of 25% after 7.1.2003.
3. It was further alleged that in terms of clarification furnished by Ministry of Commerce and Industry, Hudbust No. 110 of Tehsil Paonta Sahib, District Sirmour, Kanungo Circle Paonta Sahib had to cover khasra Nos. 1 to 418 in the notification issued, but by an inadvertent and printing mistake, instead of notifying khasra Nos. 1 to 418, Khasra Nos. 1-41 were notified. The petitioner in consultation with the District Industries Center, Nahan checked the list and being satisfied that these khasra numbers were duly recommended for inclusion by the nodal agency, undertook substantial expansion on the bona fide belief that the mistake shall be rectified by the concerned departments themselves and the benefit of exemption stated in the notification will be available from the date of commencement of commercial production after substantial expansion and exercised its option to claim exemption from payment of Central Excise Duty by filing a formal declaration to this effect with the Assistant Commissioner, Shimla. It was further alleged that the aforesaid mistake in notifying the khasra numbers was duly rectified by the Government vide notification dated 30.9.2005. After issuance of the said notification, the petitioner was served with a show cause notice dated 7.7.2006 by the Assistant Commissioner, Central Excise alleging that the petitioner/Unit is not eligible to claim benefit of exemption during the period from 7.8.2004 to 30.9.2005 being the period during which the khasra numbers of the petitioner/Unit were not included in the first notification. The petitioner responded to the show cause notice vide his letter dated 28.8.2006. In response to the notice issued by respondent No. 5, the Tehsildar, Paonta Sahib, vide his letter dated 23.8.2006, clarified that the khasra number of the petitioner/Unit was 147 with Hudbust No. 110 and it was covered within khasra Nos. 1 to 418 at Rampur Ghat, Tehsil Paonta Sahib, on 10.6.2003. The issue pertaining to the extension of central excise exemption was decided by the Assistant Commissioner (respondent No. 5) in favour of the petitioner vide letter dated 29.8.2006 and the petitioner was extended the benefit of exemption under notification of 2003 from the date of commencement of commercial production after undertaking substantial expansion i.e. from 17.8.2004. However, after the adjudication of the show cause notice, dated 7.7.2006, by the Assistant Commissioner, Excise Shimla (respondent No. 5) in favour of the petitioner that he was eligible to the benefit of exemption w.e.f. 17.8.2004, a second show cause notice dated 20.9.2006 for identical period and on identical issue was served upon the petitioner by the Joint Commissioner, Central Excise, Chandigarh (respondent No. 4). It was further alleged that the petitioner under the bona fide belief that respondent No. 4 was not aware of the proceedings taken and order passed in this regard by respondent No. 5, the petitioner replied to the show cause notice vide letter dated 17.10.2006 and submitted therein the entire factual and legal aspects of the matter. However, respondent No. 4 failed to appreciate the submissions made before him and confirmed a demand of Rs. 8,05,874/- with equivalent penalty vide order dated 28.11.2006 inspite of the fact that the earlier adjudication order passed by respondent No. 5, the competent authority, was alive and had not been challenged in appeal by the department and, therefore, the second show cause notice was bad under the doctrine of resjudicata since there was no fresh grounds to review and upset the earlier findings. It was further alleged that respondent No. 5 issued another show cause notice to the petitioner dated 21.12.2006 stating that the petitioner/Unit had undertaken the expansion before 30.9.2005, therefore, it is not entitled to exemption under the earlier notifications and thereby laying the claim for the period from 1.10.2005 to 31.10.2005.
4. The petitioner had challenged both the subsequent show cause notices issued by respondent No. 5 being patently illegal and without jurisdiction and had prayed for quashing of the said show cause notices issued to the petitioner by respondent No. 5 on various grounds including the violation of principles of natural justice and that the proceedings were without jurisdiction.
5. In reply filed by respondent No. 1 i.e. Secretary Industries to Government of H.P., it was admitted that the respondent had taken up with respondent No. 2 that khasra numbers of Hudbust No. 110 had erroneously been mentioned as 1-41, whereas respondent No. 1 had proposed Khasra Nos. 1-418 and this was a typographical error which could not be detected during various stages of finalization of notification. It was also pleaded that respondent No. 2, on recommendations of respondent No. 1, had recommended on 11.10.2004 to respondent No. 3 to consider this proposal to correct the khasra numbers of Hudbust No. 110 from 1-41 to 1-418. It was admitted that the petitioner/Unit had undertaken substantial expansion w.e.f. 17.8.2004 with an increase in investment from Rs. 23.21 lacs to Rs. 41.31 lacs in plant and machinery. This expansion was taken on record by General Manager, District Industries Center, Nahan, on 28.3.2005.
6. In reply filed by respondents No. 2 to 5, they admitted the facts that the subsequent notification was issued in which Khasra Nos. 1 to 418 of Hudbast No. 110 were included for extension of benefit of exemption though it was pleaded that the said notification was made effective from 1.10.2005. It was pleaded that accordingly a show cause notice dated 7.7.2006 was issued by respondent No. 5 to the petitioner wherein it was held that the petitioner/Unit was entitled to get the benefit under notification issued in 2005 retrospectively. However, it was pleaded by respondents that the said order passed by respondent No. 5 was subject to review by the Commissioner within the period of one year and accordingly show cause notices were issued to the petitioner demanding a sum of Rs. 8,08,874/- on account of duty involved on the goods cleared for period prior to 1.10.2005. However, it was denied that due to inadvertence and printing mistake, Khasra No. 1 to 418 were notified as Khasra Nos. 1 to 41 and as the notifications issued subsequently were effective from 1.10.2005, the show cause notices issued by respondent No. 4 were legal and are not time barred.
7. We have heard the learned Counsel for the parties at length and have gone through the record of the case carefully.
8. The facts of the case, as alleged by the petitioner as mentioned above, are not in dispute. Respondent No. 1 in their reply have clearly admitted that the recommendation was made for inclusion of the Khasra Nos. 1 to 418 and these khasra numbers were their in all the stages of the recommendations made to respondent No. 2. Respondent No. 1 has clearly admitted that inadvertently or by typing mistake, khasra numbers were mentioned as 1-41 in place of 1-418. The necessary rectification notifications were issued in the year 2005 by respondent No. 2 on the clear recommendation of respondent No. 1. There is nothing in the reply filed by respondent No. 1 or the notification issued by respondent No. 2 on the recommendation of respondent No. 1 that these khasra numbers were being included for the first time for the benefit of excise subsidy and these were, therefore, admittedly being issued in the form of clarification. It is also clear from the reply filed by respondents No. 2 to 5 that the show cause notice was issued by respondent No. 5 to the petitioner/Unit alleging that they were not entitled to the exemption and that appeal was duly considered by respondent No. 5 and the Assistant Commissioner, (respondent No. 5), who passed an order in favour of the petitioner/Unit that they were entitled to the concession from the date of original notification issued in 2003 and not from the date 1.10.2005, which was the date when subsequent notifications in the form of correction were issued by respondent No. 2.
9. The two points which arise for consideration are; firstly, whether respondent No. 4 had the authority to pass orders of issuance of fresh show cause notices to the petitioner/Unit once the point in issue has been settled as per the orders passed by respondent No. 5. Secondly, as to whether the notification can be said to be applicable retrospectively and as to whether the benefit of subsidy could be granted to the petitioner/Unit from the date of issuance of original notification in 2003 or from the date of issuance of the notification in the form of correction issued w.e.f. 1.10.2005. The third question which may arise for consideration is in case the petitioner/Unit had already taken the benefit under the scheme promulgated by respondent No. 2, as to whether they are entitled to refund of the excise duty in such circumstances or not.
10. Coming to the first question with regard to the fresh show cause notices having been issued by the Joint Commissioner, Customs and Central Excise, Chandigarh, I may reiterate that the facts as have been mentioned above are not in dispute and it has to be considered as to whether the Commissioner, Customs and Central Excise, Chandigarh, respondent No. 4 had the powers under the provisions of the Act or not to issue fresh show cause notice to the petitioner/Unit and pass orders accordingly in view of those show cause notices.
11. Coming to the question as to whether the Joint Commissioner, Customs and Central Excise (respondent No. 4) has the jurisdiction to issue show notice to the petitioner/Unit or not, the learned Counsel for the petitioner had referred to the provisions of Section 35-E of Central Excise Act, 1944 (hereinafter to be referred as the Act). The provisions of Section 35-E of the Act may be reproduced as under:
35-E Powers of Board or Commissioner of Central Excise to pass certain orders.- (1) The Board may, of its own motion, call for and examine the record of any proceeding in which a Commissioner of Central Excise as an adjudicating authority has passed any decision or order under this Act for the purpose of satisfying itself as to the legality or propriety of any such decision or order and may, by order, direct such Commissioner or any other Commissioner to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the Board in its order.
(2) The Commissioner of Central Excise may, of his own motion, call for and examine the record of any proceeding in which an adjudicating authority subordinate to him has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order and may, by order, direct such authority to apply to the Commissioner (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Commissioner of Central Excise in his order.
(3) The Board or Commissioner of Central Excise, as the case may be, shall, where it is possible to do so, make order under Sub-section (1) or Sub-section (2), within a period of six months, but not beyond a period of one year, from the date of the decision or order of the adjudicating authority.
12. It is, therefore, clear that the Board may, of its own motion, or Commissioner of Central Excise can call for and examine the record of any proceeding in which a Commissioner of Central Excise as an adjudicating authority has passed any decision for the purpose of satisfying itself as to the legality or propriety of any such decision and order. The requirement is that the Commissioner of Central Excise may, of its own motion, call for and examine the record of any proceeding in which an adjudicating authority subordinate to him has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order. It follows from a perusal of this Section that the Central Excise Commissioner had the power to examine the record of any order or decision passed by an authority subordinate to him.
13. Coming to the order passed by the Assistant Commissioner respondent No. 5, it is clear that the order was passed by the Assistant Commissioner within the provisions of the Act, though this order does not make a specific reference to the provisions under which it was passed. A perusal of this order shows that this order was passed on 29.8.2006 and according to the provisions of Section 35- E(3) of the Act referred to above, respondent No. 4/Commissioner of Central Excise was competent to pass order under sub Clause (1) or (2) within a period of six months but not beyond a period of one year from the date of the decision or order. The notices were issued to the petitioner by the Central Excise and Taxation Commissioner, Chandigarh on 20.9.2006 and accordingly, he had taken the cognizance within the period of limitation prescribed under Clause (3) mentioned above and therefore, he could pass an order under the provisions of Section 35-E(1) or (2). A question arises as to whether the Central Excise Commissioner was exercising the powers of revision of his own motion or otherwise under the provision of Section 35-E of the Act or he was passing an order at first instance of his own under the provisions of the Act. There is no dispute that respondent No. 4/Central Excise Commissioner, Chandigarh had the power under the provisions of Section 35-E (1) and (2) to pass an order but the powers to be exercised are the revisional powers prescribed under the Act which were to be exercised by him. The power of revision is exercised against an order which is in existence and the facts of the case show that an order was already in existence passed by the Assistant Commissioner, Shimla, dated 29.8.2006, referred to above. However, a perusal of the notices issued to the petitioner/Unit by the Central Excise Commissioner shows that the show cause notices were issued on 20.9.2006 and 21.12.2006. In reply to the first notice issued to the petitioner/Unit, the petitioner thought that probably respondent No. 4 was not aware of the proceedings before respondent No. 5 and he submitted its reply and brought to its notice the entire factual position i.e. regarding passing of an order by the Assistant Commissioner Excise, respondent No. 4 granting the exemption in favour of the petitioner/Unit. However, in the second notice issued or in the first notice issued to the petitioner/Unit mentioned above, it was no where mentioned that the order passed by the Assistant Commissioner Excise (respondent No. 5) was liable to be revised by the Joint Commissioner, Customs and Central Excise, in view of the powers conferred under Section 35-E of the Act. Even in the reply filed by respondents No. 2 to 5, it was pleaded that respondent No. 4 had power to issue such show cause notice but it was nowhere mentioned that these powers of revision were being exercised as provided under Section 35-E of the Act, but both these notices gave an impression that the earlier order passed by the Assistant Commissioner was being ignored and it was not being revised but a fresh notice was issued by the Commissioner Central Excise which notice, in accordance with the provisions of Section 35-E, could not be issued since the Central Excise Commissioner had the powers of revision only as provided under this provision. Once an order was passed by a competent authority, namely, Assistant Commissioner, Customs and Excise, Shimla and no appeal had been preferred against that order by either of the parties and no such power was exercised to file an appeal against the said order, the said order had become final. However, it was liable to revision under the provisions of Section 35-E of the Act but no original power of issuing of a fresh show cause notice could be exercised by Central Excise Commissioner and, therefore, the order passed by the Assistant Commissioner had become final and no second show cause notice could be issued to the petitioner/Unit in this regard.
14. A plea has been taken that there is a remedy for filing of the appeal once an order is passed under Section 35-E of the Act by the Central Excise Commissioner and as such, the present writ petition was not maintainable. However, once it has come to the notice of the court that the order passed by the Assistant Commissioner Excise had become final and it was not being sought to be revised by the Central Excise Commissioner in view of the powers conferred upon him under Section 35-E of the Act, no fresh show cause notice could be issued once the earlier order passed had become final. The issuance of show cause notice to the petitioner/Unit was prima facie illegal and as such the powers could be exercised by this Court under its writ jurisdiction. Therefore, the notices issued by the Central Excise Commissioner in question can be said to be without jurisdiction and are required to be quashed.
15. Coming to the question of retrospectivity of the notifications issued as to whether they are applicable from the date of issuance of the notifications i.e. 1.10.2005 or from the original notification when this was issued in the year 2003, reliance was placed by the learned Counsel for the petitioner to the following decisions:
16. The decision in Vijay v. State of Maharashtra and Ors. : (2006)6SCC289 , shows that the observations made in the said case are relevant and are being reproduced below:
The said Act is a disqualifying statute. A plain reading of the amended provision clearly shows that it was intended by the legislature to have retrospective effect. The appellant was elected in terms of the provisions of a statute. The right to be elected was created by a statute and, thus, can be taken away by a statute.
The general rule that a statute shall be construed to be prospective has two exceptions: It should be expressly so stated in the enactment or inference in relation thereto becomes evident by necessary implication.
The inhibition against retrospective construction is not a rigid rule. It is true that ordinarily a statute is construed to have prospective effect, but the same rule does not apply to a disqualifying provision. It does not apply to a curative or a clarificatory statute. Every law that takes away a right vested under the existing law is retrospective in nature. When a law is enacted for the benefit of the community as a whole, even in the absence of a provision, the statute may be held to be retrospective in nature. The appellant does not and cannot question the competence of the legislature in this behalf.
If from a perusal of the statute, intendment of the legislature is clear, the court will give effect thereto. For the said purpose, the general scope of the statute is relevant. When a literal reading of the provision giving retrospective effect does not produce absurdity or anomaly, the same would not be construed to be only prospective. The negation is not a rigid rule and varies with the intention and purport of the legislature, but to apply it in such a case is a doctrine of fairness.
17. The decision in Belapur Sugar & Allied Industries Ltd. v. Collector of Central Excise, Aurangabad : 1999(108)ELT9(SC) , shows that a plea was taken in regard to subsequent notification issued vide which the appellant was entitled to duty reduction. The observations made therein are relevant and are being reproduced below:
The question in the instant appeal was whether the excess production of sugar by the appellant during the designated period commencing on 1.5.1982 but before the date of issue of the amending Notification No. 193 of 1982 dated 11.6.1982 was entitled to duty reduction under para 4 of Notification No. 132 of 1982 dated 21-4-1982 as substituted by Notification No. 193 dated 11.6.1982. Under new para 4 the excess sugar produced in a factory during May to September was entitled to rebate in excise duty even if the sugar production in that factory during the corresponding period in the preceding three years was nil. The assessee's claim to the benefit of new para 4 was opposed by the Revenue merely on the grounds that: (i) the later notification was not retrospective and hence would not cover the period prior to 11.6.1982, and (ii) the assessee in the present case having cleared the goods and paid the excise duty could not claim the benefit of the notification. Allowing the assessee's appeal the Supreme Court held:
Unless there is anything to the contrary in the Act, rules or notification, if there be two possible interpretations, it is that interpretation which subserves the object and purpose should be accepted. The objective of the notification in question is that by conferring rebate in excise duty, an incentive is given to a factory for increasing the sugar production during the lean period. One has to scrutinize the two notifications, keeping this in mind. Significantly the language used in the second notification is: 'For prar 4, following paragraph shall be substituted.' It is significant that while substituting this para 4 on 11.6.1982, it admits to confer rebate for the period preceding the date of this notification viz. from May. So this notification clearly indicates to confer benefit which is covered by the first Notification No. 132. Substituted para 4 has two parts, first 'where production during three preceding years was nil' and second, 'the entire production during May to September 1982 will be exempted'. The appellant's case is covered under both parts Its production in the last three preceding years was nil and in terms of Notification No. 132 read with this substituted para 4, in terms of the 2nd part the entire sugar produced during May to September 1982 would be exempt. Thus the interpretation suggested by the Revenue cannot be accepted as it defeats the very object of the notification.
18. A perusal of the decision taken by the Assistant Commissioner, Excise (respondent No. 5) shows that he had considered the question as to whether the notification had retrospective effect and whether it can be said to be a clarificatory notification or an original notification issued by the Central Government. He had also placed reliance on the decision of the Apex Court in the case of Belapur Sugar & Allied Industries Ltd. Collr. of C.Ex, Aurangabad, but the said case law is not available with us. However, a perusal of the order passed by the Assistant Commissioner shows that he observed as under:
The Hon'ble Supreme Court in the above judgment has held that the Notification which seeks to substitute a para of the Notification has to be given retrospective effect. A similar view point was also taken by the CESTAT in the case of Commissioner of Central Excise, Bangalore v. Shree Lakshmi Foundary holding that a Notification substituting the old Notification being clarificatory in nature has retrospective.
19. He followed the ratio of this judgment and observed that amendment notification dated 30.9.2005 has extended the benefit of exemption to Hudbust No. 110 by substituting Khasra Nos. 1-41 by 1-418 and has retrospective effect being clarificatory in nature. Therefore, he held that the petitioner is entitled to avail exemption from the date i.e. 10.6.2003 which was the date of filing their declaration under the said notification.
20. It follows from the above discussion that since the notification issued was only in the nature of clarificatory and the State Government had admitted its mistake that the khasra numbers were wrongly not given though these were recommended and as such fresh notification was issued by the Union Government, which has the effect of giving retrospective effect and the petitioner was entitled to the benefit of exemption which cannot be denied to him for not fault of his.
21. Coming to another question that he had carried on the expansion after that he was entitled to the expansion to the extent of 25% after the date of issuance of notification i.e. after 1.10.2005 only, when the original notification stood substituted by the notification issued and effective from 1.10.2005 which has effect of retrospectivity, the petitioner cannot be denied the benefit of the exemption for having undertaken expansion after 2003 since the benefit was to be available upto 2007 or for a period of 2 years and as such the petitioner was entitled to the benefit of exemption from the period from 17.8.2004 to 30.9.2004 applying the retrospective nature of the notification and the fact that the petitioner could carry out this expansion upto the year 2007, as per the Rules.
22. Therefore, from whichever angle the facts of the case are looked into, the findings recorded by the Assistant Commissioner, which were not challenged and had become final accordingly, are to be given effect and the petitioner is entitled to exemption as per the order passed by the Assistant Commissioner and the subsequent show cause notices issued by the Central Excise Commissioner (respondent No. 4) are quashed being bad in the eyes of law. The writ petition is allowed accordingly. There is no order as to costs.
CMP No. 37 of 2007:
23. In view of the final disposal of the main petition, this application also stands disposed of. Interim order shall stand vacated.