Punalur Paper Mills Ltd. Vs. Collector of Customs - Court Judgment

Excerpt:
in the facts and circumstances explained in the stay application, the pre-deposit of duty and penalty ordered in the collector's order dated 12.3.1987 under the customs act is dispensed with and the appeal itself is taken up for hearing today.this is an appeal directed against the order dated 12.3.1987 passed by the collector of customs, cochin, confirming the demand for duty amounting to rs. 9,60,950/- being the duty payable on 246.82 m.t. of waste paper and imposing a penalty of rs. 1,00,000/- on the appellant under. section 112(a) of the customs act, 1962. in this case the appellant had been charged with having imported 246.82 m.t. of waste paper, but having not used the waste paper for the purpose for which imported. only on such use for the purpose specified, the importer will be eligible for exemption under notification no. 219/84 dated 10.8.1984. the appellant had imported consignment for the manufacture of pulp and paper. at the time of clearance, they executed a bond, binding themselves to produce 'end-use' certificate to fulfil the condition of the notification. these certificates were also subsequently produced. however, as a result of an investigation conducted by the central excise collector, cochin, it was noticed that waste paper/old newspaper imported for making pulp was not utilised for the said purpose, but had been diverted and sold in the open market and that the raw material consumption account at the factory had been manipulated, in order to obtain an 'end-use' certificate from central excise department. a statement was also recorded from a lorry driver, shri m.p. sasidharan nair, who had transported the old newspaper from cochin port to the waste paper merchant and from a waste paper merchant who had purchased the material. shri shanmugham, in-charge of godown at the appellant's paper mill, also gave a statement for having sold and despatched 246.82 m.t. of imported old newspaper to different waste paper merchants. manipulation of the raw material account was also admitted in the statement by an officer working in the raw material division of the appellant factory. following further investigation, a show cause notice was issued to the appellant for demanding duty on the 246.82 m.t. of waste paper, as they had wilfully suppressed the facts regarding its unauthorised use. the collector thereafter adjudicated the case confirming the demand and imposing the penalty as stated above.3. appearing for the appellant, the learned consultant, shri s.venkataraman argued that the order of the collector is not tenable because the show cause notice issued in this case is ab-initio void, as it had been issued in violation of the customs act. the learned consultant submitted that by the amendment to section 28 of the customs act, brought about on 27.12.1985 by the customs (amendment) act, 1985, it has been specifically laid down that the collector should issue a show cause notice where the extended period for demanding duty under the proviso to section 28 was being invoked. the object of bringing about this amendment is made clear in the statement of objects and reasons of the central excises and salt (amendment) bill, 1985, which referred to identical provision on the central excise side under section 11a of the central excises and salt act. it has been stated in the statement of objects and reasons therein that the amendment proposed was that show cause notice in regard to duty of excise short levied or short paid etc. by reason of fraud. collusion of any wilful mis-statement or suppression of facts should be issued and such cases decided by the collector of central excise instead of the assistant collector of central excise as at present. shri venkataraman argued that his clearly shows that the amendment was specifically brought about to ensure that in cases where the longer period of time limit is invoked the show cause notice itself should be issued by the collector himself and not by any other officer. in this case, on the other hand, the show cause notice has been issued not by the collector, but by the assistant collector which is illegal. it is well settled that a power which is delegated cannot be further delegated. therefore, it is not enough if the collector has approved of the decision to issue show cause notice but the show cause notice must be signed by the collector himself.4. appearing for the department, the learned s.d.r., shri k.k. bhatia, contended that the records of the customs house would clearly show that it was the collector who had considered all the aspects of the case and had passed orders for issuing the show cause notice invoking the longer period of time limit. the show cause notice also clearly informed the appellant that the collector of customs had excercised his powers under section 28(1) of the customs act, 1962, for making the demand for duty.in such a case, according to the learned s.d.r., there is no force in the argument that the show cause notice should have been signed by the collector himself.5. we have given careful consideration to the submissions made by the learned consultant and the learned s.d.r. on a perusal of section 28(1) as amended by the customs (amendment) act, 1985, it is clear that the show cause notice for recovery of duty for a period beyond 6 months under that section has to be issued by the collector. this position also follows on a perusal of the statement of objects and reasons for the identical provision under section 11a of the central excises and salt act referred to by the learned consultant. admittedly in this case, this statutory formality has not been followed, although as has been pointed out by the learned s.d.r., the decision to issue the show cause notice was taken by the collector. the non-compliance with the statutory formality of the notice having to be issued by the collector would make the issuance of the show cause notice by the assistant collector as a notice issued without jurisdiction and hence not legally valid. consequently the impugned order based on show cause notice issued by the assistant collector, is also legally not tenable. in this view of the matter, we set aside the impugned order appealed against and allow this appeal. we would, however, like to make it clear that this order would not, in any way, preclude the department from taking appropriate steps open to them under law by issue of a fresh show cause notice for levy of the duty in question from the appellant. the appeal is disposed of accordingly.

Judgment:
In the facts and circumstances explained in the Stay application, the pre-deposit of duty and penalty ordered in the Collector's order dated 12.3.1987 under the Customs Act is dispensed with and the appeal itself is taken up for hearing today.

This is an appeal directed against the order dated 12.3.1987 passed by the Collector of Customs, Cochin, confirming the demand for duty amounting to Rs. 9,60,950/- being the duty payable on 246.82 M.T. of waste paper and imposing a penalty of Rs. 1,00,000/- on the appellant under. Section 112(a) of the Customs Act, 1962. In this case the appellant had been charged with having imported 246.82 M.T. of waste paper, but having not used the waste paper for the purpose for which imported. Only on such use for the purpose specified, the importer will be eligible for exemption under Notification No. 219/84 dated 10.8.1984. The appellant had imported consignment for the manufacture of pulp and paper. At the time of clearance, they executed a bond, binding themselves to produce 'end-use' certificate to fulfil the condition of the Notification. These certificates were also subsequently produced. However, as a result of an investigation conducted by the Central Excise Collector, Cochin, it was noticed that waste paper/old newspaper imported for making pulp was not utilised for the said purpose, but had been diverted and sold in the open market and that the raw material consumption account at the factory had been manipulated, in order to obtain an 'end-use' Certificate from Central Excise Department. A statement was also recorded from a lorry driver, Shri M.P. Sasidharan Nair, who had transported the old newspaper from Cochin Port to the waste paper merchant and from a waste paper merchant who had purchased the material. Shri Shanmugham, in-charge of godown at the appellant's paper mill, also gave a statement for having sold and despatched 246.82 M.T. of imported old newspaper to different waste paper merchants. Manipulation of the raw material account was also admitted in the statement by an officer working in the Raw Material Division of the appellant factory. Following further investigation, a show cause notice was issued to the appellant for demanding duty on the 246.82 M.T. of waste paper, as they had wilfully suppressed the facts regarding its unauthorised use. The Collector thereafter adjudicated the case confirming the demand and imposing the penalty as stated above.

3. Appearing for the appellant, the learned Consultant, Shri S.Venkataraman argued that the order of the Collector is not tenable because the show cause notice issued in this case is ab-initio void, as it had been issued in violation of the Customs Act. The learned consultant submitted that by the amendment to Section 28 of the Customs Act, brought about on 27.12.1985 by the Customs (Amendment) Act, 1985, it has been specifically laid down that the Collector should issue a show cause notice where the extended period for demanding duty under the proviso to Section 28 was being invoked. The object of bringing about this amendment is made clear in the Statement of Objects and Reasons of the Central Excises and Salt (Amendment) Bill, 1985, which referred to identical provision on the Central Excise side under Section 11A of the Central Excises and Salt Act. It has been stated in the statement of Objects and Reasons therein that the amendment proposed was that show cause notice in regard to duty of excise short levied or short paid etc. by reason of fraud. Collusion of any wilful mis-statement or suppression of facts should be issued and such cases decided by the Collector of Central Excise instead of the Assistant Collector of Central Excise as at present. Shri Venkataraman argued that his clearly shows that the amendment was specifically brought about to ensure that in cases where the longer period of time limit is invoked the show cause notice itself should be issued by the Collector himself and not by any other officer. In this case, on the other hand, the show cause notice has been issued not by the Collector, but by the Assistant Collector which is illegal. It is well settled that a power which is delegated cannot be further delegated. Therefore, it is not enough if the Collector has approved of the decision to issue show cause notice but the show cause notice must be signed by the Collector himself.

4. Appearing for the department, the learned S.D.R., Shri K.K. Bhatia, contended that the records of the Customs House would clearly show that it was the Collector who had considered all the aspects of the case and had passed orders for issuing the show cause notice invoking the longer period of time limit. The show cause notice also clearly informed the appellant that the Collector of Customs had excercised his powers under Section 28(1) of the Customs Act, 1962, for making the demand for duty.

In such a case, according to the learned S.D.R., there is no force in the argument that the show cause notice should have been signed by the Collector himself.

5. We have given careful consideration to the submissions made by the learned Consultant and the learned S.D.R. On a perusal of Section 28(1) as amended by the Customs (Amendment) Act, 1985, it is clear that the show cause notice for recovery of duty for a period beyond 6 months under that Section has to be issued by the Collector. This position also follows on a perusal of the statement of Objects and Reasons for the identical provision under Section 11A of the Central Excises and Salt Act referred to by the learned Consultant. Admittedly in this case, this statutory formality has not been followed, although as has been pointed out by the learned S.D.R., the decision to issue the show cause notice was taken by the Collector. The non-compliance with the statutory formality of the notice having to be issued by the Collector would make the issuance of the show cause notice by the Assistant Collector as a notice issued without jurisdiction and hence not legally valid. Consequently the impugned order based on show cause notice issued by the Assistant Collector, is also legally not tenable. In this view of the matter, we set aside the impugned order appealed against and allow this appeal. We would, however, like to make it clear that this order would not, in any way, preclude the department from taking appropriate steps open to them under law by issue of a fresh show cause notice for levy of the duty in question from the appellant. The appeal is disposed of accordingly.