ORDER
G.P. Agarwal, Member (J)
1. This appeal is directed against the impugned Order-in-Appeal passed by the Collector of Central Excise (Appeals), New Delhi.
2. Brief facts leading to the present appeal are that, the Inspector of Central Excise, Kankroli, debited the RG 23 Part-II account of the respondents on 10.2.1986 by making the debit entry of Rs. 23,36,637.32/- by writing “amount debited against demand raised vide Superintendent, Central Excise, Range – Kankroli’s letter C. No. CE-20/2/TI 16/85/1883 dated 28.11.1985”. Against that alleged arbitrary and illegal action of the Inspector of Central Excise, Kankroli, the appellants filed their appeal before the Collector of Central Excise (Appeals), New Delhi, who vide his impugned Order-in-Appeal disposed of the said appeal by observing as follows:
…I observe that the action on the part of the Inspector to carry out the debit entries in the accounts of the assessees was not proper even without issue of Demand Show Cause Notice, its decision and thereafter initiating recovery proceedings under Section 11 of the Central Excises Rule & Salt Act, 1944.I hold the action in this case as devoid of legal sanction behind it and admit the appeal accordingly. It is, however, open to the department to establish the claim to duty or recover through proper recovery proceedings. The appeal in this case is admitted and disposed of accordingly.
2.1 Hence the present appeal by the Revenue.
3. Arguing on behalf of the Revenue, Shri L.C. Chakraborty, learned SDR, while assailing the impugned Order-in-Appeal explained the background of the case and stated that the Assistant Collector, Kota, vide his letter dated 10.1.1985 informed the Assistant Collector, Udaipur, that M/s Shriram Rayons, Kota, filed a refund claim for the excise duty paid by them during the period from June 1978 to September 1980 on the clearances of Rayon Tyre fabrics under Tariff Item 68 of the erstwhile Tariff. However, on appeal, the Collector (Appeals) held that a consequential refund be allowed and set-off of duty availed of by the consignee be recovered. Since M/s Shriram Rayons, Kota, also despatched their product (Rayon Tyre fabrics) to the present respondents to be used as inputs in the manufacture of their final product (Tyre), they (respondents) also availed set-off of duty paid under Notification No. 178/77-CE dated 18.6.1977 and Notification No. 201/79-CE dated 4.6.1979. Consequently, the Superintendent, Central Excise, Kankroli, vide his letter dated 22.2.1985 intimated the present respondents that they had received Rayon Tyre fabrics during 28.6.1978 to 21.8.1980 from M/s Shriram Rayons, Kota, and they had also availed set-off of duty paid on the excisable goods and, therefore, the amount of set-off availed by them under Notification No. 201/79-CE dated 4.6.1979 is required to be debited in RG-23, Part II account. It was also pointed out by him that, further the Assistant Collector, Kota, vide his letter dated 19.8.1985 informed the Assistant Collector, Udaipur, that since the refund had been sanctioned to M/s Shriram Rayons, Kota, set-off availed of by the present respondents is recoverable from them. Consequently, the Superintendent, Central Excise, Kankroli, again vide his letter dated 8.11.1985 demanded a sum of Rs. 23,36,637.32 for the set-off availed by the respondents and also directed them that the said amount of Rs. 23,36,637.32 should be debited either by cash or by a debit entry in the RG-23, Part II accounts within 10 days of the receipt of the said letter. Since the respondents did not pay the said amount nor debited their RG-23 Part II account, the said amount was debited by the Inspector of Central Excise, Kankroli in RG-23 Part II account of the respondents on 10.2.1986. In this premises, it was his submission that the findings of the Collector (Appeals) that the Show Cause Notice ought to have been issued is not legally tenable. It was stressed by him that the respondents have already recovered the duty paid on the input (Rayon Tyre Cord fabrics) from the manufacturer (M/s Shriram Rayons, Kota) vide cheque No. 70874 dated 21.10.1985 for Rs. 39,13,693.27. Therefore, restraining the Department from recovering the just and fair amount of wrongly availed set-off by the respondents will amount to double benefit to them and helping them to enrich themselves unjustly would be illegal and cited the case of Roplas (India) Ltd. v. Union of India, . He vehemently contended that reliance placed on the judgment rendered by the Patna High Court on 31.1.1973 in Civil Writ Case No. 670 of 1970 in the case of Rohtas Industries Limited v. Superintendent of Central Excise, [since ] by the Collector (Appeals) is erroneous. Alternatively, it was also submitted by him that the letter dated 22.2.1985 issued by the Superintendent of Central Excise, Kankroli, intimating the respondents that since they had also availed set-off of duty paid on the excisable goods during 28.6.1978 to 21.8.1980 the amount of set-off availed by them under Notification No. 201/79-CE dated 4.6.1979 is required to be debited in the RG-23 Part II account, amounts to a Show Cause Notice itself and cited the case of Bakeman’s Home Products Pvt. Ltd. v. Collector of Central Excise . In reply, Shri V. Sridharan, learned Counsel, submitted that the case of Rohtas Industries Ltd. v. Superintendent of Central Excise, supra, applies on all fours to the present case and under no circumstances the Inspector had any legal authority to make the debit entry in the accounts of the respondents. He also drew our attention of Annexure ‘D’ of the Paper Book and submitted that on receipt of the said letter dated 28.11.1985 issued by the Superintendent, Central Excise, Range – Kankroli, demanding a sum of Rs. 23,36,637.32 towards the set-off availed on Tyre Cord under Notification No. 201/79-CE, the respondents while inviting the attention of the Assistant Collector to their letter dated 14.10.1985 also intimated that they have already repaid/debited some amounts to the extent of set-off availed on the clearances for OE & ADV tyres at nil rate of duty and making a specific request to issue a Show Cause Notice and also give them an opportunity of personal hearing to explain in person the details about the matter before any demand is raised. He also submitted that under no circumstances the said letter dated 22.2.1985 can be termed as Show Cause Notice as envisaged under the law.
4. We have considered the submissions. The contention of the learned SDR that in the circumstances of the case requirement of issue of Show Cause Notice and Adjudication Order was not warranted and simple letter to the Respondent (consignee) conveying the reasons for the refund to the manufacturer-Shriram Rayons, Kola was sufficient, is not tenable in law. In the case of Bakeman’s Home Products Pvt. Ltd. v. Collector of Central Excise, supra, (to which I was a party), it was held by the Tribunal while dealing with the case of recovery of set-off of duty under Third Proviso of the Appendix to Notification No. 201/79-CE dated 4.6.1979 (which is also subject matter in the present appeal) that if Department was to raise the demand, it has to be governed by substantial provisions of limitation for raising such demand under Section 11-A of the Central Excises and Salt Act, 1944 and for this view reliance was placed on the judgment rendered by the Special Bench of this Tribunal in the case of Premier Tyres Ltd. v. Collector 1986 (26) ELT 42-Special Bench constituted to resolve the conflicting decisions regarding the applicability of the provisions of Section 11-A while applying the set-off under Notification No. 201/79-CE. In fact, in the case of Steel Ingots P Ltd. v. Union of India, 1988 (36) ELT 529 : 1988 (17) ECR 453 (MP), it was held by the Division Bench of the Madhya Pradesh High Court that recovery of credit wrongly availed of is not to be adjusted by excise authorities under Rule 57-I of the Central Excise Rules, 1944 without issuance of Show Cause Notice and passing of the speaking order.
5. As regards the alternative submission of the learned SDR, that the letter dated 22.2.1985 be treated as Show Cause Notice has also no substance. It is an axiomatic proposition of law that before a person is called upon to pay any sum or amount, it has got to be preceded by an assessment after issue of Show Cause Notice by the authorities concerned in terms of the Act and Rules made thereunder and in conformity with the principles of natural justice. It needs hardly to be emphasised that a person should be put on notice by means of a Show Cause Notice unless otherwise waived under law, calling upon him to show cause against the levy or short levy of the duty. In the present case in his letter dated 22.2.1985 the Supdt. of Central Excise after inviting the attention of the appellants, that M/s Shriram Rayons, Kola, filed a refund claim for the excise duty paid by them on the clearances of Rayon Tyre Fabrics under Item 68 of CET during the period 6/78 to 9/80 and on appeal the Collector (Appeals) held that consequential refund be allowed and set-off of duty availed of by the consignee be recovered, stated that since you (respondents) have availed the set-off under Notification No. 201/79, you please verify your records and if the amount has been taken as set-off, the same is to be debited in your RG-23 Part II and inform the particulars within 7 days from the receipt of this letter. This letter in our considered opinion can by no stretch of imagination be considered to be a Show Cause Notice. In all fairness to the Revenue it may also be stated that there is a letter dated 28.11.1985 on our record (to which our attention was also drawn by the learned Counsel for the respondents) which was issued by the Supdt. of Central Excise, demanding a sum of Rs. 23,36,637.32. However, this letter also cannot be considered as a Show Cause Notice. It simply asked the respondents that the said amount demanded may be deposited within 10 days of the receipt of this letter, failing which the suitable action would be initiated as provided under the Central Excises and Salt Act and Rules, 1944, adding that the deposit particulars may be please be furnished to this office per return of post and the matter be treated as most urgent, as there is nothing in the said letter to indicate that the respondents were required to “Show Cause” why demand should not be made. Even no indication was given regarding the personal hearing. No doubt the Supdt. had indicated therein the reasons for his demanding the duty but this by no stretch of imagination can be considered to be a Show Cause Notice. See Collector of Central Excise v. South India Plywood Industries, 1990 (31) ECR 613 and Mahindra and Mahindra Ltd. v. Collector of Central Excise . To this it may also be added that on receipt of the said letter dated 28.11.1985 the respondents vide their letter dated 30.11.1985 while inviting the attention of the Assistant Collector to their earlier letter dated 14.10.1985 also intimated that they have already repaid/debited some amount to the extent of set-off availed on the clearances for OE & ADV tyres at nil rate of duty and made a specific request to issue a Show Cause Notice and also give them an opportunity of personal hearing to explain in person the details about the matter before any demand is raised, but for the reasons best known to the authorities concerned, no such Show Cause Notice was ever issued and it appears that the Inspector concerned, as aforesaid, debited the RG-23 Part II account of the respondents on 10.2.1986 against the said (alleged) demand raised by the Supdt. in his letter dated 28.11.1985. This action of the Inspector was without any authority in view of the judgment rendered by the Patna High Court in the case Rohtas Industries Ltd. v. Supdt. of Central Excise, supra, wherein it was held by the Division Bench of the Patna High Court that on failure of the assessee to pay the duty by making the debit entry in the account-current as required by Rule 173-I(2) the proper officer has a right to recover the sum in the mode permissible in law, but he cannot make the debit entry in the accounts. Neither Section 11 nor any Rule gives him such power.
6. In view of the above, we reject the appeal and uphold the impugned Order-in-Appeal passed by the Collector (Appeals), New Delhi.