ORDER
R. Jayaraman, M (T)
1. Both the aforesaid appeals are directed against the Order-in-Appeal bearing No. GSM-2009/89-AHD (File No. V-2 (52Ch)13/Ahd/89) dated 5-10-1989 passed by the Collector of Customs & Central Excise (Appeals), Bombay.
2. Appeal No. 847/89 Bom has been moved on behalf of the Collector of Central Excise, Ahmedabad, while the other appeal bearing No. E/772/89Bom has been moved by M/s Mihir Textiles Ltd. against the same order of the Collector of Customs & Central Excise (Appeals).
3. Since both the appeals are against the same order and the facts and issues involved covered by the single order were argued together and hence disposed of by this common order.
4. Shri K.M. Mondal, the Learned S.D.R., on behalf of the appellant-Collector, gave the brief facts relating to their appeal as below:
5. The Assistant Collector of Central Excise, adjudicated 19 show cause notices issued for the purpose of recovery of duty on yarn captively consumed by the respondents mills during the various periods in the years 1981, 82 and 83 for a total amount of Rs. 4,69,85,529.29. The question of liablity to duty in respect of yarn captively consumed in the composite mills was finally decided by the Supreme Court in the case of J.K. Spinning and Weaving Mills Ltd. & Another v. Union of India & Others reported in 1987 (32) ELT 234 (SC) in favour of the Revenue holding that the amendment carried out in Rules 9 and 49 and retrospective validity of the said amendment brought out by Sec. 51 of the Finance Act, are valid. However, the Supreme Court did not accept the contention of the Learned Attorney General that the demands could be issued for periods beyond six months but held that all the demands should be within the purview of Sec. 11A of the Central Excises and Salt Act, 1944 and Sec. 51 of the Finance Act, 1982 cannot over-ride the provisions of Sec. 11A of the Central Excises and Salt Act. The Supreme Court, while disposing of a group of appeals including the appeal of the respondents in the case of Rohit Mills Ltd. v. Union of India & Ors. reported in 1988 (18) ECR 17 (SC) directed that in cases where notices under Sec. .11A of the Central Excises and Salt Act, have been served and the claims do not cover for any period beyond six months from the respective dates of the notices, the Government would be entitled to realise the dues and in the case of dispute as to whether notice under Sec. 11A of the Central Excises and Salt Act had been issued or not, the Assistant Collector will decide the issue and in cases where notices are yet to be issued, the Department would be entitled to do so but the same should not go beyond six months. In pursuance of this direction, the Assistant Collector, after considering the representation from the respondents, passed the order dated 5-7-1988 confirming the demands raised under 19 show cause notices for the total amount as mentioned above. The respondent mills went before the Gujarat High Court against the aforesaid order of the Assistant Collector. The Gujarat High Court was pleased to remand the case back to the Assistant Collector with a direction to give the respondents a personal hearing and to pass orders. Thereafter, the Assistant Collector, after giving personal hearing, passed the order dated 22-11-1988 confirming the demands. The respondent mills went in appeal before the Collector (Appeals) alongwith a request for staying recovery of the dues adjudicated by the Assistant Collector. The Collector (Appeals) rejected the stay petition and directed the respondent mills to deposit the amount as a pre-condition for hearing the appeal, against which they again moved the Gujarat High Court and got the direction to the Collector (Appeals) for entertaining the appeal on merits without pre-deposit. The Collector (Appeals), thereafter, considered the appeal on merits and passed the order on 3-10-1989, issued on 5-10-1989. The aforesaid order of the Collector (Appeals) directs the Assistant Collector to examine whether 9 show cause notices, which are alleged to have been issued under Sec. 51(2)(d) of the Finance Act, 1982, were so issued under the aforesaid Section of the Finance Act and if so, they are not valid notices and the demands covered by these notices are not enforceable. He also remanded the case back to the Assistant Collector for consideration of their claim in respect of the duty paid on yarn cleared outside and on waste yarn for working out the extent of demand payable. However, as regards other show cause notices, the Collector (Appeals) has upheld the order of the Assistant Collector, confirming the demands covered by those show cause notices.
6. Shri K.M. Mondal, the Learned SDR, indicated that the department’s appeal is only confined to the proposition of law set out by the Collector (Appeals) in respect of the 9 show cause notices, which are held by the Collector (Appeals) as not tenable and also is against the remand of the case by the Collector (Appeals) for considering the claim of the respondent mills in respect of the duty paid on yarn removed outside and on waste yarn for arriving at the duty payable. Shri Mondal, contended that the arguments taken by the respondent mills before the Collector (Appeals) were briefly as below:
i) the show cause notices which were not issued in accordance with the provisions of Sec. 11A of the Central Excises and Salt Act, 1944 but have been issued under Sec. 51 (2)(d) of the Finance Act, 1982, do not vest power in the revenue for the issue of notices and demand of duty.
ii) The notices which have been issued under Sec. 51(2)(d) of the Finance Act, are without the authority of law and therefore, they deserve to be dropped on this account. The respondent mills are entitled for adjustment of duty paid on the waste yarn, which otherwise stood exempted and also in respect of duty on yarn removed outside. Though the aforesaid contention was raised by the respondents before the Assistant Collector, the same has been dealt with by him in a slipshod manner without giving any cogent reasons. The Collector (Appeals) has accepted the argument of the respondents in respect of the 9 show cause notices which are alleged to have been issued under Sec. 51(2)(d) of the Finance Act, 1982 and held that the show cause notices are required to be issued in terms of Sec. HA of Central Excises and Salt Act, and hence, he quashed the 9 demands confirmed by the Assistant Collector, which were issued under Sec. 51(2)(d) of the Finance Act, subject to verification by the Assistant Collector that they were actually issued under Section 51 of the Finance Act. The Collector (Appeals) has also observed that the show cause notices in certain cases included the amount of duty on such yarn, which had been removed by them outside the factory premises. However, the respondents have not given the details of such removals. The respondents have also stated that they have paid the duty on the waste yarn which was otherwise not payable by them. In view of this, the Collector (Appeals) held that the matter requires re-examination and hence he set aside the order of the Assistant Collector, but directed for redetermination of the amount of duty to be paid by them. The department’s appeal is also against the aforesaid direction of the Collector (Appeals).
7. Shri Mondal, thereafter, proceeded to argue on the merits of the department’s appeal as below:
8. It is not the case of the respondents that all the nine show cause notices, which are ordered to be quashed by the Collector (Appeals) are not issued within a period of six months as laid down under Sec. 11A of the Central Excises and Salt Act. He also placed before us a chart showing the fact that in all these cases the demands have been issued well within the period of six months. It is not the case, where the demand has been issued under Sec. 51(2)(d) of the Finance Act, over-riding the Sec. 11A of the Central Excises and Salt Act. He referred to the judgment of the Supreme Court in J.K. Spinning and Weaving Mills Ltd. reported in 1989 (23) ECR 178 (SC), particularly, he read out the relevant paragraphs 32, 33 and 34 of the aforesaid judgment and contended that the Supreme Court has clearly indicated that any demand, even if issued under Sec. 51 of the Finance Act, should be subject to the provision of Sec. 11A of the Central Excises and Salt Act. In this case, all these 9 show cause notices, though they have been issued under Sec. 51(2)(d) of the Finance Act, they are subject to the provisions of Sec HA of the Central Excises and Salt Act, inasmuch as they are well within the period of limitation of six months prescribed under Sec 11A of the Central Excises and Salt Act. Merely because the notices invoked Sec. 51 of the Finance Act, they cannot be said to be legally invalid and hence cannot be quashed by the Collector (Appeals), because of the fact that the Supreme Court’s decision directly applicable in this case clearly envisages that there should be notices and such notices, even if they are issued under Sec. 51 of the Finance Act should be subject to the provisions of Sec. HA of Central Excises and Salt Act. The direction given in the order of the Supreme Court in the case of the respondents while disposing of the appeals filed by the respondents arises out of their detailed judgment in J.K. Spinning & Cotton Wvg. Mills case and hence has to be read in conjunction with the main judgement of the Supreme Court. The direction of the Supreme Court is only to the effect that in case of a dispute as to whether notice under Sec. 11A of the Central Excises and Salt Act is issued or not, the Assistant Collector will decide the issue. In this case, the Assistant Collector has taken note of the fact that all the demands are covered by show cause notices and these notices are well within the period of six months. Hence he has taken them to be valid notices which are enforceable under Section 11A of the Central Excises and Salt Act.
9. Shri K.M. Mondal, the learned SDR, also referred to the arguments of the Textile Mills before the Supreme Court and also before the Special Bench ‘D’ of CEGAT, where they have pleaded that notices are required to be issued under Sec 51 of the Finance Act, since the cause of action for issuing demands accrued after the amendment of Rules 9 and 49 of the Central Excise Rules. He, therefore, contended that the respondents, by taking the aforesaid arguments before the Collector (Appeals), were inconsistent with their earlier stand taken before the Supreme Court and also before the Special Bench ‘D’. Even in the case of arguments before this Bench in Mafatlal Industries and Others, Order No. 1187-1214/89WRB dated 27-12-1989, the Learned Senior Counsel Shri S.I. Nanavati, took the same argument that without a proper notice under Sec. 51(2)(d) of the Finance Act, the notices issued prior to 20-2-1982 are ab initio void and cannot be enforced.
10. The next argument was that even in these cases where show cause notices have been issued after 20-2-1982, the Department could as well resort to Sec. 11A of the Central Excises and Salt Act; mere invoking Sec. 51(2)(d) of the Finance Act, citing of this provision in the show cause notice, does not vitiate the show cause notices themselves. In other words, he conceded that since these notices pertain to the period after 20-2-82, when the show cause notices could be straightaway issued under Sec. HA of the Central Excises and Salt Act, resorted to Sec. 51(2)(d) of the Finance Act may not be called for. Even assuming that the Section invoked is not appropriate in these cases, that cannot justify the order of the Collector (Appeals) quashing the notices themselves as invalid because of the following reasons:
The Supreme Court’s observations in J.K. Spinning and Weaving Mills Ltd. clearly indicate that even if the recoveries are to be effected under Sec. 51(2)(d) of the Finance Act, they are subject to the provision of Sec. HA of the Central Excises and Salt Act. Hence the main and substantive question to be looked into is whether notices have been issued and if notices are issued, whether they are subject to the provision of limitation under Sec. 11A of the Central Excises and Salt Act. The Collector (Appeals), instead of looking into this main aspect, has only gone by the Section invoked for arriving at the wrong conclusion to hold that the notices have become ab initio void. In this context, he cited the judgement of the Supreme Court in J.K. Steels Ltd. v. U.O.I. in 1978 (2) ELT 355, he particularly took us through paragraph 45 of the aforesaid Supreme Court judgement. He also indicated that the Tribunal has also held in many other cases that wrong citation of a rule does not make the demand invalid. In this context, he referred to one such judgement in the case of Collector of Central Excise, Meerut v. Star Paper Mills Ltd. reported in 1986 (26) ELT 81 (Tribunal). He, therefore, contended that these judicial pronouncements particularly that of the Supreme Court have not been taken into consideration by the Collector (Appeals) while passing the impugned order quashing the 9 show cause notices. He, therefore, prayed that the Tribunal should set aside this part of the order of the Collector (Appeals) and restore the order of the Assistant Collector, confirming the demands covered by the nine show cause notices.
11. On the question of remanding the case back to the Assistant Collector for taking into account the duty paid on waste yarn and also the duty paid on such yarn cleared outside, he contended that no details were made available even before the Collector (Appeals). Moreover, just as the department can recover any short levy or non-levy or short or non-payment by issuing proper demand under Sec. 11A of the Central Excises and Salt Act, the respondents also have the remedy of claiming refund of duty under Sec. 11B of the Act. Hence the assessee cannot seek for adjustment of duty paid without short circuiting the statutorily laid down requirement. In this case, the respondents have not placed any material before the Collector (Appeals) justifying that the working out of the demand is wrong. Hence even without arriving at a prima facie satisfaction that there is a claim for adjustment, the Collector (Appeals) has remanded the case back, which is not tenable.
12. Shri Mondal also contended that the duty amount in respect of the past period has been worked out by the respondents and submitted before the High Court and the Supreme Court for purpose of furnishing bank guarantee. Hence the respondents’ claim for adjustment of some duty paid at this belated stage without any supporting evidences should not have been entertained by the Collector (Appeals). He, therefore, sought for setting aside this part of the order of the Collector (Appeals) remanding the case back to the Assistant Collector for redetermining the duty amount.
13. Shri G. Ramaswamy, the Learned Senior Counsel, on behalf of the respondents, raised a preliminary submission to the effect that the case has been remanded for the limited purpose of ascertaining certain facts and re-determining the duty amount to be demanded, and hence unless the entire matter including the factual position is determined by the Assistant Collector, the appeal from the department is premature and is not maintainable.
14. We have carefully considered this preliminary submission but are unable to accede to the same because of the fact that the Collector (Appeals) has specifically given a finding on a point of law that 9 show cause notices are not legally valid, if they have been issued under Sec. 51(2)(d) of the Finance Act, 1982. If the department does not challenge this finding by way of appeal, it would amount to acceptance of this finding and the Assistant Collector to whom the case has been remanded back is only required to verify whether the demand has been issued under Sec. 51(2)(d) of the Finance Act and if so, drop the show cause notices. He has no other alternative but to drop the proceedings if the demand is issued under Sec. 51(2)(d) of the Finance Act. Hence in our view, the department is right in coming up in appeal against the decision of the Collector (Appeals), on this point of law at this stage itself. We would not consider this as a premature appeal or an appeal not maintainable. We, therefore, heard the other arguments of Shri G. Ramaswamy, the Learned Senior Counsel.
15. The Learned Senior Counsel referred to the provision of Sec. 11A of the Central Excises & Salt Act (CESA) and contended that this Section consists of two parts. One is the power of recovery and the other is prescription of the time limit within which recovery can be made. When the statute specifically provides for the power of recovery and the manner in which recovery is to be done, the officer cannot exercise that power under any other provision, that too under the provision of totally a different Act, namely, the Finance Act, 1982.
16. His next argument was that Rules 9 and 49 of the Central Excise Rules were amended on 20-2-1982. Sec. 51 of the Finance Act was introduced effective from 28-2-1982. Sec. 11A of the CESA is a general provision available in the Central Excises Act for any demand required to be made in respect of non-payment or short payment etc., whereas the Sec. 51(2)(d) is applicable only to recoveries which are to be made in respect of the period prior to 20-2-1982. Sec. 51(2)(d) does not provide for any limitation within which the demand is required to be made. However, the Supreme Court has held that Sec. 51 of the Finance Act is subject to the provisions of Sec. 11A of the CESA, only with regard to the limitation of time, where demands are required to be issued for the period prior to 20-2-1982. He also contended that in view of the categorical pronouncement of the Supreme Court that Sec. 51(2)(d) of the Finance Act is subject to provision of Sec. 11A of CESA, notices issued under Sec. 51(2)(d) of the Finance Act cannot be held to be valid. Moreover, in respect of period after 20-2-1982, they could be done only by invoking Sec. 11A of CESA and not Sec. 51 of the Finance Act. In all the cases of 9 show cause notices, they relate to period after 20-2-1982 and hence the power for recovery of duties can only be had from Sec. 11A of the CESA and not from Sec. 51(2)(d) of the Finance Act. Moreover, on 13-5-1982, the Board issued a circular to all the Collectors directing them to keep the demands alive by issuing demands under Sec. 51(2)(d) in respect of the period prior to 20-2-1982, implying thereby that in respect of periods after 20-2-1982 demands can be issued straight-away under Sec. 11A of CESA. Even after this direction of the Board, if the Assistant Collector, who ought to be aware of the Board’s circular, has chosen to issue show cause notices under Sec. 51(2)(d) of the Finance Act, whatever the motive be, such show cause notices per se are bad in law. It can not be construed to be a mistake on the part of the Assistant Collector in applying a wrong section. Even when this plea was taken before the Assistant Collector, he has not admitted that section invoked by him was wrong nor such an argument was advanced by the Department before the Collector (Appeals). Hence it is not open to the department to contend, at this stage, that the section invoked is wrong and even if it is wrong, citing of a wrong section cannot invalidate the show cause notice. By such an argument, the department seeks to urge the Tribunal to rectify the patently illegal show cause notices, which are required to be set aside as ab initio void, by giving life to the same by way of substitution of the appropriate provision of law.
17. He also argued that it is conceded by the Learned SDR that wrong section is quoted, but this point is raised only for the first time and not at any stage earlier by the Department. The Tribunal cannot be asked to decide that the Assistant Collector has gone on the premises that the notice was under Sec. 11A of the CESA.
18. There is no inconsistency in the arguments of the respondent mills either before the Supreme Court or before the Tribunal. They had objected to the issue of show cause notice under Sec. 51 of the Finance Act in respect of the periods prior to 20-2-1982 because the cause of action has arisen only on that day, after the amendment to Rules 9 and 49 of the Rules. Hence the demands could not have been issued under Sec. 51 in respect of the period prior to 20-2-1982. In the case of 9 show cause notices, now under dispute, the period relates to the period after 20-2-1982 and hence there is no inconsistency in their stand.
19. Attacking the citations made by the Learned SDR, relating to the J.K. Steel case (supra), he contended that this judgment is based on the doctrine of tracing the power. The Supreme Court have held that if the exercise of a power can be traced to a legitimate source and the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of power in question. Elaborating this point he stated that this doctrine would be applicable where the authority without application of mind quoted a wrong provision of law. In this case, there are two provisions under two enactments providing for recovery of duties not paid – one provision relates to recovery prior to 20-2-1982 prior to the amendment of Rules 9 and 49 of the Central Excise Rules, which amendment has been made retrospective by Sec. 51 of the Finance Act. The other provision is Sec. 11A of CESA, which is applicable to the recoveries to be made after 20-2-1982, since it is general provision prescribed under the CESA for recovery of dues not paid. In the circumstances, when the Assistant Collector, after due application of mind has upheld the show cause notices issued under a provision of law, which is totally not applicable in the facts of the case, that cannot be construed to be falling within the doctrine of tracing the power. He also referred to the judgment of the Supreme Court reported in AIR 1964 SC 358 in the State of U.P. v. Singhara Singh & Ors., a photo copy of which was given during the hearing, wherein the Supreme Court, adopting the ratio of the judgment in Tailor v. Tailor case, have held that, where a power is given to do a certain thing, in a certain way, the thing must be done in that way or not at all and that the other methods of performance are necessarily forbidden, applies to judicial officers. In this case, the statutorily recognised method is provided under Sec. 11A of CESA and when that sec. has not been invoked in the show cause notice, the notice cannot be invoked at all. He therefore contended that even going by the judgment of the Supreme Court in the case of State of U.P. v. Singhara Singh, the show cause notice issued under a totally different provision of the Finance Act, especially when there is a specific provision in the Central Excise Act itself, such a notice is ab initio invalid and is required to be quashed. The Collector (Appeals) is therefore justified in doing that. He also contended that the doctrine of tracing power cannot be extended in such an extreme case. Even in the judgment of Special Bench ‘D’ of CEGAT, New Delhi, in the case of J.K. Cotton Mills (supra) there Were two sets of show cause notices covering the same period in respect of the same goods, one issued under Sec. 11A of CESA and another issued under Sec. 51(2) of the Finance Act and in that context, the Special Bench ‘D’ decided the issue in favour of the revenue. There was no occasion for the Special Bench ‘D’ to go into the question of doctrine of tracing of the power.
20. In the case of Hydraulic Ltd. reported in 1983 (12) ELT 533, decided by the Tribunal, it has been held that quoting one rule and exercising power under another rule was illegal and this judgment of the three members is required to be respected by this Bench.
21. He also cited the following judgments:-
(1) 1979 (4) ELT J 304.
(2) Jay Engg. Works reported in 1979 (4) ELT 307.
(3) Judgment of this Bench in the case of Mafatlal Industries.
22. Shri G. Ramaswamy, the Learned Senior Counsel, also stated that the very same Collectorate has issued show cause notice in the case of same respondents invoking Sec. 11A of CESA in respect of the period subsequent to 20-2-1982. He produced one such copy of the show cause notice and contended that the show cause notice issued on 23-5-1983 invoking Sec. 11A of CESA clearly indicates that the Assistant Collector was aware of the legal position and if he has deliberately invoked Sec. 51(2)(d) of the Finance Act, such a notice cannot be legally sustainable.
23. Shri K.M. Mondal, the Learned SDR, in reply, stated that the show cause notice has been issued under Sec. 51(2)(d) of the Finance Act by the Assistant Collector, on a wrong conception. It is not deliberate action or conscious application, as contended by the other side. The show cause notice dated 23-5-1983, copy of which was produced by the Learned Senior Counsel itself indicates that this show cause notice has been issued after the date of these disputed 9 show cause notices. Hence it can be reasonably concluded that the Assistant Collector, having initially made a mistake in issuing notices under Sec. 51 of the Finance Act, later corrected himself by invoking Sec. 11A of CESA. In any case, deliberate and conscious application of Sec. 51(2)(d) of the Finance Act by the Assistant Collector in the notices cannot be said to be established on the basis of the arguments from the other side. It is also not the practice of the department to make counter submissions before the Collector (Appeals). Once the Assistant Collector has adjudicated, the case, he becomes functus officio and cannot revise or modify his own order or review on the question whether he has rightly or wrongly applied the correct provision of law. It is the appellate authority who can correct or modify, if the order is taken up in appeal. Hence the appropriate stage for agitating the issue is only now before the Tribunal. Hence it cannot be alleged that this issue is raised for the first time. He also stated that it is not as though the provisions of the CESA and Rules have been totally ignored in the impugned show cause notices. The notices also quote Sec. 3 of the CESA and Rules 9 and 49 of the Rules. On the question of doctrine of tracing the power, he contended that in this case it is not disputed that the Superintendent or Assistant Collector can issue show cause notice both under Sec. 51 of the Finance Act and Sec. 11A of CESA. If the authority has wrongly invoked the provision of Sec. 51 of Finance Act instead of Sec. 11A of CESA, so long as the demand is well within the purview of Sec. 11A of CESA, it cannot be held to be invalid, because for exercising the powers in respect of both the provisions of law, source can be traced to the same authority, namely the Supdt. or the Assistant Collector. He also contended that the Supreme Court decision referred to by the Ld. Senior Counsel relates to recording of the confessional statements by the Magistrate in Judicial Proceedings, where the statute requires the same to be recorded in a particular manner. He contended that this principle may not be applicable in the case of Taxing Statute and that too in the sphere of recovery of duties not levied.
24. On behalf of the appellants M/s. Mihir Textiles (in appeal No. E/772/89 Bom.), Shri S.I. Nanavati, the Learned Senior Counsel, fairly conceded that the points which have been agitated in their appeal relate to the validity of notices issued prior to 20-2-1982 under Sec. 11A of the CESA and this issue has been considered by this Bench in the case of M/s. Mafatlal Industries Ltd. & Ors. by its order No. 1187-1240/89 WRB dt. 27-12-1989. Since there are no other points, which he is advancing, he requested that the issue may be decided in the light of the decision already given by this Bench as referred to above. He, however, contended that out of an amount of Rs. 4,69,85,529.29, the Collector (Appeals) has set aside the show cause notice involving an amount of Rs. 1,89,95,126.00. They have already deposited a sum of Rs. 2,93,65,952.74 and hence they would be eligible to get the refund, in case the appeal filed by the department is held by the Bench as not sustainable and suitable direction may be given by this Bench for the grant of refund.
25. After hearing both sides, we identify the following main issue, which is required to be considered for deciding the appeal filed by the department:-
“Whether the 9 show cause notices issued invoking Sec. 51(2)(d) of the Finance Act, 1982, can be held to be valid despite the fact that the said show cause notices have not specifically mentioned nor invoked Sec. 11A of the Central Excises and Salt Act, 1944?”
26. For arriving at a decision on this main issue, the following questions raised during the hearing of both the sides are required to be answered :
(i) Whether the notices could be issued only under Sec. 11A of the CESA in respect of the period subsequent to 20-2-1982?
(ii) Whether the show cause notices issued invoking Sec. 51 of the Finance Act have been on proper application of mind by the Assistant Collector and they are deliberately invoking Sec. 51 of the Finance Act?
(iii) Whether the doctrine of tracing of power would be appliable in this case for sustaining the ratio of the judgment of the Supreme Court in the case of J.K. Steels Ltd. reported in 1978 (2) ELT 355?
(iv) Whether the ratio of the judgment of the Supreme Court in the case of State of Uttar Pradesh v. Singhara Singh reported in AIR 1964 Supreme Court 358 would be applicable and on that basis the show cause notice issued under Sec. 51 of the Finance Act, 1982 could be held ab initio bad and are contrary to the statutory provisions laid down under Sec. 11A of the CESA?
(v) Whether the ratio of the judgments cited by the Learned Senior Counsel in the case of Jay Engineering Works reported in 1979 (4) ELT J 307, in the case of Hydraulics Ltd. reported in 1983 (12) ELT 533 and the judgment of this Bench in the case of M/s. Mafatlal Industries Ltd. & Ors. would be applicable?
27. Once these questions are decided, the main issue raised in the appeal would be answered.
28. Taking the first question, we observe that the Learned SDR has conceded that the demands are to be issued invoking Sec 11A of the CESA, since the period relates to after 20- 2-82. Hence no major arguments have been advanced by the department on this question. It is the contention of the respondents that the demand can be issued only under Sec. 11A of CESA because Section 51(2)(d) of the Finance Act is only in respect of recoveries to be effected prior to the amendment of Rule 9 and 49 of the Central Excise Rules on 20-2-82. This is an enabling provision for applying the amendment retrospectively and to effect recoveries. Section 51 of the Finance Act, 1982 reads as follows:
“51. Retrospective effect for certain amendments to Central Excise Rules and validation –
(1) The amendments made in Rules 9 and 49 of the Central Excise Rules 1944, by notification of the Govt. of India in the Ministry of Finance (Department of Revenue) No GSR 74 (E) dated the 20th day of February, 1982, shall be deemed to have, and to have always had effect on and from the date on which the Central Excise Rules, 1944, came into force.
(2) Any action or thing taken or done or purporting to have been taken or done before the 20th day of February, 1982, under the Central Excises Act and the Central Excises Rules, 1944 shall be deemed to be, and to have always been, for all purposes, as validly and effectively taken or done as if the amendments referred to in sub-section (1) had been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any court, tribunal, or other authority –
(a) all duties of excise levied, assessed or collected or purporting to have been levied, assessed or collected before the 20th day of February, 1982, on any excisable goods under the Central Excises Act, shall be deemed to be, and shall be deemed to have always been, as validly levied, assessed or collected as if the amendments referred to in sub-section (1) had been in force at all material times;
(b) no suit or other proceeding shall be maintained or continued in any court for the refund of, and no enforcement shall be made by any court of any decree or order directing the refund of, any such duties of excise which have been collected and which would have been validly collected if the amendments referred to in sub-section (1) had been in force at all material times;
(c) refund shall be made of all such duties of excise which have been collected but which would not have been so collected if the amendments referred to in sub- section (1) had been in force at all material times;
(d) recovery shall be made of all such duties of excise which have not been collected or, as the case may be, which have been refunded but which would have been collected or, as the case may be, would not have been refunded, if the amendments referred to in sub-section (1) had been in force at all material times.
Explanation – For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force.”
29. From the aforesaid position, it is clear that Sec 51 of the Finance Act is intended to give retrospective effect for amendments made in Rules 9 and 49 of the Rules and sub-sec. 2 (d) of Sec 51 is specifically intended to provide the enabling provision for recoveries of duties not collected during the period prior to amendment enabling the department to effect recovery as if the amendment had been in force at all material times. In view of this, we share the view expressed by both the sides that invoking Sec 51(2)(d) is not appropriate in respect of the demands issued after the amendment of Rules 9 and 49 of the Rules and since the general provision for such recovery is available under Sec 11A in the CESA. We answer the question accordingly.
30. Now coming to the question (ii) above, the Learned Senior Counsel contended that these nine show cause notices have been issued invoking Sec 51 of the Finance Act on proper application of mind and it has been deliberately invoked. The basis of his argument is derived from the fact that this was specifically put across to the Assistant Collector during the hearing and he has not accepted that it is a mistake. The Board’s circular also clearly indicates the legal position which the Assistant Collector is supposed to be aware of. Notwithstanding this, if he has issued these show cause notices invoking Sec 51 of the Finance Act, his action is to be construed as deliberate and on proper application of mind. The Learned Senior Counsel also contended that irrespective of the motive, which is not relevant, such notices are ab initio bad.
31. We have carefully considered this argument. We find that in this case, the same Assistant Collector has adjudicated on a show cause notice dated 23-5-1983, where section invoked was Section 11A of the CESA. This show cause notice also relates to the same respondent mills and it is in respect of the period posterior to the date of issue of 9 show cause notices under dispute. In view of this factual position, the argument of the Learned SDR that the earlier show cause notices has been issued under the wrong appreciation of law by the Assistant Collector cannot be dismissed. Moreover, it is evident from the order of the Assistant Collector that he has treated all the notices alike for the purpose of assessing the validity of the show cause notices judged by the touch-stone of the time limit prescribed under Section 11A. Hence it could be that the authority who issued the show cause notice had the misconception that the notice could be issued under Section 51 of the Finance Act as well, so long as it is within the purview of the time limit prescribed under Section 11A of the CESA. Probability of such misconception is also not without any basis because of the fact that the Supreme Court in its judgment in J.K. Cotton Mills has held that even recoveries under Section 51 of the Finance Act have to be subject to the provisions of Section HA of the CESA. Though this observation is in the context of recoveries to be effected for the period prior to amendment, nevertheless the authority issuing the show cause notice could have reason to misconstrue this as empowering them to issue show cause notices under Section 51 of the Act. It is also likely that this mistake has been realised subsequently and thereafter notices came to be issued under Section HA of the CESA.
32. Coming to the third question, the issue canvassed by the Learned SDR is that notwithstanding the citation of a wrong section, so long as the notice is well within the time limit prescribed under Section HA of the CESA, citing of a wrong section does not invalidate the notice. For this, he placed reliance mainly on the judgement of the Supreme Court in J.K. Steel Ltd. (supra).
33. The Learned Senior Counsel, on the other hand, contends that this judgement would be applicable only in a case, where the doctrine of tracing of powers could be available and the officer exercising the power has committed a mistake in applying the wrong provision.
For appreciating the arguments of both sides, it would be relevant to reproduce the relevant para 45 of the aforesaid judgement of the Supreme Court:
“I shall now take up the question of limitation. The written demand made on March 21, 1963 purports to have been made under Rule 9(2) of the Rules. Therein the assessing authority demanded steel ingot duty, which according to it, the assessee had failed to pay. Quite clearly Rule 9(2) is inapplicable to the facts of the case. Admittedly the assessee had cleared the goods from the warehouse after paying the duty demanded and after obtaining the permission of the concerned authority. Hence there is no question of any evasion. Despite the fact that the assessee challenged the validity of the demand made on him. Both the Assistant Collector as well as the Collector ignored that contention; but when the matter was taken up to the Government it treated the demand in question as a demand under Rule 10. The Government confined the demand to clearance effected after December 21, 1962. The demand so modified is in conformity with Rule 10. But the contention of the assessee is that the demand having been made under Rule 9(2) and there being no indication in that demand that it was made under Rule 10, the Revenue can not now change its position and justify the demand under Rule 10; at any rate by the time the Government amended the demand, the duty claimed became barred even under Rule 10. We are unable to accept this contention as correct. There is no dispute that the officer who made the demand was competent to make demands both under Rule 9(2) as well as under Rule 10. If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. This is a well settled proposition of law. In this connection reference may usefully be made to the decisions of this Court in P. Balakotaiah v. The Union of India, 1958 SCR 1052 : (AIR 1958 SC 232) and Afzal Ullah v. State of U.P., 1964-4 SCR 991 : (AIR 1964 SC 264). Further a common form is prescribed for issuing notices both under Rule 9(2) and Rule 10. The incorrect statements in the written demand could not have prejudiced the assessee. From his reply to the demand, it is clear that he knew as to the nature of the demand. Therefore, I find no substance in the plea of limitation advanced on behalf of the assessee.” (emphasis supplied).
From the aforesaid decision of the Supreme Court, it is clearly evident that the assessing authority demanded duty under Rule 9(2) which has been held to be not applicable in the facts of the case because of the fact that the assessee had cleared the goods on payment of appropriate duty at the time of removal of the goods. Both the Assistant Collector as well as the Collector (Appeals) have ignored their contention of the non-applicability of Rule 9(2) and when the matter was taken up to the Government, it acceded to this argument that the demand is not maintainable under Rule 9(2) but sustained part of the demand under Rule 10 within time limit prescribed therein. The Supreme Court have rejected the contention of the petitioners that the Government could not have confirmed part of the demand under Rule 10, when the original demand was not made under Rule 10 but under Rule 9(2) of the Rules. In that context the Supreme Court held that if the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. We are now to look into as to how far the present facts of the case would come within the purview of the decision applying the doctrine of tracing the power as pleaded by the Learned Senior Counsel.
34. In this case, 9 show cause notices have been issued under Section 51 of the Finance Act, which we have now held that they should have been issued under Section HA of the CESA and Section 51 of the Finance Act is not the appropriate Section. All the same, we observe that Section 51 of the Finance Act is intended to validate levies and also to enable recoveries of duties not having been paid in respect of captively consumed goods prior to the amendments of Rules 9 and 49 of the Rules. The power of recovery of such duties not paid or not levied vests with the Central Excise Officer only and not with any other agency. The competent officer for confirming the show cause notice even under Section 51(2)(d) of the Finance Act can only be the Assistant Collector. Even under Section HA of the CESA, where the extended period is not applicable under proviso to Section HA, the officer competent to decide on the show cause notice is the Asst. Collector and the officer who can issue such show cause notice is the proper central excise officer. Hence the Assistant Collector is the competent authority for ordering recovery of the duty not levied or not paid, during the period prior to amendment of Rules 9 and 49 of the Rules. The same officer is the officer designated for adjudicating on a show cause notice issued under Section HA of the CESA. This being the position, in our view, the origin of power is traceable to the Assistant Collector in respect of recoveries to be made either under Section 51 of the Finance Act or under Section 11A of the CESA. This being the position, when the proper officer has, for any reason or may be on account of misconception, invoked a wrong section in the show cause notice, that cannot vitiate the proceedings as such. This is what has been held by the Supreme Court in the case of J.K. Steels Ltd. reported in 1978 (2) ELT 335. Moreover, we observe that in this case also the Assistant Collector is reported to have ignored their contention that the demand is to be issued under Section 11A. This is the very same position, which was observed by the Supreme Court, in the case cited supra, where both the Asst. Collector and the Collector (Appeals) have ignored the plea that demand under Rule 9(2) is not tenable but the Govt. of India accepted the plea and confirmed the demand for a limited period under Rule 10. Hence we fail to appreciate the argument of the Learned Senior Counsel as to how the Tribunal could not treat this as a demand which can be enforced under Section 11A of the CESA. In the case decided by the Supreme Court, the Government in exercise of the revisionary powers held that though the demand was not issued under Rule 9(2) of the Central Excise Rules, the demand can be enforced for the time limit prescribed under Rule 10 of the Rules. This has been upheld by the Supreme Court. We also find that the show cause notice does not merely refer to Section 51(2)(d). It also refers to the provisions of Rule 9 of the Rules and Section 3 of the CESA. It also indicates that the duty is payable in respect of captively consumed yarn which have been cleared without payment of duty because of the Court’s order. Hence no prejudice is caused to the respondents by not mentioning specifically Section 11A of the CESA. We, therefore, answer the question in favour of the Revenue and dismiss the contention of the Learned Senior Counsel that the case is not falling within the purview of the doctrine of tracing the powers and hence not covered by the Supreme Court judgement in J.K. Steels Ltd.
35. Now coming to the fourth question, the Learned Counsel contended that the ratio of the judgement of the Supreme Court in the State of U.P. v. Singhara Singh (supra) would be applicable in this case. The Learned SDR, on the other hand, contended that the judgement of the Supreme Court is in the context of the proceedings before the Magistrate, where the confessional statements are to be recorded in a particular manner prescribed in law and the Magistrate has not adopted the method. The Supreme Court has held that it is not legally valid.
36. We have carefully considered the arguments from both the sides on this question. We find from the judgement of the Supreme Court in the State of U.P. v. Singhara Singh (supra), it relates to confession statements recorded by the Magistrate in the case of a murder, with particular reference to the confession purported to have been recorded under Section 164 of the Code of Criminal Procedure. In the context of that case, the Supreme Court, following the principles laid down in Tailor v. Tailor, observed that where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all and that the other methods of performance are necessarily forbidden, applied to judicial officers making a record under Sec. 164 and therefore held that the Magistrate could not give oral evidence of the confession made to him, which he had purported to record under Sec. 164 of the Code. The case before us is the notice issued for recovery of duty not collected or not paid and the question is whether invoking of a wrong section would make it invalid. The issue involved does not appear to be on all fours comparable to the case of a murder tried by a Court, where confessions are to be recorded in a particular manner to be admissible as evidence. It is also well settled law that the principles of criminal jurisprudence and Evidence Act are not applicable to the adjudication proceedings. Hence observation of the Supreme Court in the aforesaid case and the principles laid down may not, in our opinion, apply on all fours to the facts of this case.
38. Be that as it may, even assuming that this principle can be stretched to the facts of this case, we proceed to consider the argument of the Learned Senior Counsel, in the light of the principle laid down in Tailor v. Tailor case. The principle is as follows: “If a statute has conferred a power to do an act and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any other manner that that which has been prescribed”. (emphasis supplied).
Now we proceed to apply the principle to the present facts of this case.
38. Under Sec. 11A of the CESA, the method prescribed is that when any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, a Central Excise Officer may, have to issue a show cause notice calling for explanation from the assessee as to why the amount specified in the notice should not be recovered. The Assistant Collector, after considering the representation made by the assessee, shall determine the amount of duty of excise due from the assessee and such duty shall not be in excess of the amount prescribed in the show cause notice. The notice is also required to be issued within a period of six months and if there is an allegation of suppression of facts or wilful mis-statement etc., the notice is required to be issued by the Collector and also adjudicated by the Collector and in such case the extended period of five years is applicable. This is the sum and substance of the procedure or method laid down under Sec 11A of the CESA. It is not the case of the respondents that a notice has not been issued, calling upon the respondents to show cause as to why the duty specified in the notice should not be ordered to be recovered. It is also not the case of the respondents that they were denied any opportunity of making any representation, nor it has been argued before us that the notices traverse beyond a period of six months laid down under Sec 11A. It is also an admitted fact that the Assistant Collector has confirmed the demand after taking into account the representation as well as the points made during the hearing and passed the impugned order. We are therefore of the view that even applying the principles laid down in the Supreme Court judgement (supra) every detail of the procedure prescribed under Sec. 11A has been followed in the case of 9 show cause notices. The only defect is that Sec. 11A of CESA has not been mentioned and invoked. Instead Sec. 51(2)(4) of the Finance Act has been invoked. Sec. 51(2) (d) of the Finance Act, as already observed by us, though is not the proper enabling section in the case of recoveries to be effected after 20.2.82, is not totally out of context because of the fact that section is intended to collect dues not levied or not paid in respect of captively consumed goods, and in these cases also demand is in respect of such duty on captively consumed yarn. The Supreme Court have also held that Sec. 51(2)(d) of the Finance Act is legally valid but it is subject to the provisions of Sec. 11A of CESA. In view of these factors, merely because Sec. 11A of the CESA is not quoted, it cannot be said to have been issued completely ignoring the procedure or the method prescribed under Sec. 11A of the CESA for recovery of duties not paid. We are therefore of the view that even going by the principles laid down by the Supreme Court in the aforesaid case, the show cause notices cannot be said to have been issued ignoring the method prescribed under Sec. HA of the CESA and hence such notices are not valid. We, therefore, reject this contention of the Learned Senior Counsel.
39. Now coming to the fifth question, in the case of Jay Engg Works reported in 1979 (4) ELT J 307, it is observed that the High Court of Andhra Pradesh, disagreeing with the contention of the Standing Counsel for the Central Government that the error referred to in Rule 10 of the Rules does not include the error of law, finally held that the proposed show cause notice as well as the levy of excise duty short levied was issued and made beyond the period of limitation prescribed by Rule 10 and is therefore bad. In the case before us, it is conceded by the Learned SDR that the show cause notice has been issued invoking Sec 51 of the Finance Act on a wrong understanding of law by the Assistant Collector. Hence even if it is construed as a wrong understanding of law, so long as the duty is not paid or not collected and notice has been issued for the purpose of recovery of such duties not paid, that would come within the purview of the provision of Sec. HA of the CESA intended for recovery of such dues. Undisputedly in this case, notices have not been issued for a period extending beyond six months and hence on that ground they come within the purview of Sec. HA of the CESA. We, therefore, do not appreciate the applicability of the ratio of the judgement of the Andhra Pradesh in the case of Jay Engineering Works (supra) in the facts and circumstances of the present case.
40. In the case of Hydraulics Ltd. reported in 1983 (12) ELT 533, the Tribunal has held that when the Assistant Collector came to the conclusion that Rule 9(2) of the Central Excise Rules was not applicable since there was no clandestine removal and demands are enforceable only under Rule 10, such recovery of duty by resorting to Rule 10 was vitiated. The Tribunal held that it is not the same power which was exercised, as has been proposed under the show cause notice but a different power, in the facts and circumstances, in the mind of the issuer of the show cause notice. Firstly, we observe that in this case decided by this Bench, the decision of the Supreme Court now cited before us by the Learned SDR was not canvassed before the Tribunal. Moreover, we find that the Tribunal has given a clear finding that when the show cause notice was issued, the mind of the issuer of the show cause notice was on the lines of alleging clandestine removal and demanding duty under Rule 9(2) of the Rules and hence it is not the same power which was exercised as has been provided in the show cause notice, but a different power for enforcing the show cause notice limited to the period prescribed under Rule 10. In this case, it is observed that the issue involved is collection of duty on yarn captively consumed which has not been paid on account of Court’s orders and the Assistant Collector, on the specific direction from the Supreme Court, was to decide on these notices whether they have been validly issued within the purview of Sec. HA of CESA. Even in the show cause notices no allegation of clandestine removal has been made, on the contrary the show cause notices clearly indicate that in view of the injunction order given by the Delhi High Court, the recovery of the duty is not enforced, so long as the injunction order is in operation. This is clearly mentioned in para 3 of the notices. In view of the specific mention of this position, it is evident that the department does not allege any clandestine removal but points out that the duty on captively consumed yarn was not paid because of the injunction order of the High Court and they would take action on the notices and enforce recovery only after the injunction order is vacated. In view of this position, we hold that the decision of the Tribunal in Hydraulic Ltd. case would not help the case of the respondents, where in the show cause notices issued in that case was under Rule 9(2) of the Rules alleging clandestine removal, which stand was subsequently altered during the adjudication proceedings causing greater prejudice to the assessee. We, therefore, reject the contention of the Learned Senior Counsel with regard to the applicability of this case.
41. The other case law relates to the decision of this Bench in Mafatlal Industries Ltd. This Bench rejected the contention of the department that endorsements on RT-12 Returns should be construed as show cause notices under Sec. HA of the CESA, and thus can save the period of limitation. Even this case does not come to the rescue of the respondents because of the fact that the endorsement made on the RT-12 Returns cannot be a notice issued for showing cause as to why the duty should not be recovered. It is a straight demand made on the assessment. Sec. HA of the CESA prescribes the method of issue of show cause notice, getting the representation from the assessee and thereafter passing the order confirming the demand to the extent of duty indicated in the show cause notice. Hence the Tribunal took the view, following the ratio of the decision of the Supreme Court in Kosan Metal Products reported in 1989 (20) ECR 30 (SC) that mere endorsement in RT-12 Returns cannot save the limitation and cannot be construed to be a show cause notice validly issued under Sec HA of the CESA. In this case, as already discussed, notices have been issued, the representations have been obtained, personal hearing has been granted and all the procedures and methods prescribed under Sec. HA of the CESA have been complied with. Hence we are unable to appreciate as to how far the ratio of the decision would be applicable to the present facts and circumstances of this case.
42. After having considered all the questions, the position is clear with regard to the main issue. We have held that the notices issued under Sec. 51(2)(d) of the Finance Act in respect of periods after 20.2.82 could be on a misconception of law. We have also held that the same statutory power is competent to decide on the show cause notice both under Sec 51 of the Finance Act and under Sec 11A of the CESA that the same power, by the mistaken impression cited a wrong provision (though not totally irrelevant or out of context), such a notice per se cannot be said to be invalid on this ground. We also held that the ratio of the judgement in J.K. Steel Ltd. would be squarely applicable to the facts and circumstances of the present case and the Tribunal is competent to hold that the notices issued though under Sec. 51 (2) (d) of the Finance Act are within the purview of Sec. HA. We also held that even going by the doctrine of tracing of power, the power can be traced in both the sections to the same authority, namely the Assistant Collector. We have also held that even going by the principles laid down in the case of Tailor v. Tailor, the method prescribed under Sec. 11A of the CESA has been complied with in this case, while confirming the notices. In view of these specific findings on the various questions, which has been discussed elaborately, we have come to the conclusion and to answer the main issue in favour of the revenue. The Collector (Appeals), in our view, has erred in quashing the 9 show cause notices and this part of the order of the Collector (Appeals), is therefore required to be set aside and we order accordingly.
43. Now coming to the minor issue, namely the remand for the purpose of adjustment of the duty paid on yarn removed outside and also the duty paid on waste yarn, we find that no documents were presented even before us on this point. Moreover, even if it is assumed that the demand confirmed is in excess of the actual duty payable, because of inclusion of certain alleged payments towards waste yarn and other yarn cleared outside, the respondents have the remedy to claim the refund thereof by filing the refund claim within six months from the date of payment of the duty ordered to be paid, inasmuch as the alleged excess payment would accrue only, when the duty demanded by these show cause notices are paid by the respondents. The question of consideration of adjustment of duty paid on waste or other yarn at this stage does not appeal to us particularly when these figures have been confirmed, even before the judicial forums and on that basis orders have been passed. It is not the case as though the respondents are left with no legal remedy and once they paid the duty confirmed, that will be final. They are entitled to claim the refund of duty in case the figures of demand confirmed include such duty on yarn cleared outside and on waste yarn entitled to exemption, on account of which they are entitled to refund of the excess collection.
44. With this observation, we hold that the order of remand for redetermination of the duty by the Collector (Appeals) is not called for and is therefore required to be set aside.
45. On behalf of the appellants M/s Mihir Textiles in appeal No. E/772/89 Shri S.I.Nanavati, the Learned Senior Counsel, fairly conceded that the arguments contained in the appeal memorandum before us were the same, which were advanced in the appeals relating to M/s Mafatlal Industries Ltd. and Ors. The main argument was that no notices could be validly issued under Sec. 11A prior to 20-2-1982. He also fairly conceded that this question has been decided in our Order No. 1187-1214/89 WRB dt 27-12-1989. In view of the aforesaid submission, we find no reason to go in detail on merits of the appeal filed on behalf of M/s Mihir Textiles Ltd., since all the issues raised in the present appeal have been considered by us in detail and decided in favour of the Revenue. We, therefore, reject the appeal filed by M/s Mihir Textiles Ltd.
45. In the result, the appeal No. E/847/89 filed by the Department succeeds and the appeal No. E/772/89 filed by M/s Mihir Textiles is rejected.