ORDER
V.K. Ashtana, Member (T)
1. This is an appeal against Order-in-Original No. 4/96, dated 12-8-96 passed by the Commissioner of Central Excise, Delhi who had been empowered by the Govt. to deal with these matters pertaining to assessment of Cigarettes falling under Sub Heading 2403.11 of the Central Excise Tariff Act for the period from 1st April 1980 to 28th February, 1983. The said Order-in-original had been issued by the Id. Commissioner in consideration of the Show cause notice C. No. V/24/30/74/87-C-I, dated 25-9-87 issued by the Collector of Central Excise, Bangalore.
2. Vide the Order-in-original impugned, the Id. Commissioner has, inter alia, noted the directions/orders of the Hon’ble Karnataka High Court in this matter, the gist of which was that the Jurisdictional Assistant Commissioner of Central Excise was to finalise the pending provisional assessment as per law for the period noted above and had ordered that this finalisation of provisional assessment should be completed as expeditiously as possible.
3. While the present appellant had no quarrel with this direction, the subsequent paragraphs of the said Order-in-original impugned have raised dispute which is before us. In Para (iv) the Id. Commissioner has directed that as soon as the competent authority completes the finalisation of the said provisional assessment, the Commissioner should be informed of this position so that he can continue to proceed with adjudication on this show cause notice dated 25-9-87.
4. This order was passed in view of the Id. Commissioner’s finding in Para (i) of the order impugned that the contention of the noticees that since the show cause notice had been issued during the pendency of the provisional assessment, it was not sustainable in law, was not acceptable to him.
5. In Para (iv) the Id. Commissioner further clarified that the direction contained in this sub-para of the order was merely an interim direction in the course of adjudication proceedings in respect of this show cause notice and is without prejudice to his further order which he may pass subsequently, after finalisation of provisional assessment as ordered by him.
6. Heard Shri Anil B. Divan, Sr. Advocate, R. Sashidharan & L. Maithili, Advocates for the appellants and Shri S. Kannan, Id. D.R.. for the Revenue.
7. Ld. Sr. Advocate recalls the basic points involved in this appeal while passing our Miscellaneous Order No. 796/98 and Stay order No. 1168/98 dated 3-12-98 in this matter. The appellants submit that the Id. Commissioner had erred in adjudicating the said show cause notice when the matter of provisional assessment had not yet been finalised by the Jurisdic-tional Assistant Commissioner and therefore his finding was erroneous in law. Secondly, the appellants submit that once the Order-in-Original impugned is issued by this Id. Commissioner, he becomes functus officio. Therefore his directions to the Executive Commissioner to inform him after the provisional assessments are finalised so that he can continue with the adjudication of the show cause notice is wrong in law. Ld. Sr. Advocate submits that the correct procedure in law would be that if either side is aggrieved by the order finalising the provisional assessment, they could seek legal remedy before the next Appellate Authority concerned. Therefore, the purport of this Order-in-original impugned tantamounts to the Id. Commissioner also acting as an Appellate Authority by seeking to continue to adjudicate after the finalisation of the provisional assessment.
8. Ld. Sr. Advocate had also brought to our notice that against another Order-in-original finalising certain aspects of provisional assessment passed by the Jurisdictional Assistant Commissioner, some of which matter were common to this show cause notice issued, an appeal was pending before the Id. Commissioner of Appeals, Bangalore. Ld. Sr. advocate had submitted that unless all proceedings are linked up, if Id. Commissioner (Appeals) proceeds to pass an Appellate order, in that appeal before him, it would generate multiplicity of proceedings. This multiplicity of proceedings would be unfortunately on common issues.
9. In consideration of these submissions, we had vide our Stay order noted above, ordered that the proceedings sought to be initiated by the Id. Commissioner of Central Excise, New Delhi in continuation with the Order-in-Original impugned before us was stayed. With respect to the appeal pending before the Commissioner (Appeals), Bangalore, we had observed that either side was at liberty to move the said Commissioner (Appeals), Bangalore for an early hearing in the matter.
10. Thereafter, though this appeal was posted for hearing before us on many occasions, the same had been adjourned on request from either side from time to time. This was particularly in view of the fact that the Govt. had reported to us that they were actively considering a solution to this problem which would obviate such multiplicity of proceedings.
11. Vide our Miscellaneous order No. 727/99 dated 3-8-99 we had further heard this appeal wherein it had been submitted that it would be practical and to the advantage of both sides if a final decision in this appeal before us is deferred till the Id. Commissioner (Appeals), Bangalore considers and issues in his Order-in-Appeal on the appeal pending before him. We had accepted this submission.
12. The Id. Commissioner (Appeals), Bangalore has since reportedly finalised his decision vide Order-in-Appeal No. 1215/99-C.E., dated 20-11-99 in Appeal No. 323/98 B-III wherein he had sat aside the Order-in-Original impugned before him and allowed the appeal by remanding the matter for a fresh and full consideration by the original authority after taking into consideration the directions set out in para 7 of his Order-in-Appeal which read as follows : –
7. Both the appellants and the respondents have no objection to the case being considered afresh taking into account all the issues germane to the valuation of cigrettes manufactured/cleared by the appellants during 1-10-75 from 28-2-83, I accept the submissions made by the appellants and hold that the case of the Original Authority calls for a fresh and full consideration of the matter. The Original Authority should give due consideration to the following directions of this authority :
(a) The Original Authority should consider all the issues raised in the Show Cause notice dated 25-9-87. (b) The Original Authority should consider the revised price list filed in pursuance of the DG's Order. (c) The Original Authority should consider the question of adding of notional deposit expenses in the light of the evidence produced by the appellant by way of invoices to establish that the sales were ex-factory. (d) The submission made by the appellant that the quantification was erroneous be examined and that all payments made by the appellant should be taken into account and appropriate adjustment made in arriving at the final duty demand. 8. In sum, I set aside the Order-in-original and allow the appeal by remanding the case for a fresh and full consideration of the matter by the Original Authority after taking into account the directions set out in para 7 above.
13. Ld. Sr. Advocate submits that since the Commissioner (Appeals), Bangalore has now accordingly remanded the matter to the Jurisdictional Assistant Commissioner of Central Excise and that this remand covers the period from 1-10-75 to 28-2-83, which includes the period also in consideration before us in this appeal, therefore it would now logically follow that the Order-in-original impugned before us and the attendant show cause notice is also set aside and the entire matter is remanded to the same jurisdictional Assistant Commissioner of Central Excise for finalisation of the provisional assessment on all counts. Ld. Sr. Advocate submits that the net effect of this prayer would be that the said Jurisdictional Assistant Commissioner shall be seized of the entire matter of assessment of the Cigarettes for the period noted above in view of the same being remanded to him from two sources namely this Tribunal and the Commissioner of Central Excise (Appeals), Bangalore, as noted above. Once the said Jurisdictional Assistant Commissioner finalises the provisional assessment on all counts, the multiplicity of litigations feared earlier would not arise any more in as much as either side would then be at liberty to seek appellate remedies in case of grievances.
14. Ld. D.R. has filed a memo in the Court today for submission of certain documents in this connection by Revenue. The said memo informs us that the matter had been considered by the Central Board of Excise & Customs and consequent thereto, the Office of the Commissioner of Central Excise, Bangalore had instructed the Id. D.R. vide their letter dated 12-1-2000 which the Id. D.R. seeks to bring before us by this memorandum.
15. For ease of convenience, the contents of the said letter are extracted below :-
Reference invited to CEGAT’s Misc. Order No. 727/99 dated 3-8-99 and 1014/99 dated 7-12-99 on the above subject.
2. The above appeal matter is coming up before the CEGAT on 13-1-2000 for arguments from both sides. Shri M. Chandrasekaran, Senior Advocate representing the Department who is based at Delhi had represented the Departmental case during earlier hearings. DGAE, New Delhi has been requested by this office to suitably brief Shri. M. Chandrasekaran, for the Departmental arguments on 13-1-2000 and Shri M. Chandrasekaran is expected to appear before Hon’ble CEGAT for the purpose.
3. Please find herein enclosed a copy of this office letter C. No. IV/3/9/2000 Review dated 12-1-2000 addressed to the Joint Director, Directorate of Anti-evasion, New Delhi with regard to the line of action proposed for Departmental stand to be taken for the arguments before the CEGAT for the hearing on 13-1-2000. In view of this, it is impressed upon that the Department is ready to agree for the consideration of all the issues raised in Show Cause Notice dated 25-9-87 in the proposed de novo consideration of the provisional assessment by the Assistant Commissioner as ordered by the Commissioner (Appeals) in OIA No. 1215/99-C.E., dated 20-11-99 (copy enclosed) which was passed in pursuance of CEGAT’s Misc. Order No. 727/99, dated 3-8-99, except that portion of the Show Cause Notice dated 25-9-87 relating to the imposition of penalty which aspect is required to be decided by the CCE, Delhi after finalising the provisional assessments by the JAC in de novo proceedings.
4. In case, Shri M. Chandrasekaran, Senior Advocate to represent the Department in the above hearing could not make his presence for any reason, it is requested that the Senior Departmental Representative may kindly represent this case on the line of action proposed in the reference cited above in para 3.
A copy of this memo has been served on Id. Sr. Advocate representing the appellants. In this connection, Id. D.R. further submits that the issues which were raised by the show cause notice dated 25-9-87 were not merely confined to demand of duty but also raised allegations regarding suppression of certain information by the noticees for which it was proposed that they were also liable for penal action under the Act and the Rules. Ld. D.R. submits that in case the issue of finalisation of provisional assessment is sent back to the Jurisdictional Assistant Commissioner, the question of adjudicating upon the allegations regarding suppression of facts, etc. for which there was a penal liability under the law would still remain open. In this connection, he submits that the same should be allowed to be adjudicated by the designated authority of Commissioner of Central Excise, New Delhi. This was for two reasons: Firstly, the Jurisdictional Assistant Commissioner of Central Excise who will be required to finalise the provisional assessment would not have the legal jurisdiction to consider charges and allegations of suppression leading to penal liability and secondly, even if he has such a jurisdiction, the quantum of penalty leviable by him may not be commensurate to the expectations of Revenue. Therefore, he submits that either the Commissioner of Central Excise designated authority at New Delhi or the juris-dictional Commissioner of Central Excise, Bangalore should be allowed to proceed with consideration of those allegations leading to penal liability determination under law or the Revenue may be left free to invoke the powers available under Rule 6 of the Central Excise Rules so that finalisation of provisional assessment itself could be done by either of these Commissioners.
16. Ld. Sr. Advocate submits that since the Revenue has now agreed that the entire matter pertaining to finalisation of provisional assessment be diverted to the Jurisdictional Assistant Commissioner, the only issue in dispute is whether the Commissioner of Central Excise, New Delhi could still adjudicate on the allegations of penalties leviable in the subject show cause notice. He further submits that the said show cause notice was ab initio issued without proper legal authority and was premature. He submits that when the entire matter of assessment for the entire period was pending finalisation of provisional assessments under Rule 9 (b), then during the currency of such pendency, the Revenue had no legal authority to issue a show cause notice demanding duty under Section HA and proposing penal action under the Act. He supports this submission by citing the following decisions :-
(i) U.O.I. v. Godrej & Boyce Manufacturing Co. Pvt. Ltd. as in 1989 (44) E.L.T. 3 (Bom.) which was confirmed by the Supreme Court in SLP C. No. 12824/89 order dated 8-3-90.
(ii) Serai Kella Glass Works Pvt. Ltd. v. CCE as in 1997 (91) E.L.T. 497 (S.C.) (iii) Nayek Paper Industries Pvt. Ltd. v. U.O.I. as in 1991 (56) E.L.T. 31 (Cal.) (iv) Ponds (India) Ltd. v. A.C., CE as in 1994 (73) E.L.T. 272 (Mad.) (v) Modi Rubber Ltd. v. C.C.E. as in 1999 (108) E.L.T. 90 (T) and (vi) Tribunal's Final Order No. 386/93-A, dated 29-7-93 in the case of C.C.E. v. Ponds (India) Ltd. and Ors., in Appeal No. E/2344/92-A.
17. Ld. Sr. Advocate submits that ratio of these decisions is to the effect that during the pendency of provisional assessment, a show cause notice under Section HA and proviso thereof cannot be issued demanding duty as well as proposing penal action. This right accrues to the Revenue only after the provisional assessments are finalised under Rule 9(b)(5). He submits that in the instant case, it is not disputed that the provisional assessments on certain counts were pending. That is why even the Order-in-Original impugned had directed the Jurisdictional Assistant Commissioner to finalise them in line with the orders of the Hon’ble High Court of Karnataka. Therefore, it follows that the show cause notice dated 25-9-87 was itself issued without authority of law. If that be so, Id. Sr. Advocate submits, then the attendant Order-in-original impugned shall also be liable to be set aside as it had adjudicated the said show cause notice. He further reiterates his earlier submissions that once the Id. Commissioner of Central Excise, Delhi had passed the order impugned, he had become functus officio and therefore he could not have proceeded to further adjudicate in continuation thereof as ordered by him. He also reiterated his submission that because the demand for duty contained in the show cause notice was connected with finalisation of provisional assessment at the Assistant Commissioner’s level, therefore by reserving a right to further adjudicate upon the show cause notice, the executive Commissioner of Central Excise, New Delhi had in fact assumed upon himself the powers of an Appellate Authority. Sr. Advocate further submits that the question of applicability of Rule 9(2) in these circumstances does not arise as the assessments are still provisional. Secondly, Section 11A is also not applicable because it pertains to duty short levied. In the present case, the levy has not been finalised and therefore there cannot be any resultant short levy, etc.
18. Ld. D.R. further submits that while finalisation of provisional assessment may be pending, the discovery by Revenue of certain aspects of valuation which were suppressed by the noticees and the resultant demand for duty under Section HA along with imposition of penalty is a matter which is totally divorced from the pending provisional assessments. Therefore, the Revenue has a right even after finalisation of the provisional assessment, to proceed with the present show cause notice alleging such suppression and proposing such penal liability.
19. We have carefully considered the submissions and records of the case. In view of the memo submitted by Id. D.R. which is already extracted above, the Revenue has indicated that it has no objection for the entire assessments for the period in dispute to be finalised under Rule 9 (b) (5) by the jurisdictional Assistant Commissioner concerned. Revenue has indicated that while doing so, the jurisdictional Assistant Commissioner can also take into account the evidences available with Revenue on which set of evidence the show cause notice dated 2-9-87 was issued. However, the Revenue has reserved the right of adjudication of penal liabiality alleged in the show cause notice by Commissioner of Central Excise, New Delhi after finalisation of the provisional assessment. It is this reservation by Revenue which is not acceptable to the appellants. Ld. Sr. Advocate has argued that when the show cause notice itself was without authority of law, there was no question of letting it continue. Further, in view of his submission noted above, he has prayed that both the show cause notice as well as the order impugned be quashed. He has, however, no objection to the finalisation of provisional assessments on all counts for the period concerned by the jurisdictional Assistant Commissioner provided they are heard in the matter before him and provided also that all the basis on which the said Assistant Commissioner seeks to finalise the provisional assessment is made known in this hearing by communicating the same in writing.
20. Therefore, the issues for determination before us are as follows:-
(i) Whether the show cause notice in question survives or is issued without authority of law? (ii) Whether the Order-in-Original is required to be set aside and (iii) Suitable directions regarding finalisation of the provisional assessments for the entire period by the Jurisdictional Assistant Commissioner.
21. Since the question of legal propriety of issue of show cause notice by Revenue while provisional assessment were still admittedly pending is central answer to either question, therefore we consider this issue first. In this connection, we find that the matter is no longer res Integra, but is covered by decisions of the various Courts and Tribunals as is noted above. In the case of U.O.I, v. Godrej & Boyce Manufacturing Co. P. Ltd., the Hon’ble High Court at Bombay had held that since the show cause notice was based upon material which was the same as was concerned with the provisional assessment pending, therefore the show cause notice was of dubious validity. It had further held that the relevant date for issue of such a show cause notice under Section 11A would be the date of adjustment of duty after final assessment. This decision was confirmed by the Hon’ble Apex Court in their judgment dated 8-3-90 (supra). In this connection, the Hon’ble Apex Court had observed as follows:-
“Nothing prevents petitioners from the utilising any material collected by them for the purpose of making the final assessment and that such material does not cease to be available to the assessing authority by reason alone of the circumstances that such material has been referred to and incorporated in the impugned notices.”
In this case, vide the memo submitted by the Id. D.R., Revenue has indicated a similar desire except that they went to continue adjudication on penal liability on the said show cause notice also after finalisation of the provisional assessment. Applying the ratio of this judgment, we find that nothing prevents the Revenue from the material contained in the impugned notice to be used as independent material to support the finalisation of assessment, after making this material known to the present appellants in writing and after considering their response thereto both in writing and on personal hearing, therefore no prejudice would be caused to them on this ground.
22. In the case of Serai Kella Glass Works Pvt. Ltd. v. C.C.E., the Hon’ble Apex Court had similarly directed that no show cause notice under Section 11A of the Central Excise Act is required to be issued until the pending provisional assessments are finalised. Duty short levied, non levied or erroneously refunded, if found after final assessment, only then the proceedings under Section HA can be taken up after issuing a show cause notice. Further, the Hon’ble Apex Court had also clarified that where such a show cause notice is issued under Section HA of the Central Excise Act after finalisation of the assessment, the period of limitation will run from the date of adjustment of duty consequent to finalisation of the assessment. We find that this judgement squarely applies to the facts of this case and particularly the submissions of Id. Sr. Advocate that the present notice having been issued under Section 11A while the provisional assessments were still in pendency was without authority of law because such a notice could only be issued after the assessments had been finalised. For that reason, we have to overrule the prayer of Revenue contained in the memo filed by D.R. that penal proceedings under this show cause notice could continue to be adjudicated upon by the Commissioner of Central Excise, Delhi after the provisional assessments are finalised. The law in this regard laid down by the Hon’ble Apex Court in the aforesaid two decisions is to the contrary. It is now well settled that while Revenue had the right under law to issue a fresh show cause notice under Section HA etc., after considering the results of the finalisation of the assessments, the present show cause notice dated 25-9-87 having been issued before such finalisation of assessment, would be, according to us, bad in law.
23. In case of Nayek Paper Industries Pvt. Ltd. v. U.O.I (supra), the Hon’ble High Court at Calcutta had held similarly that a demand raised before finalisation of assessments would not be proper as the cause of action under Section HA would arise only from the date of adjustment of duty finally assessed and not earlier, and therefore, no show cause notice under Section HA could be issued prior to this event. Applying respectfully the ratio of this judgments, we find that the present show cause notice has been issued pre-maturely and that it could not have been issued under law because it is not in dispute that the show cause notice had invoked the provisions of Section 11A and the proviso thereof. Once the notice could not have been issued for recovery of any short levy or non levy etc., even if the said short levy or noil levy was due to suppression or any other wilful intention on the part of the noticee, which also attracted penal liability, it is our considered view that such penal liability could not be divorced from the demand of duty on this count. We find that this view is supported by the decision of the Hon’ble Calcutta High Court in this case wherein the Hon’ble Court has observed as follows :-
“In other words, the point of law would affect both the question of penalty as well as the payment of differential duty.”
24. The Hon’ble High Court at Madras, in whose jurisdiction this Tribunal sits, has in its judgment in the case of Ponds (India) Ltd. v. A.C., C.E. (supra) similarly ruled that Section 11A is invocable only after finalisation of assessment in which finalisation, the various valuation dispute as per the price-list/declaration must be settled first under Rule 9(b)(5).
25. A similar decision has been taken by this Tribunal in the case of Modi Rubber Ltd. v. C.C.E. (supra) and the Tribunal’s Final Order No. 386/93-A in the case of C.C.E. v. Ponds (India) Ltd. and Ors.
26. In view of these decisions discussed above, we are of the considered opinion that this show cause notice dated 25-9-87 was not issued under any legal authority as the provisional assessments for this period concerning the assessee had not been finalised. Being pre-maturely issued, we find that the said show cause notice requires to be set aside.
27. Since the said show cause notice is required to be set aside, therefore the attendant Order-in-Original impugned before us also cannot be allowed to survive.
28. This leaves us to the last issue namely to issue suitable directions with respect to the finalisation of the provisional assessment concerned. Since the Commissioner (Appeals), Central Excise, Bangalore has already remanded the issue of finalisation of provisional assessments with respect to the present appellants to the jurisdictional Assistant Commissioner for a similar period, we also direct that the matter pertaining to finalisation of the provisional assessments on all issues which are pending shall be attended to expeditiously by the jurisdictional Assistant Commissioner concerned. We also clarify that in terms of the decisions noted above, the said jurisdictional Assistant Commissioner shall have the liberty to use all the material, evidences, etc. which were available to Revenue in the show cause notice dated 25-9-87 while proposing finalisation of the provisional assessment provided the said Assistant Commissioner brings all these to the notice of the present appellants in writing and then also considers their submission thereupon both in writing as well as during personal hearing. He shall thereupon, after a detailed consideration of these, proceed to pass a speaking order under Rule 9(b)(5) finalising the assessments on all counts for the period under dispute as noted above. While doing so, he shall also comply with the orders of the Commissioner (Appeals), Central Excise, Bangalore which would merge with each other. With respect to the prayer of Id. D.R. regarding invokation of Rule 6, we submit that this is a matter which can be decided upon by Revenue at the appropriate time. It does not require any direction from us. At this point, Id. Sr. Advocate submits that in order to judiciously, effectively and practically implement these directions from us, it would perhaps be necessary that the appellants’ representatives are associated informally with the jurisdictional Assistant Commissioner at the time of computation and calculations which may lead to the finalisation of the assessments expeditiously. Though such a request appears slightly unusual, we are of the considered opinion that if it is accepted by Revenue, it would certainly lead to reduction of areas of conflict at a later date, as also a more judicious and expeditious settlement of this dispute. Therefore, we commend this for consideration of the Revenue.
29. In view of the aforesaid findings and analyses, we sum up our orders as follows:-
(a) The show cause notice dated 25-9-87 and the attendant Order-in-Original impugned before us are set aside; (b) The Jurisdictional Assistant Commissioner is directed to expeditiously address himself to the finalisation of the provisional assessments as already detailed above; (c) In view of the aforesaid Judicial decisions, we find that the Revenue shall be at liberty to examine the issue of any short levy, non-levy and consequent penal liability only after the finalisation of the assessment, etc. as per law. The appeal is disposed of accordingly.