JUDGMENT
B.P. Jeevan Reddy, C.J.
1. This writ petition calls in question the validity of an order passed by the Government of India on 5-7-1980 on a Revision petition filed under Section 36 of the Central Excise Act. Under the said order, the Central Government dismissed the revision filed by the petitioners against the judgment and order of the Appellate Collector, Central Excise, dated 25-9-1979.
2. Petitioner No. 1 is a partnership firm. It is engaged in manufacturing electrolytic grade aluminium conductors and wires. According to the petitioners, products manufactured by them are of 7 and 8 SWG. They obtained the necessary licence from the Central Excise authorities and, as required by Rule 173-B of the Central Excise Rules, they submitted a classification list, which was checked and approved with a certificate that the said products/ goods are non-excisable and no duty is payable on their manufacture. It was counter-signed by the Assistant Collector, Central Excise, Meerut, on 6th February, 1973. The petitioners say further that in accordance with the said approval, they were clearing the goods without paying duty and have been regularly submitting returns in forms RT 5 and RT12 in accordance with Rules 55 and 173. It is also submitted that Central Excise Officers were visiting the petitioner’s factory from time to time and were satisfied about the correct and proper working of the petitioner-concern. While so, the petitioners complain, they received a notice dated 7th April, 1975, issued by the Superintendent, Central Excise, calling upon the petitioners to show cause why penalty should not be imposed on them under Rule 173Q for the reason that the petitioners have sold 45019 Kgs. of electrolytic grade aluminium wire without payment of duty. The petitioners submitted a reply thereto and were also heard by the Assistant Collector. Thereafter, the show cause notice was amended by way of a corrigendum, whereunder action proposed was related to Rule 9(2) instead of Rule 173Q. The petitioners again represented that they have not violated any of the provisions of the Central Excise Rules, but yet the Assistant Collector decided, vide his order dated 29th April, 1977, that the petitioners ought to pay a sum of Rs. 21,755.85p as excise duty under Rule 173Q. Against the said order, the petitioner filed an appeal before the Appellate Collector, who disposed of the appeal on 25th September 1979. The Appellate Collector agreed with the petitioners that they were not guilty of making a false declaration in respect of Aluminium wires upto 10 SWG manufactured by them out of electrolytic grade aluminium. He found that the petitioners did not make any attempt to mis-declare or suppress material facts. He also noted that Central Excise Officers had been visiting the petitioners’ factory from time to time, but did not point out any violation. Indeed, he was of the opinion that it was the responsibility of the Assistant Collector, before granting approval of the classification list, to have satisfied himself about the description of the goods and if he entertained any doubt in this behalf, he could have ordered drawal of samples for necessary checking, which was not done in this case. This omission has resulted in clearance of dutiable goods without payment of duty. It has happened due to error of inadvertence on the part of the departmental officers. Having said so, the Appellate Collector observed :-
“I do not find any justification for the adjudicating officer to have revoked the classification list with retrospective effect and demanded duty under Rule 9(2) of the Central Excise Rules, 1944. However, the fact remains that excisable goods have been cleared by the licensee without payment of duty and hence the duty is rightly recoverable under Rule 10 of the Central Excise Rules, 1944. Since the show cause notice has been issued on 7-4-1975, for clearances effected during the period from 20-2-1974 to 18-10-1974, the demand for the period prior to 8-4-1974 is time-barred under Rule 10 of the Central Excise Rules. The demand in respect of the remaining period is maintainable and is hereby confirmed. The Adjudicating Officer has quoted a wrong rule for recovery of the amount of duty due from the appellants but merely mentioning of a wrong rule in the Adjudication order does not vitiate the demand. Since there has not been any deliberate attempt on the part of the appellants to evade duty, I do not see any justification in imposing penalty on them. Order of penalty imposed on the appellants is, therefore, vacated. Except for the above modification the order passed by the Assistant Collector, Central Excise, Meerut, is upheld and the appeal is otherwise rejected.”
Against this order, the petitioner preferred a revision to the Government, which was dismissed with an observation that the Government are unable to see any substance in the two contentions urged by the petitioners, namely, (1) that the Assistant [Appellate?] Collector was not justified in sustaining the levy under Rule 10, having found that Rule 9(2) was not applicable and (2) that the Assistant Collector was not competent to correct the error committed by his predecessor in approving the classification list (holding the goods non-dutiable).
3. In this writ petition, it is contended by Sri Bharat Ji Agarwal, learned Counsel for the petitioners, firstly that it was not open to the Appellate Collector to have sustained the levy of duty under Rule 10, which was never invoked by the Assistant Collector (Adjudicating Officer). He submitted that Rule 9(2) and Rule 10, as they stood at the relevant time, are qualitatively different and, it is not merely a case of citing a wrong provision. There is substantive difference between the procedures under the two Rules and, therefore, it was not permissible for the Appellate Collector to have invoked Rule 10. Alternately, he contended that even if Rule 10 can be held to have been rightly invoked, even so levy of duty is bad since it is barred by limitation prescribed under Rule 10.
4. Rule 9 of the Central Excise Rules, 1944 provides for the time and manner of payment of duty. Sub-rule (1) provides that no excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto (specified by the Collector in this behalf), whether for consumption, export or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in the Central Excise Rules. Sub-rule (2) provides for a situation where sub-rule (1) is contravened. It reads :-
“(2) If any excisable goods are, in contravention of sub-rule (1), deposited in, or removed from, any place specified therein, the producer or manufacturer thereof shall pay the duty leviable on such goods upon written demands made within the period specified in Section 11A of the Act by the proper officer, whether such demand is delivered personally to him, or is left at his dwelling house, and shall also be liable to penalty which may extend to two thousand rupees, and such goods shall be liable to confiscation.
Explanation – For the purposes of this Rule, excisable goods produced, cured or manufactured in any place and consumed or utilised –
(i) as such or after subjection to any process or processes or
(ii) for the manufacture of any other commodity, whether in a continuous process or otherwise, in such place or any premises appurtenant thereto, specified by the Collector under sub-rule (1), shall be deemed to have been removed from such place or premises immediately before such consumption or utilisation.”
(the words “within the period specified in Section 11A of the Act” were substituted by a notification dated 14-1-1981. Prior to this amendment, no period of limitation was prescribed. In the case before us, we are concerned with the period February, 1974 to October, 1974, and therefore, the said words inserted in 1981 are not relevant for our purposes). A reading of Rule 9(2) shows that it provides for a situation where excisable goods are removed from the specified place without paying the duty, that is, in contravention of sub-rule (1). In such a case, the proper officer is empowered to collect the appropriate duty and also to levy penalty. Even the goods so removed can be confiscated.
5. Rule 10, as originally enacted, and in force during the period relevant herein, read as follows :-
“10. Recovery of duties or charges short-levied, or erroneously refunded. –
(1) When duties or charges have been short-levied through inadvertence, error, collusion, or misconstruction on the part of an officer, or through mis-statement as to the quantity, description or value of such goods on the part of the owner, or when such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded, the proper officer may, within three months from the date on which the duty or charge was paid or adjusted in the owner’s account-current, if any, or from the date of making the refund, serve a notice on the person from whom such deficiency in duty or charge is or are recoverable requiring him to show cause to the Assistant Collector of Central Excise why he should not pay the amount specified in the notice.
(2) The Assistant Collector of Central Excise, after considering the representation, if any, made by the person on whom notice is served under sub-rule (1), shall determine the amount of the duty or charges due from such person not being in excess of the amount specified in the notice and thereupon such person shall pay the amount so determined within ten days from the date on which he is required to pay such amount or within such extended period as the Assistant Collector of Central Excise may, in any particular case, allow.”
This rule was substituted by a new rule by a notification dated 6-8-1977 and ultimately omitted with effect from 17-11-1980; in its place Section 11A was introduced in the Act itself with effect from the same date. We are concerned with Rule 10 as it stood prior to 6th August, 1977, which has been extracted hereinabove. It provides that where duties or charges have been short-levied through inadvertence, error, collusion or mis-construction on the part of an officer inter alia, the proper officer may within three months from the date on which the duties or charges were paid, serve a notice on the person concerned to show cause and after hearing him determine the duty payable and collect the same.
6. Now in this case, the classification list was approved by the competent authority holding that the petitioners’ products are not dutiable. It is in accordance with the said approval that the petitioners have been removing the goods from the specified place without paying duty. Later on, however, the appropriate authority took the view that the goods are dutiable and served a notice upon the petitioners to show cause why duty should not be levied, besides levying penalty. In these facts, it is evident that Rule 9(2) has no application, as rightly held by the Appellate Collector. It is not a case where the goods were being removed in contravention of sub-rule (1) of Rule 9. The appropriate rule was rule 10, and in this view again, the Appellate Collector was right. Rule 10 provides for more than one situation and one of the situations provided is where duty has been short-levied through inadvertence, error, collusion or mis-construction on the part of an officer. In N.B. Sanjana v. E.S.W. Mills – AIR 1971 SC 2039, the Supreme Court has held that the word ‘paid’ in Rule 10 can reasonably be interpreted to mean “ought to have been paid”. It was also held that the rule applies not only to short-levy of duty but also to non-levy of duty. (We may mention that this aspect was clarified and Rule 10 was expressly made applicable to cases of non-levy also by the amendment made in August, 1977). It is thus clear that the present case squarely fell within Rule 10, as it stood at the relevant time. But, the difficulty in the way of Revenue is that the action was not taken within the period prescribed by Rule 10. At the relevant time, the rule provided that the notice to show cause must be given “within three months from the date on which the duty or charge was paid.” By virtue of the judgment of the Supreme Court referred to above, the word “paid” must be read in this case as “ought to have been paid”. Now, the duty demanded is for 30-2-1974 to 18-10-1974. The duty was payable on the dates of removal of the goods, that is, during the said period, but the show notice was issued on 7-4-1975, i.e., beyond three months from 18-10-1974. The show cause notice was thus clearly barred by time. The Appellate Collector, however, applied the substituted Rule 10 (substituted with effect from 6th August, 1977 and in force till 6-11-1980), which provided a longer period of limitation namely, 6 months from the relevant date. (The relevant date was also defined by the said amended rule to mean the date on which the duty has not been levied or paid or short-levied, as the case may be). In our opinion, however, the amended rule is not attracted in the present case. The amended rule came into force only on 6th August, 1977, that is, more than two years after the issuance of the show cause notice in this case. The period of three months prescribed by Rule 10, as in force at the time the show cause notice was issued , had expired long ago. The extended period of limitation prescribed by amended rule, which came into force on and with effect from 6th August, 1977, could not, therefore, have been relied upon to hold the show cause notice within limitation. However, the Appellate Collector appears to have calculated the six months period from the last date of the period concerned, that is, he calculated the six months period from 18-10-1974 and held that payment for the period prior to 8-4-1974 is barred, but not for the period 8-4-1974 to 18-10-1974. (As stated above, the period relevant herein is 20-2-1974). The correct method is to calculate the three months period from the date of show cause notice, backwards.
7. For the above reasons, we hold that the show cause notice issued on 7-4-1975 was barred by limitation prescribed by Rule 10 as it stood at the relevant time and, therefore, the entire action taken for recovery of duty in this case (for the period 20-2-1974 to 18-10-1974) is bad. On this ground alone, the petitioners are entitled to succeed. Though we find that the question of limitation was not specifically taken either before the Appellate Collector or before the Central Government, we permitted the petitioners to raise this plea, since this question arose on the record before us ex facie,
8. In this view of the matter, we do not think it necessary to express any opinion on the first contention urged by the learned counsel for the petitioners.
9. The writ petition is accordingly allowed and the impugned order of the Central Government dated 5-7-1980 is quashed. In the circumstances of the case, however, there shall be no order as to costs.