ORDER
S. Kalyanam, Member (J)
1. This appeal is directed against the order of Collector of Central Excise, Bangalore, dated 20-1-1988 imposing a penalty of Rs. 7,000 on the appellants under Section 173Q(1) of the Central Excise Rules, 1944, hereinafter referred to as the ‘Rules’.
2. The appellants are manufacturers of aluminium cables and conductors at Bangalore. The Central Excise officers verified the accounts of the appellants on 8-3-1985 and found that the appellants had received a sum of Rs. 4,84,538.29 on 31-10-1983 from M/s. Kerala State Electricity Board on account of increase in the labour Index for the period August, 1980 to February, 1981 towards the supply of Aluminium Conductors. The appellants were also found to have received a sum of Rs. 2,26,100.66 in excess of the invoice value towards the supply of Aluminium Conductors from M/s. Maharashtra Electricity Board on account of price variation. The excess amount collected by the appellants on grounds of escalation charges from the said parties was not brought to the notice of the Central Excise authorities much less brought in any of the statutory register. The appellants also did not choose to amend the price list for inclusion of the escalation charges admittedly collected by them from the said parties and the appellants also had not paid the duty in regard to the same. It is only subsequent to the visit of the Central Excise officers on 8-3-1985 and scrutiny of the appellants’ accounts, when the officers pointed out, the appellants paid the duty in regard to the said transactions on 9-3-1985 and 11-7-1985. In regard to this payment of duty the RT-12 returns under the Rules were submitted by the appellants for assessment by the proper officer in March, 1985 and July, 1985 and they were respectively assessed by the Superintendent of Central Excise in April and September, 1985. The Collector of Central Excise, Bangalore, by invoking the proviso to Section 11A of the Central Excises and Salt Act, 1944 issued a show cause notice to the appellants on 1-9-1987 calling upon them to show cause why a penalty should not be imposed on the appellants under Rule 173Q of the Rules inasmuch as the appellants had suppressed the receipt of the excess amount from the purview of the Department. The proceedings instituted pursuant to the show cause notice eventually culminated in the present impugned order now appealed against.
3. Shri Narasimha Murthy, the learned Consultant for the appellants, submitted that there was no intentional evasion of the payment of duty by the appellants in regard to the escalation charges collected by the appellants from the said two parties in the year 1981 and 1983. When the duty in regard to the same had already been paid by the appellants and RT-12 assessments were also made by the Superintendent of Central Excise in regard to the same, imposition of penalty is not warranted in the circumstances of the case. The learned Consultant further submitted that the Superintendent of Central Excise is competent to impose penalty under Rule 173Q of the Rules by issuing a show cause notice while assessing the RT-12 returns of the appellants and when the Superintendent has not done so, it is not open to the Collector to revive the issue for imposing penalty after a lapse of more than 2 years.
4. Shri Vadivelu, the learned D.R., contended that intentional evasion of excise duty would certainly entail penal consequences under the Act and Rules and in the present case in respect of the escalation charges admittedly collected by the appellants in the years 1981 and 1983 from the said two parties no duty was paid and it is only after it was detected by the Central Excise officers on scrutiny of the appellants’ account on 8-3-1985 the appellants came forward to discharge the duty liability. This conduct of the appellants is certainly culpable and would invite penal proceedings under the Rules. The learned D.R. further urged that the Superintendent of Central Excise has merely made assessment of RT-12 memoranda and has not issued a show cause notice for imposition of any penalty. In such a situation it is open to the Collector of Central Excise to institute proceedings under Section 11A and impose penalty. The learned D.R. further urged that though show cause notice was issued two years after the payment of the duty on the escalation charges collected and consequent to assessment of RT-12 memoranda, the same would be permissible inasmuch as the proviso to Section 11A empowers only the Collector to invoke the longer period of limitation and institute penal action and there is no legal bar for the same.
5. We have carefully considered the submissions made before us. In our view the whole issue will have to be considered on a new perspective not urged before us by the learned Consultant for the appellants. On going through the entire records and the relevant circumstances we are satisfied that the appellants are guilty of intentional evasion of payment of duty by not bringing to the notice of the Department the escalation charges collected by them as early as in 1981 and 1983 and discharging the duty liability thereon. As rightly pointed out by the learned D.R., it is only subsequent to the scrutiny of the appellants’ accounts by the officers of the Central Excise Department on 8-3-1985 this evasion of duty on the part of the appellants was detected and the duty was paid by appellants consequently on 9-3-1985 and 11-7-1985. Though we are inclined to agree with the submission of the learned D.R. that the conduct of the appellants is culpable in the facts and circumstances of the case and would certainly call for imposition of penalty under the Rules, unfortunately we have no other alternative except to set aside the order of imposition of penalty as the present impugned order is not sustainable in law. When the appellants paid the duty on escalation charges on 9-3-1985 and 11-7-1985 and when the RT-12 memoranda in regard to the same were assessed by the Superintendent of Central Excise, the Superintendent of Central Excise by invoking his powers under Rule 173Q of the Rules should have instituted proceedings for imposition of penalty against the appellants by issue of a show cause notice as per law. If for any reason the Superintendent had thought that the situation would call for imposition of mere penalty over Rs. 1,000, which amount alone he is competent to impose by virtue of the statutory direction issued by the Board under proviso to Section 33 of the Act (vide C.B.E.C.’s Circular No. 27/77-CX.VI, dated 29-11-1977 as amended by Board’s letter 208/14/79-CX.6, dated 18-11-1980; A-11013/219/80/A-IV, dated 28-2-1981 and Circular No. 41/81, dated 7-5-1981) the Superintendent should have made over the entire papers to the Collector or any other competent authority. In the present case, when the Superintendent has not chosen to impose any penalty under Rule 173Q of the Rules against the appellant in the facts and circumstances of the case, the Superintendent should be deemed to have exercised his discretion against imposition of penalty in favour of the appellant. It is not disputed before us nor is it disputable that assessment of RT-12 returns is in exercise of the power of assessment by the Superintendent of Central Excise. The learned D.R. also does not dispute the fact that the Superintendent while assessing the RT-12 returns can exercise his powers for imposition of penalty under Rule 173Q by issue of show cause notice. In other words the power of the Superintendent in making an assessment of RT-12 returns is a quasi-judicial power of assessment and imposition of penalty follows as a consequence in an assessment depending upon the nature and gravity of the offence or evasion of duty committed by a party. Though the duty on the escalation charges was paid by the appellants admittedly on 9-3-1985 and 11-7-1985, no penal action was initiated for more than 2 years till after the Collector of Central Excise issued a show cause notice on 1-9-1987. When an adjudicating authority like the Superintendent of Central Excise, while exercising his power of adjudication in assessing the RT-12 returns of the appellants by virtue of the powers conferred on him under Section 33 of the Act, has made the assessment and has not invoked the penal provisions in terms of Rule 173Q, the irresistible inference is that the adjudicating authority viz. the Superintendent of Central Excise, has chosen to exercise his discretion in favour of the appellants against the imposition of penalty. We also note that the excess payments according to the Department had been received in 1981 and 1983 and duty was paid in 1985 by the appellants when the period of six months for demanding duty under Section 11A of Central Excises and Salt Act, 1944 had elapsed even though at the time of making the payment towards short levy there had been no notice for invoking the longer period for demanding duty and in such circumstances when the jurisdictional Superintendent clothed with penal powers had not himself chosen to institute penal proceedings, there was much less justification for the Collector to do so. If, therefore, the exercise of judicial discretion by the Superintendent in not imposing any penalty against the appellants is found to be arbitrary or perverse, or non-exercise of discretion by a decision making Authority – the Superintendent of Central Excise in the present case – warrants interference at the hands of a superior Authority like Collector, in exercise of his powers of correctional jurisdiction such order of Superintendent could be called in question and rectified in terms of Section 35E(2) of Central Excises and Salt Act, 1944. Section 35E(2) of the Act reads as under:
35-E(2) “The Collector of Central Excise may, of his own motion, call for and examine the record of any proceeding in which an adjudicating authority subordinate to him has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order and may, by order, direct such authority to apply to the Collector (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Collector of Central Excise in his order.”
This correctional jurisdiction not having been resorted to we are of the view that the Collector of Central Excise cannot super-impose himself in the matter at that stage and initiate and institute proceedings for the imposition of penalty alone. Such exercise of power by the Collector would amount to reviewing the very order of the Superintendent of Central Excise not imposing penalty and such a power of review is not available to the Collector under the Act and Rules. It is also well settled that the power of review is not an inherent power but is one that is statutorily conferred on an authority under the Act. The plea of the learned D.R. that the Collector is empowered to initiate action before the expiry of the period of 5 years from the alleged date of evasion is not of any relevance in the facts and circumstances of the case, because the proviso to Section 11A of the Act empowers the Collector to invoke the longer period of limitation to levy duty on a person for a period of 5 years preceding the date of the show cause notice in the circumstances set out in the section such as fraud, collusion, wilful misstatement or suppression of facts or contravention of the provisions of the Act or Rules with intent to evade payment of duty, etc. There is no bar of limitation on the part of the Collector to institute action for imposition of penalty and, therefore, reference to the proviso to Section 11A is not relevant in the context of the present case. It would have been open to the Collector to take upon himself assessment done by the Superintendent of Central Excise and institute proceedings for the imposition of penalty under Rule 173Q. One another important circumstance we would like to advert to in the present case is the fact that for more than 2 years no action was taken by any officer of the Department and we are at a loss to understand as to why no competent authority ever thought fit to institute any penal action under the Act or Rules for an inordinately long period of more than 2 years. As a matter of fact the show cause notice issued on 1-9-1987 is nearly after 2l/2 years after the payment of duty by the appellants on 9-3-1985 and more than one year and about 2 months after the appellants paid the other duty amount on 11-7-1985. In any system of jurisprudence a person cannot be continuously left in a state of uncertainty and there cannot be an unexplained inordinate delay between the date of assessment and initiation of penal proceedings. Therefore, on consideration of the entire materials on record we are of the view that the correctness of the order of the Superintendent could be only called in question by directing the proper officer to file an appeal before the Collector (Appeals) and not by instituting an independent and separate penal proceedings by way of re-adjudication as it were, more particularly in the context of the admitted fact that the very assessing authority viz. the Superintendent of Central Excise himself had not only the powers of assessment but also the power to impose penalty under Rule 173Q by issue of a show cause notice. It should not be forgotten that after all the powers which the Superintendent of Central Excise is exercising under Section 33 of the Act and under Rule 173Q of the Rules are quasi-judicial powers clothing the aggrieved person with a right of appeal before the competent appellate authority. We, therefore, hold for the reasons set out above that the imposition of penalty is not sustainable under law and in this view of the matter we set aside the impugned order appealed against and allow the appeal.