ORDER
S.V. Maruthi, Member (J)
1. The dispute relates to the classification of ‘RSDC’ (Rasna) and the jurisdiction of Collector to issue the show cause notice dated 17th June, 1987.
2. The relevant facts are as follows. The appellants manufacture Rasna Soft-drink concentrates (for short ‘RSDC’)- Before the new Tariff was brought into force, a show cause notice dated 13th September, 1985 was issued by the Assistant Collector proposing to classify the product under Tariff Item 68 and proposing to levy duty. Since the appellants were of the view that the product is classifiable under Tariff Item 1B and consequently, eligible for exemption under Notification No. 17/70, dated 1st May, 1970, they challenged the show cause notice in the High Court of Gujarat which was disposed off without considering the merits directing the appellants to pursue the appellate remedies available under the Act. It appears that the said proceedings are still pending. Meanwhile, the department issued two letters dated 20th February, 1986 and 25th February, 1986 stating that the product in dispute is to be classified from 28th February, 1986 under Heading 21.07 and would be liable to pay duty under sub-heading 2107.91. The appellants challenged the above two letters by way of a Writ Petition in the High Court of Gujarat in Special Civil Application No. 1205/1986. The Gujarat High Court during the pendency of the proceedings, passed the following order on 28th February, 1986:
“Whereas the above named petitioner has present to this High Court of Gujarat at Ahmedabad, petition praying to restrain the respondents permanently as well as pending the hearing and final disposal of this petition from proceeding in any manner against the petitioners on the basis of their products Rasna Soft Drink Concentrate is excisable goods within the meaning of Heading No. 21.07, sub-heading No. 2107.91 or any other heading or sub-heading contained in the Schedule to the Central Excise Tariff Act, 1985 or to require the petitioners to follow any Central Excise Procedure or to observe any formality laid down under the Central Excise Rules, 1944 or to pay any Central Excise duty in respect of Rasna Soft Drink Concentrates (copy of the Petition enclosed).”
And upon hearing Mr. S. D. Vakil, Advocate for the Petitioner and Mr. S. D. Shah, Advocate for the Respondent No. 2, the Court passes the following order :
“Notice returnable on 5th March, 1986. Mr. S. D. Shah takes notice on behalf of the respondent No. 1 and waived service for respondent No. 1.
As regards respondent No. 2, Mr. Vakil, the learned Counsel for the Petitioner, will serve the notice directly to respondent No. 2.
Status-quo as on date will be maintained till further orders.
It is hereby accordingly ordered that you, your servants and your agents be and are hereby directed to maintain status-quo as on today till further orders by this Court.”
3. The High Court disposed of the Writ Petition on 20th April, 1987. While disposing of the Writ Petition, the High Court observed as follows :
“The respondents or the authority concerned shall give to the petitioners a notice calling upon them to show cause why their product soft drink concentrate under the brand name ‘RASNA’ should not be classified under the Heading 21.07. Edible preparations not elsewhere specified or included and why this product is not liable to Central Excise Duty at 15% under the sub-heading 2107.91 with effect from February 28, 1986. On receipt of such notice, petitioners shall file their reply or representation explaining their stand within three weeks from the date of the receipt of such notice. The petitioners shall also co-operate with the authority concerned in the final adjudication of the questions raised in the notice. Petitioners shall furnish figures of the quantities of their product including their prices cleared by them from February 28,1986 to April 15, 1987 on or before May 15, 1987 if they have not already done so.”
It was also observed that:
“this will be without prejudice to the rights and contentions of the respondents. Petitioners have agreed that they will not raise the plea of bar of limitation for the recovery of the excise duty, if any, payable by them from February 28, 1986, the date on which this Court orders the maintenance of status-quo by way of an interim relief, to the date the period of 30 days expires from the date of service of the order to the Petitioners as aforesaid.”
4. Thereafter, the Assistant Collector issued a show cause notice dated 17th June, 1987 requiring the appellants to show cause why RSDC should not be classified under Heading 21.07 as edible preparations not elsewhere specified and chargeable to duty at 15% ad valorem under sub-heading No. 2107.91 with effect from 28th February, 1986 and proposing to recover the short levy/non-levy of duty of Rs. 2,63,031.01 for the period from March, 1986 to April, 1987.
5. The appellants filed a reply raising inter alia objections to the jurisdiction of the Assistant Collector to issue the show cause notice. They have also contended that the show cause notice is barred by limitation. On a consideration of the reply, the Assistant Collector classified the product as proposed in the show cause notice and confirmed the demands. On appeal, the Collector remanded the matter to the Assistant Collector for de novo consideration having held that the Assistant Collector has jurisdiction to issue the show cause notice, against which the present appeal is filed.
6. Shri Jain appearing for the appellants mainly raised two contentions :
(i) The Assistant Collector has no jurisdiction to issue the show cause notice; (ii) The product is not classifiable under Tariff Item 2107.91 as edible preparations not elsewhere specified or included. Though the Collector has not decided the issue of classification, we permitted the appellants to advance arguments on the issue of classification also.
7. Shri A. K. Jain, the Id. advocate for the appellants advancing arguments on the question of jurisdiction of the Assistant Collector to issue show cause notice submitted that under Section 11A, the Assistant Collector is competent to issue the notice only for a period of six months whereas the notice in dispute covers a period beyond six months, therefore, the Assistant Collector has no jurisdiction to issue the show cause notice. Secondly, he submitted that the agreement before the High Court not to raise the plea of bar of limitation is not enforceable as it is contrary to law and opposed to law. In support of this contention, he relied on a number of decisions of the Privy Council, Supreme Court and High Courts. In view of the various decisions, it is contended that the show cause notice is without jurisdiction as it is issued for a period of more than six months.
8. Shri L.C. Chakrawarthy, appearing for the Department submitted that the Department was prevented from issuing a show cause notice vide order dated 28th February, 1986 directing the Department to maintain the status-quo. The interim order read with the final judgment of the High Court resulted in restraining the Department from serving the notice. Therefore, by virtue of the explanation to Section 11A, in computing the period of six months, the period commencing from 28th February, 1986 to 20th April, 1987 should be excluded, if so excluded, the notice issued is within the period of six months, and therefore, the Assistant Collector has jurisdiction to issue the show cause notice.
8(a). The question, therefore, is whether the interim order dated 28th February, 1986 resulted in the ‘stay of service of notice’ by the Department.
9. If the order of the Court has not resulted in the ‘stay of service of notice’ by the Department, then, admittedly, the show cause notice is barred by limitation and the Assistant Collector has no jurisdiction to issue the same as it is beyond the period of six months. However, if the interim order dated 28th February, 1986 has resulted in the ‘stay of service of notice’ by the Department, the Assistant Collector is competent not only to issue the show cause notice but the question of limitation also does not arise.
9(a). At this stage, we may point out that the appellants filed the Writ Petition No. 1205/86 in the High Court and the High Court passed the interim order on 28th Feb., 1986. The High Court disposed of the Writ Petition on 20th April, 1987. The show cause notice was issued on 17th June, 1987. Under Section 11A of the Act, a Central Excise Officer is competent to serve notice on the person chargeable with duty which has not been levied within six months from the relevant date. The expression ‘relevant date’ has been defined under Sub-section (3) of Section 11A in the following manner :
‘Relevant date’ means :-
(a) In the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid - (A) whereunder the rules made under this Act a monthly return showing particulars of the duty paid on excisable goods removed during the month to which the said return relates, is to be filed by a manufacturer or producer or a licensee of a warehouse as the case may be, the date on which such return is so filed; (B) where no monthly return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (C) in any other case, the date on which the duty is to be paid under this Act or the rules made thereunder; (b) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof.
Clause (A) & (B) are not applicable to the facts of this case as no return was filed/the last date on which such return is to be filed had not occurred. Clause (C) may be relevant in the facts and circumstances of this case as the language used is “the date on which the duty is to be paid under this Act and the rules”. Rule 49A provides for the time and place of payment of duty according to which the duty is payable at the time of removal. Therefore, the relevant date in the facts and circumstances of the case is the date on which duty is to be paid i.e. at the time of removal of goods. However, from 28-2-1986 to 20-4-1987, the order of the Gujarat High Court was in force. Therefore, though the goods were removed without the payment of duty, during this period the Department could not issue the notice under Section 11A. The Assistant Collector issued the show cause notice on 17-6-1987 proposing to recover the duty for a period from March, 1986 to April, 1987, i.e. he proposed to recover the duty for 1.4 months which is admittedly beyond his jurisdiction unless it is covered by the explanation. The relevant date as stated above for the purpose of recovering the duty is the date on which the goods were removed from the factory under Rule 49(A). Therefore, the show cause notice ought to have been issued within six months from the date of removal of the goods otherwise it would be beyond the period of six months and the Assistant Collector has no jurisdiction unless the period is covered by the explanation to the section. The explanation to Section HA reads as follows :
“Where the service of the notice is stayed by an order of a Court, the period of such stay shall be excluded in computing the aforesaid period of six months or five years as the case may be.”
10. We have already extracted the interim order passed by the Gujarat High Court in the Special Civil Application, according to which, the ‘status-quo’ as on date will be maintained ’till further orders’. The question, therefore, is what is the meaning of ‘status-quo’. Prior to the filing of the special civil application, there was a dispute as to the classification of the product. The appellants were claiming the classification under Tariff Item 1B and the benefit of exemption Notification No. 17/70 dated 1-5-1970, whereas the Department was claiming the classification under Tariff Item 68 and the dispute is pending before the Departmental Authorities. By letters dated 20th Feb., 1986 and 25th Feb., 1986, the Department wrote to the appellants saying that “Rasna manufactured in your above factory at Kalol will now be liable to be classified under the Heading No. 21.07, edible preparations not elsewhere specified are included. It will attract Central Excise duty at the rate of 12% under sub-heading No. 2107.91 with effect from 28th Feb., 1986. Therefore, you are hereby advised and requested to follow the Central Excise Procedures and observe the formalities laid down under the Central Excise Rules, 1944 in respect of the above excisable goods manufactured in your factory.” The effect of this letter is that the product in dispute is classifiable and liable to duty under the relevant Tariff Item with effect from 28th Feb., 1986. The High Court directs ‘status-quo’ as on that date to be maintained i.e. on 28th Feb., 1986. In other words, the effect of the High Court’s order is not to give effect to the proposal made in the letter dated 20th Feb. 1986 and reiterated in the subsequent letter dated 25th Feb. 1987 i.e. not to proceed with classification of the product. The letter dated 20th Feb., not only says that the product in dispute is excisable but also classifiable and liable to duty under Tariff Item 2107.91. In view of the order of the High Court, the Department cannot proceed with the classification of the product. The question of levy and collection of duty follows classification. Since the Department cannot proceed with classification, they cannot also levy and collect duty. Had they proceeded to serve notice demanding duty under Tariff Item 2107.91, it would tantamount to classifying the product under the said Tariff Item which would amount to wilfully disobeying the orders of the High Court. Therefore, the order of the High Court directly restrained the Department from classifying the product under the relevant Tariff Item. It impliedly prohibited the Department from serving a notice on the appellants. Therefore, the period from 28-2-1986 to 20-4-1987 should be excluded in computing the period of six months provided under Section HA.
12. In this context, we may consider the order of this Tribunal in J.K. Cotton Spn. & Wvg. Mills Ltd. v. C.C.E. 1989 (23) ECR 385 on which much reliance was placed by Shri Chakrawarthy. Facts in brief are whether the show cause notice issued on 5-6-1986 for the period from 1-4-1981 to 5-12-1981 is barred by limitation. The Department’s contention was that the High Court has stayed the service of notice of demand on the appellants and that the assessments were provisional, therefore, the notice dated 5-6-1982 was not hit by limitation. It is necessary to refer to certain earlier proceedings which led to the issue of stay order by the High Court. The appellants manufacture yarn and they have challenged the levy of Central Excise Duty on yarn captively consumed and succeeded before the High Court, against which special civil application was filed by the Department before the Supreme Court. In pursuance of the judgment of the High Court, the appellants stopped paying duty from 6-11-1980 on yarn consumed captively. Meanwhile, the Department issued show cause notice dated 4-5-1981 under Section 11A of the Act demanding duty from 6-11-1980 to 31-3-1981. The appellants challenged the validity of these notices before the Delhi High Court. The Delhi High Court granted stay in terms of prayer which reads as follows :
“grant of stay permitting the petitioners forthwith to further process yarn, in its composite mill in the manufacture of fabrics at nil rate of duty and to clear cotton fabrics only (without payment of duty on cotton yarn) and to restrain the respondents 4 to 6 from taking any action or proceedings pursuant to and/or on the same basis as the contents of the directive of the Board, respondent No. 2, and to stay further proceedings pursuant to notices dated 4-5-1981 and addenda dated 5-5-1981.”
During the pendency of Writ Petition, the Central Govt. amended Rules 9 & 49 of the Central Excise Rules with retrospective effect providing inter alia for levy of excise duty on goods captively consumed. The appellants challenged the amendment by amending the Writ Petition. In pursuance of the amendment, the Department issued show cause notice dated 5-6-1982 demanding duty on yarn captively consumed during the period from 6-11-1980 to 19-2-1982. On 11-1-1983, the High Court delivered the judgment upholding the retrospective amendments.
Construing the scope of the order of the High Court, the Tribunal held that by the interim order the High Court restrained the respondent from taking any action or proceedings pursuant to and/on the same basis as the contents of the direction of the Board, and the Board’s directive inter alia is to levy duty on goods captively consumed. The Tribunal observed implementation of the Board’s directive would necessarily imply/levy and collection of duty in such cases and initiation of proceedings for levy and collection in past cases for where duty had not been levied and collected. Levy of duty which in the above context would mean assessment, being quasi-judicial proceedings would have necessarily involved service of notice under Section 11A of the Central Excise Act.
The judgment of the J. K. Cotton Spn. & Wvg. Mills Ltd. may not be of much relevance to the facts of the present case as in the instant case, the classification of the product is stayed, so if the Department proceeds to issue the show cause notice under Section 11A proposing to levy duty, as stated earlier, it would tantamount to classifying the product which is prohibited by the Court.
13. The next question to be considered is how to compute the period of limitation as the jurisdiction of the Assistant Collector depends on the computation of the period of limitation. The date on which the Gujarat High Court passed the order is 28-2-1986. The new Tariff was introduced w.e.f. 28-2-1986 and the liability to pay duty arose from 28-2-1986. In the normal circumstances, for the month of March, the show cause notice under Section 11A should be issued within six months from the date of removal of goods under Rule 49A. However, by virtue of High Court’s order, no show cause notice under Section 11A could be issued and in this case, the show cause notice was issued only on 17-6-1987. In other words, the notice proposing to recover the duty for a period commencing from 28-2-1986 to 20-4-1987 namely; for 14 months which is admittedly longer than six months was issued on 17-6-1987. The explanation shows that where the service of the notice is stayed by an order of the Court, the period of such stay shall be excluded in computing the aforesaid period of six months or five years, as the case may be.
In this context, we may refer to Section 15 of the Limitation Act which is in parimateria with the present provision, which is as follows :
“Section 15 : Exclusion of time in certain causes.
(i) in computing the period of limitation for any suit or application for the execution of a decree, the institution or execution of which has been stayed by injunction or order, the time of the continuance of the injunction or order, the date on which it was issued or made, and the date on which it was withdrawn, shall be excluded.”
The other provisions are not relevant.
Construing the above provisions, the Allahabad High Court in Hula Singh and Ors. v. Data Ram and Ors. [1943 AIR 291 Allah.] held that the period between and conclusion of proceedings must be excluded. It is necessary to refer to the facts in brief. The mortgage was executed by the defendant in favour of the plaintiff on 10-7-1925 and under the law of limitation, the time of instituting a suit on the basis of the mortgage would have expired on 10-7-1937. However, the mortgagers on 24-4-1936 filed an application under the Encumbered Estates Act and that application was forwarded by the Collector to the Special Judge on 6-6-1936 in accordance with the provisions of Section 6 Encumbered Estates Act. The application remained pending for some time before the Special Judge owing to the default of the landlord applicant. The Special Judge in conformity with the provisions of Sub-section (3) of Section 8 Encumbered Estates Act, dismissed the application on 10-8-1937. The suit giving rise to the appeal was then filed on 17-9-1937.
The main contention of the plaintiff was that for the purpose of computing the period of limitation, they were entitled to the exclusion of the period intervening between 6-6-1936, the dates on which the Collector forwarded the application to the Special Judge and 10-8-1938, when the application of the landlord applicants was dismissed by the Special Judge under Section 8(3) of the Act. The defendants, on the other hand, contested this position and maintained that the period above referred to could not be excluded in computing the period of limitation in a suit to enforce the mortgage.
The Court held that the plaintiffs claim was not barred by limitation. The Court oberved that:
“if follows that after an order by the Collector under Section 6, no creditor could, during the pendency of proceedings, under the Encumbered Estates Act, institute a suit for the recovery of the debt due to him from the landlord. The consequences of an order under Section 6 was, therefore, to bar the institution of a suit by a creditor. It is, therefore, correct to say that the Collector’s order in the present case shall tantamount to an order staying the institution of a suit by the plaintiffs. In this view of the matter, the order of the Collector under Section 6 attracts the provisions of Section 15 Limitation Act and the period intervening between the date of that order and conclusion of the proceedings under the Encumbered Estates Act must, therefore, be excluded in the computation of the period of limitation for a suit by a creditor.”
14. We may also refer to another decison of the Patna High Court expressing a similar view in Lal Pasi and Ors. v. Ramsaran Lal Chowdhary 1925 AIR 298 Patna. The brief facts are that on 9-6-1916 a final decree for sale of a house was passed in favour of the Mortgagee respondent. On 7-6-1917 execution was taken out. On 17-6-1917 Sale Proclamation was issued and 17-9-1917 was the date fixed for sale. On 3-9-1917, a third party instituted a suit claiming title to one-half of the house and injunction restraining the respondent from selling it. On 12-9-1917, injunction was granted. On 19-11-1917, the other half of the house was sold and the sale was confirmed on 22-12-1917. On 8-11-1918, the suit of the third party was dismissed for default and injunction was, thus, disallowed.
The application for execution in respect of the other half was made on 10-1-1922. The Court held that the said application was barred by limitation as it was filed beyond the period of three years from the date on which the last application for step-in-aid of execution was filed. The last application of the Court to take some step-in-aid of execution was filed on 19-11-1917, three years from that expired on 19-11-1920. The injunction was in force for 11 months and 20 days viz; from 19-11-1917 to 8-11-1918. By adding this period of 11 months and 20 days, the respondent was entitled to apply for execution uptill 8-11-1921. Since the execution application was filed on 10-1-1922, the Court rejected the same as barred by limitation.
15. From the above, it follows that for the purpose of calculating the period of six months, the period during which the stay is in operation is to be excluded. On the facts of this case, the date on which the new Tariff came into force is 28-12-1986 and the date on which the Court granted stay of the operation of the letters referred to in the earlier paragraphs was 28-2-1986. The six months period provided under Section 11A is to be counted by excluding the period during which the order of the Gujarat High Court was in force. Normally, the six months period starts running from the date of removal of the goods; however, since service of the notice was stayed, it starts running from the date on which the stay is vacated. Admittedly, in the instant case, the Writ Petition was dismissed on 20th April, 1987. So, the period between 28th Feb., 1986 to 20th April, 1987 is to be excluded. If so excluded, the show cause notice issued is within the period of six months from the relevant date.
16. As stated earlier, had the Department served a notice under Section 11A, they would have committed contempt of Court. At this juncture, it may be necessary to point out that the object of Section 11A is to issue notice to recover duties short-levied, not levied or erroneously refunded. Therefore, the question of short-levy and non-levy arises only as a result of classification of the product under a particular item, in this case under Tariff Item 2107.91. Without classification, the demand cannot be raised. If they had issued a show cause notice, it would be in direct violation of the order of the Gujarat High Court.
17. Since the notice was issued within 6 months from the relevant date i.e. within six months from the date of removal of goods, the Assistant Collector had jurisdiction to issue the show cause notice although it covers a longer period, viz. 14 months, in view of the explanation to Section 11A. Any other interpretation would make the explanation redundant. It is now well-settled that a construction which would leave without effect any part of the language of a statute will normally be rejected. Similarly, the main part of the section must not be construed in such a way as to render a proviso to the Section redundant. [Maxwell Interpretation of Statutes – 12th Edition Pages 36 & 38].
18. From the above, it follows that the Department was restrained from serving a notice in terms of the explanation to Section 11A. Therefore, the period of stay shall be excluded in computing the period of six months. The Assistant Collector had jurisdiction to issue the show cause notice.
19. As regards the classification of the goods, though we heard extensive arguments advanced by Shri Jain, the ld. Advocate for the appellants and Shri Chakrawarthy, we are not expressing any view as the Collector has not considered the classification on merits and remanded the same for de novo consideration to the Assistant Collector. Therefore, it is not proper for us to consider the arguments on the question of classification and give a finding in the absence of a finding by the Collector. Therefore, we are remanding the matter to the Collector to consider the issue of classification afresh, and the appellants as well as the Department is directed to produce before the Collector all the material that is produced before us alongwith the miscellaneous application filed by the appellants. The appeal is, thus, remanded to the Collector for disposing it of on merits.