ORDER
Jyoti Balasundaram, Member (J)
1. The above appeal arises out of the order of the Commissioner of Central Excise (Appeals), Pune, upholding the differential duty demand of Rs. 63,57,102.76 on finalisation of provisional assessment covering the period May, 1981 to May, 1984.
2. The brief facts of the case are that the appellants herein are engaged in the manufacture and sale of cotton yarn, cellulosic spun yarn, non-cellulosic spun yarn and manmade fabrics. They manufactured yarn liable to duty under tariff Item Nos. 18, 18A and 18E of the first Schedule to the erstwhile Central Excise Tariff. They had filed a Writ Petition No. 1063 of 1981 in the Hon’ble Delhi High Court challenging the levy of excise duty on yarn manufactured and and consumed captively, and the court by its order dated 08.05.1981 stayed the recovery of the disputed duty subject to the appellants furnishing a bond for the same and furnishing a bank guarantee for 50% of the disputed amount of duty. The appellants executed the bond in Form – B-13 along with requisite bank guarantees in respect of 50% of the duty payable on yarn captively consumed. The bond was accepted and assessments were made provisional under Rule 9B of the Central Excise Rules, 1944 pending the disposal of the writ petition before the High Court. By Notification 22/82 dated 20/02/1982 Rules 9 and 49 of the Central Excise Rules were amended with retrospective effect by the Finance Act requiring payment of duty even on captively consumed yarn. The Delhi High Court in the case of J.K. Cotton Spinning and Weaving Mills reported in 1983 ELT 239 (Del) held that yarn captively consumed is chargeable to duty and the writ petition field by the present appellant was also disposed of following the principles laid down in the J K Cotton Mills case. The Court, however, observed that the present appellants would be entitled to invoke the provisions of Section 11A of the Central Excise Act, 1944 when recoveries were sought to be made from them for the past period. The appellants filed Civil Appeal No. 219/1984 in the Supreme Court challenging the validity of Rules 9 and 49. The Court directed the assessees to pay 50% of the above disputed dues and in respect of balance 50%, the Court directed furnishing of bank guarantees and bonds or continuation in operation of the bonds and bank guarantees already furnished in pursuance of the Delhi High Court order dated 08.05.1981. No stay in respect of future recoveries were granted and the apex Court directed the appellants to pay the full duty on yarn cleared for captive consumption. The appellants paid 50% and kept alive the bank guarantees. The assessments were finalised by the jurisdictional Superintendent on 19.05.1995. The Supreme Court upheld the judgment of the Delhi High Court in J K Cotton Spinning & Weaving Mills thereby upholding the amendment of Rules 9 and 49 with retrospective effect. The supreme Court held that where notices under Section 11A had been issued to any assessee the same would be decided after extending an opportunity of personal hearing and 8 weeks time was given for filing reply to the notices if issued prior to the date of its judgments. The court also held that if notices have not been received, they could be issued within the time limit prescribed under Section 11A of the Central Excise Act, 1944. It was further observed that the question whether demands were issued under Section 11A or not will be decided by the Assistant Commissioner. The court further held that bank guarantees furnished by the assessees shall be made available for realisation of dues if any.
3. During the pendency of the appeal before the Hon’ble Supreme Court the Central Excise authorities called upon the assessees by letter dated 12/01/1995 to pay Central Excise duty arrears of Rs. 63,57,102.76 but as the assessee’s petition was pending decision by the Supreme Court recovery of duty was not pursued till the decision of the Supreme Court. After the decision of the Supreme Court in the assessee’s own case, the jurisdictional Superintendent vide his letter dated 11.04.1995 informed the appellants that provisional assessments made on RT12 returns for the period May, 1981 to May, 1984 were to be finalised. The appellants responded by letter dated 09.05.1995 contending that the question of assessments was not an issue and it was incorrect to levy and collect duty on yarn captively consumed and contending that they were entitled to refund of Rs.68,78,320.65 already paid by them under protest in accordance with the interim order of the Supreme Court, as the recovery was barred by limitation. They also filed civil suit before the Court of Civil Judge, Senior Division Solapur, seeking a declaration that the entire proceedings initiated by the Superintendent on 11.04.1995 was without jurisdiction, but the suit was dismissed both on maintainability and on merits, and the appeal against the dismissal was disposed of by the High Court, directing the appellants to prefer a statutory appeal under the Central Excise Act, 1944. The provisional assessment was finalised by the Range Superintendent, who directed the appellants to pay the balance duty of Rs.63,57,102.76 (out of the total dues of Rs. 1,37,56,641.30 payable as per RT-12 returns for May, 1981 to May, 1984 the assessees had already paid Rs.68,78,320.65 through PLA and an amount of Rs.5,21,217.89 was adjusted against a sanctioned refund). An appeal before the Commissioner (Appeals) was filed who held as under:
“10. I have carefully considered the submissions made by the appellants. I find that the basic issue involved here is whether the assessment in this case were provisional or not. Once it is held that the assessments were provisional then there was no requirement of issue of show cause notice. But if on the other hand it is held that the assessment were not provisional, then in terms of the Supreme Court’s order it was mandatory that a show cause notice should have been issued before demanding duty. I further find that the Supreme Court has passed a common order in respect of the number of cases in which common question arose for determination. The Hon’ble Supreme Court has discussed all possible eventualities in this matter and directed that in cases where the notice under Section 11A of the Act have been served and claims were raised within the period of six months from the relevant date, the revenue will be entitled to realise the dues. Secondly in case of disputes as to whether the notice under Section 11A has been served or not the Asstt. Commissioner were to decide the issue. The third category of cases where the notices have not been served as yet, the revenue will be entitled to do so within the time limit prescribed by Section 11A of the Act. It was concluded that for any of the eventualities, the orders will not be passed by the authority without giving opportunity to the assessee to make their representation against the proposed order. The Supreme Court has also directed that the bank guarantees furnished by the assessee shall be made available for realisation of dues by the revenue. Since the question of assessment being provisional were not brought to the notice of the Hon’ble Supreme Court, it did not expressly expressed its opinion regarding need of issuing show cause notices under Section 11A. It is a settled law that once the assessments are provisional, the demands are not required to be raised under Section 11A and it is only on the finalisation of the assessment, that the demands are required to be issued under Section 11A. The appellants have cited a series of decisions which all emphsises on that requirement of show cause notice before making a demand under Section 11A is a must and it cannot be dispensed with. In an these submissions, the appellants have lost sight of the relevant fact that in the cases of provisional assessment, there is no requirement of issuing the show cause notice under Section 11A. The fact that the assessments were provisional is borne out by the fact that the appellants have opted to furnish bank guarantee and the bonds in form B-13 in favour of the Central Bank. This bond specifically says that the appellants desire that the assessments should be made provisional till the matter is decided by the Hon’ble High Court/Supreme Court. It is important to note that it was not the direction of the Hon’ble High court or Hon’ble Supreme Court to execute the bond in form B-13 but it was the appellants themselves who have chosen the format of such a bond to be executed in favour of the Government as per directives of the Hon’ble Supreme Court. Moreover the figures of the amount of 50% are drawn as per provisional assessment itself and they are precisely mentioned in the terms thereof. The Hon’ble Supreme Court has asked the appellants to pay 50% of the past dues and to provide guarantee for the balance amount. If the appellants were of the view that there was no demand pending against them and the assessments were not provisional, they should have pointed out the same to the Hon’ble Supreme Court and refrained from depositing the duty. Once the appellants have executed a B-13 bond and requested for provisional assessment, they cannot plead that the assessments were not provisional. Reliance in this regard is placed on the decision in the case of Usha Martin v. Collector of Central Excise, Patna, 1982 (27) ELT 728 (T). Reference is also invited to the decision of Hon’ble Calcutta High court in the case of Rungta Sons Pvt. Ltd. & another v. Collector of Customs, 1986 (23) ELT 14 (Calcutta) wherein it has been held that “where the provisional assessment is made at the instance of the petitioner though such a provisional assessment is not permitted by the provisions of Sea Customs Act, yet when a petitioner has taken the advantage of the same, petitioner cannot lateron turn around and challenge it. Though neither under Section 32 nor under Section 137, any action was taken by the respondents, the question did not arise in the instant case because there was a provisional assessment and the assessee had agreed to pay the balance amount after the final assessment.” In view of this decision, the appellants plea that the provisional assessment can be made only when there is a dispute in classification list or price list and cannot be made when the levy of duty is disputed has no force because they have themselves opted for the provisional assessment by making a request and executed B-13 bond and by not taking objection to the Supdt’s endorsement on the RT12 returns that the duty was assessed provisionally under Rule 9B and provision of said rule shall apply for recovery of the deficiency in or refunds of excise duty. Their contention that there has to be an express order for making assessment provisional is also not correct as the Hon’ble Supreme Court has held in Smart International Pvt. Ltd’s case reported at 1992 (58) ELT 561 (SC) that where classification list is not approved the assessments are deemed to be provisional. This shows that the requirement of the issue of a specific order for provisional assessment was not absolute or mandatory. In the present case, since the assessment were made provisional, pending disposal of the writ petitions in the Court of Law the assessment gets finalised the day the Supreme Court passed its final verdict and all that was required to do was to demand the efficiency in duty in terms of Rule 9B from the appellants and that is what the Supdt. has precisely done, who is the proper officer to assess RT12 returns under rule 173(I) and, therefore, while finalising the assessment he has demanded differential duty. As directed by the Hon’ble Supreme Court, the jurisdictional Supdt. has offered every opportunity to the appellants to present their say in the matter and after considering them he has demanded the deficiency in the duty. The Hon’ble Karnataka High Court has in the case of NGEF Ltd. v. Asst-Colector, held that provisional assessment includes incomplete assessment which the authorities are entitled to finalise under rule 9B/173(i). Since in the present case the assessments were not finalised, they have to be treated as provisional. In the Swan Mills v. Union of India, 1989 (44) ELT 601-(Bom), the Hon’ble High Court has held that issue of notice under Section 11A is not necessary when the assessments are not finalised. Further the Hon’ble Supreme Court has itself stated in its order that the Bank Guarantees shall be furnished to the dept. for its enactment. This is precisely what has been done in this matter that the bank guarantees encashed. IT was held in Eagle Mineral Products v. Collector of Central Excise, 1988 (38) ELT 35 that when the assessments are provisional and the assessee has executed B13 bond, the show cause notice issued after one year from the relevant date do not become time barred. The appellants reliance on the several decisions cited by them including Davangere Cotton Mills, 1991 (55) ELT 295, Mafatlal Industries, 1990 (49) ELT 115 (T), Mahindra & Mahindra Ltd, 1989 (44) ELT 669 are all distinguishable in the sense that in most of the cases stay was not granted by the Courts and no bonds were executed by the assessees in cases where the bonds were executed. There were no endorsements on RT12s as in the present case where it was specifically stated that the duties were assessed provisionally in terms of Rule 9B till the disposal of the Court’s order and the deficiency in the duty or the refund, if any, will be governed by the provisions of Rule 9B. In all these cases cited by the appellants, there was no provisional assessment with necessary endorsement at the foot of the RT 12 return and a B13 bond executed by the assessees. In view of these facts, it was required of the Dept. to consider in the light of these Hon’ble Supreme Court as to whether the show cause notice in the matter was necessary. The directives of the Supreme Court were wide enough to cover all possible eventualities wherein it is ordered that in any circumstances the assessments should not be made without extending the reasonable opportunities of being heard to the petitioners. It has been left to the jurisdictional Asstt Commissioner and other concerned officers of Central Excise to determine the points relating to assessment. In any case the assessment was not to be finalised without observing the Rules of Natural Justice. In the present case, the appellants were given an opportunity of giving their say in the matter including offer of hearings and, therefore, there has been sufficient compliance of principles of natural justice.”
4. The lower appellate authority held that since the assessments were provisional, the question of issuing notice for demanding duty under Section 11A of the Central Excise Act, 1944 did not arise, that the differential duty had been rightly demanded and rejected the assessee’s appeal. Hence this appeal before the Tribunal.
5. We have heard both sides.
6. We agree with the appellants that this is not a case where any payment of duty was effected pending finalisation of classification or price-lists, as seen from the facts set out above but a situation where the issue was subjudice. In these circumstances the ratio of the larger bench decision in the case of Rajiv Mardia V. CCE, Indore 2000 (118) ELT 627 holding that there should be material on record to show that the procedure laid down in Rule 9B was followed for the purpose of showing that assessments are provisional, namely, that there should be a provisional assessments order in terms of Rule 9B, is squarely applicable. The larger bench held that decisions of the apex Court in the case of Samrai International Pvt. Ltd. V. Collector 1992 (58) ELT 561 holding that the clearances between the date of filing of classification list and approval of the same must be presumed to be provisional was not limited to cases of refund but applied even to cases of demand. The subsequent larger bench decision of Rajiv Mardia V. CCE, Indore 2001 (129) ELT 334 to the effect that the procedure contemplated by Rule 9B need not be followed for payment pending decision on classification list or price-lists to be treated as provisional, does not affect the present case in the light of the fact existing hereunder. Therefore the present case cannot be treated as one of provisional assessment and the issue of show cause notice was necessary. Since no notice under Section 11A was issued to the appellants for recovery of the duty confirmed in the present case, we set aside the impugned order as bad in law and allow the appeal.
Moheb Ali M, Member (T)
7. The Hon’ble Member (Judicial) has round that the present case cannot be treated as one of provisional assessment and therefore duty cannot be recovered from the appellants in the absence of a notice under Section 11A of the Central Excise Act and accordingly set aside the impugned order as bad in law. I beg to differ with this finding. I find that the assessments during the impugned period 8.5.1981 to 4.5.1984 are provisional and the department has rightly issued notice to the appellants for finalisation of the assessments. The department called upon the appellants to make any representation against finalisation of the assessment in compliance with the Supreme Court’s order.
8. The appellants filed a writ petition in the Delhi High Court in 1981, challenging the levy. The Hon’ble Court by its order dated 8.5.1981 stayed the recovery of disputed duty subject to the appellants furnishing a bond for the disputed duty, supported by a bank guarantee for 50% of the duty. Accordingly, the appellants executed bond and bank guarantee covering the duty payable during the period 8.5.1981 to 4.5.1984.
9. It is pertinent that the duty payable prior to 8.5.1981 is not the subject matter of this appeal. It is not clear whether the appellants paid duty on captively consumed yarn prior to 8.5.1981. The appellants are silent on this aspect.
10. The bond was executed in Form B-13 which is prescribed for provisional assessment. The bond was accepted and provisional assessments were made on the RT-12s filed by the appellants during the period in question. The appellants have not furnished copies of CLs filed after the stay order was obtained.
11. In February 1982, by notification Rules 9 and 49 were amended with retrospective effect requiring payment of duty on captively consumed goods. The validity and vires of the amended rules as well as the retrospective effect thereto notified 1982 was upheld by the High Court, and the appellants’ petition was disposed of by the High Court on 17.4.1984. While disposing of the writ petition, the Hon’ble High Court directed that the petitioners would be entitled to invoke the provisions of Section 11A when recoveries were sought to be made from it for the past period (emphasis supplied). Similarly, the court directed that the respondents would be entitled to claim the benefit of Section 11B of the Act where returns are to be made. While granting the petitioner’s prayer and certifying the case as fit for appeal to the Supreme Court, the High Court directed that interim orders passed by the court during the pendency of the petition will continue to operate till 8.5.1984. The appellants filed an appeal before the Supreme Court thereafter.
12. The Supreme Court admitted the appeal and passed the following order:-
“In this group of cases common questions arise for determination. They are covered by the decision of this Court in M/s. Cotton Spinning and Weaving Mills Ltd. & Anr. V. Union of India and Ors. By the said decision this Court upheld as legal and valid the amendments made to Rules 9 and 49. It was argued that if the amendments are given retrospective effect from the date the Rules were framed, i.e., from February 28, 1944, the assessees would be required to pay an enormous amount of duty. This Court appreciated the contention that if the duty has to be paid with retrospective effect from 1944 it would undoubtedly cause great hardship to the assessees but concluded that in view of Section 11-A of the Act such as apprehension was misplaced. Pointing to clause (I) of Section 11-A it held that it engrafts a rule of limitation of six months and since the proviso to Section 11-A is not applicable the demand though it may include even a demand for more than six months must be made within a period of six months from the date of the amendment.
Having considered, the facts in this group of cases, in our view, in the light of the observation in J K Cotton Spinning and Weaving Mills it would be appropriate to direct that in cases where notices under Section 11-A of the Act have been served and the claims are raised within a period of six months from the relevant date, the Revenue would be entitled to realise the dues. In case of dispute as to whether the notice under Section 11-A had been served or not the Assistant Collector will decide the issue. However, in cases where the notices have not been served as yet the Revenue would be entitled to do so within the time limit prescribed by Section 11-A of the Act. In either of the aforesaid eventualities orders will not be passed by the authorities without giving an opportunity to the assessee to make representations against the proposed orders. If notices have already been served for the aforesaid purpose the assessees would have eight weeks time from today to reply or to make a representation. The Bank guarantee furnished by the assessees shall be made available for realisation of dues, if any, by the Revenue.
The interim orders shall stand modified as above.
The appeals will stand disposed of accordingly with no order as to costs.”
13. The appellants complied with this order and paid 50% of the duty amounting to 68.78 lakhs. They have been providing bank guarantees for the rest of the amounts in compliance with the Supreme Court’s interim order. Vide its final order dated 17.1.1995, the supreme Court upheld the validity of the amendments to Rules 9 and 49 made in 1982. The Supreme Court also observed that it would cause enormous hardship to the appellants if the retrospective nature of 1982 amendment was interpreted to mean that the department could recover duties right from 1944. It therefore ordered that the demands for duty could be made only in terms of the provisions of Section 11A (limitation etc. applies).
14. The Commissioner (Appeals) held that the appellants’ case is one of provisional assessment and therefore no notice under Section 11A was necessary while finalising the assessments for the period May 1981 to May 1984. During this period the assessments were pending finalisation due to interim orders of the High Court and subsequently the apex court.
15. Neither the High Court nor the Supreme Court directed the appellants to execute a provisional assessment bond nor directed the department to provisionally assess the goods during the pendency of the litigation (1981 to 1984). It is only the appellants who requested the department to assess the goods provisionally and accordingly executed a bond binding themselves to pay the differential duty as and when the assessments were finalised. It is not open to them to challenge that what was done was not provisional assessment during this period. The High Court of Andhra Pradesh in their order reported in AIR 1958 AP 122 (V.45 C.40) held, quote “provisional assessment, we may point out, is done at the instance of the petitioner’s husband, though such a provisional assessment was not provided under the Sea Customs Act. Yet when the petitioner’s husband has taken advantage of the same, the petitioner cannot, in our opinion, turn round and challenge. we therefore repel this contention also.” This ruling of the Hon’ble High Court applies to the facts and circumstances of this case. I therefore hold that provisional assessment was made in the appellants’ case as pointed out by the learned Commissioner (Appeals).
16. The appellants’ reliance on the decision in the case of Rajeev Mardia 2001 (129) ELT 334 is, according to me, misplaced. This decision of the larger bench says that in a case where the approval of CL/PL is pending, the assessments can be treated as provisional. It also says that in all other cases, there should be material available on record to show the procedure laid down in Rule 9B was followed for the purpose of showing that the assessments are provisional. In the present case, there is material on record to show that the assessments are provisional. The record does not show that the appellants have filed either a revised CL or PL after they obtained the stay order from the High Court against levy on captively consumed goods, which only means that the appellants were clearing goods captively consumed yarn without any approval of a revised CL/PL. After having chosen to execute a B-13 bond, the appellants have followed their own procedure while filing RT-12s during the disputed period. In their letter dated 1.9.1981, the appellants informed the department that thenceforward they would divide the yarn produced by them into two categories, one that is consumed captively and the other which is sold in the open market. They would pay duty on the yarn sold in the open market and would not do so on the yarn captively consumed. There is a clear indication in the RT-12s that no duty is being paid on captively consumed yarn in terms of the bond executed by them. In view of this stand of the appellants, the assessing officer had no other way except to keep the assessments provisional and incomplete. The court directed the appellants to execute a bond binding themselves to pay duty if they were required to do so. They, all the same, chose to seek provisional assessment. In the light of the fact that the appellants did not file a revised CL after they obtained a stay, the clearances made by them during the period have to be held provisional even in terms of the Tribunal’s decision in Rajeev Mardia’s case.
17. The appellants’ contention that procedure envisaged under Rule 9B is not followed in their case and therefore their case does not come within the purview of provisional assessment has to be rejected. A five-member bench of the apex court in a case reported in 1994 (53) ECR 329 (J.K. Synthetics v. CTO) held that when a statutes levies a tax, it does so by inserting a charging section by which a liability is created and provides a machinery to make the liability effective. It therefore provides the machinery for the assessment of duty liability already fixed by a charging section. Ordinarily, the charging section is strictly construed like in other statute but the rule of strict construction is not extended to the machinery provisions. The machinery provisions must no doubt be so construed as would effectuate the object and purpose of the statute and not defeat the same. What the appellants are attempting to do is to defeat the purpose of the statute by claiming that the procedure laid down under Rule 9B is not either strictly followed/or is applicable or both. It is their argument that Rule 9B speaks of classification of the goods whereas their case is one of levy itself and therefore the provisions of Rule 9B are not applicable for the department to assess their case provisionally. I observe that levy and classification are interlinked. Without deciding the levy, the question of classification of goods does not arise and vice versa. Following the ratio of the judgment cited supra of the Supreme Court, I hold that Rule 9B would cover even the question of levy. When there is a dispute about levy, provisional assessment can still be resorted to as provided under the Rule. The obligations case on the appellants in terms of the bond and bank guarantee do not wither away on the specious plea that the procedure under Rule 9B does not apply to them. The rule provides for an order for provisional assessment. In this case, such an order is made on the RT-12s by the assessing officer. I am of the opinion that even the requirement of passing a provisional assessment order is satisfied in this case.
18. Without conceding the plea that the goods were not provisionally assessed during the period 1981-84, the department can still demand duty under Rule 1731. At the material time, the appellants were working under Chapter VIIA of the Central Excise Rules. Under this procedure, they were required to file RT-12s and the proper officer is required to assess the same under Rule 173I. Since the officer was prevented from assessing the RT-12s, he left the assessment incomplete/provisional. What he sought to do after the Hon’ble Supreme Court has disposed of the appeal is to finalised an incomplete assessment by giving a proper notice to the assessee. This view is expressed by a division bench of Karnataka High Court in a case reported in 1997 (95) ELT 480.
19. The Delhi High Court in its order stated that the petitioner would be entitled to invoke the provisions of Section 11A for the past period if recoveries are sought to be made from it. It is important to know what is meant by past period. Viewed in the light of the Supreme Court’s observation that it would cause enormous hardships to the assessee if duties are demanded from 1944 onwards because of the retrospective nature of amendment made in 1982, the ‘past period’, the supreme Court had in mind, is not the period between 1981 and 1984 but some period prior to that. This is because the period between 1981 and 1984 is covered under a bond. If the department were to demand duties prior to 1981, it should surely be covered under the provisions of Section 11A. It cannot be argued that a litigant can get away from his obligations under the bond on the plea that a notice has not been issued under Section 11A. The Hon’ble Supreme Court in the case of CC, Shillong v. Wood Crafts Products Ltd. 2002 (143) ELT 247 held that an assessee is obliged to make a restitution in case the department succeeds in a particular case. The facts of that case are slightly different from the present one, but the principle laid down by the Supreme Court applies to this case as well. It is not open to the appellants to say that they would not abide by the decision of the supreme Court by not allowing the department to enforce the provisions of the bank guarantee when such a bank guarantee is executed in accordance with the Court’s direction. The Court’s direction that the appellants should furnish a bank guarantee is to ensure that moneys due to the department are secured. It would be a different case if the Court has only ordered stay of recovery and the department has not issued demands covering the period of litigation. In this case, the Court has not merely stayed recovery, but has also asked the assessee to execute a bond/bank guarantee undertaking to discharge their duty liability, if the case were to be decided in favour of the department.
20. In an earlier case, the Tribunal in the case of Moraji Goguldas Spg. & Wvg. Mills Ltd. v. CCE, Mumbai-I (2000 (40) RLT 364) held that, in the absence of an order under rule 9B and fulfilment of formalities required to be observed for provisional assessment, though B-13 bond was executed in terms of the High Court’s stay order, demand is time barred. I respectfully disagree with this finding on two counts. It is not true that B-13 bond was executed in terms of the High Court’s order. The High Court never directed the appellants to execute B-13 bond as the issue before the court was leviability of duty on captively consumed goods. The appellants close to execute this particular bond to suit their own convenience. Secondly, the observation of the bench that provisional assessment can be resorted to only at the request of the assessee is not correct. In any case there is a request in this case as is evident from the wording of the bond and the letter dated 1.9.1981 of the assessee. As I have earlier pointed out, in this case there is compliance with the provisions of Rule 9B insofar as the department is concerned.
21. In view of my observations above, I hold that provisional assessment was done in this case and therefore there was no need to issue a notice under Section 11A of the Central Excise Act. The observations made by the Supreme Court in respect of the provisions of Section 11A do not cover the period between 1981. The Supreme Court was only trying to protect the interest of the assessees from whom demands may be made right from 1944 irrespective of the provisions of Section 11A. The present case is for the period 1981 to 1984 during which period provisional assessment was resorted to by department. I therefore hold that no notice under Section 11A need to be issued in their case.
22. The appeal therefore has to be rejected and the impugned order of the Commissioner (Appeals) upheld.
The following difference of opinion is placed before the Hon’ble President for reference to Third Member for resolving the difference:-
Whether the present case cannot be treated as one of provisional assessment and issue of show cause notice was necessary, and since no notice under Section 11A of the Central Excise Act, 1944 was issued to the appellants for recovery of the duty confirmed, the impugned order is required to be set aside and the appeal allowed, as proposed by Member (judicial)
OR
Whether the case is one of provisional assessment and no notice under Sec. 11A needs to be issued and the order is required to be upheld and the appeal rejected, as proposed by Member (Technical)
S.S. Sekhon, Member (T)
1.1 Heard both sides.
1.2 The facts of the case are not being repeated as they have been brought out in the orders of the Ld Members. I have perused the same. The question to be decided in this case is whether the assessment were not provisional as held by the Member (Judicial) or provisional as held by the Member (Technical).
2.1 (a) The Ld Advocate appearing for the appellant has argued that the assessments were not provisional and therefore Show Cause Notice should have been issued under Section 11A of the Central Excise Act, 1944. He has submitted that a super Rule 9B of the Central Excise Rules, 1944 there should be specific order in writing directing that the duty leviable should be assessed provisionally. In this case, there was no such order from the proper officer. He relies on Board’s Circular No. 13/90-CX dated 25.5.1990 and the Central Excise Trade Notice reported in 1989 (42) ELT T-13. The Ld Advocate has also cited the following decisions:
(i) Metal Forgings v. UOI ;
(ii) Coastal Glass & Chemicals Pvt Ltd v. AC ;
(iii) ACCE v. Shree Gobinda Glass Works Ltd 72 CWN 137
(iv) Rajiv Mardia v. CCE, Indore 2000 (118) ELT 627 (T. LB);
(v) J K Cotton Spg & Wvg Mills Co Ltd v. CCE 1998 (99) ELT 8 (SC);
(vi) J K Cotton Spg & Wvg Mills v. CCE, Kanpur 1989 (23) ECR 385 (CEGAT-SB-D);
(vii) Chemicals & Plastics (I) Ltd v. UOI 194 (74) E549 (MOD);
(viii) Simplex Mills Co Ltd v. CCE, Mumbai 2001 (47) RLT 862 (CEGAT-Mum);
(ix) Moraji Goguldas Spg & Wvg Mills Ltd v. CCE, Mumbai I 2000 (40) RLT 364 (CEGAT);
(x) Modi Pan Ltd v. CCE, Ghaziabad 2004 (174) ELT 126 (Tri-Del);
(xi) CC, Kandla v. Surya Reshim Ltd 1999 (112) ELT 938 (T);
(xii) Mar candy Bad Radar Krishna Based Pvt Ltd v. CCE, Cal-II 1998 (102) ELT 705 (T);
(xiii) Kalian Ferrous & Alloys Ltd v. CCE, Belgaum 2002 (147) ELT T 834 (Tri-Bom)
(xiv) Associated Cement Co Ltd, Retractors Works v. CCE 1992 (57) ELT 178 (T);
(xv) Cipla Ltd v. CCE, Bangalore 2002 (143) ELT 202 (Tri-Bom).
(b) Appearing for the Revenue, Ld Jt CDR has submitted that the Member (Technical in this case rightly held that the assessments were provisional and therefore there was no need for issuing the Show Cause Notice under Section 11A on the ground:
(i) The Ld Advocate has relied upon the decisions where facts were entirely different. In the case of J K Cotton & Spg & Wvg Mills’ case, the Delhi High Court granted stay in terms of prayer (a) in the petition which reads as follows:
“It is therefore, most respectfully prayed that this Hon’ble Court may be please to:
(a) grant of stay permitting the petitioners forthwith to further process yarn, in its composite mill in the manufacture of fabrics at 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.”
Whereas in this case, the stay granted by Delhi High Court reads as follows:
“… In the meanwhile, we stay the recovery of the disputed excise duty subject to the petitioner giving a Bond for the disputed duty and a bank guarantee for 50% of the disputed duty….”
In pursuant to this stay order, the appellant had furnished B-13 Bond. In the Bond. it was mentioned:
“And whereas the obligers desire that the Government should make provisional assessment of excise duty of the said goods pending final assessment as provisions contained in Rule 9B of the Central Excise Rules, 1944.”
& he relied upon the decision of this Tribunal in the case of Piramal Spinning & Weaving Mills Ltd v. CCE, Mumbai I 1996 (17) RLT 39 (CEGAT-WRB) wherein it has been held that in terms of the Bond executed by the party as per the directions of Delhi High Court, the assessments were to be construed as provisional assessments. Therefore, the case law relied by Ld Advocate would help Revenue’s case, as assessments herein are provisional because of orders of High Court in this case.
(ii) The appellant, vide letter dated 1.9.1981 has informed the department that the yarn production for home consumption would be cleared under bond as per Delhi High Court stay order, which therefore has to be a clearance on provisional assessment.
(iii) The appellant, vide order dated 4.5.1984 has directed the appellants to pay 50% of dues for the part period and to furnish Bank guarantee and bond for the rest 50%. Vide letter dt 10.12.1984, they informed the department about the total dues involved and gave details of payment of 50% dues as directed by the Supreme Court. They did not raise any issue of Show Cause Notice under Section 11A at this stage because they had accepted that the assessments were provisional.
(iv) As provided under the rule 173F, the appellant had determined the duty liabilities in respect of clearance of goods. In respect of yarn cleared for captive consumption the amount of duty payable was debited from the Bond account furnished by the appellant in terms of Delhi High Court order. They had given the details in RT-12 Returns provided that the proper officer while assessing the RT-12 Returns in terms of Rule 173 has to state and stated these clearances are assessed provisionally. Reliance was placed on supreme Court’s decision in the case of Serai Kalla Glass Works Pvt Ltd v. CCE, Patna and Karnataka High Court decision in the case of N.G.E.F. Ltd v. AC of CE Bangalore .
(v) The Jt CDR has referred to decision of Civil Court in Special Civil Suit No. 249/1995 filed by the appellant. In this decision, the endorsement made on RT-12 Returns is reproduced which is as below:
“Duty of goods removed under a gate passes and included in this return has been assessed provisionally under Rule 9B and the provisions of said rule shall apply for recovery of the deficiency in or refund of excise duty stayed bonding disposal of W.P. filed in the court of law.”
In para 37. the Ld Civil Judge, after referring to B-13 bond has observed that:
“If it was not provisional assessment as alleged by plaintiff or that the duty was in fact being barred by limitation during pendency of writ petition in High Court or Supreme Court, it was their duty to bring this fact to the notice of Lordships.”
2.2 I have gone through the records of this case as well as the submissions made by both sides before me. It is found:
(a) Ld Member (Judicial) has relied upon the Larger Bench decision in the case of Rajiv Marida v. CCE, Indore 2000 (118) ELT 626 wherein it was held that there should be material on record to show that the procedure laid down in Rule 9B was followed for the purpose of showing assessments are provisional, namely that, there should be a provisional assessment order in terms of Rule 9B. The Member (Judicial) also referred to Larger Bench’s decision in the case of Rajiv Mardia v. CCE, Indore 2001 (129) ELT 337 to come to the conclusion that in this case assessments were not provisional. With great respect, I have not been able to persuade myself to agree with her conclusion that the present case is not of provisional assessment for the following reasons:
(i) In the case of Rajiv Mardia v. CCE, Indore 2000 (118) ELT 627 (Tribunal-LB), the issue referred to the Larger Bench was whether the clearance between the date of filing the CAL. and approval of the same must be presumed to be provisional was limited to refund or to payment of duty also. The Larger Bench in para 4 has held as below:
“In view of our findings hereinabove, we hold that the view taken in Universal Paper Mills that Smart decision of the Hon’ble Supreme Court confined to cases of refund is not correct and Smart’s decision applies even to cases of demand. We hold, following the Supreme Court’s judgment in Coastal Glass and Chemical, that there should be material on record to show that the procedure laid down in Rule 9B was followed for the purpose of showing that the assessments are provisional.”
The correctness of the statement made by the Larger Bench, manely, that procedure laid down in Rule 9B should be followed for the purpose of showing that the assessment are provisional was doubted and the matter was referred still to a Larger Bench. The Larger Bench in this case held that the observation made by the Larger Bench of the five Members, that there should be material on record to show that the procedure laid down in Rule 9B was followed for the purpose of showing that the assessments are provisional, cannot hold good in the case of payment of duty affected pending finalization of CL/PL. The Five Members Larger Bench has held that Smarat decision applies even to cases of demand. The observation of this Larger Bench that there should be material on record to show that the procedure laid down in Rule 9B was followed for the purpose of showing that the assessments are provisional has been overruled by the Larger Bench of Six Members. In view of this, Ld Member (Judicial) reliance on decisions of the Larger Bench in the case of Rajiv Mardia to hold that the assessments were not provisional cannot be agreed to.
(ii) In the case of Metal Forgings v. UOI , the Supreme Court has observed as below:
“to establish that the clearances were made on provisional basis, they should be first of all an order under Rule 9B of the Rules, and then material to show that the goods were cleared on the basis of said provisional classification. These facts in the instant cases are missing, therefore, in our opinions there is no material in the instant case to establish the fact that either there was a provisional classification or there was an order under Rule 9B empowering the clearances on the basis of such provisional classification.”
Member (Judicial) had observed that there should be a specific provisional assessment order in terms of Rule 9B to constitute assessment as provisional. I find, in this case, the appellant has filed B-13 Bond and in this bond has specifically requested the department to make provisional assessment of Excise Duty, pending final assessment in terms of rule 9B. Appellant had also undertaken to observe all the formalities relating to such Provisional Assessment and to pay the duty on the basis of the decision of High Court within 10 days from the date of demand. This Bond was duly accepted by the department. In other words, the appellant’s request for making the provisional assessment pursuant to an order of provisional assessment by the High Court has been accepted by the department. Therefore, it should be constituted that an order of Provisional Assessment exists and pursuant to that clearances were effected. The requirement of Metal Forgings decision of the Supreme Court have thus been in fact and law complied. There is no reason to restrict the Apex Court’s decision in Metal Forgings case to only an order of Assistant Collector, an order of a High Court/Supreme Court pursuant to a dispute before them to grant interim relief can be an order of Provisional Assessment under Rule 9B especially when Bonds prescribed thereunder are executed. The assessee was determining the duty liability in terms of rule 173F and was debiting the duty payable in Bond account and furnishing monthly RT 12 returns as required under Rule 173G showing the clearances for captive consumption. In RT-12 returns for such clearances were assessed provisionally under Rule 173I as seen on the endorsement made on these returns. The assessee himself had calculated the 50% of duty payable as per the stay order passed by the Supreme Court and had paid it accordingly and for the rest 50% bonds were made available. In these facts, the conclusion can be that the assessments were provisional. The Member (Technical has given reasons in details in his order in this regard and I agree with the same. I cannot find, in the facts herein, that assessments were not provisional.
3.1 Consequent to may finding, the reference is answered by arriving at the conclusion that assessments in facts and on law were Provisional Assessments.
3.2 Matter may now be placed before the referring Bench for disposal of the appeal.
3.3 Ordered accordingly.
The assessments during the period in dispute were provisional and notice under Section 11A of the Central Excise Act, 1944 was required to be issued to the appellants. Hence the impugned order is upheld and the appeal rejected.