Full Judgment Text
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CASE NO.:
Appeal (civil) 754 of 2001
PETITIONER:
M/s. Duncans Industries Ltd., Calcutta
RESPONDENT:
Commissioner of Central Excise, New Delhi
DATE OF JUDGMENT: 22/08/2006
BENCH:
ASHOK BHAN & MARKANDEY KATJU
JUDGMENT:
J U D G M E N T
With
Civil Appeal Nos. 4075-4076 of 2001
BHAN, J.
These civil appeals are directed against the
common impugned order Nos. 829 and 830 of 2000
dated 4.10.2000 passed by the Customs, Excise &
Gold (Control) Appellate Tribunal (hereinafter
referred to as "the Tribunal") in Appeal Nos.
E/1622/99-A and E/2095/2000-A. Revenue has filed
Civil Appeal Nos. 4075 \026 4076 of 2001 against the
deletion of duty demand of Rs. 17,67,13,315/-
raised in the show-cause notice dated 1.10.1986 for
the period September 1981 to February 1983 and the
assessee has filed Civil Appeal No. 754 of 2001
against the levy of penalty of Rs. One crore.
Since these appeals are directed against the common
order passed by the Tribunal, we also propose to
dispose them of by a common order. The facts are
common in both the sets of appeals.
This case has a chequered history and has had
various round of litigation in different forums.
In order to determine the controversy and the point
involved in these appeals the following facts may
be noticed.
M/s National Tobacco Company Limited Agarpara,
a manufacturer of cigarettes falling under
erstwhile Central Excise Tariff Item No. 4 II(2),
and holder of Central Excise Licence L-4 No. 3/84
for the manufacture of cigarettes, was merged with
M/s Mirpara Tea Company effective from 1.4.1977.
Consequent to this, it became a Division of newly
formed M/s. Duncans Agro Industries Limited,
Calcutta. Thereupon, Central Excise Licence L-4
No. 1-Cig/I/V/78 dated 18.2.1978 for the
manufacture of cigarettes was issued to M/s.
National Tobacco Company.
In April 1984, M/s. National Tobacco Company
was de-merged from M/s. Duncans Agro Industries
Limited and was made a wholly owned subsidiary of
M/s. Duncans Agro Industries Limited in the name
and style of M/s. New Tobacco Company. M/s.
Duncans Agro Industries Limited, is the respondent
in the two appeals filed by the Revenue and the
appellant in Civil Appeal No. 754 of 2001 and would
be referred to as the assessee.
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As a result of demerger, a new Central Excise
Licence No. L-4 No.1/Cig/IV/Khar/85 dated 9.3.1985
was issued to M/s. New Tobacco Company Limited for
the manufacture of cigarettes.
As there was some dispute as to whether excise
was leviable on manufacturing cost plus
manufacturing profit and post manufacturing cost
and profits arising from post manufacturing
operations, the provisional assessments were made
from July, 1973 to February, 1983. Final
assessments were to be made later. On 8.5.1984,
Assistant Collector of Central Excise, Calcutta
issued a show-cause notice to the assessee for the
period July, 1973 to February, 1983 calling upon
the assessee to show cause as to why:
"...the deductions claimed on account of
freight, interest on freight, rebate,
octroi, interest on receivables and
tariff rate of duty from the wholesale
price should not be disallowed and why
the charges on account of freight,
interest on freight, rebate, octroi and
interest on receivables should not be
included in the assessable value and also
why the cost of C.F.C. packing charged
and realized by them from the buyers
should not be included in the assessable
value under Section 4(1) (a) and Section
4 (4) (d) (i) of Central Excise & Salt
Act, 1944 and why price of each product
should not be approved accordingly.
Collector of Central Excise, Delhi issued
another show-cause notice on 1.10.1986 to the
assessee for the period September, 1981 to
February, 1983 alleging that the assessee has
willfully mis-declared assessable value of
cigarettes from time to time during the period from
September, 1981 to February, 1983 in the Central
Excise documents, Price Lists with fraudulent
intent to evade the payment of correct amount of
duty and thereby they have short paid Central
Excise duty amounting to Rs. 97,55,56,362/-.
Accordingly, the assessee was called upon to show
cause as to why:
"a) the duty short paid amounting to Rs.
97,55,56,362.00 as per Annexure ’D’
should not be demanded under Rule
9(2) of the Central Excise Rules,
1944 read with the proviso of sub-
section (1) to Section 11A of the
Central Excise and Salt Act, 1944.
b) Penalties should not be imposed on
them under Rules 9(2), 52A(5), 210 &
226 of the Central Excise Rules,
1944."
Assessee being aggrieved filed a Civil Writ
Petition No. 1708 of 1987 in the Delhi High Court
on the ground that the show cause notice dated
1.10.1986 issued to the assessee alleging
contravention of the central excise duty in respect
of cigarettes manufactured and cleared from the
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factory at Agarpara during the period September,
1981 to February, 1983 and also addendum to the
show-cause notice dated 3.10.1986 was in excess of
the jurisdiction and/or without authority of law
inasmuch as the assessee had been paying the excise
duty on the basis of the provisional assessments
pursuant to filing of provisional price lists and
till the price lists and the assessments were
finalized a show-cause notice could not be issued.
According to the petitioner Section 11-A of the
Central Excises Salt Act, 1944 (for shot "the Act")
could not be invoked in cases where duties are paid
under provisional assessment made under Rule 9B of
the Central Excise Rules, 1944 (for short "the
Rules") without first finalizing the assessment.
The Division Bench of the High Court dismissed the
writ petition by its order dated 12.8.1988 reported
in Duncans Agro Industries Ltd. Vs. Union of India
& Ors., 1989 (39) ELT 511 (Del.). Contention of
the assessee that the cause of action for invoking
Section 11-A would accrue only from the relevant
date defined under Section 11-A which in case of
provisional assessment means the date of adjustment
of duty after final assessment under Rule 9B was
rejected. This judgment became final and is
binding between the parties. This Court later took
a contrary view in Serai Kella Glass Workers Pvt.
Ltd. Vs. Collector of Central Excise, Patna, 1997
(4) SCC 641.
Collector of Central Excise, Delhi took up for
hearing the proceedings arising from the show-cause
notice dated 1.10.1986 and disposed of the same on
27.3.1991 with the interim directions, which are as
under:
"I direct the Divisional Assistant
Collector, Kharda Division of Calcutta-II
Collectorate to make final assessment in
the case under Rule 9B(5) of the Central
Excise Rules, 1944, for the period
covered by the instant show cause notice
as early as possible. He may use the
material contained in the instant show
cause notice as independent material to
support the final assessment after
according an opportunity to the
manufacturer/other parties concerned to
meet the case and after considering the
cause show. He is further directed to
intimate the undersigned as soon as he
completes the said provisional
assessment. Thereafter this show cause
notice will be taken up for
adjudication."
In this order the Collector of Central Excise,
Delhi gave three fold directions to the Divisional
Assistant Collector, Kharda Division of Calcutta
II, namely, (1) To make final assessment in the
case under Rule 9B(5) of the Rules for the period
covered by the instant show-cause notice
(1.10.1986) as early as possible; (2) He could use
the material contained in the show-cause notice
dated 1.0.1986 as independent material to support
the final assessment after affording an opportunity
to the manufacturer/other parties concerned to meet
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the case and after considering the show cause; (3)
He was further directed to intimate the Collector
of Central Excise, Delhi as soon as he completes
the provisional assessment; and (4) The show-
cause notice dated 1.10.1986 was to be taken up for
adjudication thereafter.
The assessee being aggrieved filed an appeal
before the Appellate Tribunal at New Delhi, which
was disposed of on 9.12.1997. The assessee
challenged the finding/observation made by the
Collector of Central Excise, Delhi that "thereafter
this show cause notice will be taken up for
adjudication" on the ground that after finalizing
of the assessment there would be nothing left for
the Collector of Central Excise, Delhi for
consideration or decision and therefore, this
sentence in the order should be set aside. The
appeal was disposed of by observing:
"\005.We do not understand the impugned
order as recording a finding overruling
the contention raised by the appellant
the collector had no jurisdiction to
adjudicate on the strength of show cause
notice dated 1.10.86 or as to whether
after finalisation of assessments
anything would be left for the Collector
to decide. Thereafter the appellant
cannot have any grievance. It is open to
the appellant to raise these aspects if
after finalisation of assessment, the
Collector takes up the proceeding before
him for adjudication in this matter.
With this observation, the appeal is
disposed of."
[Emphasis supplied]
Thus the liberty to take up this point was
reserved with the assessee after the finalization
of the proceedings.
In pursuance to the interim directions issued
by the Collector of Central Excise, Delhi in its
order dated 27.3.1991 the office of the Assistant
Collector Central Excise, Kharda Division, Calcutta
issued addendum dated 20.2.1992 incorporating the
contents of the show-cause notice dated 1.10.1986
in the show cause notice dated 8.5.1984 thereby
assuming jurisdiction to adjudicate all issues
raised in both the show cause notices.
The two show cause notices were finally
adjudicated by the Assistant Collector Central
Excise, Kharda Division, Calcutta by its order
dated 11.1.1996. The assessable value was
determined and consequent thereupon demand was
raised by finalizing assessments for the entire
period from July 1973 to February, 1983.
On 3.7.1996 show cause cum demand notice was
issued by the Superintendent, Office of the
Assistant Collector Central Excise, Kharda
Division. Calcutta on the basis of adjudication
order dated 11.1.1996 quantifying the amount of
short levy for the period July 1973 to February,
1983. Assistant Collector Central Excise, Kharda
Division, Calcutta adjudicated the show cause cum
demand notice dated 3.7.1996 confirming the demands
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(short levy) of Rs. 386,45,71,192.69 and Rs.
66,45,136.19 in respect of cigarettes and smoking
mixtures respectively.
The assessee being aggrieved against the order
of Assistant Collector Central Excise, Kharda
Division. Calcutta filed an appeal before the
Commissioner (Appeals) Central Excise, Calcutta.
Commissioner of Appeals by his order in appeal
dated 25.7.1997 accepted the appeal and remanded
the matter to the Assistant Collector Central
Excise, Kharda Division. Calcutta for recomputation
of the duty afresh in the light of the decision of
this Court in Government of India Vs. Madras Rubber
Factory, 1995 (4) SCC 349. Assistant Collector
Central Excise, Kharda Division. Calcutta in
compliance of the order of remand dated 25.7.1997
of the Commissioner of Appeals Central Excise,
Calcutta recomputed the amount of duty short paid
as Rs. 16.6,94,320.34 and Rs. 8,13,683.29 after
adjusting Rs. 5.97 crores pre-deposited in the
light of the judgment of this Court in Madras
Rubber Factory’s case (supra). This order was
later on corrected by issuing a corrigendum and the
amount was reduced.
After finalization of the proceedings by the
Assistant Collector Central Excise, Kharda
Division. Calcutta the Commissioner of Central
Excise, Delhi passed an order in original in show-
cause notice dated 1.10.1986 determining Rs. 17.67
crores as due as duty liability and imposing a
penalty of Rs. One crore.
Assessee being aggrieved filed Appeal No.
E/1622/99-A/92E/2095/2000A which has culminated in
the impugned order. Tribunal accepted the appeal
partly. Duty liability was set aside as it had
already been adjudicated in the earlier proceedings
but upheld the levy of penalty. While deleting the
duty liability the Tribunal observed thus:
"From this, it is clear that the
Collector had left the duty demand raised
in the show cause notice dated 1-10-1986
also to be included in the finalisation
of the provisional assessment which was
pending from 1973. The Revenue had not
challenged that order. Pursuant to that
order, the Assistant Collector had issued
an Addendum to the assessees on 20-2-1992
making the materials relied upon in the
show cause notice dated 1-10-1986 as part
of the materials for finalising the
assessments and the duty demand was
finalised after assessees made their
representations. That duty demand became
final as the Revenue did not challenge
it. The order passed on the assessees’
appeal against that duty demand was also
not challenged by both sides. We,
therefore, hold that the duty demand made
by the Assistant Collector was a
consolidated demand and that demand
having become final, no second demand
could be made in another adjudication
proceeding by the Commissioner.
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Accordingly, we set aside the duty demand
of over Rs. 17 crores made in the
impugned order."
Revenue being aggrieved has filed Civil Appeal
Nos. 4075-4076 of 2001 against the deletion of the
duty liability and the assessee has filed the Civil
Appeal No. 754 of 2001 against the order
maintaining the levy of penalty.
Another fact which needs to be noticed is that
after the Assistant Collector Central Excise,
Kharda Division, Calcutta finalized the assessment
order dated 3.12.1996, the Assistant Collector
Central Excise, issued show cause notice dated
27.5.1998 stating therein that the order in
original dated 12.12.1997 the extra amounts
realized as "additional consideration" was not
taken into consideration and accordingly a demand
of Rs. 21.58 crores was made on the assessee. In
the meantime, Kar Vivad Samadhan Scheme, 1998 (for
short "the KVS Scheme") was introduced by Finance
(No. 2) Act, 1998. Pursuant to the said scheme the
assessee filed a declaration under Section 89 of
the Finance (No. 2) Act, 1998 in respect of the KVS
Scheme. An order under the KVS Scheme was passed
in pursuance to which the assessee paid the demand
raised under the said scheme.
Counsel for the parties have been heard at
great length.
The issue before the Assistant Collector
Central Excise, Kharda Division, Calcutta was for
the determination of the assessable value of the
goods for the period July, 1973 to
February, 1983 i.e. the period covered by the show
cause notice dated 8.5.84. The issue before the
Commissioner of Central Excise, Delhi was also for
determination of the assessable value of the goods
for the period September, 1981 to February, 1983,
the period covered by show cause notice dated
1.10.1986. The show cause notice dated 1.10.1986
was issued against 20 persons including the
assessee company. As regards the assessee, for the
period September, 1981 to February, 1983, the
Commissioner of Central Excise passed the order
dated 27.3.1991 directing the Assistant
Commissioner to determine the assessable value
taking into consideration the materials contained
in show cause notice dated 1.10.1986. This he did
by noticing the correct position of law laid down
by this Court in the case of Union of India Vs.
Godrej & Boyce Mfg. Co. (Pvt.) Ltd., (Civil Appeal
No.12824 of 1989 decided on 8.3.90). The Assistant
Collector Central Excise, Kharda Division, Calcutta
thereafter issued addendum dated 20.2.992
incorporating the allegations made in show cause
notice dated 1.10.1986 in the show-cause notice
dated 8.5.1984. The effect of the order passed by
the commissioner of Central Excise, Delhi was that
the Assistant Collector Central Excise, Kharda
Division, Calcutta alone had the jurisdiction to
finally adjudicate and determine the assessable
value of the goods cleared from the assessee’s
factory for the entire period and the consequent
duty liability. Either party wishing to dispute
the determination made by the Assistant Collector
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Central Excise, Kharda Division, Calcutta had to do
so by invoking the right of appeal to the
Commissioner of Appeals, Tribunal and the Supreme
Court. In addition the Department could have
invoked the short levy provision under Section 11-A
within a period of six months or invoked the
extended period of limitation of 5 years under
proviso to Section 11-A provided the conditions
laid down in the proviso were satisfied. The two
show-cause notices were finally adjudicated by the
Assistant Collector Central Excise, Kharda
Division, Calcutta on 11.01.1996. The assessable
value determined and consequent demand was raised
by finalizing assessments for the entire period
July 1973 to February, 1983. If the revenue was
aggrieved by the above proceedings it was incumbent
upon them to either invoke the right of appeal
against that order under Section 35 E (2) or issue
a short levy notice under Section 11-A within six
months. Neither of these two options having been
invoked, the order attained finality as against the
revenue.
It need not be emphasized that there could not
be two assessments for the same period.
This apart finally determined as due for the
entire period of 10 years from the assessee having
been settled under the Kar Vivad Samadan Scheme,
1998, there is no scope for any further review or
determination of that issue by any authority under
the Act.
In Hira Lal Hari Lal Bhagwati Vs. CBI. 2003
(5) SCC 257, at page 274 this Court observed:
"We have carefully gone through the
Kar Vivad Samadhan Scheme, 1998 and the
certificate issued by the Customs
Authorities. In our opinion, the GCS is
immune from any criminal proceedings
pursuant to the certificates issued under
the said Scheme and the appellants are
being prosecuted in their capacity as
office-bearers of the GCS. As the
customs duty has already been paid, the
Central Government has not suffered any
financial loss. Moreover, as per the Kar
Vivad Samadhan Scheme, 1998, whoever is
granted the benefit under the said Scheme
is granted immunity from prosecution from
any offence under the Customs Act, 1962
including the offence of evasion of duty.
In the circumstances, the complaint filed
against the appellants is unsustainable."
And at page 280 it was observed:
"The Kar Vivad Samadhan Scheme
certificate along with CBI v. Duncans
Agro Industgries Ltd., 1996 (5) SCC 591,
and Sushila Rani v. C.I.T., 2002 (2) SCC
697, judgments clearly absolve the
appellants herein from all charges and
allegations under any other law once the
duty so demanded has been paid and the
alleged offence has been compounded. It
is also settled law that once a civil
case has been compromised and the alleged
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offence has been compounded, to continue
the criminal proceedings thereafter would
be an abuse of the judicial process."
Thus, after the grant of certificate under the
Kar Vivad Samadan Scheme, 1998 as having settled
the dispute and payment of the amount determined no
further proceedings could be initiated or proceeded
with for the period in question.
For the reasons stated above, we do not find
any substance in the appeals filed by the Revenue.
Accordingly, Civil Appeal Nos. 4075-4076 of 2001
are dismissed and the order passed by the Tribunal
in this respect is affirmed.
Taking up the appeal of the assessee, it may be
noted that the proposed penalty was under Rule 9(2)
and 52-A. This Court in N.B. Sanjana Vs.
Elphinstone Spg. & Wvg. Mills Co. Ltd., 1971 (1)
SCC 337, at page 348 held as under:
".....To attract sub-rule (2) of
Rule 9, the goods should have been
removed in contravention of sub-rule (1).
It is not the case of the appellants that
the respondents have not complied with
the provisions of sub-rule (1). We are of
the opinion that in order to attract sub-
rule (2), the goods should have been
removed clandestinely and without
assessment. In this case there is no
such clandestine removal without
assessment. On the other hand, goods had
been removed with the express permission
of the Excise authorities and after order
of assessment was made. No doubt the
duty payable under the assessment order
was nil. That, in our opinion, will not
bring the case under sub-rule (2). "
In the present case there is not even an
allegation much less finding by the department that
there has been any clandestine removal of goods
without assessment. As such the penalty is liable
to be set aside. The matter having been settled
in the Kar Vivad Samadan Scheme, 1998 the question
of determination of the duty payable or levy of
penalty did not arise. In our view, the Tribunal
clearly erred in upholding the levy of penalty.
Accordingly, Civil Appeal No. 754 of 2001 filed by
the assessee is accepted and the penalty levied is
ordered to be deleted.
These two sets of appeals are disposed of in
the above terms leaving the parties to bear their
own costs.
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