Full Judgment Text
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CASE NO.:
Appeal (civil) 2350 of 2002
PETITIONER:
M/s. Pahwa Chemicals Pvt. Ltd.
RESPONDENT:
The Commissioner of Central Excise, New Delhi
DATE OF JUDGMENT: 24/02/2005
BENCH:
S. N. Variava,Dr. AR. Lakshmanan & S. H. Kapadia
JUDGMENT:
J U D G M E N T
WITH
CIVIL APPEAL NO. 406 OF 2004
S. N. VARIAVA, J.
Civil Appeal No. 2350 is filed against the Judgment dated 19th
July, 2001 passed by the Customs, Excise & Gold (Control) Appellate
Tribunal (for short ‘CEGAT’) and Civil Appeal No. 406 of 2004 is filed
against the Judgment dated 25th June, 2003 passed by CEGAT. Both
these Appeals can be disposed off by this common Judgment as the
parties are the same and the question involved is the same.
Briefly stated the facts are as follows:
The Appellants are engaged in manufacture of Textile Printing
Adhesives falling under Chapter Heading No. 3402 of the Central
Excise Tariff Act, 1985. The Appellants were claiming benefit of
Notification No. 1 of 1993 as amended and Notification No. 16 of 1997.
Show-cause-notices were issued to them alleging that they were not
entitled to the benefit of the Notifications as they were using the logo
of "ATR" belonging to one M/s. ATR St. Moritz A.G., Switzerland.
Duty and penalty was demanded from them for having suppressed the
facts and non-payment of duty. The Appellants replied to the notices.
However, the Deputy Commissioner confirmed the demand of
Rs.26,74,875.75 and imposed a penalty of Rs. 26,00,000/-.
The Appellants filed an Appeal before the Commissioner of
Central Excise (Appeals). They inter alia contended that, as
suppression has been alleged, the Superintendent who had issued the
show-cause-notices was not competent to issue the show-cause-
notices and the Deputy Commissioner was not competent to
adjudicate. The Commissioner (Appeals) upheld the contention that
the show-cause-notices were wrongly issued and had been wrongly
adjudicated by the Deputy Commissioner in excess of powers vested in
him by the Central Board of Central Excise (for short ‘Board‘). The
Commissioner (Appeals) remitted the matter back with the following
directions:-
"I. If the matter does not really merit invocation of
suppression of facts, willful misstatement, etc., the
superfluous words may be got deleted from the
subject Show Cause Notices by issuing suitable
corrigenda and the matter may be re-adjudicated by
the competent adjudicating authority. The SSI
Notification Nos. may also be duly amended and
substituted by Notifications in force during the
periods of demand.
II. If the charge of misstatement suppression of facts
etc. is to be retained, fresh Show Cause Notices may
be issued in supersession of the impugned Show
Cause Notices in line with the instructions contained
in the two circulars referred to above.
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III. While re-adjudicating the matter, the appellants’
contention that vide their letter dated 1.4.99, they
had sent a specimen of the label to be used by them
and that this specimen shows that their own brand
name was more prominently displayed than the
foreign brand name and that the price should be
treated as cum-duty price should be examined in the
light of the various CEGAT decisions available on this
subject."
Aggrieved by the directions given, the Appellants filed an Appeal.
CEGAT by its Order dated 19th July, 2001 held that the Commissioner
(Appeals) should not have remitted the matter back with the above
directions and directed the Commissioner (Appeals) to decide the
matter on merits. CEGAT also held on merits that the Appellants
were not entitled to the benefits of the above mentioned Notifications
as they used the brand name of another Company on their products.
Aggrieved by this Order the Appellants have filed Civil Appeal No. 2350
of 2002.
No stay was granted in this Appeal, therefore, the Commissioner
(Appeals) adjudicated and confirmed the demand by an Order dated
17th July, 2002. The Appellants then filed an Appeal before CEGAT
wherein the only contention taken was that the Superintendent had no
jurisdiction to issue show-cause-notices and the Deputy Commissioner
had no jurisdiction to adjudicate. CEGAT has dismissed the Appeal by
the Order dated 25th June, 2003. The Appellants have filed Civil
Appeal No. 406 of 2004 against this Order.
It must be mentioned that the only point agitated is that the
Superintendent had no jurisdiction to issue the show-cause-notices
and that the Deputy Commissioner had no jurisdiction to adjudicate.
This is because in an earlier round it has already been held by CEGAT,
by its order dated 17th October, 2000 that the Appellants are not
entitled to the benefit of the Notifications. Against that Order Civil
Appeal No.4050 of 2001 is pending before this Court.
In order to consider this point it is necessary to see the relevant
provisions.
Section 11A, as it stood, prior to 14th May, 1992 reads as
follows:
"SECTION 11A. Recovery of duties not levied or not
paid or short-levied or short-paid or erroneously
refunded.\027(1) When any duty of excise has not been
levied or paid or has been short-levied or short-paid or
erroneously refunded, a Central Excise Officer may, within
six months from the relevant date, serve notice on the
person chargeable with the duty which has not been levied
or paid or which has been short-levied or short-paid or to
whom the refund has erroneously been made, requiring
him to show cause why he should not pay the amount
specified in the notice:
Provided that where any duty of excise has not been
levied or paid or has been short-levied or short-paid or
erroneously refunded by reason of fraud, collusion or any
willful mis-statement or suppression of facts or
contravention of any of the provisions of this Act or of the
rules made thereunder with intent to evade payment of
duty, by such person or his agent, the provisions of this
sub-section shall have effect, as if, for the words "Central
Excise Officer", the words "Collector of Central Excise" and
for the words "six months" the words "five years" were
substituted.
Explanation.\027Where the service of the notice is
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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.
(2) The Assistant Collector of Central Excise or, as
the case may be, the Collector of Central Excise shall, after
considering the representation, if any, made by the person
on whom notice is served under sub-section (1), determine
the amount of duty of excise due from such person (not
being in excess of the amount specified in the notice) and
thereupon such person shall pay the amount so
determined.
(3) For the purposes of this section,--
(i) "refund", includes rebate of duty of excise
on excisable goods exported out of India or
on excisable materials used in the
manufacture of goods which are exported
out of India;
(ii) "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\027
(A) where under the rules made
under this Act a monthly return,
showing particulars of the duty
paid on the 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;
(c) in the case of excisable goods on which
duty of excise has been erroneously
refunded, the date of such refund.
Thus, under Section 11A, as it then stood, whenever it was alleged
that there was fraud, collusion, willful misstatement or suppression of
facts, the show-cause-notices could only be issued by the Collector.
As the Act itself laid down a requirement, it has been held, in a
number of authorities, that a show-cause notice issued and/or
adjudication done by an officer below the rank of a Collector would be
invalid as such an officer had no jurisdiction.
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With effect from 14th May, 1992 Section 11A was amended and
the word "Collector" was deleted and the words "Central Excise
Officer" were incorporated. Thus, the Legislature purposely and
knowingly made a change whereby it was no longer required that
where allegations of fraud, collusion, willful misstatement or
suppression of facts are made, a Collector should issue a show-cause
notice or adjudicate the same. Now a Central Excise Officer also has
the jurisdiction.
Section 2(b) of the Act defines a "Central Excise Officer" as
follows:
"2(b). "Central Excise Officer" means the Chief
Commissioner of Central Excise, Commissioner of Central
Excise, Commissioner of Central Excise (Appeals),
Additional Commissioner of Central Excise, Deputy
Commissioner of Central Excise, Assistant Commissioner of
Central Excise or any other officer of the Central Excise
Department, or any person (including an officer of the
State Government) invested by the Central Board of Excise
and Customs constituted under the Central Boards of
Revenue Act, 1963 (54 of 1963) with any of the powers of
a Central Excise Officer under this Act."
Thus, even an Additional Commissioner or an Assistant Collector or a
Deputy Commissioner or any other Officer of the Central Excise or any
person invested by the Board with the power of the Central Excise
Officer would be a Central Excise Officer. Even though the Legislature
made this change, the Board issued a Circular dated 27th February
1997 which reads as follows:
"I am directed to say that the Board has decided to
review the powers of adjudication with the objective that
cases are decided expeditiously, there is even distribution
of workload and various doubts in this regard are clarified.
2. In this connection, the following facts and legal
position has been taken into consideration:-
(i) By virtue of Clause (a) of Section 33 of
Central Excise Act, 1944, Commissioners
can adjudicate the cases of confiscation and
penalty without limit. This power has been
delegated to Deputy Commissioners by CBR
Notification No.12-C.Ex., dated 17th May,
1947, to Assistant Commissioners of Central
Excise by CBR Notification No.8-C.E., dated
2nd September, 1944 and to Superintendent
of Central Excise by CBR Notification
No.93/59, dated 28th November, 1959.
(ii) So far as the confirmation of duty is
concerned, it is observed that Section 11A
empowers any Central Excise Officer to
issue the notice and determine the duty
due.
(iii) Likewise, the "proper officer" i.e.
Jurisdictional Central Excise Officer can
issue notice and adjudicate the demands
under Rule 9(2)/Rule 57-I/Rule 57U of
Central Excise Rules, 1944.
(iv) In order to bring about uniformity and
objectivity the Board issued instructions
defining powers of adjudication of specified
Central Excise Officers taking ’duty involved’
as the criterion.
3. Those show cause notices where adjudication
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orders are not passed upto 28th February, 1997, will be
adjudicated as provided hereinafter :-
(A) All cases involving fraud, collusion, any willful
mis-statement, suppression of facts, or
contravention of Central Excise Act/Rules made
thereunder with intent to evade payment of
duty and/or where extended period has been
invoked in show cause notices, (including
Modvat cases, Rule 9(2) cases of this type) will
be adjudicated by :-
(Amt. of duty involved)
Commissioners - Without limit
Addl. Commissioners - Upto Rs. 10 lakhs
(B) In respect of cases which do not fall
under the category (A) above, will be
adjudicated by :-
(Amt. of duty involved)
Commissioners - Without limit
Addl. Commissioners/ - Above Rs. 2 lakhs
Dy. Commissioners and upto Rs. 10 lakhs
Assistant Commissioner - Upto Rs. 2 lakhs
Notwithstanding the powers of Assistant Commissioners to
adjudicate the cases involving duty amount upto Rs. 2
lakhs only as above, all cases of determination of valuation
and/or classification other than those covered under
Category (A) above, will be adjudicated by the Assistant
Commissioners without any limit as hitherto, as also
Modvat disputes, other than those at category (A) above.
(C) Cases related to issues mentioned under first
proviso to Section 35B(1) of Central Excise
Act, 1944 would be adjudicated by the Addl.
Commissioners/Dy. Commissioners without
any monetary limit, as was the position under
Board’s Circular No. 13/93-CX., dated 15th
October, 1993.
4. The value of goods/conveyance, plants,
machinery and building etc., liable to confiscation will not
alter above powers of adjudication which will solely depend
upon the amount of duty/Modvat credit involved on the
offending goods.
5.1 In respect of cases covered under Category (A)
of Para 3 above, the show cause notices will be issued by
the same rank of officers who will adjudicate them.
Wherever the posts of Commissioner-I and Commissioner-
II (Judicial) are in existence, the show cause notices will
be issued by Commissioner-I.
5.2 In respect of cases covered under Category (B)
of Para 3 above, show cause notices will be issued by the
Range Superintendent where they are to be adjudicated by
the Assistant Commissioner and such notices will be issued
by Assistant Commissioner when they are adjudicated by
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Dy. Commissioner/Addl. Commissioner/Commissioner.
5.3 In respect of cases covered under category (C)
of Para 3 above, show cause notices will be issued by
Assistant Commissioner.
6. The definition of expression "Commissioner"
contained in Rule 2(ii) was amended by Notification No.
11/92-C.E. (N.T.), dated 14-5-1992. Accordingly, an
Additional Commissioner of Central Excise is not a
Commissioner for the purposes of appeal. Therefore,
appeal against the Order-in-Original passed by an Addl.
Commissioner of Central Excise shall lie to the
Commissioner of Central Excise (Appeals) and not to the
CEGAT.
7. All Previous Board’s Circulars relating to issue
of show cause notices and their adjudications except the
Circular No. 13/93-C.X., are hereby rescinded.
8. An immediate exercise should be undertaken
thereafter to take the stock of the pendencies as on 1st
March and transfer of the relevant files and records to
respective adjudicating authorities by 15th March, 1997
under proper receipt. This re-cast figures should be
reflected suitably in the Monthly Technical Report of March,
1997 to be submitted in April, 1997.
9. Receipt of this Circular may please be
acknowledged.
10. The trade and field formations may be suitably
informed."
By clauses 3(A) and 5.1 of this Circular, the Board is directing that in
cases of fraud, collusion, willful misstatement or suppression of facts
the notice must be issued and adjudication must take place by the
Commissioner without limit and by the Deputy Commissioner up to a
limit of Rs.10,00,000/-. Thereafter the Board by another Circular
dated 13th August, 1997 reiterated the above position.
The Appellants place strong reliance upon these two Circulars
and submit that by virtue of these Circulars the Superintendent had no
jurisdiction to issue the show-cause-notices and that the Deputy
Commissioner had no jurisdiction to adjudicate.
As noted above, the Legislature has purposely omitted the word
"Collector" from the proviso to Section 11A and replaced it with the
words "Central Excise Officer". It is the Act which confers jurisdiction
on the concerned Officer/s. The Act permits any Central Excise Officer
to issue the show-cause notices even in cases where there are
allegations of fraud, collusion, willful misstatement and suppression of
facts. The question therefore is: Can the Board override the provisions
of the Act by issuing directions in the manner in which it is done and if
the Board cannot do so then what is the effect of such Circulars?
In order to consider the powers of the Board one needs to see
certain provisions of the Act. Section 2(b) defines the "Central Excise
Officer" and it is mentioned therein that any Officer of the Central
Excise Department or any person who has been invested by the Board
with any of the powers of the Central Excise Officer would be a Central
Excise Officer. Thus, the Board has power to invest any Central Excise
Officer or any other Officer with powers of Central Excise Officer. By
virtue of Section 37B the Board can issue orders, instructions or
directions to the Central Excise Officers and such Officers must follow
such orders, instructions or directions of the Board. However, these
directions can only be for the purpose of uniformity in the classification
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of excisable goods or with respect to levy of duties of excise on such
goods. It is thus clear that the Board has no power to issue
instructions or orders contrary to the provisions of the Act or in
derogation of the provisions of the Act. The Board can only issue such
direction as is necessary for the purpose of and in furtherance of the
provisions of the Act. The instructions issued by the Board have to be
within the four corners of the Act. If, therefore, the Act vests in the
Central Excise Officers jurisdiction to issue show-cause-notices and to
adjudicate, the Board has no power to cut down that jurisdiction.
However, for the purposes of better administration of levy and
collection of duty and for purpose of classification of goods the Board
may issue directions allocating certain types of works to certain
Officers or classes of Officers. The Circulars relied upon are, therefore,
nothing more than administrative directions allocating various types of
works to various classes of Officers. These administrative directions
cannot take away jurisdiction vested in a Central Excise Officer under
the Act. At the highest all that can be said is Central Excise Officers,
as a matter of propriety, must follow the directions and only deal with
the work which has been allotted to them by virtue of these Circulars.
But if an Officer still issues a notice or adjudicates contrary to the
Circulars it would not be a ground for holding that he had no
jurisdiction to issue the show cause notice or to set aside the
adjudication.
The Tribunal has in its order dated 25th June, 2003, inter alia,
held as follows:-
".....Further, at the relevant time as per the
provisions of Section 11A(1) proper officer which
includes Superintendent is competent to issue the
show cause notice. Board’s Circular is only the
administrative direction which does not cause any
prejudice to the Appellants....."
In our view this is absolutely correct. We, therefore, see no infirmity
in the Judgment dated 25th June, 2003. We hold that the
Superintendent had jurisdiction to issue show-cause-notice and the
Deputy Commissioner had jurisdiction to adjudicate.
As we have held that the concerned Officers had jurisdiction, we
see no infirmity in the Order dated 19th July, 2001 directing the
Commissioner (Appeals) to dispose of the Appeal.
In view of the above, we see no reason to interfere. The Appeals
stand dismissed. There will be no Order as to costs.