Commissioner Of Central Excise vs M/S Standard Niwar Mill
2013 Latest Caselaw 392 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

RESERVED
 
											   (AFR)
 

 
Case :- CENTRAL EXCISE APPEAL No. - 115 of 2005
 

 
Petitioner :- Commissioner Of Central Excise
 
Respondent :- M/S Standard Niwar Mill
 
Petitioner Counsel :- K.C. Sinha,S.P. Kesarwani
 
Respondent Counsel :- Pankaj Bhatia,Gopal Verma
 

 
Hon'ble Prakash Krishna,J.

Hon'ble Ram Surat Ram (Maurya),J.

(Delivered by Prakash Krishna, J.)

The above appeal has been filed under section 35-G of the Central Excise Act, 1944 by the Central Excise Department questioning the legality and validity of the order dated 13.12.2004 passed by the Custom, Excise and Service Tax Appellate Tribunal, New Delhi in E/A Nos. 2125-2126/04 - NB ( C ) whereby the Tribunal has confirmed the order passed by the Commissioner (Appeals).

The respondent mill is engaged in the manufacture and clearance of made up textile articles and processed textile falling under Chapters 63 and 52 of the Central Excise Tariff Act, 1985 respectively. The Excise Department received an information that the respondent has charged and collected the Central Excise Duty amounting to Rs.11,11,401/- in respect of supply of certain 'towels hand white' through supply order dated 14th of November, 1995 but has failed to deposit the Central Excise Duty. The proceedings against the respondent manufacturer was set to motion by issuing a show cause notice to the respondent manufacturer on the allegation that it has supplied the goods from the period April 1996 to June, 1996 and has charged the excise duty at the rate of 10 per cent amounting to Rs.11,11,400.86 but not debited either in PLA or in RG-23A/RG-23 C Part-II and thus, contravened the provisions of Rule 52-A (6) of the Central Excise Rules. The cause was shown by the respondent manufacturer by denying its liability. The allegations of contravention of Rules as well as charge of collecting the Central Excise Duty but not paying it to the credit of the Central Government were denied. The respondent manufacturer requested to provide copies of RT-12 return duly assessed for the year 1995-1996, triplicate copies of invoices issued during the period of demand and copies of audit report for the year 1995-1996. The request for supply of the documents referred to above made by the respondent manufacturer was rejected. The Additional Commissioner, Central Excise, Kanpur by his order dated 14th of November, 2003 asked the respondent manufacturer to pay an amount of Rs.11,11,401/- minus Rs.4,50,000/- which was already deposited, in terms of section 11D, imposed penalty of the like amount under Rule 173 Q (1) (a & b) of the then Central Excise Rules, 1944 read with section 38A of the Central Excise Act and a penalty of Rs.50,000/- was levied on Sri Ajay Agrawal, one of the partners of the respondent manufacturer Firm. The matter was carried in appeal before Commissioner (Appeals) who by the order dated 3.2.2004 allowed the appeal by setting aside the order in original with consequential reliefs. The Department carried the matter thereafter in second appeal before the Tribunal unsuccessfully.

On the following substantial questions of law, the present appeal has been admitted:-

1. Whether the Hon'ble Tribunal was right in not appreciating that the provisions of Section 11-D are independent of the provisions of Section 11-A and importing the specific period of limitation of Section 11-A in Section 11-D where there is really no limitation prescribed is not permissible in the light of law laid down by Apex Court in Commissioner Versus Raghuvar (India) Ltd. reported in 2000(118) ELT Page 311 (SC)?

2. Whether the Hon'ble Tribunal was right in holding that Section 11-D has got no application in this case due to the reason that no a single penny was paid towards the duty to the department while clearing the goods and therefore the question of receiving/collecting more duty than what was paid to the department by way of duty, did not arise, although the title of Section 11-D reads as "Duties of Excise collected from the buyers to be deposited with the Central Government?"

3. Whether the Hon'ble Tribunal was right in ignoring the word "determined" appearing in Section 11-D and fastening the applicability of Section 11-D only with the assessment while holding that "Mere issuance of the invoices by the respondents to the buyer while clearing the goods did not result in assessment of the duty specially when the respondents had not paid any duty whatsoever while issuing the invoice?"

Heard Sri S.P. Kesarwani, learned counsel for the appellant and Sri Pankaj Bhatia assisted by Sri Gopal Verma for the respondents.

The learned counsel for the appellant submitted that on the facts of the present case, the Tribunal has misinterpreted and misconstrued the sections 11A and 11D of the Central Excise Act (hereinafter referred to as the Act). The extended period of limitation of five years as provided in section 11 A cannot be imported and read under section 11D of the Act. Submission is that on the facts it is established beyond doubt that the respondent manufacturer has collected the excise duty on the supplies made during the period April, 1996 to June, 1996 on 'towels hand white' but has failed to deposit the same. The respondent manufacturer has been unjustly enriched as it collected the duty but failed to deposit the same with the Central Government and in such cases, bar of period of limitation will not be attracted. It was also submitted that the Rules as then existed, had provided payment of duty on self assessment by the manufacturer. Even if the Department has not assessed the duty by making an assessment order, nonetheless it cannot be said that there is no assessment of duty in as much as it is a case of self assessment of duty which amounts to assessment and therefore, the duty amount can be recovered from the manufacturer. Reference was made to the relevant Rules as then existed and emphasis was laid mainly that it is a case of unjust enrichment and technicalities such as prescribed period of limitation or there is no assessment order should not come in the way of the Department.

In reply, the learned counsel for the respondent manufacturer, submitted that on a plain reading of section 11 D (1) it is clear that the duty collected should be in excess of duty assessed or determined and paid. Unless and until duty is assessed or determined, it cannot be said that the duty collected by a manufacturer is in excess of duty assessed or determined and paid. The necessary requirement for invoking section 11-D is that there should be an assessment. Elaborating the argument, it was submitted that the period of limitation at the most could be extended by five years, which had expired in the present case. The show cause notice was issued after expiry of the period of five years. The second argument is that it is a case where proper opportunity of hearing was denied by the department. The Department had issued the show cause notice after expiry of the period of five years and for an effective defence/reply, the manufacturer required certain documents which were not supplied and the prayer was refused. Resultantly, in absence of relevant record, the respondent manufacturer was not afforded a reasonable opportunity of hearing which vitiates the entire proceedings. The reliance placed on the statement of Sri Vinay Agrawal was misplaced one in as much as he gave the statement to the effect that it appears that the duty was not paid in absence of record and this statement does not lead to the conclusion that the non-payment of duty or short payment of duty was an admitted fact by the manufacturer.

Considered the respective submissions of the learned counsel for the parties.

All the questions are interrelated, as such, are taken together.

For the sake of convenience, Section 11-D is reproduced below:-

Duties of excise collected from the buyer to be deposited with the Central Government. -

(1) "Notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder, every person who is liable to pay duty under this Act or the rules made thereunder, and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under this Act or the rules made thereunder from the buyer of such goods in any manner as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government.

(1A) Every person, who has collected any amount in excess of duty assessed or determined and paid on any excisable goods or has collected any amount as representing duty of excise on any excisable goods which are wholly exempt or chargeable to nil rate of duty from any person in any manner, shall forthwith pay the amount so collected to the credit of the Central Government.

(2) Where any amount is required to be paid to the credit of the Central Government under sub-section (1) or sub-section (1A), as the case may be, and which has not been so paid, the Central Excise Officer may serve, on the person liable to pay such amount, a notice requiring him to show cause why the said amount, as specified in the notice, should not be paid by him to the credit of the Central Government.

(3) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom the notice is served under sub-section (2), determine the amount 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.

(4)    The amount paid to the credit of the Central Government under sub-section (1) or sub-section (1A)  or sub-section (3), as the case may be, shall be adjusted against the duty of excise payable by the person on finalisation of assessment or any other proceeding for determination of the duty of excise relating to the excisable goods referred to in sub-section (1) and sub-section (1A).
 
(5)   Where any surplus is left  after the adjustment under sub-section (4), the amount of such surplus shall either be credited to the Fund or, as the case may be, refunded to the person who has borne the incidence of such amount, in accordance with the provisions of section 11B and such person may make an application under that section in such cases within six months from the date of the public notice to be issued by the Assistant Commissioner of Central Excise for the refund of such surplus amount."
 
	Every person who has collected any amount from buyer as duty is liable to pay the said amount forthwith to the central government  and shall be given credit on finalization of assessment. 
 

A fair reading of the provision quoted above would show that a person who has collected any amount in excess of duty assessed or determined from the buyer, shall forthwith pay the amount so collected to the credit of the Central Government. The liability to pay the amount collected as duty in excess of duty assessed or determined has been created by section 11-D (1). A person who fails to deposit the duty as provided for under sub section (1) of section 11-D be asked to deposit the duty after serving a show cause notice by the Central Excise Officer who will pass an order after considering the explanation for payment of the amount so determined by him. The amount paid or deposited to the credit of the Central Government under sub section (1) or sub section (1A) or sub section (3) shall be given adjustment against the duty of excess payable on finalization of assessment or any other proceeding for determination of duty of excess as per its subsection (4). Its sub section (5) provides for refund of excess duty so paid on the application filed by the person within six months. On reading of section 11-D as a whole would show that this section provides for payment of duty on provisional basis i.e. till the finalization of assessment or any other proceeding for determination of duty of excess. The aforesaid section has been substituted w.e.f. 20th of September, 1991. The aforesaid section opens with a non-obstante clause - "notwithstanding anything contrary to law contained in any order or direction or Rules made thereunder". But at the same time, it provides that the amount collected by the person liable to pay the duty under the Central Excise Act is in excess of the "duty assessed or determined and paid". These are the key-words. It presupposes the determination or assessment of duty. Only thereafter, the question of excess collection of duty over and above the duty assessed or determined would arise. The point which we are trying to bring home is that the assessment or determination is sine qua non under sub section (1) of section 11-D to hold a person that he has collected any amount in excess of duty assessed or determined. It is nobody's case that sub section (3) of section 11-D is attracted to the facts of the present case, there being no such order by the Central Excise Officer thereunder.

To overcome the difficulty regarding assessment or determination of duty, the learned counsel for the department took the shelter of self assessment scheme available under the then existing Rules. He submitted that the word 'assessment' has been defined under Rule 2(2) of the Central Excise Rules. The definition of word 'assessment' prior to 20th of November, 1996 was as follows:-

"Sub section (2)- " 'Assessment' means assessment made by the proper officer and includes reassessment, provisional assessment under Rule 9B, summary assessment under Rule 37A, best assessment under Rule 173Q and any order of assessment under which the duty assessed is nil".

The aforesaid definition of assessment was amended subsequently vide notification no.36/96-CE (NT) dated 20th of November, 1996. After amendment it reads as follows:-

"Assessment means Assessment made by the proper officer and includes self assessment of duty made by the assessee, reassessment by the proper officer, provisional assessment under Rule 9B, summary assessment under Rule 37A, best judgment assessment under Rule 173Q and any other order of assessment in which duty assessed is nil."

In view the above, the argument of the department is that even if there is no assessment order of any kind by the proper officer even then the self assessment made by the respondent manufacturer would be assessment in view of the above amended definition. At this juncture, the learned counsel for the respondent manufacturer rightly submitted that the amended Rule came into force w.e.f. 20th of November, 1996 i.e. subsequent to the period involved "April, 1996 to June, 1996" herein and as such, the amended Rule will not be applicable to the present case. We find sufficient force in the above argument of the learned counsel for the respondent manufacturer. Even otherwise also, the argument of the learned counsel for appellant is far-stretched. The Department cannot blow hot and cold simultaneously by saying, on one hand, that the self assessment is assessment and on the other hand, that it is not bound by the self assessment and can create a demand without passing any assessment order rejecting the self assessment on its whims and fancy. There has to be an adjudication in case of dispute by some authority who is competent to adjudicate it. The self assessment should be accepted as such by the department else there should be proceedings for assessment. Meaning thereby, if there is no dispute with regard to self assessment it should be treated as final.

The problem on hand can be seen from another angle too. The show cause notice and the order in original is based on terms of section 11D of the Act. Section 11D, casts obligation on the manufacturer to deposit the duty collected from the buyer subject to finalisation of assessment. To put it differently, deposit of duty is provisional subject to adjustment on finalisation of assessment. It does not talk of assessment or determination of duty, if any. Section-11D is in the nature of machinery provision for collection of duty, till final assessment, where the duty has been collected but not deposited. The substantive provision is section 11-A which deals with recovery of duties not levied or not paid or short levied or short paid or erroneously refunded. Resultantly, in these situations, the recourse could only be to section 11-A, which also prescribes the outer limit of time for taking any such action, maximum being five years. Thus, no demand for recovery of duties not paid etc. could be made by invoking section-11D of the Act.

The heading of section 11-D as also its scheme clearly shows that the said provision is in the nature of machinery provision making provision for deposit of duty collected from the buyer in excess of duty assessed, determined and paid on any excisable goods under this Act or the Rules made thereunder. This section by itself does not provide for levy of duty.

We may refer to the observations of Apex Court in A.V. Fernandez versus State of Kerala, AIR 1957 SC 657, wherein the Apex Court referring to the observations made earlier in Chatturan Horiram Ltd. versus CIT, Bihar, AIR 1955 SC 619, has said that there are three stages in the imposition of tax being, the declaration of liability, assessment and recovery. The third stage i.e. recovery of tax will come into play only when a person does not voluntarily pay the tax. Here, the liability to pay excise duty was there, but its recovery is barred by time. Section 11-D, being machinery provision for payment/realization of provisional duty realised by the buyers, subject to final assessment, final assessment is barred by time, cannot be pressed into service. Machinery provision section 11-D could be invoked in the aid of main provision i.e. section 11-A, but note vice versa.

To some extent the law as laid down by the Apex Court in the case of Indian Carbon Ltd. Vs. State of Assam, (1997) 106 SJC 460, wherein it has been laid down that interest for late payment of central sales tax, cannot be levied, unless there is such substantive provision in the Central Sales Tax Act for levy of interest, supports the above view.

Section- 11A provides for recovery of duties not levied or not paid or short levied or short paid or erroneously refunded. The normal period for recovery of such dues is one year from the relevant date. However, the period of one year can be extended in cases of fraud, collusion, any willful mis-statement or suppression of facts by any person or his agent. The period for which the duty has not been paid on the goods i.e. hand towels is April, 1996 to June, 1996. The show cause notice is dated 6th of March, 2003 and was served on 3rd of February, 2004, beyond the maximum prescribed period of limitation. The contention of the Department is that it is a case where the assessee respondent has realized the excess duty on the supplies made to the Air Head Quarters, but has not deposited the duty. The contention is that irrespective of expiry of period of limitation prescribed under section 11-D, the doctrine of unjust enrichment will come into play in favour of the department and against the respondent manufacturer. It was submitted that one of the partners Vinay Agrawal has admitted that the duty has not been paid and deposited of Rs.4,50,000/- by him, is indicative of the fact that it is a case of duty realised but of short deposit. Strong reliance has been placed upon the well known judgment of the Apex Court in the case of Mafatlal Industries Limited vs. Union of India, JT 1996 (11) SC 283. It has been laid down therein that a claim for refund of tax or duty can succeed only if the petitioner alleges, and establishes that he has not passed on the burden of duty to another person as in the case of passing of burden to another, the real loss or prejudice is suffered by the person who has ultimately borne the burden and only that person can legitimately claim the refund. Doctrine of unjust enrichment is just and solitary doctrine. It provides that a person cannot collect the duty from his purchaser and also claims refund of the same duty from the State on the basis of the State having collected from him contrary to law. An exception has been provided to State. There cannot be any quarrel to the above proposition of law. But its applicability on the facts of the present case is a different matter. The doctrine of unjust enrichment bars the remedy of a person who claims refund of the tax or paid realized by the State from such person contrary to law. But it does not provide that if a person has realized the duty or tax and not deposited the same with the State, the State can recover this amount allegedly due to it without taking recourse to any statutory provision. There are many fiscal statutes, for example - U.P. Trade Tax Act which provides that if a person collects an amount in the name of Trade Tax but does not deposit the same, proceeding for penalty may be initiated and the minimum penalty amount is the amount so realized. In absence of any such provision in the Central Excise Act, merely on the hypothesis of unjust enrichment, the amount in dispute cannot be realized by the appellant. Section - 11-A is very widely worded and provides for recovery of duties not levied or not paid or short levied or short paid or erroneously refunded. All possible eventuality of loss of revenue to the Central Government is comprehended therein. Taking that it is a case of recovery of duty either not levied or not paid even though the prescribed period of limitation in such cases is five years from the relevant date. The relevant date is defined in its sub section (3) (ii) which means where under the Rules made under this Act, a periodical return is to be filed, the date on which such return is to be filed and where no periodical return is to be filed, the last date on which such return is to be filed under the said Rules and in any other case, the date on which the duty is to be paid under this Act or the Rules made thereunder. The show cause notice which indicates the stand of the appellant shows that it was issued on the allegation that the goods were cleared from the factory without payment of Central Excise Duty leviable thereon etc.. The show cause notice proceeds on the footing that the respondent had indulged in clandestine removal of the goods during the period April, 1996 to June, 1996 and has not paid the duty payable on them. Taking the show cause notice on its face value, it was not the case of the Department in the show cause notice that the respondent manufacturer is liable to pay the duty under the doctrine of unjust enrichment. The clandestine removal of the goods being the stand of the Department, it is to bring its case within the four corners of section 11-A of the Act which it has failed to do. The order in original proceeds on the footing that it is true that duty cannot be recovered under section 11-A after lapse of five years but there is no period of limitation provided under the Rule or Act for the purposes of imposing penalty under the different Rules forgetting that non payment of duty and penalty are two different things; when duty could not be levied, question of levy of penalty for non payment of duty does not arise. It proceeds thereafter to hold that noticee has contravened the provisions of Rule 9, 52 A, 173B and 173G of the then Central Excise Rules, 1944 are liable to penalty under Rule 173Q of the Central Excise Rules, 1944. In the present appeal, the Department has not raised any such question as to whether the noticee/respondent manufacturer has contravened the provisions of these Rules and is liable for penalty. Therefore, we were not called upon to address the penalty part under Rule 173Q of the Rules. The argument before the Tribunal as is apparent from the order of the Tribunal and also before this Court proceeded on the footing that the amount representing the duty was collected on clandestine removal of goods on the strength of fake/parallel/duplicate invoices.

The show cause notice was issued and served beyond the extended period of five years, the action of the appellant is clearly barred by time. Section 11A covers the field of any duty of excise not levied or not paid or has been short levied or short paid etc. specifically; resort to section 11D in such matters is not permissible under law. Section 11D provides for provisional deposit of duty with the Central Government by a person who has collected it from the buyer. It does not concern the situation which falls under section 11A of the Act which deals with the recovery of duties.

Viewed as above, the Tribunal was right in holding that on the facts of the case on hand it is section 11A which is attracted and not section 11D of the Act. All the questions are, therefore, decided in favour of the respondent assessee and against the department.

Before saying omega to the appeal, it would be apt to refer a very recent pronouncement of the Apex Court in M/s. Uniworth Textiles Ltd. Vs. CCE, JT 2013 (2) SC 113. Though, the then Section 28 of the Excise Act, its proviso in particular was up for consideration. The Apex Court relying upon its earlier judgments delivered under section 11A of the Act, held that mere nonpayment of duty does not amount to collusion, wilful mis-statement or suppression of facts so as to invoke extended period of limitation of five years, which also has expired in the present case indisputably.

In the result, the appeal fails and is hereby dismissed. But no order as to costs.

(R.S. Ram (Maurya), J.) (Prakash Krishna, J.)

Order Date :- 05.04.2013

LBY