Calcutta High Court
M/S. Bengal Hammer Industries (P) ... vs Union Of India & Ors on 3 May, 2023
O - 27
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION
ORIGINAL SIDE
CEXA/1/2009
IA NO.GA/1/2009 (GA/56/2009)
M/S. BENGAL HAMMER INDUSTRIES (P) LTD.
-Versus-
UNION OF INDIA & ORS.
BEFORE:
The Hon'ble T.S. SIVAGNANAM, ACTING CHIEF JUSTICE
-And-
The Hon'ble JUSTICE HIRANMAY BHATTACHARYYA
Date : 3rd May, 2023.
Appearance :
Mr.Arijit Chakraborty, Adv.
Mr.N.K. Chowdhury, Adv.
Mr.D. Sharma, Adv.
..for the appellant.
Mr. K.K. Maiti, Adv.
Mr.Tapan Bhanja, Adv.
..for the respondent.
The Court : This appeal by the assessee under Section 35G of
the Central Excise Act, 1944 (for brevity 'The Act') is directed
against the order dated 25th June, 2008 passed by the Customs,
Excise & Service Appellate Tribunal, East Zonal Bench, Kolkata
(Tribunal). The appeal was admitted on 8th April, 2009 on the
following substantial question of law :
"Whether the Tribunal below substantially erred in law
in dismissing the appeal filed by the appellant without
appreciating that refixation of annual capacity of
production made by the Commissioner, on reviewing his
own order, without issuing any show cause notice and
without giving an opportunity of hearing inasmuch as the
order of the Commissioner was contrary to the principles
of natural justice and fair play?"
We have heard Mr. Arijit Chakraborty, learned counsel
assisted by Mr. N.K. Chowdhury, learned advocate appearing for the
appellant/assessee and Mr. K.K. Maiti, learned standing counsel
assisted by Mr. Tapan Bhanja, learned advocate appearing for the
respondent/department.
The short issue which falls for consideration is whether the
proceedings initiated by the Joint Commissioner (Technical)
pursuant to his order dated 3rd August, 1999 by issuing a notice to
show cause cum demand demanding central excise duty on the ground
that the annual production capacity of the appellant had been re-
fixed pursuant to a circular issued by the Board dated 13th
November, 1999 was valued in the eye of law. The question would be
whether the order passed by the Commissioner of Central Excise,
Calcutta - II dated 3rd April, 1998 which was holding the field and
accepted by the department could have been unilaterally revised by
a subordinate authority, namely, the Joint Commissioner solely due
to a circular issued by the Board. It is not in dispute that the
Commissioner of Central Excise had fixed the annual capacity of
the assessee under the Hot Re-rolling Steel Mills Annual Capacity
Determination Rules, 1997 by order dated 3rd April, 1998. By the
said order the Commissioner after examining the submissions made
by the assesssee and after considering the particulars declared by
the assessee under the Rules and the notification dated 30.8.1997
and after re-verification based on a request made by the assessee
and taking into consideration the report given by the Assistant
Commissioner, Central Excise, Howrah, North Division, re-
determined the annual capacity of the appellant/assessee as
20326.919 MT and 14228.843 MT (70% non alloy steel) and fixed duty
liability for the year 1997-98. The said order further stated that
the remaining 30% of the annual capacity of production, i.e.
6098.076 MT alloy steel as declared by the assessee or the actual
production of alloy steel whichever is higher, is to be cleared
after discharging the central excise duty liability under Section
3 of the Central Excise Act, 1944. After the instruction given by
the Board, the Commissioner of Central Excise appears to have
unilaterally re-determined the annual production capacity of the
appellant and admittedly no opportunity was granted to the
appellant/assessee to place materials as no show cause notice was
issued by the Commissioner proposing to re-determine the annual
capacity purportedly to be based upon the instruction given by the
Board. This unilateral decision taken by the Commissioner by
determining the annual capacity on the entire quantity, that is,
100 per cent. The Joint Commissioner had re-determined the duty
liability and issued show cause notice. Though the appellant had
submitted their reply to the show cause notice on 30th July, 2004
stating that they have been manufacturing both alloy and non-alloy
steel products and their alloy steel products were approximately
30 per cent and non alloy steel were 70 per cent, they had
approached the Commissioner of Central Excise stating that they
would have manufacturing 70 per cent of non-alloy steel and 30 per
cent of alloy steel of annual capacity of the production which was
declared by them by letter dated 9th September, 1997 and they would
be paying central excise duty on non-alloy steel as per demanded
capacity on pro rata basis and for alloy steel they would be
paying duty at 15 per cent on ad valorem after observing the
central excise formalities. Based on the request letter given by
the assessee dated 9th September, 1997 the Commissioner of Central
Excise by order dated 16th October, 1997 re-fixed the duty
liability. By further letter dated 27th March, 1998 of the assessee
they requested the Commissioner to fix the duty liability at 70
per cent of the total capacity of the production for non alloy
steel products and 30 per cent would be paid by them under the
provisions of Section 3 of the Act. The Commissioner examined the
matter and by order dated 3rd April, 1998 determined the annual
capacity of the unit 20326.919 MT and 14228.843 MT (70 per cent
non-alloy steel) and, accordingly, fixed the duty liability.
Regarding 30% of the alloy steel products it was ordered that
the same was to be cleared from the factory under the provision of
Section 3 of the Act. Subsequently, a corrigendum was also issued
on 22.9.1998. Based on the said order Joint Commissioner of
Central Excise also determined the duty liability. Thereafter, the
show cause notice-cum-demand was issued on 28.5.2001 stating that
the assessee was required to pay duty as per the capacity
determined by the Commissioner on the entire determined quantity
and not on 70% of the determined capacity. The assessee,
therefore, contended that when no appeal had been preferred
against the original order of the Commissioner determining the
annual capacity at 70%, re-fixation could not be done by 100%.
This contention was not accepted by the adjudicating authority and
passed an order on 10.8.2004 affirming the demand proposed in the
show cause notice.
Aggrieved by the same, the assessee preferred an appeal
before the Commissioner of Central Excise, Calcutta redirecting
the stand taken by them in the reply to the show cause notice. The
Commissioner by an order dated 11.2.2005 dismissed the appeal
solely on the ground that the jurisdictional Commissioner had
reviewed the earlier determination and superseded the same by
determining the annual capacity of the assessee for the material
period in the light of the Board's letter dated 13.11.1998.
However, the issue agitated by the assessee was not considered by
the appellate authority. Aggrieved by the order passed by the
appellate authority the assessee preferred appeal before the
tribunal. The Tribunal non-suited the assessee solely on the
ground that the assessee did not challenge the order passed by the
Commissioner re-determining the annual production capacity. On
perusal of the grounds of appeal filed before the Tribunal by the
assessee we find that specific contention raised by the assessee
was that the earlier order passed by the Commissioner attained
finality accepted by the department not appealed against the
review, the order could not have been done unilaterally by an
officer, who is junior in rank than the Commissioner. This
contention raised by the assessee was not considered by the
Tribunal. Interestingly, identical issue has been raised in
respect of the other assessees, who are also carrying on similar
production activities and one such case travelled up to the
Tribunal in the case of Hooghly Ispact Ltd. and in appeal no.E-
718-719 of 2001 [Commissioner of Central Excise-IV vs. Hooghly
Ispat Ltd.] The Tribunal by judgment dated 22.1.2022 dismissed the
appeal filed by the department and affirmed the order passed by
the Commissioner of Central Excise [Appeals] was granted relief in
favour of the said assessee. The learned Tribunal pointed out that
the availment of MODVAT credit by the said assessee was lawful.
The contention of the department which is similar to the
contention raised before us stating that the order of the
Commissioner originally fixing the annual production capacity was
not in accordance with the clarification issued by the Board dated
19.11.1998. The Tribunal pointed out that the order passed by the
Commissioner was never withdrawn or challenged by the department
before higher forum and, therefore, held that the said assessee
had rightly discharged the duty burden. Similar issue also arose
before the Tribunal in the case of Hooghly Ispat Ltd. vs.
Commissioner of Central Excise-IV in appeal no.E-813 of 2002 and
by order dated 18.2.2003 the learned Tribunal had allowed the
appeal accepting the stand taken by the assessee that they had
discharged the duty burden based on the determination of the
annual production capacity by the Commissioner and the said order
having not been challenged before the higher forum, unilaterally
the annual capacity cannot be re-fixed. The Tribunal in the said
decision also noted the other decision of the Tribunal on the
similar point. Thus, the Tribunal did not go into this aspect
though the same was specifically canvassed by the assessee in the
appeal before the learned Tribunal. The question thus would be
whether the department can be directed to take a different stand
when they have not preferred any appeal against those decisions of
the Tribunal which were decided in favour of those assessees on an
identical issue. In this regard, it would be beneficial to refer
to the decision of the Hon'ble Supreme Court in the case of Birla
Corporation Ltd. vs. CCE, 2005 69 RLT 580 (SC). The Hon'ble
Supreme Court held when a same question arises for consideration
on identical fact, the revenue cannot be permitted to take a
different stand and it was pointed out that earlier appeal
involving the identical issue was not pressed and dismissed and
the revenue having taken a conscious decision to accept the
principles laid down in the said order cannot be permitted to take
opposite stand in a different manner and if the same is permitted,
the law will be in a state of confusion and will place parties as
well as the assessee in a quandary. The said decision of Birla
Corporation (Supra) as well as the other decisions on the point
were relied on by the Hon'ble Supreme Court in the case of Indian
Oil Corporation Versus CCE Baroda; 2006 (76) RLT 548 (SC) and in
the case of Commissioner of Central Excise Mumbai Vs. Bigen
Industries Limited; 2006(197) ELT 305(S.C.) and Jindal Dye
Intermediate Limited Versus Collector of Customs, Mumbai ;
2006(197) ELT 471. The law laid down in the above decision is
quite clear that once the department has accepted the orders
passed in identical issue considering the scope of the revision of
the annual production capacity of those units who are also
carrying similar group of activities, the department has precluded
from taking a different stand in other cases more particularly, in
the case of the assessee.
Thus, we find that assessee had made out sufficient grounds
for us to interfere with the order passed by the learned Tribunal.
For the above reasons, the appeal filed by the assessee is
allowed and the order passed by the learned Tribunal is set aside
and consequently, the orders passed by the first appellate
authority and the Joint Commissioner of Central Excise are set
aside and the demand is quashed.
The substantial question of law framed for consideration is
answered in favour of the assessee.
Consequently, GA/1/2009 stands closed.
(T.S. SIVAGNANAM)
ACTING CHIEF JUSTICE
(HIRANMAY BHATTACHARYYA, J.)
S.Das/pkd/GH.
