Industries Ltd. Vs. Collector of Central Excise, New Delhi  INSC 609 (22 July 1997)
BHARUCHA, V. N. KHARE
22ND DAY OF JULY, 1997 Present:
Mr. Justice S. P. Bharucha Hon'ble Mr. Justice V. N. Khare The following
Judgment of the Court was delivered:
is in appeal against an order of the Customs, Excise and Gold (Control)
out the facts only insofar as they relate to the three issues which are
canvassed at the Bar.
a cigarette manufacturing company, was issued a show cause notice on 26th August, 1983 in respect of its Bombay factory. A demand for excise duty
in the sum of Rs. 28.93 crores was raised for the period 1978 to 1983.
On 19th April, 1984 a second show cause notice was
issued to the assessee. It was in respect of its Baroda factory. It related to period 1978 to 1983 and demanded Rs.
35.82 crores by way of excise duty. On 2nd September, 1985 a third show cause
notice was issued to the assessee which related to its Bombay and Baroda factories. It sought to make they assessee and two of its
job workers liable to excise duty in the sum of Rs. 13.37 crores for the period
1st July, 1978 to 30th June, 1980. The third show cause notice was issued by the Deputy
Director of Anti Evasion, Central Excise, New Delhi.
1984 the assessee filed a writ petition before the High Court at Bombay challenging the first, show cause
notice. At subsequent stages the writ petition was amended so that the second
and third show cause notices were also subjected to challenge. On 20th June, 1984 the High Court permitted the
Revenue to proceed with the adjudication of the first show cause notice, but
order signed by the concerned officer as provided herein above will not be
communicated to the respondents nor will be concerned officer or any other officer
of the Excise Department inform the respondents of the fact that the order has
been passed and/or signed by the concerned office." On 18th June, 1991 the
High Court noted that orders had been passed in the adjudication proceedings
and directed that the sealed cover in which the orders had been placed be
opened and the orders shown to learned counsel for the assessee and the
Revenue; also, that the Revenue should supply copies of the orders to the assessee's
21st July, 1994 the High Court directed that the assessee and/or the Revenue
"may file appeal to the Tribunal against the said orders within two months
from today..." and "If the said appeal is filed by the petitioners or
the respondents, as the case may be, the Tribunal to entertain the said appeal
on merits without taking the objection of limitation." On 29th May, 1992
the Central Board of Excise & Customs made an order under the provisions of
Section 35E(1) of the Central Excise and Salt Act, 1944 directing the
Commissioner (L & A) as Collector of Central Excise to apply to the
Tribunal for determination of the questions therein stated which arose out of
the adjudication order dated 21st August, 1987 passed by the Director (L &
A) on the three show cause notices, heard and dealt with together. The order of
the Central Board was endorsed, amongst others, to the Principal Collector of
Central Excise, New
On 16th September, 1994 the assessee filed appeals before
the Tribunal against the said adjudication order insofar as it related to the
first and second show cause notices, which was adverse to it.
On 14th December, 1995 an application for
clarification/directions was made by the Commissioner (L & A), Customs and
Central Excise, New
Delhi to the
application stated that an appeal had been lodged by the applicant against the
said adjudication order on that day, namely, 18th December, 1995. It stated that since a copy of the Boards order
under Section 3E(1) had not been endorsed to the applicant, although there was
a direction to file an appeal, he did not have knowledge of the direction until
he was informed by the Deputy Director (Investigations);
General, Anti Evasion, New
Delhi by his letter
dated 7th December,
1996. The application
submitted that the date of communication of the Boards' order should be taken
to be the date on which the applicant was informed of it, i.e., 7th December, 1995; accordingly, the appeal that was
being filed should be taken on record and listed for hearing on 14th December 1995 along with the two appeals filed by
On 25th March, 1996 the tribunal passed the order that
is under appeal. It referred to the orders of the High Court and held that the
elective date of the said adjudication order was not the date on which it was
originally signed but the date on which the sealed envelope had been opened
pursuant to the High Court's direction and the said adjudication order show to
counsel for the parties. The contention that the Boards' order had been passed
beyond the period stipulated in Section 35E was, therefore, negatived.
Tribunal referred to the application made to it by the commissioner (L &
A), New Delhi and accepted his case that he came to know of the Boards' order
only on or immediately after 7th December, 1995. Accordingly, it held that the
Revenue's appeal against the said adjudication order was in time. The Tribunal
then noted the contention of the assessee that the assessment order had
traversed beyond the scope of the grounds contained in the first and second
show cause notices. The Tribunal saw no reason why the details regarding extra
profit margin submitted in the third show cause notice should not be looked into
for the purpose of the first and second show cause notices. It held that the
allegations contained in the third show cause notice which are relevant and
apposite to the period covered by first and second show cause notices can be
looked into for the purpose of adjudication." It is submitted on behalf of
the assessee that the Board's order, directing that an appeal should be filed
by the Revenue against the said adjudication order, was passed after the expiry
of the period specified in that behalf.
that, in any event, the filing of the Revenue's appeal was beyond time.
Thirdly, that the Tribunal exceeded its jurisdiction in ordering that the
allegations contained in the third show cause notice should be looked into for
the purpose of adjudication, on remand, of the first and second show cause
35E(1) empowers the Board to call for and examine the record of any proceeding
in which the Collector of Central Excise, as an adjudicating authority, has
passed any decision or order under the Act for the purpose of satisfying itself
as to the legality and propriety thereof, It can direct the Collector to apply
to the Tribunal for determination of such points as arise out of the decision
of order as are specified by the Board. Sub-section (3) of Section 35E requires
that no order shall be made under such section (1) after the expiry of one year
from the date of the decision or order of the adjudicating authority.
said adjudication order was made on 21st August, 1987. The Boards' order was made on 29th May, 1992. Prima facie, the Boards' order was
well beyond the permitted time.
learned Additional Solicitor General, appearing for the Revenue, relied upon
the order of the High Court dated 20th June, 1984 which required that the adjudication
order should not be communicated to the assessee but should be kept in a sealed
envelope. He submitted that it was in consonance with the spirit of the order
of the High Court that the said assessment order had not been looked at by the
Board under the provisions of Section 35E and that, therefore, the period
during which the said assessment order remained in a sealed envelope should not
be taken into consideration; in other words, that the said assessment order
should be deemed to bear the date on which it was removed from the sealed
envelope, i.e., 18th June, 1991, from which date the appeal was in time.
High Court's order dated 20th
June, 1984 required
the Revenue not to communicate to the assessee the said assessment order. It
imposed no restriction on the activities of the Revenue. That this is so is
borne out by the terms of the subsequent order of the High Court dated 18th June, 1991 in which the Revenue was directed
to supply copies of the said assessment order to the assessee's advocates. The
examination of the said assessment order by the Board under section 35E of the
Act was in no way inhibited by any order of the High Court nor was the passing
of an order directed to the assessing authority hold that the Boards' order was
passed after the period prescribed in that behalf by Section 35E of the Act.
brings us to the application for clarification/direction made by the
and Central Excise, New
Delhi to the Tribunal
on 13th December, 1995. It stated, as aforesaid, that the
Revenue's appeal should be entertained because the Commissioner (L & A),
Customs and Central Excise, New Delhi had
not been endorsed a copy of the Boards' order and that he had been informed
thereof only on 7th
December, 1995. The
Boards' order was endorsed to the Principal Collector, Central Excise, New Delhi. The third show cause notice, in
respect of which the Revenue filed the appeal before the Tribunal, was issued
by an officer in the Central Excise Collectorate at New Delhi, The requirement of
Section 35E that the communication or the Boards' order should be made was
satisfied long before 7th December, 1995. Consequently;
Revenue's appeal was filed long after the permissible period of three months.
to be noted that the High Court by its order dated 21st July, 1994, permitted the assessee and the Revenue to file appeals
against the said adjudication order within two months, but the Revenue did not
take advantage thereof and filed its appeal only on 13th December, 1994.
Tribunal found no legal difficulty in holding that the allegations contained in
the third show cause notice should be looked into for the purpose of
adjudication of the first and second show cause notices. We find great
difficulty in upholding the Tribunal's view. As we see it, each show cause
notice must be limited to the case that is made out therein by the Revenue. It
is not within the jurisdiction of the Tribunal to direct otherwise; to do so is
to go beyond its purely adjudicatory function.
appeals are allowed to the extent aforestated. The appeal filed by the Revenue
before the Tribunal is held to be beyond time and it shall not be entertained.
The hearing on remand of the first and second show cause notices shall proceed,
but limited to the case made out in each on its own merits.
order as to costs.