Collector
of Central Excise, Chandigarh Vs. Beecham Consumer Health Care
[2002] Insc 573 (20
December 2002)
Syed
Shah Mohammed Quadri & Arijit Pasayat.Arijit Pasayat, J.
Appeal (civil) 9947 of 1999
These
appeals are directed against common judgment of the Customs Excise & Gold
(Control) Appellate Tribunal, New Delhi (in
short 'the Tribunal').
Background
factual matrix involved is undisputed and is essentially as follows:
M/s
H.M.M. Limited (subsequently known as M/s. Smithkline Beecham Consumer Health
Care Ltd.), (hereinafter referred to as 'the assessee') was availing set off
under notification No.201/79 dated 4.6.1979 in respect of inputs, namely, Malt
and Malt extract under T.I. 68, received by it from M/s Malt & Co. (India)
Pvt. Ltd., M/s Barmalt Ltd. and M/s A.K. Malt (P) Ltd. during the years 1977 to
1985. The said notification was issued in exercise of powers conferred by
sub-rule (1) Rule 8 of the Central Excise Rules, 1944.
By the
said notification, all excisable goods on which duty of excise is leviable and
in the manufacture of which any goods falling under Item No. 68 of the First
Schedule to the Central Excises and Salt Act, 1944 (presently Central Excise
Act, 1944, in short 'the Act') have been used as raw materials or components
parts from so much of the duty of excise leviable thereon as is equivalent to
the duty of excise already paid on the inputs. The excisable goods, and the raw
materials and the component parts were referred to as "the said
goods" and "the inputs" respectively in the notification. In the
Appendix to the notification, in paragraphs 3 and 5 (d) and (e) it was, inter alia,
provided as follows:
XXX XXX
XXX "3. If the duty paid on the inputs (on which credit has been taken) is
varied subsequently due to any person resulting in payment of refund to, or
recovery of more duty from, the manufacturer of the inputs, the credit taken
shall be varied accordingly by adjustment in the credit account maintained
under paragraph 5 of this Appendix or in the account-current maintained under sub-rule
(1) of rule 9, or sub-rule (1) of rule 173-G, of the Central Excise Rules,
1944, or, if such adjustment be not possible for any reason, by refund to, or
as the case may be, cash recovery from the manufacturer of the said goods.
XXX XXX
XXX
5. A
manufacturer of the said goods shall (d) maintain an account in Parts I and II
of Form R.G. 23 in Appendix I to the Central Excise Rules, 1944;
(e) maintain
in respect of the duty payable on the said goods an account-current with the
Collector of Central Excise with adequate credit balance to cover payment of
Central Excise duty leviable on the said goods cleared at any time." The
scope and ambit of the afore-said paragraphs form subject matter of
consideration in these appeals. Sellers of the inputs as described above, filed
writ applications before the Delhi High Court and took the stand that Malt and
Malt Extracts were not dutiable in terms of notification no. 55/75. The High
Court accepted this stand of the Sellers.
The
Sellers had paid excise duty on the inputs, and, therefore, the assessee had
taken credit in respect of the amount of duty paid on the inputs. Pursuant to
the High Court's order appellant had refunded the duty. Barmalt took refund of
the amounts paid on 8.11.1985 and 14.11.1985, while Malt India was refunded the amount involved on
8.5.1987. On 7.9.1987 a Demand show-cause notice was issued by the Assistant
Collector requiring it to show-cause as to why the amount of duty involved in
the set off be not recovered from it under paragraph 3 of the Appendix to the
notification no.201/1979. Assessee submitted its reply taking the stand that
the notice was issued beyond the prescribed period of limitation under Section
11A of the Act. In any event, cash recovery was not permissible and what at the
most the authorities could do was to adjust the amount from the credit account
maintained in terms of paragraph 5. The plea did not find acceptance and by
order dated 22.12.1987 the Assistant Collector confirmed the demand. Appeals
before the Collector of Central Excise (Appeals) did not bring any relief to
the assessee who carried the matter in further appeals before the Tribunal.
By the
impugned judgment, Tribunal set aside the orders of the authorities holding
that the case was covered under Section 11A of the Act and, therefore, the
actions initiated were beyond the prescribed period of limitation.
In
support of the appeals, Mr. A.K. Ganguli, learned senior counsel, submitted
that the Tribunal's conclusions are indefensible. Paragraph 3 of the Appendix
and Section 11A operate in different fields. While Section 11A relates to
non-levy or short-levy, paragraph 3 of the Appendix deals with situations where
there is variation of duty paid on the inputs of which credit has been taken
subsequently due to "any reason" In any event, according to him,
Section 38A of the Act introduced by Act 14 of 2001 holds the field, and even
if the notification no. 201/79 was rescinded w.e.f. 1.3.1986, the same is of no
consequence. Particular reference is made to clause (c) of the said provision.
According to him assessee had an obligation fixed statutorily to pay the
difference in case of a variation of the duty paid on the inputs. There was a
corresponding crystalised right available to the authorities to make necessary
changes. It was pointed out that in a given situation the assessee could also
benefit from the change.
Learned
counsel for the assessee on the other hand contended that Section 11A of the
Act is clearly applicable because what was paid by the assessee was less than
what was payable by it because of the set off availed and it is a case of
short-levy. What was collected was less than the amount collectable, and,
therefore, there is short-levy. As the notification itself has been rescinded w.e.f.
1.3.1986, no action could be taken in terms of paragraph 3 of the Appendix to
the notification. Though this point was taken before the Tribunal, no finding
specifically was recorded by it in this regard. With reference to Clause (a) of
Section 38A, it is submitted that there was nothing in existence which could be
revived, as the set-off had been rightly granted. The refund in terms of the
High Court's order was granted much after 1.3.1986. Therefore, the provision
does not assist the appellant. Alternatively, it was submitted that the assessee
is placed in a piquant situation, because the sellers of the inputs have taken
the refund and duty burden is being fastened on the assesseee. With reference
to the decision of this Court in the case of one of the sellers i.e. Barmalt in
Union of India and Ors. vs. Barmalt (India) Ltd. Gurgaon and Ors. (1997 (5) SCC 748) it was submitted that the
ratio is applicable so far as other parties are concerned and the procedure
adopted in terms of that judgment applied. It is to be noted that the present
dispute has become academic so far as Barmalt is concerned, because of the
aforesaid judgment. In any event it was contended there was no scope for
demanding payment of duty when paragraph 5 to the Appendix permits adjustment.
Mr.
D.A. Dave, learned senior counsel appearing for the sellers who were added as
parties as per this Court's order dated 1.8.2001, submitted that the procedure
adopted in Barmalt case (supra) cannot be applied to others in view of what has
been specifically stated by this Court in the said case.
From
the impugned order it is noted that the Tribunal referred to an earlier
judgment by it in the case of Bakeman Home Products vs. Collector of Central
Excise (1990 (48) ELT 518) and held that Section 11A was applicable.
The
said provision reads as follows:
"11A.
Recovery of duties not levied or not paid or short-levied or short-paid or
erroneously refunded; (1) When any duty of excise duty has not been levied or
paid or has been short-levied or short-paid or erroneously refunded, whether or
not such non-levy or non-payment, short-levy or short payment or erroneous
refund, as the case may be, was on the basis of any approval, acceptance or
assessment relating to the rate of duty on or valuation of excisable goods
under any other provisions of this Act or the rule made thereunder, a Central
Excise Officer may, within one year 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 wilful misstatement 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.
Provided
further that where the amount of duty which has not been levied or paid or has
been short-levied or short-paid or erroneously refunded is one crore of rupees
or less a notice under this sub-section shall be served by the Commissioner of
Central Excise or with his prior approval by any officer subordinate to him;
Provided
also that where the amount of duty which has not been levied or paid or has
been short-levied or short-paid or erroneously refunded is more than one crore
rupees, no notice under this sub-section shall be served without the prior
approval of the Chief Commissioner of Central Excise;
Explanation
Where the service of the notice is stayed by an order of a court, the period of
such stay shall be excluded in computing the aforesaid period of one year or
five years as the case may be." A bare reading of the provisions makes it
clear that it deals with recovery of duty not levied or not paid or short-
levied or short-paid or erroneously refunded. The scheme under the notification
no.201/79 operated in a different field altogether. There was no short-levy or
non-levy. The levy was made as per the applicable statutes. Only a benefit was
granted to the manufacturer in respect of the duty already paid on the inputs
which constitute raw materials or component parts in the excisable goods. The
benefit was granted by exercise of powers conferred by sub- rule (1) of Rule 8
of the Rules providing exemption of all excisable goods on which duty of excise
is leviable and in the manufacture of which some other goods have been used as
inputs. If the inputs have suffered duty, the quantum thereof was allowed to be
set-off. There is no variation of the duty leviable. That is invariable. What
is determined is the quantum of duty payable after adjustment of the duty paid
on the inputs. Section 3 is the charging Section and Section 4 deals with
valuation of excisable goods for the purposes of charging duties of excise.
Section 11A, which was introduced with effect from 17.11.1980, provides for
recovery of duties not levied or not paid or short-levied or short-paid or
erroneously refunded. It is to be noted that the scheme under the notification
is essentially linked with quantification and collection. The method of
collection does not affect the essence of duty, but only relates to the
machinery of collection for administrative convenience. As noted by this Court
in Assistant Collector of Central Excise, Calcutta Division vs. National
Tobacco Co. of India Ltd. (1972 (2) SCC 560), the term "levy" is
wider in its import than the term "assessment". It may include both
"imposition" as well as "assessment". Imposition is
generally used for levy of a duty or tax by legislative provisions indicating
the subject matter of levy and rate of levy. Levy of duty does not mean actual
collection, there is a conceptual difference. The charging provision Section
3(1) specifically says: "There shall be levied and collected in such a
manner as may be prescribed the duty of excise....". Both the expressions
"levy" and "collected" are used. Therefore, lesser
collection of duty because the adjustment of duty paid on inputs is not a case
of short- levy as contended by learned counsel for assessee. The notification
in question was issued under sub-rule (1) of Rule 8. Said Rule, omitted vide
Notification No.19/88 CE dated 1.7.1988 dealt with power to authorize exemption
from duty in special cases. If exemption is granted under Rule 8(1), goods do
not cease to be excisable goods and levy of duty is not erased. Emphasis was on
the duty of excise leviable on the manufactured item and duty of excise paid on
the inputs available for adjustment. Therefore, Section 11A had no application
to such a situation. To that extent the Tribunal was not justified in its
conclusions; but that is not the end of the controversy. It appears that the assessee
had specifically questioned applicability of the notification after same was
rescinded. Tribunal has not recorded any finding in this regard. The effect of
Section 38A, which was introduced with retrospective effect, is also to be
considered. We, therefore, deem it proper to remand the matter back to the
Tribunal for consideration of these aspects. If the Tribunal holds that after
the notification was rescinded w.e.f. 1.3.1986; paragraph 3 of the Appendix
became inoperative, then the position would be different.
While
considering that aspect the effect of Section 38A has to be kept in view. In
case the Tribunal comes to the conclusion that paragraph 3 of the Appendix was
applicable because of Section 38(A)(C), it has to consider the further stand of
the assessee about adjustment in the credit account maintained under paragraph
5 of the Appendix.
Needless
to say that the Tribunal shall consider these aspects after due notice to the parties.
Liability, if any, of the sellers of inputs except Barmalt is a controversy
with which we are not presently concerned and, therefore, we do not think it
necessary to express any opinion in that regard. The appeals are accordingly
disposed of.
Back
