M/S. Duncans
Industries Ltd., Calcutta Vs. Commissioner of Central Excise, New Delhi [2006] Insc 517 (22 August 2006)
Ashok
Bhan & Markandey Katju
With
Civil Appeal Nos. 4075-4076 of 2001 BHAN, J.
These
civil appeals are directed against the common impugned order Nos. 829 and 830
of 2000 dated 4.10.2000 passed by the Customs, Excise & Gold (Control)
Appellate Tribunal (hereinafter referred to as "the Tribunal") in
Appeal Nos. E/1622/99-A and E/2095/2000-A. Revenue has filed Civil Appeal Nos.
4075 4076 of 2001 against the deletion of duty demand of Rs. 17,67,13,315/-
raised in the show-cause notice dated 1.10.1986 for the period September 1981
to February 1983 and the assessee has filed Civil Appeal No. 754 of 2001
against the levy of penalty of Rs. One crore.
Since
these appeals are directed against the common order passed by the Tribunal, we
also propose to dispose them of by a common order. The facts are common in both
the sets of appeals.
This
case has a chequered history and has had various round of litigation in
different forums.
In
order to determine the controversy and the point involved in these appeals the
following facts may be noticed.
M/s
National Tobacco Company Limited Agarpara, a manufacturer of cigarettes falling
under erstwhile Central Excise Tariff Item No. 4 II(2), and holder of Central
Excise Licence L-4 No. 3/84 for the manufacture of cigarettes, was merged with
M/s Mirpara Tea Company effective from 1.4.1977.
Consequent
to this, it became a Division of newly formed M/s. Duncans Agro Industries
Limited, Calcutta. Thereupon, Central Excise Licence
L-4 No. 1-Cig/I/V/78 dated 18.2.1978 for the manufacture of cigarettes was
issued to M/s. National Tobacco Company.
In
April 1984, M/s. National Tobacco Company was de-merged from M/s. Duncans Agro
Industries Limited and was made a wholly owned subsidiary of M/s. Duncans Agro
Industries Limited in the name and style of M/s. New Tobacco Company. M/s. Duncans
Agro Industries Limited, is the respondent in the two appeals filed by the
Revenue and the appellant in Civil Appeal No. 754 of 2001 and would be referred
to as the assessee.
As a
result of demerger, a new Central Excise Licence No. L-4 No.1/Cig/IV/Khar/85
dated 9.3.1985 was issued to M/s. New Tobacco Company Limited for the
manufacture of cigarettes.
As
there was some dispute as to whether excise was leviable on manufacturing cost
plus manufacturing profit and post manufacturing cost and profits arising from
post manufacturing operations, the provisional assessments were made from July,
1973 to February, 1983. Final assessments were to be made later. On 8.5.1984,
Assistant Collector of Central Excise, Calcutta issued a show-cause notice to the assessee for the period July, 1973 to
February, 1983 calling upon the assessee to show cause as to why:
"...the
deductions claimed on account of freight, interest on freight, rebate, octroi,
interest on receivables and tariff rate of duty from the wholesale price should
not be disallowed and why the charges on account of freight, interest on freight,
rebate, octroi and interest on receivables should not be included in the
assessable value and also why the cost of C.F.C. packing charged and realized
by them from the buyers should not be included in the assessable value under
Section 4(1) (a) and Section 4 (4) (d) (i) of Central Excise & Salt Act,
1944 and why price of each product should not be approved accordingly.
Collector
of Central Excise, Delhi issued another show-cause notice on 1.10.1986 to the assessee
for the period September, 1981 to February, 1983 alleging that the assessee has
willfully mis-declared assessable value of cigarettes from time to time during
the period from September, 1981 to February, 1983 in the Central Excise
documents, Price Lists with fraudulent intent to evade the payment of correct
amount of duty and thereby they have short paid Central Excise duty amounting
to Rs. 97,55,56,362/-.
Accordingly,
the assessee was called upon to show cause as to why:
-
" the duty
short paid amounting to Rs. 97,55,56,362.00 as per Annexure 'D' should not be
demanded under Rule 9(2) of the Central Excise Rules, 1944 read with the
proviso of sub- section (1) to Section 11A of the Central Excise and Salt Act,
1944.
-
Penalties should
not be imposed on them under Rules 9(2), 52A(5), 210 & 226 of the Central
Excise Rules, 1944." Assessee being aggrieved filed a Civil Writ Petition
No. 1708 of 1987 in the Delhi High Court on the ground that the show cause
notice dated 1.10.1986 issued to the assessee alleging contravention of the
central excise duty in respect of cigarettes manufactured and cleared from the
factory at Agarpara during the period September, 1981 to February, 1983 and
also addendum to the show-cause notice dated 3.10.1986 was in excess of the
jurisdiction and/or without authority of law inasmuch as the assessee had been
paying the excise duty on the basis of the provisional assessments pursuant to
filing of provisional price lists and till the price lists and the assessments
were finalized a show-cause notice could not be issued.
According
to the petitioner Section 11-A of the Central Excises Salt Act, 1944 (for shot
"the Act") could not be invoked in cases where duties are paid under
provisional assessment made under Rule 9B of the Central Excise Rules, 1944
(for short "the Rules") without first finalizing the assessment.
The
Division Bench of the High Court dismissed the writ petition by its order dated
12.8.1988 reported & Ors., 1989 (39) ELT 511 (Del.). Contention of the assessee that the cause of
action for invoking Section 11-A would accrue only from the relevant date
defined under Section 11-A which in case of provisional assessment means the
date of adjustment of duty after final assessment under Rule 9B was rejected.
This judgment became final and is binding between the parties. This Court later
took a contrary view in Serai Kella Glass Workers Pvt. (4) SCC 641.
Collector
of Central Excise, Delhi took up for hearing the proceedings arising from the
show-cause notice dated 1.10.1986 and disposed of the same on 27.3.1991 with
the interim directions, which are as under:
"I
direct the Divisional Assistant Collector, Kharda Division of Calcutta-II Collectorate
to make final assessment in the case under Rule 9B(5) of the Central Excise
Rules, 1944, for the period covered by the instant show cause notice as early
as possible. He may use the material contained in the instant show cause notice
as independent material to support the final assessment after according an
opportunity to the manufacturer/other parties concerned to meet the case and
after considering the cause show. He is further directed to intimate the
undersigned as soon as he completes the said provisional assessment. Thereafter
this show cause notice will be taken up for adjudication." In this order
the Collector of Central Excise, Delhi gave three fold directions to the Divisional Assistant Collector, Kharda
Division of Calcutta II, namely,
-
To make final
assessment in the case under Rule 9B(5) of the Rules for the period covered by
the instant show-cause notice (1.10.1986) as early as possible;
-
He could use the
material contained in the show-cause notice dated 1.0.1986 as independent
material to support the final assessment after affording an opportunity to the
manufacturer/other parties concerned to meet the case and after considering the
show cause;
-
He was further
directed to intimate the Collector of Central Excise, Delhi as soon as he completes the
provisional assessment; and
-
The show- cause
notice dated 1.10.1986 was to be taken up for adjudication thereafter.
The assessee
being aggrieved filed an appeal before the Appellate Tribunal at New Delhi, which was disposed of on
9.12.1997. The assessee challenged the finding/observation made by the
Collector of Central Excise, Delhi that "thereafter this show cause notice
will be taken up for adjudication" on the ground that after finalizing of
the assessment there would be nothing left for the Collector of Central Excise,
Delhi for consideration or decision and therefore, this sentence in the order
should be set aside. The appeal was disposed of by observing:
".We
do not understand the impugned order as recording a finding overruling the
contention raised by the appellant the collector had no jurisdiction to
adjudicate on the strength of show cause notice dated 1.10.86 or as to whether
after finalisation of assessments anything would be left for the Collector to
decide. Thereafter the appellant cannot have any grievance. It is open to the
appellant to raise these aspects if after finalisation of assessment, the
Collector takes up the proceeding before him for adjudication in this matter.
With
this observation, the appeal is disposed of." [Emphasis supplied] Thus the
liberty to take up this point was reserved with the assessee after the
finalization of the proceedings.
In
pursuance to the interim directions issued by the Collector of Central Excise,
Delhi in its order dated 27.3.1991 the office of the Assistant Collector
Central Excise, Kharda Division, Calcutta issued addendum dated 20.2.1992
incorporating the contents of the show-cause notice dated 1.10.1986 in the show
cause notice dated 8.5.1984 thereby assuming jurisdiction to adjudicate all
issues raised in both the show cause notices.
The
two show cause notices were finally adjudicated by the Assistant Collector
Central Excise, Kharda Division, Calcutta by its order dated 11.1.1996. The assessable value was determined and
consequent thereupon demand was raised by finalizing assessments for the entire
period from July 1973 to February, 1983.
On
3.7.1996 show cause cum demand notice was issued by the Superintendent, Office
of the Assistant Collector Central Excise, Kharda Division. Calcutta on the basis of adjudication order
dated 11.1.1996 quantifying the amount of short levy for the period July 1973
to February, 1983. Assistant Collector Central Excise, Kharda Division, Calcutta adjudicated the show cause cum
demand notice dated 3.7.1996 confirming the demands (short levy) of Rs. 386,45,71,192.69
and Rs. 66,45,136.19 in respect of cigarettes and smoking mixtures respectively.
The assessee
being aggrieved against the order of Assistant Collector Central Excise, Kharda
Division. Calcutta filed an appeal before the
Commissioner (Appeals) Central Excise, Calcutta.
Commissioner
of Appeals by his order in appeal dated 25.7.1997 accepted the appeal and
remanded the matter to the Assistant Collector Central Excise, Kharda Division.
Calcutta for recomputation of the duty
afresh in the light of the decision of Factory, 1995 (4) SCC 349. Assistant
Collector Central Excise, Kharda Division. Calcutta in compliance of the order
of remand dated 25.7.1997 of the Commissioner of Appeals Central Excise,
Calcutta recomputed the amount of duty short paid as Rs. 16.6,94,320.34 and Rs.
8,13,683.29 after adjusting Rs. 5.97 crores pre-deposited in the light of the
judgment of this Court in Madras Rubber Factory's case (supra). This order was
later on corrected by issuing a corrigendum and the amount was reduced.
After
finalization of the proceedings by the Assistant Collector Central Excise, Kharda
Division. Calcutta the Commissioner of Central Excise, Delhi passed an order in
original in show- cause notice dated 1.10.1986 determining Rs. 17.67 crores as
due as duty liability and imposing a penalty of Rs. One crore.
Assessee
being aggrieved filed Appeal No. E/1622/99-A/92E/2095/2000A which has
culminated in the impugned order. Tribunal accepted the appeal partly. Duty
liability was set aside as it had already been adjudicated in the earlier
proceedings but upheld the levy of penalty. While deleting the duty liability
the Tribunal observed thus:
"From
this, it is clear that the Collector had left the duty demand raised in the
show cause notice dated 1-10-1986 also to be included in the finalisation of
the provisional assessment which was pending from 1973. The Revenue had not
challenged that order. Pursuant to that order, the Assistant Collector had
issued an Addendum to the assessees on 20-2-1992 making the materials relied
upon in the show cause notice dated 1-10-1986 as part of the materials for finalising
the assessments and the duty demand was finalised after assessees made their
representations. That duty demand became final as the Revenue did not challenge
it. The order passed on the assessees' appeal against that duty demand was also
not challenged by both sides. We, therefore, hold that the duty demand made by
the Assistant Collector was a consolidated demand and that demand having become
final, no second demand could be made in another adjudication proceeding by the
Commissioner.
Accordingly,
we set aside the duty demand of over Rs. 17 crores made in the impugned
order." Revenue being aggrieved has filed Civil Appeal Nos. 4075-4076 of
2001 against the deletion of the duty liability and the assessee has filed the
Civil Appeal No. 754 of 2001 against the order maintaining the levy of penalty.
Another
fact which needs to be noticed is that after the Assistant Collector Central
Excise, Kharda Division, Calcutta finalized the assessment order dated
3.12.1996, the Assistant Collector Central Excise, issued show cause notice
dated 27.5.1998 stating therein that the order in original dated 12.12.1997 the
extra amounts realized as "additional consideration" was not taken
into consideration and accordingly a demand of Rs. 21.58 crores was made on the
assessee. In the meantime, Kar Vivad Samadhan Scheme, 1998 (for short "the
KVS Scheme") was introduced by Finance (No. 2) Act, 1998. Pursuant to the
said scheme the assessee filed a declaration under Section 89 of the Finance
(No. 2) Act, 1998 in respect of the KVS Scheme. An order under the KVS Scheme
was passed in pursuance to which the assessee paid the demand raised under the
said scheme.
Counsel
for the parties have been heard at great length.
The
issue before the Assistant Collector Central Excise, Kharda Division, Calcutta was for the determination of the
assessable value of the goods for the period July, 1973 to February, 1983 i.e.
the period covered by the show cause notice dated 8.5.84. The issue before the
Commissioner of Central Excise, Delhi was also for determination of the assessable value of the goods for the
period September, 1981 to February, 1983, the period covered by show cause
notice dated 1.10.1986. The show cause notice dated 1.10.1986 was issued
against 20 persons including the assessee company. As regards the assessee, for
the period September, 1981 to February, 1983, the Commissioner of Central
Excise passed the order dated 27.3.1991 directing the Assistant Commissioner to
determine the assessable value taking into consideration the materials
contained in show cause notice dated 1.10.1986. This he did by noticing the
correct position of law laid down Godrej & Boyce Mfg. Co. (Pvt.) Ltd.,
(Civil Appeal No.12824 of 1989 decided on 8.3.90). The Assistant Collector
Central Excise, Kharda Division, Calcutta thereafter issued addendum dated 20.2.992 incorporating the allegations
made in show cause notice dated 1.10.1986 in the show-cause notice dated
8.5.1984. The effect of the order passed by the commissioner of Central Excise,
Delhi was that the Assistant Collector
Central Excise, Kharda Division, Calcutta alone had the jurisdiction to finally adjudicate and determine the
assessable value of the goods cleared from the assessee's factory for the
entire period and the consequent duty liability. Either party wishing to
dispute the determination made by the Assistant Collector Central Excise, Kharda
Division, Calcutta had to do so by invoking the right
of appeal to the Commissioner of Appeals, Tribunal and the Supreme Court. In
addition the Department could have invoked the short levy provision under
Section 11-A within a period of six months or invoked the extended period of
limitation of 5 years under proviso to Section 11-A provided the conditions
laid down in the proviso were satisfied. The two show-cause notices were
finally adjudicated by the Assistant Collector Central Excise, Kharda Division,
Calcutta on 11.01.1996. The assessable value
determined and consequent demand was raised by finalizing assessments for the
entire period July 1973 to February, 1983. If the revenue was aggrieved by the
above proceedings it was incumbent upon them to either invoke the right of
appeal against that order under Section 35 E (2) or issue a short levy notice
under Section 11-A within six months. Neither of these two options having been
invoked, the order attained finality as against the revenue.
It
need not be emphasized that there could not be two assessments for the same
period.
This
apart finally determined as due for the entire period of 10 years from the assessee
having been settled under the Kar Vivad Samadan Scheme, 1998, there is no scope
for any further review or determination of that issue by any authority under
the Act. (5) SCC 257, at page 274 this Court observed:
"We
have carefully gone through the Kar Vivad Samadhan Scheme, 1998 and the
certificate issued by the Customs Authorities. In our opinion, the GCS is
immune from any criminal proceedings pursuant to the certificates issued under
the said Scheme and the appellants are being prosecuted in their capacity as
office-bearers of the GCS. As the customs duty has already been paid, the
Central Government has not suffered any financial loss. Moreover, as per the Kar
Vivad Samadhan Scheme, 1998, whoever is granted the benefit under the said
Scheme is granted immunity from prosecution from any offence under the Customs
Act, 1962 including the offence of evasion of duty.
In the
circumstances, the complaint filed against the appellants is
unsustainable." And at page 280 it was observed:
"The
Kar Vivad Samadhan Scheme certificate along with CBI v. Duncans Agro Industgries
Ltd., 1996 (5) SCC 591, and Sushila Rani v. C.I.T., 2002 (2) SCC 697, judgments
clearly absolve the appellants herein from all charges and allegations under
any other law once the duty so demanded has been paid and the alleged offence
has been compounded. It is also settled law that once a civil case has been
compromised and the alleged offence has been compounded, to continue the
criminal proceedings thereafter would be an abuse of the judicial
process." Thus, after the grant of certificate under the Kar Vivad Samadan
Scheme, 1998 as having settled the dispute and payment of the amount determined
no further proceedings could be initiated or proceeded with for the period in
question.
For
the reasons stated above, we do not find any substance in the appeals filed by
the Revenue.
Accordingly,
Civil Appeal Nos. 4075-4076 of 2001 are dismissed and the order passed by the
Tribunal in this respect is affirmed.
Taking
up the appeal of the assessee, it may be noted that the proposed penalty was
under Rule 9(2) Elphinstone Spg. & Wvg. Mills Co. Ltd., 1971 (1) SCC 337,
at page 348 held as under:
".....To
attract sub-rule (2) of Rule 9, the goods should have been removed in
contravention of sub-rule (1).
It is
not the case of the appellants that the respondents have not complied with the
provisions of sub-rule (1). We are of the opinion that in order to attract sub-
rule (2), the goods should have been removed clandestinely and without
assessment. In this case there is no such clandestine removal without
assessment. On the other hand, goods had been removed with the express
permission of the Excise authorities and after order of assessment was made. No
doubt the duty payable under the assessment order was nil. That, in our
opinion, will not bring the case under sub-rule (2). "In the present case
there is not even an allegation much less finding by the department that there
has been any clandestine removal of goods without assessment. As such the penalty
is liable to be set aside. The matter having been settled in the Kar Vivad Samadan
Scheme, 1998 the question of determination of the duty payable or levy of
penalty did not arise. In our view, the Tribunal clearly erred in upholding the
levy of penalty.
Accordingly,
Civil Appeal No. 754 of 2001 filed by the assessee is accepted and the penalty
levied is ordered to be deleted.
These
two sets of appeals are disposed of in the above terms leaving the parties to
bear their own costs.
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