A SERA! KELLA GLASS WORKS PVT. LTD.
v.
COLLECTOR OF CENTRAL EXCISE, PATNA
APRIL 8, 1997
B [SUHAS C. SEN AND K.T. THOMAS, JJ.)
Central Excises and Salt Act, 1944 : Sections 4 and 11-A.
Excise Duty-Differential Duty-Levy of-Provisional assessment made
C by proper officer without issuing show cause notice-Quashed by High Coult
with a directio11 for re-detennination of post-ma11ufacturi11g expenses a11d
exclusio11 thereof from the assessable value-Held : Provisio11 for issue of
show cause 11otice not applicable-Proper officer required to proceed under
S.4 and R.173-1 -Central Excise Rules, 1944, Rr. 173- F, 173-I and 9-B.
D The appellant manufactured sheet glass and filed price lists and
paid duty according to their calculations. The Assistant Collector of
Central Excise, after issuing show cause notices, directed the appellant to
follow the provisional assessment procedure prescribed under Rule 9-B of
the Central Excise Rules, 1944 for further clearances. Thereafter, the
, E Assistant Collector modified the price list filed by the appellant and
disallowed all the deductions claimed by it except for trade discounts.
The High Court quashed the order passed by the Assistant Collector
disallowing the appellant's claim for deductions and also the direction for
provisional clearance on furnishing of bond.
F
The High Court, however, remanded the case back to the Assistant
Collector to ascertain the element which would constitute post-manufac-
turing expenses which according to the High Court could not be included
in the assessable value. Subsequently, after issuing show cause notice the
G Assistant Collector rejected the appellant's claim to deductions and by two
separate orders demanded the differential duty.
The appellant's contention that the said two orders was not proceded
by any show cause notice under Section 11-A of the Central Excises and
Salt Act, 1944 and hence these two orders were void ab initio was rejected
H by the Assistant Collector. The Customs, Excise and Gold (Con.trol)
700
SERA! KELIA GLASS WORKS (P) LIB. v. COLLECTOR OF CENTRAL EXCISE 701
Appellate Tribunal dismissed the appeal. Being aggrieved the appellant A
preferred the present appeal.
Dismissing the appeal, this Court
HELD : 1.1. In the instant case, the High Court after quashing the
provisional assessment, directed the assessments to be made afresh in B
accordance with the guidelines given by it. The provisional assessment was
quashed by the High Court and direction was given to re-compute the value
of the excisable goods. This could only be done in accordance with the
substantive provisions of Section 4 and in accordance with the procedure
laid dowu in Rule 173-1 of the Central Excise Rules, 1944. [706-C-E) C
1.2. The assessee is entitled under Rule 173-F of the Rules to deter-
mine his liability for duty on the excisable goods manufactured by him and
to remove such goods on payment of duty on self assessment iu accordance
with the provisions laid down in the Rules. But this is only the first step
in making of the assessment under Rule 173-F by the proper officer. After D
final assessment, a copy of the order on the return filed by the assessee
has to be sent to him. Duty has to be paid by the assessee on the basis of
final assessment within 10 days time from the receipt of the return. No
question of giving any notice under Section 11-A arises in such a case. It
is only when even after final assessment and payment of duties, it is found E
that there has been a short-levy of duty, the Excise Officer is empowered
to take proceedings under Section 11-A within the period of limitation after
issuing a show cause notice. In such a case, limitation period will run from
the date of the final assessment. The scope of Section 11-A and Rule 173-1
are quite different. [707-A-B; F-H)
F
1.3. In the instant case, the provisional assessment earlier made by
the proper officer has been quashed and pursuant to the direction of the
High Court, the proper officer has made the final assessment. No question
of failure of issuance of show cause notice under Section 11-A arises in
this case. [707-H; 708-A-B]
G
Union of India v. Madhumilan Syntax Pvt. Ltd. & Anr., [1988) 3 SCC
348 and CCE v. Kosan Metal Products Ltd., [1989) Supp. 1SCC135, held
inapplicable.
Union of India v. Bombay Tyres International Ltd. & Ors., [1983) 4 H
702 SUPREME COURT REPORTS [1997] 3 S.C.R.
A SCC 210, Gokak Patel Vo/kart Ltd. v. CCE, [1987] 2 SCC 93 and Samrat
I11tematio11al (P) Ltd. v. CCE, [1992] Supp. 1 SCC 293, referred to.
CIVIL APPELLATE .JURISDICTION : Civil Appeal Nos. 4052-53
of 1988.
B From the Judgment and Order dated 28.7.88 of the Customs, Excise
& Gold (Control) Appellate Tribunal, New Delhi in E/A. Nos. 2942-43 of
1985-A.
D.A. Dave, Ms. Monica Sharma and Sunil Dogra for the Appellant.
C M. Gauri Shankar Murthy, S.D. Sharma. and V.K. Verma for the
Respondent.
The Judgment of the Court was delivered by
SEN, J. This case is a good illustration of why the High Court should
D not intervene in revenue matters in exercise of writ jurisdiction where
adequate alternative statutory remedies are available. In the instant case,
complications have arisen because of the directions given by the Patna
High Court on 15.9.1982 after quashing the various notices and orders in
course of proceedings under the Central Excise and Salt Act.
E The appellants are manufacturers of sheet glass which at the material
time was chargeable to Central Excise duty on ad valorem basis. The
appellants used to file their price lists in accordance with the procedure
prescribed by the Central Excise Rules (hereinafter referred to as the
'Rules') and pay duty according to their calculations. The trouble in this
p case arose with the price list No. 38/1979 which was filed on 4.7.1979. A
show cause notice dated 7.7.1979 was issued by the Assistant Collector of
Cen:ral Excise calling upon the assessee to explain as to why certain
deductions claimed by them should not be added back to the excisable
value of the goods. This was followed up by another show cause notice
dated 16.8.1979 directing the appellants to follow the provisional assess-
G ment procedure prescribed under Rule 9B of the Rules and execute bonds
for the purpose of effecting further clearances. On 5.9.1979, the Superin-
tendent of Central Excise issued yet another show cause notice calling
upon the appellants to explain as to why differential rate of duty should
l)ot be demanded under Rule 10 of the Rules w.e.f. 20.6.1979 and why
H penalty should not be imposed on them under Rule 1730 of the Rules. By
SERA! KELLA GLASS WORKS (P) LTD. v. COLLECTOR OF CENTRAL EXCISE !SEN, J.J 703
another order dated 21.3.1980, the Assistant Collector modified the price A
list filed by the appellants and disallowed all the deductions claimed by
them except for trade discounts.
The appellants filed a writ petition in the High Court challenging the
aforesaid orders passed by the Superintendent of Central Excise. Ultimate-
ly on 15.9.1982, the High Court quashed the show cause notice, the order B
passed on 21.3.1980 by the Assistant collector of Central Excise disallowing
the claim for the deductions made by the appellants and also the direction
for provisional clearance on furnishing of bond given on 16.8.1979.
The High Court, however, remanded the case back to the Assistant C
Collector to ascertain the element which will constitute post- manufactural
expenses which according to the High Court could not be included in the
assessable value. The assessable value was directed to be redetermined by
the Assistant Collector in accordance with the guidelines given by the High
Court.
D
The Central Excise authorities did not prefer any appeal against the
order of the High Court. On 7.3.1983, the Assistant Collector issued
another show cause notice as to why claims for various deductions should
not be disallowed. By final order dated 6.9.1984, the Assistant Collector
rejected the claims for deductions following the law laid down by this Court E
in the case of Union of India v. Bombay Tyres lntemational Ltd. & Ors.,
(1983] 4 SCC 210. A sum of Rs. 4,61,09,242.28p. was demanded for the
period from 20.6.1979 to 30.7.1983. By a further order dated 17.10.1984,
the Assistant Collector made another demand for differential duty amount-
ing to Rs. 27,81,826.87p. for the period from 1.8.1983 to 31.12.1983.
F
The appellants' contention is that these two orders were not
preceded by any show cause notice under Section llA of the Central
Excise and Salt Act. This according to the appellants, was mandatory and
failure to give such a notice made these two orders ab initio void and of
no legal effect. The appeal against the orders of the Assistant Collector
was dismissed by the Collector (Appeals). A further appeal was preferred G
to Customs, Excise and Gold (Control) Appellate Tribunal. The Tribunal
did not agree with the assessee's contention that because no show cause
notice under Section llA was given to the appellants by the excise
authorities, the orders making demands by the Assistant Collector of
Central Excise were void and had to be quashed. H
704 SUPREME COURT REPORTS (1997) 3 S.C.R.
A Mr. Dave on behalf of the appellants has contended that the demand
for duty under the Central Excise Act could only be effected by issuing a
show cause notice under Section llA except in a case where clearance was
provisional under Rule 9A in which case, on finalisation of assessment,
differential duty could be determined as payable by the assessee. Reliance
B was placed for this proposition on the decision of this Court in the case of
U11io11 of India and Others v. Madlmmilan Syntex Pvt. Ltd. and Anotlier,
(1988) 3 sec 348.
In Madhumila11's case, an approved classification list was in force.
A demand was made without issuing a notice modifying the classification
C list. In the instant case, however, there was a series of notices issued by the
excise authorities. Although show cause notice dale 5.7.1979 was quashed
by the Patna High Court, the other notice had not been quashed. ln any
event, the Tribunal has pointed out that the excise authorities wrote to the
appellant repeatedly for production of the bills and accutlllt books for the
D purpose of "determination of duty liability". The Tribunal held that the
Assistant C:illector's letter dated 5.12.1983 was nothing but a notice for
levy of 'differential duty'.
In Gokak Patel Volka1t Limited 'I. Collector of Central Etcise, Bel-
gaum, (1987) 2 SCC 93, it was held by this Court that issue of show cause
E notice under sub-section (1) of Section llA was a condition-precedent to
a demand under sub-section (2) of that Section.
On behalf of the Revenue, Mr. Gauri Shankar Murthy drew our
attention to the case of Mis. Samrat lntemational (P) Ltd. v. Collector of
p Central Excise, Hyderabad, [1992) Supp. 1 SCC 293, where this Court held
that when the assessee cleared the goods by determining the dnty himself
and debiting the amount to personal ledger account, the duty was
provisional and subject to final approval by the Excise Officer concerned.
In such situalinns, Para (B), Clause (e) of the Explanation to Section 118
will apply. The relevant provisions of Section llB at the material lime were
G as under:
"llB. Claim for refund of duty. (1) Any person claiming refund of
any duty of excise may make an application for refund of such duty
to the Assistant Collector of Central Excise before the expiry of
H six months from the relevant date :
SERA! KELLA GLASS WORKS (P) LTD. v. COLLECTOR Of CENTRAL EXCISE !SEN, J.J 705
Provided that the limitation of six months shall not apply where A
any duty has been paid under protest.
x x x x
Expla11atio11. - For the purposes of this section, -
B
(A) x x x x
(B) "relevant date" means, -
(a) to (d) x x x x
(e) in a .case where duty of excise is paid provisionally under this
c
Act or the rules made thereunder, the date of adjustment of duty
after the final assessment thereof;
(!) in any other case, the date of payment of duty."
D
It was argued that Sections llA and llB are similarly worded and
the scheme of the two sections is the same. In one case, the assessee can
claim refund, in the other, the department can realise tax which was not
levied or short-levied. Under Section llA, the period of limitation has to
be calculated from the 'relevant date' as defined. The important point is E
that this Court recognised that in a self assessment scheme, where the
assessee calculated and paid the amount of duty, nothing but a provisional
assessment had taken place which was subject to final assessment. The
period of limitation in such case will run from the date of making of the
final assessment.
F
Mr. Dave drew our attention to the case of Collector of Ce/llral
Excise, Baroda v. Ms/. Kosan Metal Products Ltd., [1989) Supp. 1 SCC 135.
In that case, brass rods were assessed under II 68 during the period from
24.7.1978 to 31.3.1979 and under TI 26-A(l)(a) with effect from 1.4.1979.
Thereafter, it was noticed by the Superintendent of Central Excise that the
assessee had availed of the incorrect set off of duty and a notice for G
imposition of penalty was issued under Rule 173 Q. It was alleged in the
notice that the company was not eligible to set off of duty. The case of the
company was that no notice under Rule 10 was issued to it within the time
and there had been no fraud, collusion, wilful misstatement or suppression
of facts on its part and that it· had correctly availed this set off. H
706 SUPREME COURT REPORTS (1997) 3 S.C.R.
A Rule 10 has now been repealed and the provisions of it have been
incorporated in Section llA of the Act. But, in that case the Tribunal ·
found that the classification lists had been finalised by the Bombay Collec-
toratc. The Assistant Collector, Surat, had no authority to reopen those
assessments.
B Because the assessments had become final, this Court held that when
the duty of excise had not been levied or paid or short-levied or short-paid,
a notice had to be issued under Section llA to realise the amount which
has been short-levied. The notice has to be issued normally within a period
of six months of completion of final assessment. This case does not in any
C way give any support to the contention made by Mr. Dave.·
In the instant case, the High Court after quashing the provisional
assessment, directed the assessments to be made afresh in accordance with
the guidelines given by it. No question of giving any notice under Section
llA arises at I.his stage. The provisional assessment was quashed by the
D High Court and direction was given to recompute the value of the excisable
goods. This could only be done in accordance with the substantive
provisions of Section 4 and in accordance with the procedure laid down in
Rule 173 I which at the material time stood as under :
Assessment by proper officer. (1) The proper officer shall on the
E basis of the information contained in the return filed by the
assessee under sub-rule (3) of rule 173G and after such further
inquiry as he may consider necessary, assess the duty due on the
goods removed and complete the assessment memorandum on the
return. A copy of the return so completed shall be sent to the
F assessee.
(2) The duty determined and paid by the assessee under rule
l 73F shall be adjusted against the duty assessed by the proper
officer under sub-rule (1) and where the duty so assessed is more
than the duty determined and paid by the assessee, the assessee
G shall pay the deficiency by making a debit in the account-current
within ten days of receipt of copy of the return from the proper
officer and where such duty is less, the assessee shall take credit
in the account-current for the excess on receipt of the assessment
order in the copy of the return duly countersigned by a Superin-
H tendent of Central Excise."
SERA! KELLA GLASS WORKS (P) LTD. v. COLLECTOR OF CENTRAL EXCISE (SEN, J.) 707
The assessec is entitled under Rule 173F to determine his liability A
for duty on the excisable goods manufactured by him and to remove such
goods on payment of duty on self assessment in accordance with the
provisions laid down in the Rules. But this is only the first step in making
of the assessment. The proper officer is empowered to assess the duty on
the goods so removed by the assessee and complete the assessment on the B
return filed by the assessee. A copy of the return so computed by the
proper officer has to be sent to the assessee. The duty assessed and paid
by the assessee on self assessment will be set off against the duty assessed
by the proper officer. If the duty paid by the proper officer on final
assessment is more than the duty determined and paid by the assessee, the
assessee has to pay the deficiency by making a debit in the account-current C
within ten <lays of the receipt of the copy of the return from the proper
officer. If the duty on final assessment payable by the assessee is less than
what he has actually paid, the assessee is entitled to take credit in the
account-current for the excess payment. No question of any show cause
notice under Section llA arises at this stage. The duty has to be paid by D
making adjustment in the account-current which has to be maintained by
the assessee within ten days' time.
Section llA deals with recovery of duty not levied or not paid or
short-levied or short-paid or erroneously refunded. Proceedings under
Section llA have to be commenced with a show cause notice issued within E
six months from the relevant date. 'Relevant' date' has been definrd under
sub-section 3(ii) to mean in a case where duty of excise is provisionally
assessed under this Act or the rules made thereunder, the date of adjust-
ment of duty after the final assessment thereof.
F
After final assessment, a copy of the order on the return filed by the
assessee has to be sent to him. Duty has to be paid by the assessee on the
basis of the final assessment within ten days' time from the receipt of the
return. No question of giving any notice under Section llA arises in such
a case. It is only when even after final assessment and payment of duties,
it is found that there has been a short-levy or non-levy of duty, the Excise G
Officer is empowered to take proceedings under Section 1lA within the
period of limitation after issuing a show cause notice. In such a case,
limitation period will run from the date of the fi~al assessment. The scope
of Section llA and Rule 173 I are quite different. In this case, the
provisional assessment earlier made by the proper ' officer has been H
708 SUPREME COURT REPORTS [1997) 3 S.C.R.
A quashed and pursuant to the direction of the High Court, the proper officer
has made the final assessment. No question of failure of issuance of show
cause notice under Section llA arises in this case. Even otherwise, we do
not find any infirmity in the order of the Tribunal.
There is no merit in the appeals. The appeals are, therefore, dis-
B missed with no order as to costs.
v.s.s. Appeals dismisscJ.