AMIT PROCESSORS PVT. LTD. Vs. UNION OF INDIA

JUDGEMENT

(1.) PETITIONER No. 1 is a Private Limited Company, while petitioner No. 2 is a shareholder of the said Company. The petitioner -company carries on the business of processing of textile fabrics of various varieties and has for that purpose a process house situated at Ahmedabad. Section 3 of the Khadi and other Handloom Industries Development (Additional Excise Duty on Cloth) Act, 1953 (Act No. 12 of 1953) (hereinafter to be referred to as 'the Act of 1953') provides for levy of duty on all cloth manufactured on or after the appointed day in India and on all cloth lying in stock on the appointed day in any factory where cloth is manufactured or in any premises appurtenent thereto. Section 5 of the said Act of 1953 empowers the Central Government to exempt a particular variety of cloth from levy of such duty. In exercise of the said powers, the Union of India, respondent No. 1 in this petition issued a notification exempting processed cotton cloth manufactured on hand -loom or on power -loom from the Additional excise duty leviable thereon under the Act of 1953. The said Notification is issued on 18 -6 -1963 and is at annexure 'A' to the petition. The petitioners received 31 pieces of cloth a measuring about 2225 metres from one Jayantilal Atmaram for Swastik Cloth Trading Co., through one Chaturbhai Madhabhai of Vijapur for being processed. The said cloth was manufactured on power -looms less than five in number as alleged. Necessary classification lists were submitted from time to time for the period from 18 -6 -1977 to 26 -5 -1978 claiming exemption as per the Government Notification dated 18 -6 -1963. The classification lists were accepted and no duty was demanded at that time. Then on 1 -8 -1978, a notice was issued by the Superintendent of Central Excise, Annexure 'D' to this petition, calling upon the petitioner to show cause why additional duty as per the Act of 1953 should not be demanded from the petitioners under Rule 10 of the Central Excise Rules, 1944. Reply to the said notice was given by the petitioners on 19 -8 -1978 showing cause. Thereafter, proceedings were ending and no action was taken till the year 1984. The Assistant Collector of Central Excise, on 29 -6 -1984 passed an order, Annexure 'H' holding that the petitioners were liable to additional excise duty on the said cloth as per the Act of 1953 and confirmed the notice which was issued under Rule 10. It may be mentioned at this stage that by Notification No. 177, dated 12 -11 -1980 Rule 10 of the Central Excise Rules, 1944 was omitted with effect from 17 -11 -1980. A similar provision was, of course, made in the Act viz. by Act No. 25 of 1978 and Section 11A was added and that provision was to come into effect from the appointed date and the appointed date as per Notification No. 182 of 1980 issued by the Government of India was 17 -11 -1980 and that way Section 11A of the Act also came into force with effect from the same date on which Rule 10 was omitted. The petitioners being dissatisfied with the order passed by the Assistant collector on 29 -6 -1984 have filed this petition challenging the said order of the Assistant Collector on various grounds. The grounds on which the order is challenged are as follows : (1) Notice dated 1 -8 -1978 was issued under Rule 10 and no action was taken as per the said notice upto the month of June, 1984. Rule 10 having been omitted with effect from 17 -11 -1980, no action could be taken as per the said notice because there is no saving clause anywhere in the notification by which Rule 10 was omitted. The order passed on the basis of the notice issued under Rule 10 is bad and hence liable to be struck down. (2) The classification lists claiming exemption were approved without modification and hence the power under Rule 10 cannot be exercised particularly when powers under Rule 173B(5) were not exercised to modify the classification. (3) Show cause notice has not been issued within six months from the relevant date i.e. the date of approval of R.T. 12 returns filed by the petitioners or clearance of the goods as required by Rule 10 and hence bad. (4) Additional duty is exempt vide Notification No. 115, dated 1 -3 -1975 stating therein that because basic duty is exempted, additional duty also exempted.

(2.) WE first take up the first contention raised by the petitioners. Rule 10 of the Central Excise Rules, 1944 as it then was prior to its omission with effect from 17 -11 -1980 as per Notification No. 177 of 1980, dated 12 -11 -1980, Annexure 'F' to the petition read as follows : - (1) Where any duty has not been levied or paid or has been short -levied or erroneously refunded or any duty assessed has not been paid in full, the proper officer may, within six months 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 to whom the refund has erroneously been made, or which has not been paid in full, requiring him to show cause why he should not pay the amount specified in the notice. Provided that - (a) where any duty has not been levied or paid, has been short -levied or has not been paid in full, by reason of fraud, collusion or any wilful mis -statement or suppression of facts by such person or his agent, or (b) where any person or his agent, contravenes any of the provisions of these rules with intent to evade payment of duty and has not paid the duty in full, or (c) where any duty has been erroneously refunded by reason of collusion or any wilful mis -statement or suppression of facts by such person or his agent, the provisions of this sub -section shall, in any of the cases referred to above, have effect as if for the words 'six months', the words 'five years' were substituted. Explanation. - Where the service of the notice is stayed by an order of Court the period of such stay shall be excluded in computing the period of six months, or five years, as the case may be. (2) The Assistant Collector of Central Excise shall, after considering the representation, if any made by the person on whom notice is served under sub -rule (1) determine the amount of duty due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.' * * *

(3.) THE learned Standing Counsel Mr. S. R. Shah for the Union Government and other respondents submitted that though there is no saving clause in the notification, Section 11A is brought on the statute with effect from the same date viz. 17 -11 -1980 and, therefore, the action which was initiated under Rule 10(1) can be continued and concluded even after the omission of Rule 10 because the provisions of Section 11A are substantially the same as those of Rule 10 as it then existed. The learned Standing Counsel also submitted that Section 6 of the General Clauses Act will save the action of the Assistant Collector, in spite of the omission of Rule 10. Prima facie, one would be inclined to accept the submission made by Mr. Shah that Section 6 of the Central Clauses Act will apply in such a situation. It is, however, not possible to accept this submission of Mr. Shah in view of the decision of the Supreme Court in the case of M/s. Rayala Corporation (P) Ltd. v. The Director of Enforcement, AIR 1970 S.C. 494 cited by Mr. Dave. The Supreme Court was in that case called upon to consider the effect of omission of Rule 132A of the Defence of India Rules, 1962. It appears from the discussion made at para 12 of the report that while omitting Rule 132A, a provision was made that the rule was omitted except as respects things done or omitted to be done under that rule. In that case, prosecution was not at all started before the rule was omitted. It was contended that the saving clause would save the prosecution but the Supreme Court negatived that contention and held that the language contained in Clause 2 of the Defence of India (Amendment) Rules, 1965 can only afford protection to action already taken while the rule was in force, but cannot justify initiation of a new proceeding which will not be a thing done or omitted to be done under the rule but a new act of initiating proceeding after the rule had ceased to exist.