NEO-SHINE VARNISHES Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioners were served with show cause notice dated March 14, 1973 by the Assistant Collector of Central Excise for revision of excise duty for the period commencing from May 15, 1967 and ending with April 30, 1969. The show cause notice, inter alia, recites that during the course of investigation it was noticed that the petitioners had cleared paints and varnishes without proper documents. The enquiries revealed that the petitioners had issued paints and varnishes to various Government departments during the above period and total quantity supplied was 1,13,235 Ltrs. The petitioners, however, had shown the clearance from the factory of 16,712 Ltrs. The Department noticed against the production and clearance of the figures, the petitioners had cleared more goods than for what the duty was paid. The petitioners filed reply to the show cause notice raising various contentions including that the show cause notice was served after a period of limitation set out under Rule 10 of Central Excise Rules.

(2.) The Department informed the petitioners on September 17, 1975 that show cause notice stands withdrawn. Before this date, on August 9, 1975, second show cause notice was served on the petitioners for identical purpose i.e. revision of duty for the period commencing from May 15, 1967 and ending with April 30, 1969. The petitioners filed reply to the second show cause notice and the Collector, Central Excise, Bombay, by order dated May 28, 1979, held that the allegations against the Company made in the show cause notice stood proved. The Collector levied penalty of Rs. 2,000/- under Rule 9(2), penalty of Rs. 1,000/- under Sub-rule (5) of Rule 32-A and penalty of Rs. 1,000/- under Rule 210 upon the petitioners. The petitioners carried appeal before the Central Board of Excise and Customs, but the appeal ended in dismissal by order dated April 25, 1980. These orders are under challenge in this petition under Article 226 of the Constitution.

(3.) Mr. Kantawala, learned Counsel appearing on behalf of the petitioners, submitted that the service of second show cause notice was clearly unsustainable. It was also urged that the show cause notice was served long after the expiry of the statutory period of limitation under Rule 10 and consequently the show cause notice was vitiated. The Collector has observed that the second show cause notice was issued because the first show cause notice had nominated Deputy Collector as Adjudicating Officer. But before the case was referred to the adjudication, the Officer, who investigated the case, was promoted to the post of Deputy Collector and, therefore, to observe the principles of natural justice, fresh show cause notice was issued. Reasons furnished are entirely inadequate and unrealistic. Apart from this consideration, the principal question urged by the learned Counsel for the petitioners is that the proceedings commenced by the show cause notice stand vitiated as the proceedings were commenced long after expiry of three months from the date on which the duty is charged. Mr. Kantawala referred to Rule 10(i) of Central Excise Rules, which, inter aiia, provides that for the duties or charges levied through mis-statement as to the quantity, description or value of such goods on the part of the owner, the proper officer within three months from the date on which the duty was evaded can serve a show cause notice as to why the owner should not be made to pay the amount specified in the notice. The claim of Rule 10 makes it clear that both the first show cause notice and the second show cause notice were served long after the expiry of period of three months from the date of short levy of the goods and secondly the proceedings commenced by the Collector were without any jurisdiction. Mr. Mehta, learned Counsel appearing on behalf of the Department, referred to the provisions of Rule 10-A, but in our judgment reliance on this rule is incorrect, because this rule comes into play only when Rule 10 does not make any specific provisions for the short levy of duty. As in the present case, Rule 10 clearly applies to the facts of the case, reference to Rule 10-A is incorrect.