Mobile View
Main Search Forums Advanced Search Disclaimer
Cites 162 docs - [View All]
The Salt Cess Act, 1953
Section 11A in The Central Excises And Salt Act, 1944
The Mines Act, 1952
The Central Excises And Salt Act, 1944
Section 5 in The Salt Cess Act, 1953

User Queries
Customs, Excise and Gold Tribunal - Delhi
Balaji Paper Boards (P) Ltd. And ... vs Collector Of Central Excise on 8 October, 1998
Equivalent citations: 1998 (62) ECC 631
Author: L Ram
Bench: U Bhat, S T K., R T Lajja, S T G.R., A Unni

ORDER

Lajja Ram, J.

1. Prior to its amendment on 27.12.1985, Section 11A of the then Central Excises and Salt Act, 1944 {now called Central Excises Act, 1944, and hereinafter referred to as the 'Act'), provided that for recovery of central excise duty not levied or not paid or short levied or short paid, notice was to be served, on the person chargeable with the central excise duty, which had not been levied or paid or which had been short levied or short paid, by a Central Excise Officer. The power to determine the amount of duty of excise due from such person on whom the notice had been served, was to be exercised by the Asstt. Collector of Central Excise, A question had arisen whether this power could be exercised by the Collector of Central Excise. The Assistant Collector of Central Excise was an officer subordinate to the Collector of Central Excise. There were a few decisions of the Tribunal wherein it had been held that even though under Sub-section (2) of Section 11A of the Act, Asstt. Collector of Central Excise was referred to as the authority to determine the amount of duty of excise due, this power could be validly exercised by the Collector of Central Excise, by virtue of Rule 6 of the Central Excise Rules. 1944 (hereinafter referred to as the 'Rules'). According to these decisions, the Collector of Central Excise (as the Officer was known then) could determine the amount of duty of excise due from the person on whom the notice had been served by him or by any other central excise officer. One case was however, noticed wherein by a majority decision, the Bench had held that the Collector of Central Excise could not have exercised the powers vested in the Asstt. Collector of Central Excise, under the provisions of Section 11A(2) of the Act. It was at such a stage that the Appeal No. E/660/85 Bl filed by M/s. Premier Iron and Metal Industries came up before the Tribunal.

2. M/s. Premier Iron & Metal Industries (hereinafter referred to as M/s. "PIMI') were engaged in the manufacture of motor vehicle parts, motor vehicle accessories and fittings and embellishments of suit-cases and trunks falling under T.I. No. 34A and Item No. 68 of the erstwhile Central Excise Tariff. Prior to 27.1.1981, they had no central excise licence, as required under Rule 174 of the Rules. Rule 174 stipulated that every manufacturer, trader or person mentioned in that Rule was to take-out a licence and was not to conduct his business in regard to the excisable goods, so mentioned, otherwise than by the authority and subject to the terms and conditions of a licence granted by a duly authorised officer in the proper form. Manufacturers of excisable goods were required to takeout such a licence. M/s. PIMI cleared the motor vehicle parts, etc. manufactured by them without payment of central excise duty. A visit was paid by the officers to the factory of PIMI on 8.1.1981, It was admitted by the partner of PIMI that their turnover for the years 1978-79, 1979-80 and 1980-81 (upto to December, 1980) was about Rs. 55 lakhs, Rs. 75 lakhs and Rs. 45 lakhs respectively; they had neither applied for central excise licence nor filed any declaration with the proper officer. Under Rule-174A of the Rules, the Central Government could exempt, subject to such conditions or limitations as specified, from the operation of Rule-174, any goods or class of goods which were wholly exempted from the duty of excise leviable thereon, either unconditionally or subject to fulfilment of conditions. Under Notification No. 111/78 CE dated 9.5.1978, issued in exercise of the powers conferred by Rule 174A, the Central Govt, exempted from the operation of Rule-174, the class of goods, so long as they remained exempt from the whole of the duty of excise leviable thereon in terms of notification or notifications issued from time to time under the then Rule-8. Among others, goods, subject to the above limitation, where exemption from the whole of the duty of excise leviable thereon was granted based on the value of the goods, were exempt from the operation of Rule-174. This was however, subject to the condition that the manufacturer made a declaration and gave an undertaking as specified in the form annexed to that Notification No. 111 /78 CE, while claiming exemption for the first time under that Notification and thereafter before the 15th day of April of each financial year. The exemption limit in respect of the goods classifiable under T.I. No. 68 during the relevant period was Rs. 30 lakhs, which had been exceeded in that case. The goods valued at Rs. 2,01.749.25 were seized. Further investigations were undertaken and the various provisions of the law were applied to the different goods manufactured and removed by PIMI. It was found that the value of all the excisable goods manufactured and cleared by PIMI during the year 1976-77 was Rs. 40,29,963.42 and during the year 1977-78 it was Rs. 53.55,728.92; during the year 1978-79 Rs. 43,61,358.58; during the year 1979-80 Rs. 45,00,114.61 and from 1.4.1980 to 8.1.1981, the value of all the excisable goods manufactured and cleared was Rs. 29,96,243.43. It appeared that M/s. PIMI had contravened the provisions of Section 6 of the Act (providing that certain operations were to be subject to licence), read with Rule 174 (providing for certain persons to require a licence), and the provisions of Rule 173 PP (1), 173 PP (5), provisions of Rule 173 PP related to the power to relax provisions of Chapter VIIA in respect of excisable goods comprised in Item No. 68 of the erstwhile Central Excise Tariff), read with Rule 9(1) (providing for the time and manner of payment of duty. Rule 173 PP (6) and Rule 173 PP (7) read with Rule 52A (providing that the goods were to be delivered on a gate pass). Rule 173 PP (9) read with Rule 53 (prescribing the daily stock A/c) and Rule 226 (providing as how entry book, stock A/c and warehouse registers were to be maintained), and/ or, the provisions of Rules 173B (assessee to file list of goods for approval of the proper officer), Rule 173-C (assessee was required to file price list of goods assessable Adv.), Rule 173F (assessee to determine the duty due on the goods and to remove them on payment thereof), Rule 173G(1) (procedure to be followed by the assessee) read with Rule 9(1), Rule 173G(2) read with Rule 52A and Rule 173G(4) read with Rule 53 and Rule 226.

3. For contravention of the various provisions of the Act and the Rules by suppression of the facts with intent to evade payment of duty, a show cause notice was issued on 2.6.1981 by the Asstt. Collector of Central Excise, Bombay requiring M/s. Premier Iron and Metal Industries to show cause to the Collector of Central Excise, Bombay. In the aforesaid show cause notice. Central Excise Duty amounting to Rs. 6,79,864.46 was demanded from them under Rule 10A and /or Provisos (a) and (b) of Sub-rule (1) of Rule 10 read with Rule 9(2) of the Rules and/or Section 11A of the Act. Penalties under Rules 173Q, 52A, 210 and 226 of the Rules were proposed to be imposed on them. The confiscation of the goods seized valued Rs. 2,01,749.25 under Rule 173Q and/or Rule 210 and/or Rule 226, besides confiscation of the land, building, plant and machinery, etc. under Rule 173Q was also proposed in the said show cause notice dated 2.6.81.

4. The matter was adjudicated by the Collector of Central Excise, Bombay, who under his Order-in-Original No. 33 of 1984 dated 7.1.1985 after analysing the submissions of the noticees came to a finding that the evasion on the part of the Company was deliberate, and warranted penal action, He confirmed the demand of Rs. 6,79,844.40 (against Rs, 6,79,864.46 as demanded in the show cause notice) under Rule 9(2) read with Rule 10A, Rule 10 and/or Section 11A. A penalty of Rs. 25,000/- was imposed under Rule 173Q. A further fine of Rs. 25,000/- was imposed in lieu of confiscation of land, plant, machinery, etc. under Rule 173Q of the Rules. With regard to the seized goods a redemption fine of Rs. 40,000/- was imposed.

5. When the matter came-up before the Tribunal, a miscellaneous application under Rule 10 of the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT) (Procedure) Rules 1982 for permission to raise the following additional grounds in appeal, was made:

(i) The show cause notice dated 2nd June, 1981 issued by the Asstt. Collector of Central Excise (Preventive), Head Quarters, Bombay-I, culminating in the impugned order passed, is illegal, and incompetent and the order following the same is also therefore, void: and

(ii) The Id. adjudicating authority in passing the impugned order acted without jurisdiction and thus, the said order is illegal and is thus void.

Under Rule 10 of the CEGAT (Procedure) Rules 1982 the appellant shall not, except by leave of the Tribunal, urge or be heard in support of any grounds not setforth in the memorandum of appeal. After hearing both the sides, the Bench allowed the miscellaneous application and permitted the applicants to raise the above two additional grounds. With regard to the merits of the additional grounds, the Bench observed that there were five judgments of the Tribunal on that issue. In four judgments, it had been held that the Collector of Central Excise, did not lack jurisdiction under Section 11A of the Act before its amendment in 1985 to adjudicate a case of recovery of duty not levied or not paid or short levied or short paid. As against these four judgments, the Bench noticed that there was one judgment in the case of Meghmani Dyes & Intermediates, Baroda v. CCE, Baroda 1991 (17) ETR 434 ('Meghmani Dyes' for short), in which it had been held that the Collector of Central Excise lacked the aforesaid jurisdiction. The Bench by a majority decision in the case of Meghmani Dyes, (to arrive at the conclusion that the Collector of Central Excise could not have exercised the power vested in the Asstt. Collector of Central Excise under the provisions of Section 11A(2) of the Act) had relied upon the Supreme Court's decision in the case of S. Kannan and Ors. v. Secretary, Karnataka State Road Transport Authority ('S Kannan' for short). The Bench in the case of Premier Iron and Metal Industries, whole disposing of the miscellaneous application for additional grounds, observed that the enunciation of law by the Supreme Court in S. Kannan's case was to be applied only to the scheme of the Statute i.e. Motor Vehicles Act, 1939 under consideration therein, and not to the scheme of the Central Excise Act, 1944 and the Central Excise Rules, 1944, made thereunder. The Supreme Court in S. Kannan's case had held that the power conferred on a lower authority could not be enjoyed by a higher authority because there was no express provision in that statute to the effect that the State Transport Authority (STA) could always and without any fetter enjoy the power of Regional Transport Authority (RTA). According to the Bench, in the scheme of the Central Excises Act and the Rules made thereunder, the position was totally different. Rule 6 of the Rules, gave, to the Collector of Central Excise, an unfettered power to perform any of the duties or exercise any of the powers conferred on any other Central Excise Officer. The Bench was of the view that the decision in the case of Meghmani Dyes was not based on the correct appreciation of the legal position. According to the Bench, the reasons given by the Bench in the case of Meghmani Dyes for not referring the matter to a Larger Bench were not sound enough to discard four earlier decisions of the Tribunal on the same issue which had taken a consistent view that the Collector of Central Excise was competent to adjudicate the case under Section 11A of the Act prior to its amendment in 1985. The Bench further observed that the Meghmani Dyes' case involved not only the demand of duty under Section 11A of the Act but it also involved liability to duty on the seized goods as also confiscation of the seized goods and the penalty on the persons charged with the evasion of central excise duty. Section 11A of the Act would not have any application in respect of the goods under seizure and whose confiscation had to be adjudged on merits on the basis whether those seized goods were liable to duty or not. Question of application of Section 11A for confiscation, liability to duty on the seized goods and imposition of penalty on the concerned person, in respect of such seized goods, did not arise. According to the Bench, the appeal in the case of Meghmani Dyes should not have been allowed by the majority.

6. Under miscellaneous Order No. E/48/93 B dated 19.11.92, due to conflict of views on the preliminary issue of jurisdiction among the different benches the Bench referred the matter to the Hon'ble President for constitution of a Larger Bench to resolve the conflict.

7. In the case of M/s. Balaji Paper Boards (P) Ltd. v. CCE, Tiruchirapalli Appeal No. E/2106/85 C a show cause notice dated 1.1.83 was issued to M/s. Balaji Paper Boards Pvt. Ltd. ('M/s. Balaji for short), by the Superintendent of Central Excise, answerable to the Collector of Central Excise alleging evasion of central excise duty amounting to Rs. 5,02,511.54 for the period April, 1981 to June, 1982 M/s. Balaji were engaged in the manufacture of machine finish Kraft paper falling under Item No. 17(2) of the erstwhile Central Excise Tariff. On 8.7.1982, Central Excise Officers visited their factory and conducted checks with regard to the goods and the records. The excise records were found written upto 5.7.82. It was found that considerable quantities of Kraft paper had been removed without payment of duty, without issuing any gate pass or under the cover of incorrect gate passes, duplicate gate passes and under the cover of un-used foils of gate passes pertaining to earlier years, etc. Payment particulars in the personal ledger Account had been manipulated. The annual installed capacity had been mis-declared. It appeared that M/s. Balaji had contravened the provisions of Rule 173G(4) (procedure to be followed by the assessee) read with Rule 53 (daily stock account); Rule 173B (assessee to file list of goods for approval of the proper officer); Rule 173C (assessee to file price list of goods assessable ad valorem ); Rule 9(1) (time and manner of payment of duty) read with Rule 173F (assessee to determine the duty due on the goods and to remove them on payment thereof); Rule 173G(1) and Rule 173G(2) read with Rule 52A (goods to be delivered on a gate pass). The representative of M/s. Balaji admitted the removal of Kraft paper under invalid gate passes without payment of excise duty. It was also admitted that the debit entry numbers noted in the gate passes were fictitious. Investigations were made at the different premises of their customers and a number of discrepancies were noticed. It was found that Kraft paper had been removed without payment of central excise duty. The Managing Director of the Company, Shri C. Hari Prasad in his statement dated 27.7.82 admitted despatch of goods without payment of duty and stated that the Company was liable to pay the duties on the goods that had escaped payment of duty. He admitted that duty had not been paid on the consignments of paper cleared from the factory under three invoices dated 7.7.1982 and under Invoice No. 192 dated 4.7.82; that the credit entries made in the PLA on 3.7.82 and 5.7.82 and the debit entries made against gate pass No. 75 to 78 were not correct and that the consignments of paper removed under gate passes No. 75 to 79 were removed without payment of duty. He also admitted other discrepancies/contraventions. In his further statement dt. 10.9.82, Shri C. Hari Prasad, Managing Director admitted that the annual installed capacity of the Unit had been incorrectly declared. In the show cause notice dt. 1.1.83, it was alleged that M/s. Balaji had not paid/had evaded the central excise duty amounting to Rs. 5,02,511.54 by willfully suppressing the production and removals of the excisable goods and had deliberately and wilfully misdeclared the relevant facts for proper assessment of duty. The facts like grammage of the paper and installed capacity of the Unit had been misdeclared with the deliberate intention to evade payment of excise duty. Proviso to Section 11A as made applicable to Rule 9(2) was invoked. The duty was demanded for the extended period. The provisions of Rule 173Q of the Rules were invoked for imposing penalty and for confiscation of the goods seized.

The matter was adjudicated by the Collector of Central Excise confirming the demand of Rs. 4,02,188.59 (against the demand of Rs. 5,02,511.54 made in the show cause notice). The adjudicating authority after analysing the offences committed, records seized and after taking into account the defence taken by the appellants found the allegations conclusively proved. She imposed a penalty of Rs. 15 lakhs on the appellants. A redemption fine of Rs. 2,00,790 was also imposed.

8. When the matter came-up before the Tribunal, the question of jurisdiction of the Collector of Central Excise in adjudicating the case under the provisions of Section 11A of the Act was raised. The appellants challenged the jurisdiction of the Collector of Central Excise to adjudicate the case in proceedings instituted on 1.1.83 by invoking the extended period of limitation under Section 11A of the Act. The Bench considered that the main issue involved in that appeal was the same as was before the Tribunal in the case of Premier Iron & Metal Industries Ltd. v. CCE, Bombay, and that as conflict of view had arisen, a Larger Bench had been constituted by the Hon'ble President for the purpose. The Bench, therefore, under their Miscellaneous Order No. 55/93 C dated 5.2.93 referred the matter to the Hon'ble President for tagging that appeal for hearing alongwith the appeal of M/s. Premier Iron & Metal Industries, by the Larger Bench.

9. When the issue of jurisdiction had come up before the Bench in the case of M/s. Premier Iron & Metal Industries, the only decision which had held that the Collector of Central Excise could not have exercised the powers vested in the Asstt. Collector of Central Excise under the provisions of Section 11A(2) of the Act, was in the case of Meghmani Dyes. In that case, for various violations of the law, a show cause notice dated 18.7.1981 had been issued to M/s. Meghmani Dyes. The matter was adjudicated by the Collector of Central Excise, who confirmed the demand of Rs. 12.68.075/- and imposed a penalty of Rs. 30,000/-. On appeal before the Tribunal, the appellants raised a preliminary objection that the matter had been adjudicated by the Collector of Central Excise, but that at the relevant time only the Asstt. Collector of Central Excise was authorised to adjudicate the matter and so the Collector of Central Excise had no jurisdiction to adjudicate, and so the adjudication order was illegal and void ab initio, for want of jurisdiction. At that time, there were four decisions of the Tribunal, wherein it had been held that the Collector of Central Excise was competent to exercise the powers, vested in the Assistant Collector of Central Excise, for determination of the amount of duty of excise due from the person chargeable with the duty which has not been levied or paid or which has been short levied these decisions or short paid, were:

(1) DCW Ltd. v. CCE, Madurai

(2) U.P. Laminations v. CCE, Kanpur .

(3) Steel Authority of India Ltd. v. CCE .

(4) ORG Systems v. CCE .

In the case of DCW Ltd. v. CCE. Madurai , the Tribunal in para-8 of their decision referred to the Larger Bench decision in the case of S. Kumar and Ors. v. CCE and Ors. 1983 ELT 1057 (Tribunal). The Tribunal in that decision of S. Kumar and Ors. had held that the statutory rules are always considered as part of an enactment, which provides for framing of the same, based inter alia on the Supreme Court's judgment in State of U.P. v. Babu Ram . The Supreme Court in that judgment of Babu Ram had laid down that the Rules made under a Statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act. The Tribunal had held that even prior to the insertion of Section 12A in the Act by the amendment of December, 1985, by virtue of Rule 6 the Collector could exercise the powers of his subordinate and that even though the Asstt. Collector of Central Excise was specifically mentioned in the Proviso to Section 11A. there will be no legal infirmity if the Collector of Central Excise was also to exercise the power.

In the case of U.P. Laminations v. CCE, Kanpur the adjudication proceedings confirming the demand of duty were held by the Collector of Central Excise. It was argued that under Section 11A(2) of the Act as it stood at the material time before its amendment on 27.12.85, this power was vested only in the Asstt. Collector, Central Excise, and that the adjudication proceedings were without jurisdiction. The Tribunal referred to the provisions of Rule 6 of the Rules and observed that this Rule 6 empowers the Collector of Central Excise to perform all or any of the duties or exercise all or any of the powers assigned to an officer under the Rules, and that there was no prohibition in Section 11A for the Collector of Central Excise himself to exercise the powers of the Asstt. Collector of Central Excise, who was an officer subordinate to the Collector of Central Excise, The ground urged by the appellant's counsel that the Collector of Central Excise had no power to confirm the demand raised against the appellants, was rejected.

On the competency of the Collector of Central Excise to cofirm the demand of central excise duty under Section 11 A, the Tribunal, in the case of Steel Authority of India Ltd. v. CCE. ,

observed that the intention of Sub-section (2) of Section 11A appeared to be that the Asstt. Collector of Central Excise was the lowest authority in the central excise hierarchy, who was competent to confirm the demand of duty. This however, did not preclude the Collector of Central Excise from exercising the power of Asstt. Collector of Central Excise, who was a subordinate Officer to the Collector of Central Excise. Reference was made to the provisions of Rule 6 under which the Collector of Central Excise could perform all or any of the duties or exercise all or any of the powers assigned to an Officer under those Rules. The Tribunal added that the Central Excise Rules framed under the Act have the same force as the provisions of the Act. The Tribunal held that the demand of duty confirmed by the Collector of Central Excise was legal and valid.

In the case of ORG Systems v. CCE , it had been argued before the Tribunal that as per Sub-section (2) of Section 11A of the Act, as it stood at the relevant time, after considering the representation made by the noticee in response to the show cause notice issued under Sub-section (1) of that Section 11A, the Asstt. Collector Central Excise was to determine the amount of duty of excise due from the appellant and thereupon the appellant was required to pay the duty so determined. In the matter appealed against, the appellant was to show cause to the Collector of Central Excise, Baroda, and not to the Asstt. Collector of Central Excise. It was pleaded that as such the adjudication proceedings were ab initio void, illegal and bad in the eyes of law. The Tribunal reviewed the legal provisions and the case law on the subject and held that the Collector had the jurisdiction to decide the matter.

The Bench in the case of Meghmani Dyes, by majority decision, observed that in the first three cases the Supreme Court's decision in the case of S. Kannan and Ors. v. Secretary, Karnataka State Road Transport Authority was not brought to the notice of the

respective Benches, and in the case of ORG Systems v. CCE 1989 (13) ETR 935, the Bench did not try to distinguish S. Kannan's case nor did the Bench refer to it. The Bench in Meghmani Dyes case was of the view that the decision in S. Kannan's case was squarely applicable to the facts of the case before them (refer Para 40 of the Majority decision). The Bench posed a question to themselves and answered as under:

So the question for us is whether we should follow the decision by this Tribunal in ORG Systems' case or the principle laid-down by the Supreme Court in S. Kannan's case. In our view, the reply to this question is obvious. We have to follow the ratio of S. Kannan's case since as per Article 141 of the Constitution of India, law declared by the Supreme Court is binding on all courts.

With regard to the precedent decisions of the Tribunal, the Bench thought that they did not come in their way in deciding the matter differently. The Bench observed that they were basing their finding "on a clear-cut judgment of the Supreme Court which judgment in effect over rules the interpretation sought to be put by the Tribunal in the earlier cases.

The Bench came to a view that the Collector of Central Excise could not have exercised the powers vested in the Asstt. Collector of Central Excise under the provisions of Section 11A(2) of the Act as it stood at the relevant time.

In the minority decision delivered by the Member (T), Shri V.P. Gulati, the Member (T) held that Rule 6 which empowered the Collector of Central Excise to exercise the powers of his subordinate officers would be applicable in the context of Section 11A. As regards the Supreme Court's decision in the S. Kannan's case, he observed that the Supreme Court was dealing with the matter of issue of a temporary permit in the context of the Motor Vehicles Act 1939 as to whether the State Transport Authority (STA) could issue such a permit in terms of Sub-section (7) of Section 63 of that Act. After taking note of the scheme of that Act and the purposes of conferring power on the Regional Transport Authority (RTA), and in the context of the issue of temporary permit under Section 62 of the Act, the Supreme Court observed that RTA having jurisdiction over a comparatively small area may be able to gauge, notice or appreciate a particular temporary need for which a temporary permit can be granted for a period but not exceeding 4 months without following the procedure prescribed under Section 57 of that Act. It was further observed that an authority having jurisdiction over a comparatively small area was favourably placed to notice a situation as contemplated by Section 62. It was in such a situation that the Supreme Court observed that it was not possible to accept submission that when a power is conferred on a lower authority, that power could always be enjoyed by the authority higher in the hierarchy in relation to the lower authority. The Member (T) was of the opinion that the observations of the Supreme Court have to be read in the context of the provisions of the Motor Vehicles Act. He held after analysing the provisions of the Act that the mention of the words 'Asstt. Collector' under Section 11A could not be held to mean in the scheme of the Central Excises Act that the Collector of Central Excise was precluded from adjudicating on the matter under the said section and that the Collector of Central Excise was competent to decide the matter.

10. The matter was heard by the Larger Bench constituted for the purpose from 15th to 17th and from 20th to 24th July, 1998. Shri Daya Sagar, Consultant appeared for M/s. Premier Iron & Metal Industries; Shri V. Sridharan, Advocate appeared for M/s. Balaji Paper Boards Pvt. Ltd.; Shri A.K. Jain, Advocate and Shri M. Gauri Shanker Murthy, Advocate, appeared as intervenors. Shri Lakhinder Singh, Jt. CDR and Shri Sanjeev Srivastava, JDR represented the Department.

11. Extensive arguments were advanced on behalf of the appellants and the intervenors on the one side and by the representatives of the Department on the other side. On behalf of the appellants and the intervenors, it was mainly pleaded that after the insertion of Section 11A in the Act. the Collector of Central Excise could not exercise the powers assigned to the Asstt. Collector of Central Excise under Sub-section (2) of Section 11A, and that the provisions of Rule 6 will not be applicable to the provisions in the Act. The main argument of the representatives of the Department was that on a harmonious construction of the provisions of the Act and the Rules, the Collector of Central Excise could exercise the powers of the Asstt. Collector of Central Excise under Section 11A and in any case, in composite proceedings where penal provisions were invoked and the confiscation of the goods was proposed, the adjudication by the Collector of Central Excise was provided in the Act.

12. Shri V. Sridharan, Advocate appearing for M/s. Balaji made the following points:

(1) Rules were not part of the Act and Rule 6 could not be pressed into service for empowering the Collector of Central Excise to take over the functions of the Asstt. Collector of Central Excise under Section 11 A.

Reliance was placed on the Supreme Court's decision in the case of Hotel Balaji and Ors. etc. etc. v. State ofAndhra Pradesh and Ors. etc. etc. , and Tribunal's Larger Bench decision in the case of Atma Steels Pvt. Ltd. and Ors. v. CCE, Chandigarh and Ors. 1984 (17) ELT 331 (Tribunal).

(2) Collector of Central Excise could not exercise powers of the Asstt. Collector of Central Excise under Section 11A prior to 27.12.85.

(3) In view of the provisions of Section 11 A, there is an implied repeal of Rule 9(2). Even earlier when the provisions relating to non-levy were introduced in the earlier Rule 10, implied repeal of Rule 9(2) in so far as demand of duty was concerned, has to be implied. The ground earlier occupied by Rule 9(2) has now been occupied by Section 11A.

(4) Even when Rule 9(2) is cited in the notice, it must be regarded that the notice has been issued under Section 11A and thus, only the Asstt. Collector of Central Excise could adjudicate the matter.

(5) Supreme Court's decision in the case of S. Kannan is applicable to the issue before the Larger Bench.

(6) As demand was not validly adjudicated inasmuch as the Collector of Central Excise had no jurisdiction, the penalty and confiscation also could not survive. There was no specific provision under Section 11A for confiscation and penalty. He relied upon the Tribunal's decision in the case of Bakeman's Home Products Pvt. Ltd. v. Collector of Customs, Bombay .

He submitted that prior to 27.12.85 when the proviso under Sub-section (1) and the Sub-section (2) to Section 11A were substituted, the Collector of Central Excise had no power to adjudicate under that Section 11A. When the Collector of Central Excise could not adjudicate the demand, he could also not impose any penalty and could not order for confiscation. He argued that the rules were not the part of the Act and they did not enjoy the status of the Act. In his view the decisions wherein it had been held that by virtue of Rule 6, the Collector of Central Excise could exercise the powers of the Asstt. Collector of Central Excise under Section 11A, were not correct. He, however, referred to the following decisions, which were contrary to the proposition advanced by him:

(1) U.P. Laminations v. CCE, Kanpur .

(2) Engineering Systems Pvt. Ltd. v. Union of India Karnataka, and

(3) Twin City Glass Pvt. Ltd. v. Union of India 1992 (61) ELT 440 (Bombay).

13. Shri Daya Sagar, consultant, appearing for M/s. Premier Iron & Metal Industries raised the following points :

(1) the demand for central excise duty in the facts and circumstances of the case should have been made only under Section 11A and not under Rule 9(2) and/or Section 11A, as has been made in this case;

(2) the special provisions under Section 11A should have precedence over general provisions under Rule 6. He relied upon the Supreme Court decision in the case of Ashoka Marketing Ltd. and Anr. v. Punjab National Bank and Ors. ;

(3) before the 1985 amendment in the provisions of Section 11 A, only the Asstt. Collector of Central Excise could adjudicate the case under Section 11A. He referred to Section 8 of the amending Act of 1985 wherein provision was made for transfer of pending proceedings from Asstt. Collector of Central Excise to the Collector of Central Excise;

(4) the right of appeal is a vested right and adjudication by the Collector of Central Excise had taken away assessee's right of two appeals. He relied upon the Supreme Court decision in the case of Gorika Pali Veeraya v. N. Subhiah Choudhry and Ors. . It was admitted that the show cause notice was

validly issued, but it was argued that by asking the appellants to show cause to the Collector of Central Excise their one right of appeal before the Collector of Central Excise (Appeals) had been taken away;

(5) the Meghmani Dyes case has been correctly decided.

14. Shri A. K. Jain, intervenor, made the following points:

(1) the notice under Section 11A could only be issued by the Asstt. Collector of Central Excise and not by any other Central Excise Officer. He submitted that the expression the' before the 'Asstt. Collector of Central Excise', in Section 11A(2) particularises the authority both for issuing the notice and for adjudicating the matter. He placed reliance on the Andhra Pradesh High Court decision in the case of K. Pamanna v. State Transport Appellate Tribunal Andhra Pradesh, Hyderabad and Ors. ;

(2) the scheme of demand under Rule 9(2) is different from the scheme of determination of duty under Section HA. Only cases of clandestine removal could be covered by Rule 9(2). He referred to the Supreme Court decision in the case of N.B. Sarijana, Asstt. Collector of Central Excise. Bombay v. Elphinstone Spinning and Weaving Mills Co. Ltd. 1978 ELT J 399;

(3) after amendment of Rule 10 on 6.8.1977 and deletion of Rule 10A. Rule 9(2) in so far as demand of duty was concerned, had practically become redundent. It could be invoked only for penalty and confiscation;

(4) the case could be adjudicated under Section 11A only by the Asstt. Collector of Central Excise, and the Collector of Central Excise could not adjudicate the case under Section 11A of the Act;

(5) no rule can confer powers under the Act. He relied upon the Allahabad High Court decision in the case of Jawahar v. State . and Bombay High Court decision in Atlas Exporters and Anr. v. KV Irniraya ACCIE ;

(6) Section 11A is a complete code. He relied upon the Tribunal's decision in the case of Pharma Research & Analytical Lab v. CCE. Madras. ;

(7) prior to insertion of Section 12A in the Act. no powers were conferred on Senior Officers under the Act to exercise the powers vested in their subordinate officers.

(8) for understanding the intention of the Legislature, the Statement of Objects and Reasons to the Bill could be referred to. He relied upon the Supreme Court decisions in the cases of

(i) Devadoss (Dead) by LRs and Anr. v. Veera Makali Amman Koil Athalur ;

(ii) Sole Trustee Loka Shikshana Trust v. Commissioner of Income Tax, Mysore .

The learned advocate however admitted that the following two High Court decisions were against the proposition advanced by him :

(1) Engg. System Pvt. Ltd. v. UOl ;

(2) Twincity Glass Pvt. Ltd. v. UOI

15. Shri M. Gauri Shanker Murthy, intervenor made the following points:

(1) Under Section 11A as in force prior to 27.12.85, no show cause notice could be issued under Section 11A requiring the assessee to show cause to any authority other than the Asstt. Collector of Central Excise. Any such notice, if issued requiring the assessee to show cause to any authority other than the Asstt. Collector of Central Excise, would be illegal, and the adjudication would also not be valid. He relied upon the Supreme Court's decision in the case of Official Trustee West Bengal and Ors. v. Sachindra Nath Chatterjee and Anr. .

(2) Jurisdiction is conferred by the Statute. In Section 11A, there is no reference to the Collector of Central Excise. Section 2(a) defining the adjudicating authority refers to the Act while Rule 6 providing for the exercise of powers by the Collector of Central Excise refers only to the Rules. He relied upon the following decisions:

(a) Smt. Shrisht Dhawan v. M/s. Shaw Brothers .

(b) Atma Steels Pvt. Ltd. and Ors. v. Collector of Central Excise, Chandigarh and Ors. 1984 (17) ELT 331 (Tribunal).

(c) No guidelines have been prescribed under Section 11A to provide as to which case would go before the Collector of Central Excise. If some of the cases are adjudicated by the Collector of Central Excise then it would lead to procedural discrimination.

(d) Right of appeal will be affected if the matter was adjudicated by the Collector of Central Excise. He referred to the Supreme Court's decision in the case of M/s. Hossein Kasam Dada (India) Ltd. v. State of Madhya Pradesh and Ors. .

(e) The general provisions in Rule 6 should yield to specific provisions in Section 11A. Any repugnancy between Rule 6 and Section 11A should be settled in favour of Section 11A. He relied upon the following decisions:

(i) Gadde Venkateswara Rao v. Govt. of Andhra Pradesh and Ors. AIR 1966 SC 826

(ii) The Commissioner of Income Tax, Madras v. S. Cheniappa Mudaliar .

(6) Rule 9(2) is in-effective as even for penalty and confiscation, provisions are contained in Rule 173Q in respect of SRP goods. Rule 173Q was introduced on 6.4.74. Thus, Rule 9(2) had no applicability under SRP.

(7) For penalty and confiscation, there should be separate proceedings. He relied upon the Supreme Court's decision in the case of Hindustan Steel Ltd. v. State of Ortssa 1978 ELT J 159.

(8) Only after the amendment in 1985, the Collector of Central Excise could adjudicate the proceedings. He referred to the Gujarat High Court's decision in the case of Gujarat State Fertilizers Co. Ltd. and Anr. v. Union of India and Ors. 1988 (34) ELT 442 (Gujarat).

The learned Advocate summed-up by saying that broad features of the Act and Rules should be taken into account for deciding the issue; between the general and specific provisions and between the provisions of the Act and Rules, the specific provisions and the provisions of the Act should have precedence, and that the various provisions should be harmoniously construed and procedural discrimination should be avoided.

16. On behalf of the Revenue. Shri Lakhinder Singh, Jt. CDR and Shri Sanjeev Srivastava, JDR made the following submissions:

(1) In the Scheme of the Central Excises Act and the Central Excise Rules, the rules are integrated with the Act, and without the rules the authority for the various provisions in the Act could not be located. There could be no rigid demarcation between the Act and the Rules, and the provisions of the Act and the rules have to be harmoniously construed. Reliance was placed on the following decisions:

(a) Twin City Glass Pvt. Ltd. v. Union of India .

(b) S. Kumar and Ors. v. Collector of Central Excise and Ors. .

(c) Saurashtra Cement & Chemicals Industries Ltd. v. Union of India .

(2) Rule 6 applies to Section 11A and there is no contradiction between the provisions of Rule 6 and Section 11A. and in a case where higher penalty /confiscation is proposed, the matter has to be decided by the Collector of Central Excise.

(3) Before 17.11.1980, the corresponding provisions as contained under Section 11A were in Rule 10 as in force between 6.8.1977 to 16.11.1980 and the shifting of the provision from the Rules to the Act was not intended to disturb the position earlier obtaining under which the Collector of Central Excise was empowered to exercise the powers of his subordinate officers. There was no change in the position of the Collector of Central Excise as the provisions of Rule 6 remained unchanged and the provisions regarding recovery were merely shifted from one part of the law to another part of the law. Reliance was placed on the following decisions:

(a) Gwalior Rayon Mfg. and Weaving Co. v. U.O.I. and Ors. . .

(b) Saurashtra Cement and Chemical Industries Ltd. v. U.O.I. Full Bench.

(4) Under the Rule making power of Section 37(2)(1b), the Rules could be made in particular for the assessment and collection of duties. The provisions relating to assessment and requirement to pay and collect the duty assessed are contained in the Rules and these provisions relate to the stages prior to the enforcement of the recovery. They are not provided in Section 11A. They are provided in the Rules.

(5) Demand for duty, confiscation and levy of penalty are to be made in a composite manner and duty demanded could not be segregated from confiscation and penalty. Reliance was placed on the Tribunal's decision in the case of Northern India Woollen Mills v. CC .

(6) Function was in the Central Excise administration from the rank of Inspectors to Commissioner (earlier Collector) are all Central Excise Officers. As Collector of Central Excise was the proper officer for the whole of his jurisdiction as per definition of the 'proper officer' in Rule 2 (XI) of the Rules.

(7) The decision in Meghmani Dyes' case was rendered on the basis of S. Kannaris case which was not applicable to the issue in dispute. It dealt with a different situation.

(8) The cases referred to for consideration by the Larger Bench were cases of clandestine removals. Charges were made under Rule 9(2) of the Rules read with Section 11A of the Act. As penalty and confiscation were involved, the provisions of Section 33 were attracted, and in a case where penalty and confiscation are involved, Section 11A alone without Rule 9(2) was not appropriate. In the present cases, the demand of duty was in respect of the goods clandestinely removed; as such the notices were composite notices under Rule 9(2) of the Rules and were correctly decided by the Collector of Central Excise.

(9) Right of appeal under Central Excise Law has a clear nexus to the level of the officer who is passing the order. The right of appeal crytallises even at the stage when the proceedings are initiated. At the time of initiation of the proceedings, itself if the Collector of Central Excise was competent to deal with the matter the assessee will know (through the show cause notice) as to who was going to adjudicate the matter. Thus, no question, regarding the right of appeal of the assessee being affected arose. Reliance was placed on the Tribunal's Larger Bench decision in the case of S. Kumar and Ors. v. CCE and Ors. .

(10) Guidelines are provided by the instructions of the supervisory officers, and the officers are bound by the instructions of the supervisory authorities. There was no discrimination when the matter was adjudicated by a Senior Officer. All judicial authorities had to conform to the basic principles of law.

Shri Sanjeev Srivastava, JDR sought to distinguish the case law cited by the counsel for the various appellants. He submitted that the Supreme Court's decision in the case of Hotel Balqji and Ors. etc. etc. v. State of Andhra Pradesh and Ors. etc. etc. will not apply to the present case as there was no contradiction between the Rule 6 and Section 11A. The situation here is different from the one before the Madras High Court in Commissioner of Income Tax, Madras v. Shiek Abdul Kadir Mara Cayar AIR 1928 Madras 257. The Supreme Court's decision in the case of S. Kannan and Ors. etc. etc, v. Secretary. Karnataka State Road Transport Authority was not

applicable to the present facts. He referred to the Gujarat High Court's decision in Ahmedabad Manufacturing & Calico Put. Ltd. and Ors. v. U.O.I. . He summed-up saying that the Full Bench's decision in the case of Saurashtra Cement & Chemical Industries Ltd. v. U.O.I. was applicable to the facts of the case and that in the present proceedings the show cause notices had been issued and the matter decided according to the provisions of the law, and as the cases related to the evasion of central excise duty where penal provisions were invoked and goods were liable for confiscation, the matters have been correctly decided by the Collector of Central Excise.

17. In rejoinder, Shri M. Gauri Shanker Murthy, learned Advocate stated that Rule 9(2) deals with the goods under Physical Control System under which the goods are cleared under the supervision of the Central Excise Officers and an application had to be made for clearance and the goods are assessed to duty by the proper officer. A large variety of goods are now under self-removal procedure (SRP) and the provisions of Rule 173Q of the Rules are applicable to the SRP goods. Thus, Rule 9(2) has no application and as there are no guidelines in Rule 6, the matter could not have been decided by the Collector of Central Excise.

Shri Daya Sagar, Consultant referred to the principles of statutory interpretation and submitted that the rights of the appellants had been adversely affected by the case being adjudicated by a Senior Officer of the rank of Collector of Central Excise.

Shri A.K. Jain, Advocate submitted that after introduction of Rule 209 in 1986, there was no scope for Rule 9(2) and it became otios. It has to be presumed that there was implied repeal of Rule 9(2). He also submitted that as there was a conflict between Rule 9(2) and Rule 209, the latter Rule 209 of the Rules should prevail.

18. We have carefully considered, the submissions made by both the sides and have perused the facts on record. The issue referred to us for our consideration is whether the adjudication order passed by the Collector of Central Excise under Section 11A of the Act as in force prior to 27.12,1985, was without Jurisdiction. During the course of arguments before us, both the sides have advanced elaborate submissions in support of their rival contentions. Reference has been made to the scheme of the Act, status of the Act/rules, the purpose of Section 11A of the Act, the scope of Rule 6 of the Rules, powers of different officers and the rules of construction. Keeping in view the scope of the reference, we deal with the various points made before us.

Scheme of the Act and the place of the Rules in the Act :

19. The Central Excises & Salt Act. 1944 (Act No. 1 of 1944) as enacted on 24.02.1944 was an Act to consolidate and amend the law relating to central duties of excise (for the purposes of the present . controversy, we are not concerned with Salt: so no reference is being made to it). Before this consolidation whenever central excise duty was imposed on a new commodity, a self-contained law was required to be enacted and a separate set of statutory rules were prepared. There were 10 separate excise Acts and 11 sets of statutory rules. In addition, there were many departmental instructions. Under the aforesaid Act No. 1 of 1944 all the laws relating to central duties of excise as in force at that time, were consolidated in a single enactment and at the same time the statutory rules were similarly amalgamated and consolidated.

The purpose of the Act is to provide for the law relating to the Central duties of excise on goods manufactured or produced in India. Under Section 3 of the Act, there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods which are produced or manufactured in India, as and at the rates set-forth in the Tariff Schedule. Prior to 1944, it was the Schedule in the Indian Tariff Act 1934, and prior to 1986, it was the first Schedule to the Act. Now, it is the Schedule to the Central Excise Tariff Act 1985. Under Section 2(g) of the Act, 'prescribed' means prescribed by the rules made under the Act. To carry into effect the purposes of the Act and for the purposes of providing for the assessment and collection of the duties imposed by the Act and to apply in the adapted form, certain provisions of the Customs Act (earlier Sea Customs Act 1878. now Customs Act 1962), the rules have been made by the Central Government in exercise of the powers conferred by Sections 6, 12 and 37 of the Act. Section 6 provided that certain operations were to be subject to licence. Section 12 related to the application in regard to like matters in respect of central excise duties, of the provisions of the Customs law, relating to levy of and exemption from duties, offences, penalties, confiscation, procedure relating to offences and appeal, with such modifications and alterations as the Central Govt, may consider necessary or desirable to adapt them to the circumstances. Under Section 37, the Rule making power of the Central Govt, is very wide and extends to all the purposes of the Act. The various subjects in respect of which the rules could be made as particularly mentioned under Sub-section (2) of Section 37, do not restrict the generality of the power conferred under Sub-section (1) of Section 37, Under Clause 1(b) of Section 37(2) of the Act, the rules could provide for the assessment and collection of duties of excise, the authorities by whom functions under the act are to be discharged, the issue of notices requiring payment, the manner in which the duties are required to be payable and the recovery of duty not paid. Clause (IV) related to the regulation of removal of excisable goods from the place where they are produced, stored or manufactured or subjected to any process of production or manufacture, and their transport to or from the premises of a licensed person or a bonded warehouse or to a market. Clause (XIII) provided for the detention of goods, plant, machinery and material, for the purpose of exacting the duty, the procedure in connection with the confiscation, otherwise than under Section 10 (Section 10 related to the power of courts to order forfeiture), or Section 28 (it related to the confiscation of vessel and cargo), of goods in respect of which breaches of the Act or Rules have been committed, and the disposal of the goods so detained or confiscated. There are a number of other subjects relating to the contravention of the law, adjudication of disputes, recovery of duties evaded or not paid or not collected, etc. in respect of which the rule making power has been conferred on the Central Govt., and the rules have been so framed.

Under Section 4(1)(b) of the Act. (Section 4 provides for the valuation of excisable goods for purposes of charging of duty of excise), where the normal price of the excisable goods which are chargeable to duty with reference to value, is not ascertainable for the reason that such goods are not sold or for any other reason, then the normal price would be the nearest ascertainable equivalent thereof determined in such manner as may be prescribed. The Central Excise (Valuation) Rules 1975 have been made by the Central Govt, in exercise of the powers conferred by Section 37 of the Act. Under Section 9 of the Act, whoever removes any excisable goods in contravention of any of the provisions of the Act or any rule made thereunder or in any way concerns himself with such removal, could be punished by a court of law. Under Section 11A of the Act where any duty of excise has not been levied or paid or has been short levied or short paid by reason of contravention of any of the provisions of the Act or of the Rules made thereunder, with intent to evade payment of duty by the person chargeable with the duty which had not been levied or paid or which had been short levied or short paid, then the notice for recovery could be issued within 5 years from the relevant date. Section 33 of the Act provided for the powers of adjudging confiscation and penalty by the Collector of Central Excise, Asstt. Collector of Central Excise and other officers, whereby the rules made under the Act anything was liable to confiscation or any person was liable to a penalty.

Looking to the purposes of the Act and the various provisions contained therein, it is clear that the Central Excise Rules are integrated with the Central Excises Act. Taking the Act alone, without the Rules, central duties of excise could not be levied and collected. It is a fact that the rules are made by the Central Govt., but this fact in itself does not reflect on the integration of the rules with the Act. Purpose of the Act is a unified function and without the rules that purpose could not be carried into effect. The levy and collection of central excise duties call for the identification of the assessee, determination of the tax base with reference to the goods produced or manufactured and intended to be removed, their valuation, if assessed to duty on the basis of their value, application of exemptions and other benefits, assessment, determination of the duty payable, mode of payment, procedure to be followed by the tax payers and the checks and powers to be exercised by the central excise officers to ensure collection of duty, settlement of disputes, recovery of duties and for the application of various other provisions inherent in the act of tax collection.

The scope of "levy" in some of the judicial pronouncements is given as under:--

N.B. Saryana, Asstt. Collector of Central Excise, Bombay vs. Elphinstone Spinning & Weaving Mills Co. Ltd. : The expression 'levy' does not mean 'collection'.

It is to be noted that Sub-section (1) (of Section 3 of the Central Excises & Salt Act, 1944) uses both the expressions "levied and collected" and that clearly shows that the expression "levy" has not been used in the Act or the Rules as meaning actual collection.

Asstt. Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd. :

The term 'levy' appears to us to be wider in its import than the term 'assessment'. It may include both imposition of a tax as well as assessment. The term "imposition" is generally used for the levy of a tax or duty by legislative provisions indicating the subject matter of the tax and the rates as it has to be taxed. The term "assessment" on the other hand is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount We think that although the connotation of the term levy' seems wider than that of 'assessment' which it includes, yet it does not seem to us to extend to 'collection'. Article 265 of the Constitution makes a distinction between 'levy' and 'collection'.

Union of India v. Bombay Tyre International Ltd. 1983 (14) ELT 1896 (SC) :

While the levy in our country has the status of a constitutional concept, the point of collection is located where the statute declares it will be.

J.K. Cotton Spinning & Weaving Mills Ltd. v. U.O.I. 1988 STC 68 at 421 (SC) :

While Section 3 of the Central Excises Act 1944 lays down the taxable event, Rules 9 and 49 provide for the collection of duty. There is a distinction between levy and collection of duty. In Province of Madras v. Boddu Pai Danna & Sons 1942(1) STC 104 (FC) : AIR 1942 (FC) 33 it has been observed by the federal Court as follows:

There is in theory nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed or given away. A taxing authority will not ordinarily impose such a duty because it is much more convenient admisnistratively to collect the duty (as in the case of most of the Indian Excise Act) when the commodity leaves the factory for the first time and also because the duty is intended to be an indirect duty which the manufacturer or producer is to pass on to the ultimate consumer which he could not do if the commodity had for example been destroyed in the factory itself. It is the fact of manufacture which attracts the duty even though it may be collected later.

Ashok Singh v. Asstt. Controller of Estate Duty 1992 ITR 196 at 160 (SC):

The word 'levy' in Blacks' Law Dictionary (V Edition) at page 816 is stated thus :

Levy, V. to assess: raise; execute; exact; tax; collect; gather; take-up, seize. Thus, to levy (assess, exact, raise or collect) a tax; to levy (raise or set-up) a nuisance; to levy (acknowledge) a fine; to levy (inaugurate) war; to levy an execution i.e. to levy or collect a sum of money on an execution.

As a matter of fact in Padampat Singhariia (1980) 122 (ITR) 162 (Allahabad) the meaning of this word [levy] under this very Act, [Estate Duty Act 1953] came to be laid-down which is extracted as under (at page 166):--

The word 'levy' has been interpreted by the Supreme Court in the case of Asstt. Collector of Central Excise v. National Tobacco Co. of India Ltd. as embracing within it the process

of assessment and also the imposition of tax".

Shree Synthetics Ltd., UJjain v. Union of India :

The crucial time for levy of duty is 'time of removal' as envisaged by Rule 9A of the Central Excise Rules 1944 and not the date of manufacture or production of goods in the factory.

It is not correct to say that the qualifying words 'in such manner as may be prescribed' in Section 3 of the Central Excises Act qualify only 'collected' and 'not levied'. The term 'levy' is wider and includes all stages upto assessment, but does not include 'collection' which is separately referred to in Section 3 of the Act.

The term 'levy' is a word of very wide import, while the term 'imposition' is narrower and is generally used for the levy of a tax or duty by legislative provisions indicating the subject matters of the tax and the date on which it has to be taxed.

"Assessment" has been defined in Rule 2 (la) as under:--

'Assessment' means assessment of duty made by the proper officer and includes reassessment, provisional assessment under Rule 9P, summary assessment under Rule 37A, best judgment assessment under Rule 173Q and any order of assessment, in which the duty assessed is nil.

The dictionary meaning of the term 'assessment' is the amount of tax, which is decided to be payable.

The Madras High Court in the case of K. Lakshmana Swarni Chettiar & Sons v. State of Tamil Nadu 1980 STC 46 at 327 (Madras) had held as under:

Assessment is a comprehensive word and can denote the entirety of proceedings which are taken with regard to it. It cannot and does not mean a final order of assessment alon unless there is something in the context of a particular provision which compels such a meaning being attributed to it' [at page 3291.

The modalities of the levy and collection of duties and the related functions are provided by the Rules. With such understanding, let us examine the recovery provisions:

Place of Recovery Proceedings in the Scheme of levy and collection of duties.

20. A proceeding for recovery of tax is a procedure for the enforcement of the liability determined by the procedure for assessment. Such a proceeding is not a separate and independent one but is a continuation of the proceedings for assessment (refer Calcutta High Court decision in the case of Oriental Gas Co. Ltd. v. State of West Bengal 1973 STC 32 page 141 (Calcutta)'.

The provisions regarding recovery of duties not levied or not paid etc. (we are not concerned in these proceedings with the erroneous refunds, and no reference is being made thereto), have remained in the Central Excise Rules in one form or the other since the Central Excise Law was consolidated in the year 1944. In the Act as in force in the year 1944, recovery provisions were contained in the then Rule 10. on 8.12.1951, Rule 10A was inserted in the Rules by Notification No. 35/51 CE dated 8.12.1951, in order to meet the situation arising out of the decision of the Nagpur High Court in Chhotta Bhai Jetha Bhai Patel & Co. v. U.O.I. AIR 1952 Nagpur 139. The Nagpur High Court had held that the then Rule 10 did not apply to the increased levy on the clearances of duty paid tobacco from the warehouse in cases where the said increased levy was based on change of law. In that case before the Nagpur High Court the assessee was a firm of tobacco merchants and manufacturers of bidis. They had a private warehouse licensed under Rule 140 of the Rules, at Sagar in Madhya Pradesh. On or about the 28th Feb., 1951, they had stored a large quantity of tobacco in the said warehouse on which the central excise duty had not been paid. On the introduction in Parliament of Bill No. 13 of 1951, on 28.02.51, the assessee paid the requisite duty on tobacco stored by them. Subsequently, they cleared tobacco from the said warehouse between 1.3.51 and 28.04.51. The rate of duty payable on un-manufactured tobacco was increased by the Finance Act of 1951. Though the Act became Law on 28.4.51, by Section 6(2) of the Finance Act, the rates introduced by the Act were deemed to have had effect on and from 1.3.51. A demand was made on 4.6.51 at the increased rate and the assessee therein was asked to pay the increased duty. The Nagpur High Court observed that apart from Rule 10 or Rule 160, there was no power or authority to collect the duty in respect of the excisable goods, the duties which have not been collected but which would have been collected even after the goods have been cleared and removed from the warehouse. The High Court held that neither Rule 10 nor Rule 160 prescribed the mode of collecting duty in respect of such goods and that they do not cover a case of that kind. After the Rule 10A was added by Notf. dt. 8.12.51, Full Bench of the same High Court held that Rule 10A covered a case of increased levy on the basis of a change of law. That decision was challenged before the Supreme Court unsuccessfully. The Supreme Court in Chhotla Bhai Jetha Bhai Patel and Co. v. U.O.I. rejected the assessee's claim regarding non-applicability of Rule 10A stating that it had been specifically designed for the enforcement of a demand like the one in that case. In the case of Asstt. Collector of Central Excise v. Rama Krishnan Kulwant Rai 1990 ITR 184 at 387 (SC), the Supreme Court dealing with Rule 10A observed that the scope of the Rule making power conferred by Section 3(1) of the Act is wide enough to embrace all matters relating to the manner in which both the levy and the collection of duties of excise were to be made. The Apex Court held that Rule 10A was valid and not ultra vires the powers of the Rule making authority under Section 37 of the Act.

Rule 10A was omitted from the Rules w.e.f. 6.8.77 and a consolidated new Rule 10 was introduced in the Rules vide Central Excise (19th Amendment) Rules 1977--Notf. No. 267/77 CE dt. 6.8.77. The consolidated new Rule 10 remained in the Central Excise Rules till 17.11.80 when on shifting of the provisions from the Rules to the Act it was omitted w.e.f. 17.11.80 by Notf. No. 177/80 CE dt. 12.11.80. At the same time Section 11A was brought into force w.e.f. the same date i.e. 17.11.80 under Notf. No. 182/80 CE dt. 15.11.80. Section 11A of the Act had earlier been inserted in the Act by the Customs. Central Excise & Salt & Central Boards of Revenue (Amendment) Act 1978 (No. 25 of 1978) dt. 6.6.78; however, the provisions were brought into effect only from 17.11.1980. Rule 10 as existed before 17.11.80 and Section 11A as in force from 17.11.80 are extracted below:

Rule 10 as existed before 17.11.1980:

(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.

For the purpose of this rule

(i) 'refund' includes rebate referred to in Rules 12 and 12A.

(ii) 'relevant date' means

(a) in the case of excisable goods on which duty has not been levied or paid or on which duty has been short levied or has not been paid in full, the date on which the duty was required to be paid under these rules ;

(b) in the case of excisable goods on which the value or the rate of duty has been provisionally determined under these rules, the date on which the duty is adjusted after final determination of the value of the rate of the duty, as the case may be ;

(c) in the case of excisable goods on which duty has been erroneously refunded, the date of such refund.

Section 11A as in force from 17.11.1980:

Section 11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded :

(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise 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 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, 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 a Court, the period of such stay shall be excluded in computing the aforesaid 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-section (1), determine the amounts of duty of excise 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) For the purposes of this section--

(i) "refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(ii) "relevant date" means

(a) In the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid

(A) where under the rules made under this Act a monthly return, showing particulars of the duty paid on the excisable goods removed during the months to which the said return relates, is to be filed by a manufacturer or producer or a licensee of a warehouse, as the case may be, the date on which such return is so filed:

(B) where no monthly return as aforesaid is filed, the last date on which such return is to be filed under the said rules:

(C) in any other case, the date on which the duty is to be paid under this Act or the rules made thereunder;

(b) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder; the date of adjustment of duty after final assessment thereof;

(c) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund.

The Central Excises & Salt Act 1944 was further amended in 1985 vide Central Excises and Salt (Amendment) Act 1985. The amended provisions, which came into force from 27.12.85 provided that the show cause notice in regard to duty of excise not levied or not paid etc. by reason of fraud, collusion, wilful mis-statement or suppression of facts, etc., was to be issued and such cases decided by the Collector of Central Excise. Section 11A as in force from 27.12.1985 is extracted below:--

Section 11A as in force from 27.12.1985:

Section 36[11A. Recovery of duties not levied or not paid or short-levied or short -paid or erroneously refunded37.--(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise 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 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 mis-statement 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, 38[as if for the words "Central Excise Officer", the words "Collector of Central Excise"] for the words "six months", the words "five years" were substituted.

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 six months or five years, as the case may be.

(2) The Assistant Collector of Central Excise or, as the case may be, the Collector of Central Excise shall, after considering the representation, if any, made by the person on whom notice is served under Sub-section (1), determine the amount of duty of excise 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) For the purposes of this section--

(i) "refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(ii) "relevant date" means,

(a) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid

(A) where under the rules made under this Act a monthly return, showing particulars of the duty paid on the excisable goods removed during the month to which the said return relates, is to be filed by a manufacturer or producer or a licensee of a warehouse, as the case may be, the date on which such return is so filed :

(B) where no monthly return as aforesaid is filed, the last date on which such return is to be filed under the said rules ;

(C) in any other case, the date on which the duty is to be paid under this Act or the rules made thereunder;

(b) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after final assessment thereof;

(c) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such return.

Recovery provisions were also built in Rule 9(2) which in addition also referred to the specific contravention of the law when the duty leviable and payable but not levied and paid, could be demanded. It provided "If any excisable goods are, in contravention of Sub-rule (1)". It also provided for liability to a penalty on the producer or manufacturer and liability of the goods to confiscation.

The provisions of Rule 9(2) had a purpose and had an important place in the scheme of levy and collection of duties of excise. In a case where the excisable goods have been removed clandestinely, and without assessment, the provisions of Rule 9(2) were applicable as held by the Supreme Court in the case of N. B. Sanjana, Asstt. Collector of Central Excise, Bombay v. Elphinstone Spinning & Weaving Mills Co. Ltd. . In a case of evasion from payment of duty, Rule 9(2) definitely applies as held by the Supreme Court .in the case of J.K. Steel Ltd. v. U.O.I. . In respect of the excisable goods which are covered by the scheme of self-removal procedure, the provisions of Rule 9(2) are applicable, subject to the condition that if any particular provision was in conflict with the provisions as contained in Chapter VIIA, [relating to self removal procedure] then such provision could not be applicable with regard to the excisable goods covered by the scheme of self-removal procedure. We consider that except the provision relating to presentation of the application for removal and the permission of the proper officer on such application for removal, no other part of Rule 9(2) is in conflict with the provisions as contained in Chapter VIIA of the Rules, and to that extent Rule 9(2) is very much applicable to the excisable goods under the scheme of self removal procedure.

There are also other provisions relating to recovery, imposition of penalty and liability towards confiscation of the goods, in the Rules relating to specific situations. Under Rule 160 other proper officer could demand the duty if the goods are improperly removed from a warehouse or allowed to remain beyond the time fixed. In so far as imposition of penalty is concerned, for different contraventions of rules different provisions for imposition of penalty are contained in the Rules. We may refer to the Rules 52A, 210 and 226; Rule 173Q provides for both confiscation and penalty.

Various provisions in the Act and in the Rules regarding recovery proceedings have to be read together. Section 11A starts with the stage when any duty of excise has not been levied or paid or has been short levied or short paid. It does not provide for the levy, payment and collection of duty. It does not provide for assessment which determines whether the levy is short or complete. Assessment is the actual procedure adopted in fixing the liability to pay the duty in respect of particular goods and by particular person or persons, as well as for determining the amount to be paid [(refer paras-20 and 21 of Asstt. Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd. .] Under that judgment, the Supreme Court had clearly brought out that the procedure under the earlier Rule 10 presupposed an assessment (para 19). It is the process of assessment that really determines whether the levy is short or complete (para 21). Both the Rules 10 and 10A as they stood at the relevant time dealt with collection and not with assessment (para 23).

Whether the levy is short or otherwise could only be determined by the help of the Rules.

Without the Rules the provisions of Section 11A could not be invoked. The Rules also determine as who is the person chargeable with the duty which had not been levied or paid or which had been short levied or short paid. It is also with the help of the Rules that the person chargeable and the person not chargeable with the duty not levied or not paid or short levied or short paid could be identified. Proviso to Sub-section (1) under Section 11A provides that in case of contravention of the rules with intent to evade payment of duty, the notice could be served within 5 years. 'Relevant date' in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid, where under the Central Excise Rules made under the Act. a Monthly Return was prescribed, is the date on which such monthly return was to be filed. Monthly Return is only prescribed under the rules. The provisions relating to provisional assessment are also contained only in the Rules. Thus, for construing and applying the provisions of Section 11A, we have necessarily to go to the Rules.

Place of Collector of Central Excise in Recovery Proceedings :

21. The provisions relating to the recovery of duty not levied or not paid etc. come into play only after the application of the provisions relating to the levy, assessment, determination of the duty liability, non-payment or short payment of the duties otherwise payable, contraventions of the law and a prima facie case for recovery of the duties not levied or not paid etc. Where any duty of excise has not been levied or paid or has been short levied or short paid, by reason of fraud, collusion, wilful mis-statement, suppression of facts etc., the contraventions of the law may call for the confiscation of the offending goods and the imposition of penalty on the person or persons charged with the non-levy or non-payment of duties, otherwise leviable or payable. The assessee may be guilty of contumacious or dishonest conduct. There may be deliberate violation of the provisions of the law. Evasion of central excise duty is an economic offence which destabilises the economy and causes grave incursion on the economic planning of the State (refer State of Himachal Pradesh v. Pirthi Chand (1996) 53 ECC 114 SC). They had to be viewed with seriousness [refer Superintendent of Central Excise v. Vithal Bhai Narsi Patel Gujarat (Ahmedabad)]. The machinery provisions in a taxing Act and the provisions enacted to suppress tax evasion are to be construed liberally to effectuate their object [refer Sardar Harvinder Singh Sehgal v. Asstt. Commissioner of Income Tax 1998 (144) CTR (Gauhati) 626].

The quantum of penalty in a particular case will depend upon the circumstances of the case. What should be the quantum of penalty in a particular case is a question of discretion to be exercised by the authorities, having regard to the circumstances of each case. [The Gackwar Mills Ltd. v. State of Gujarat 1976 STC 37 at 129 Gujarat (Ahmedabad)]. In determining the quantum of penalty, the conduct and the attitude of the assessee are relevant [refer N. Nagendra Rao and Co. v. State of Andhra Pradesh. 1984 STC 55 at 243 Andhra Pradesh (Hyderabad)].

Section 33 of the Act provided that where by the Rules made under the Act anything is liable to confiscation or any person is liable to a penalty then such confiscation or penalty is to be adjudged by a Collector of Central Excise without limit. The Asstt. Collector of Central Excise is empowered to impose a penalty of Rs. 250/- only under the Act. The Central Board of Excise & Customs was empowered to confer the powers of the Collector of Central Excise on any officer. In various Rules, different penalties are prescribed. In the case of ITC Ltd. v. Collector of Central Excise, Delhi 1996 (84) ELT 404 (SC), the Supreme Court had affirmed the view of the Tribunal that penalty is imposable for each transaction with reference to each gate pass and clearance, under Rule 9(2) of the Central Excise Rules. Under Rule 173Q the quantum of penalty could be upto three times the value of the excisable goods. In a case of fraud, wilful mis-statement, suppression of facts, etc. what could be the justification for demanding the duty for a period beyond the normal period of limitation of six months if the penal provisions are not invokable. It is a settled position in law that for adequate reasons appropriate penalty could be imposed when the contravention of the Rules is established. In the case of Jai Shri Engg. Co. Pvt. Ltd. v. Collector of Central Excise . the Supreme Court held that when there was deliberate suppression or wrong statement, the penalty was imposable under Rule 173Q, and the quantum of penalty could be fixed as the justice of the case demanded. In the case of Grauer and Weil (I) Ltd. v. CCE, Baroda , the appellants had acted in conscious disregard of their statutory obligations and had deliberately suppressed the material facts. The Collector of Central Excise in his Order dated 30.11.83 (before 27.12.85 when Section 11A was amended) imposed a penalty of Rs. 5 lakhs besides confirming the demand under the proviso to Sub-section (1) of Section 11A read with Rule 9(2) of the Rules. The Apex Court held that the penalty was justified. In the case of Pratibha Processors v. U.O.I. , the Supreme Court had observed that penalty is ordinarily levied on an assessee for some contumacious conduct or for deliberate violation of the provisions of the State. In a case where allegations call for a penalty which is beyond the competence of the Asstt. Collector of Central Excise, the interpretation placed by the Bench in Meghmani Dyes case will disturb the scheme of the Act. It will lead to anamolous results. A person will be liable to a penalty for contravention of the law. In a case of recovery of duty not levied or not paid or short levied or short paid, the quantum of penalty may depend upon the determination of the value of the offending goods and the amount of duty due which had been evaded. If it is assumed that in all cases the determination of the amount of duty due had to be done only by the Asstt. Collector of Central Excise then for imposing the penalty which may not be within the competency of the Asstt. Collector of Central Excise, the adjudicating authority higher than the Asstt. Collector of Central Excise will have to depend upon the decision of the Asstt. Collector of Central Excise. Such a construction has to be ruled out straightaway. Construction of provisions should not lead to anomalous results (refer Patna High Court in Commissioner of Income Tax v. Prayag Lal Agarwall & Co. 1986 ITR 162 at page 570 Patna). Construction leading to anomaly should be avoided (refer Commissioner of Income Tax v. Maharani of Mewar Charitable Foundation 1987 ITR 164 at 439 Rajasthan). In the case of Reserue Bank of India v. Peerless General Finance & Investment Co. Ltd. . the Supreme Court had held "no part of a

Statute and no word of a Statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place(Also refer page 79 of Jameshedpur Motor Accessories Stores v. U.O.I. 1991 ITR 189 at page 70 (Patna)]. In C. Anmachalam v. Commissioner of Income Tax 1 LR (1984) 2 Kar 1387. a full Bench of Karnataka High Court after reviewing the variously authorities had expressed as under :

So far as the fiscal Statutes are concerned, we must remember one more principle. The provisions in a fiscal statute are not to be so construed as to furnish a chance of escape and a means of evasion" (refer page 154 of the Coffee Board vs.Commissioner of Commercial Taxes 1985 STC 60 at page 142 Karnataka, Bangalore).

The matter could also be analysed from another angle. Under Section 11A of the Act as in force between 17.11.80 and 26.12.85. the notice for recovery of duties not levied or not paid or short levied or short paid could be served by a Central Excise Officer. Central Excise Officer has been defined in Section 2(b) of the Act as any officer of the central excise Deptt. or any person (including an officer of the State Govt.) invested by the Central Board of Excise & Customs, constituted under the Central Boards of Revenue Act 1963, with any of the powers of a central excise officer under the Act. There is no doubt that the Collector of Central Excise is a Central Excise Officer within the definition of Central Excise Officer under Section 2(b) of the Act. As a Central Excise Officer, he is empowered to 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, under the provisions of Section 11A of the Act. In the case of Asia Tobacco Co. Ltd. v. U.O.I. and Anr. , the Madras High Court had held that:

the powers having been expressly conferred by the Rules and the Act. there is no question of any conflict between the powers vested by the Rule itself in the Collector as defined and the power vested by exercise of the specific powers under the Act and the Rules.

The Collector of Central Excise, is the only authority, on whom the territorial jurisdiction in relation to excisable goods had been conferred by a specific rule --[vide Rule 2(ii) of the Rules]. He is also the proper officer for his jurisdiction. Under Rule 2(iii), "proper officer", means the officer in whose jurisdiction the land or premises of the producer of any excisable goods or of any person engaged in any process of production of or trade in, such goods or containers thereof, whether as a grower, curer, wholesale dealer, broker or commission agent or manufacturer, or intended grower, curer, wholesale dealer, broker, Commission agent or manufacturer are situated. In the case of Cheran Engg. Corpn. Ltd. v. CCE, Coimbatore , the Tribunal had held that the definition of 'proper officer' is large enough to include all the central excise officers having jurisdiction over the factory of the assessee and that it would include the Collector himself. Under Rule 5, the Collector of Central Excise could authorise, any officer subordinate to him to exercise throughout his jurisdiction or in any specified area therein, all or any of the powers of a Collector of Central Excise, under the Rules. Under Rule 6, the Collector of Central Excise could perform all or any of the duties, or exercise all or any of the powers, assigned to an officer under the Rules. Under Section 37(2), Clause 1(b), the Rules could provide for the authorities by whom functions under the Act were to be discharged. Rule 6 authorises the Collector of Central Excise to exercise the powers assigned to any Central excise officer under the Rules. The Rules being integrated with the Act, the powers assigned to any central excise officer, including the central excise officer as mentioned in Section 11A of the Act, could, thus be performed by the Collector of Central Excise. Thus, the Collector of Central Excise is a Central Excise Officer and he was empowered to serve a notice for recovery. In a case where notice has been served by the Collector of Central Excise, it could not be under the scheme of the Act that the amount of duty of excise due be determined by an officer subordinate to him, In this regard, the various provisions in the Act and the Rules have to be harmoniously construed.

Prior to 17.11.80. the provisions regarding recovery of duties not levied or not paid etc. were contained in the Rules. Rule 6 empowered the Collector of Central Excise to exercise the powers assigned to any other central excise officer. Rule 6 is extracted below:

Collector or Dy. Collector to exercise the power of any officer--

(1) The Collector may perform all or any of the duties or exercise all or any of the powers, assigned to an officer under these rules.

(2) Subject to the provisions of Sub-rule (1), the Dy. Collector of the Central Excise appointed by the Central Board of Excise & Customs, may within his territorial jurisdiction, perform all or any of the duties, or exercise all or any of the powers, assigned under these rules to an officer subordinate to him",

The Asstt. Collector of Central Excise is an officer subordinate to the Collector of Central Excise. Before 17.11.1980, there could be no doubt that the Collector of Central Exicse could definitely exercise the powers otherwise conferred on the Asstt. Collector of Central Excise under the then Rule 10. With effect from 17.11.1980, the provisions as contained in Rule 10 were, so to say, bodily lifted and placed in the Act. There is nothing to indicate that any change in the position of the Collector of Central Excise was intended. There is nothing to indicate that the legislature meant any departure from the scheme in force, since the commencement of the Central Excise & Salt Act 1944 under which the Collector of Central Excise could exercise the power of the Asstt. Collector of Central Excise, when the provisions of Rule 10 were shifted to the Act as Section 11 A.

Before the Full Bench of the High Court of Gujarat in the case of Saurashlra Cemen & Chemical Industries Ltd. v. UOI a question came-up for consideration whether the proceedings initiated under substituted Rules 10 and 10A, and omitted Rule 10 of the Rules could continue even after the substitution of Rules 10 and 10A by new Rule 10. or after omission of Rule 10 and simultaneous insertion of Section 11A in the Act. The dispute was with regard to the excise duty on packing material, that is, gunny bags for the period from 1.10.75 to 22.12.75 in respect of which the show cause notice was adjudicated on 18.10.78. The erstwhile Rule 10 was substituted by a consolidated Rule 10 (incorporating the provisions of both the earlier Rules 10 and 10A) on 6.8.1977 vide Notification No. 267/77 CE. It was contended that in view of deletion of earlier Rule 10 w.e. f. on 6.8.1977, the preceedings initiated under that old Rule 10 would come to an end and therefore, the order passed by the Asstt. Collector of Central was illegal and void. Subsequently. Rule 10 was also omitted and Section 11A was introduced in the Act w.e. f. 17.11.1980. The High Court observed in para 9 of their judgment, that the Rules were part and parcel of the statute, and the Act and the Rules are of permanent nature. In para 17. it was observed that the Central Excise Rules framed under the provisions of the Central Excises Act are statutory rules. They are law for all purposes and are part and parcel of the statute itself. In para 15, it was observed as under:--

(2) Again on 17th November 1980. Rule 10 was omitted and on the same day Section 11A ws added in the Central Excises & Salt Act 1944 by Act No. 25 of 1978. Section 11A of the Act is virtually similar to Rule 10. It is, therefore, apparent that the power of the Customs Dept. to recover duties short levied or not paid in full or erroneously refunded remains as it was, except with regard to change in time limit and some other change which has no material bearing on the power of the authority to recover the duty of excise.

Section 11A was introduced in the Act and the Rule 10 which was in existence was omitted vide Notf. No 177/80 CE dt. 12.11.1980. After referring to the various decisions relevant on the subject, the full Bench of the High Court in para 25 of there judgment observed that for the purpose of construction or obligation, the rules made under a statute must be treated as if they were part and parcel of the Act and the rights and liabilities accrued under the provisions of the original Rules 10, 10A and 11 or re-enacted Rule 10 or Section 11A are not affected by substitution or omission. Para 25 is extracted below:--

25. In the present case, considering the legislative development, it is abundantly clear that there is amendment of the existing rules by substituting it or by omitting and re-enacting it. It would be only an amendment and not abrogation or repeal of the rules as a whole. The rules are added to replace the one withdrawn. Further, the provisions of original Rules 10, 10A and 11 are repeated by substituting Rule 10 in the same or equivalent words. Same is the position with regard to Rule 10. Rule 10 is omitted by incorporating Section 11A in the Act in similar wording. Therefore, applying the aforesaid principles of Statutory Construction, it would be clear that the provisions of original Rules 10. 10A and 11 which are omitted by Rule 10 which prescribes similar procedure, are to be considered as continuation of the original Rules. Further, after omission of Rule 10 by enacting Section 11 A. the legislature has continued the provisions of the original rule with some modification. The provisions of the original rules or the re-enacted rules by substitution or omission of the rules are required to be held to be the law since they were first enacted and the provisions introduced by the amendment would have the same effect from the time when the amendment took effect. From the dicussion of the aforecited judgments, it would be clear that for the purpose of construction or obligation the rules made under a statute must be treated as if they were part and parcel of the Act. By substitution or omission of rules, crystallised rights are not at all adversely affected. There is no provision in the re-enacted Section 11A or substituted Rule 10 adversely affecting or taking away the right of the department to recover the duty of excise. The rights and liabilities accrued under the provisions of the original Rules 10, 10A and 11 or re-enacted Rule 10 or Section 11A are not affected by subsitution or omission.

In the case of State of U.P. v. Babu Ram Upadhya-MR 1961 SC 751, the Supreme Court had said that the rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are of the same effect as if contained in the Act and are to be judicially noticed for all purposes of construction or obligation till they are consistent with the provisions of the statute.

In Gwalior Rayon Mfg. (Weaving) Co. v. VOI the matter related to the excise duty payable on the sulphuric acid manufactured by the appellants and captively consumed by them in the manufacture of staple first during the period between 11.10.1976 and 31.10.78. The Central Excise duty was payable on the basis of the value which was to be determined under Section 4(1)(b) read with Rule 6(b) of the Central Excise Valuation Rules 1976 framed under Section 37 of the Act. During the relevant time, the provisions for recovery of duties not levied or not paid or short levied or short paid were contained in Rules 10 and 10A prior to 6.8.1977. and in consolidated Rule 10 from 6.8.1977 onwards. During the pendency of the appellant's petition in the Madhya Pradesh High Court, consolidated Rule 10 brought into force from 6.8.77 was replaced by Section 11A on 17.11.1980. The appellants raised an additional ground in the writ petition that the proceedings which commenced with the notice issued under Rule 10 did not survive after omission of Rule 10 w.e. f. 17.11.80. The High Court discussed the matter in paras 10 to 13 of their judgment. After referring to the Supreme Court's decision in the case of State of U.P. v. Babu Ram. , the High Court held that not only for the purpose of construction but also for the purpose of obligation thereunder, rules made under a statute must be treated "as if they were in the Act itself. In para 15, the High Court observed that "Rule 10 of the Excises Rules which was in force till 17.11.1980 formed a part of the Central Excises & Salt Act 1944 under which it was framed". Para 15 is extracted below:--

15. It follows that Rule 10 of the Excise Rules, which was in force till 17.11.1980 formed a part of Central Excise and Salt Act 1944, under which it was framed and when it ceased to exist from that date, Section 11A contained in the Act itself, which is similar, was brought into force simultaneously maintaining the continuity. The result is that the relevant provision which was in force till 17.11.1980 in the shape of a rule forming part of the Act continued without any break from 17.11.1980 in the shape of a provision in the main Act itself. This is, therefore, a case where there has neither been any repeal nor omission of an enactment but continuance of the same provision throughout as a part of the Act, the only difference being that prior to 17.11.180 was in one part of the Act and subsequent to that date it is in another part of the same Act. Where the same provision continues in the same Act, the difference being only in the part of the Act where it is contained, it is difficult to appreciate how the principles relating to repeal or omission of an enactment can apply or a saving clause is needed to continue the proceedings initiated prior to such a change being brought about by shifting the provision from one part of the Act to another. It is merely a case of shifting the provision from one part of the Act to another without any break in its continuity. No principle or authority has been cited to show that such shifting of a provision in an enactment also amounts to repeal or omission. The only possible difference, which is not material for this case, could be that earlier in the shape of a rule it was open to chellenge on the ground of inconsistency with the Act, whereas after its incorporation in the main Act itself, such challenge would arise in this petition. In this view of the matter, there can be no doubt that this contention of the learned Counsel for the petitioner must be rejected.

As held by the Karnataka High Court in the case of Commissioner of Wealth Tax v. Dominic Joseph. 1992 ITR (195) 412 (Kerala), rules made under a statute must be treated for all purposes of construction and obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act and are to be judicially noticed for all purposes of construction or obligation.

In Engtnering Systems (Put). Ltd. v. UOI . the

adjudication orders had been passed by the Addl. Collector of Central Excise on 3.9.85. 6.11.85 and 15.11.85, all before the amendment of 27.12.85. The demand of duty had been determined in terms of the provisions of Section 11 A. It was contended that the Addl. Collector of Central Excise lacked jurisdiction to issue any notice and to pass an order of adjudication under Sub-section (2) of section HA of the Act, read with Section 33 of the Act. While no challenge appears to have been made to the authority of the Collector of Central Excise under Section 11A, it was submitted that the Collector of Central Excise is a defined term under Rule 2 (ii) and therefore, an Addl. Collector cannot be a Collector of Central Excise.

After referring to the rules of construction in construing the rules and giving a proper meaning and effect to the provisions of the Act and the Rules made thereunder, in para 20 of their judgment, the High Court held that an Addl. Collector was a Collector under the Rules. In para 21, the High Court observed as under:--

21. Therefore, the Addl. Collector if he is deemed to be a Collector by virtue of the definition in the Rules, then he may exercise the powers of a Collector notwithstanding any specific conferment of power by the Board in terms of Section 11A of the Act or any other provisions of the Act (with regard to) the duties and functions required to be performed by the Additional Collector.

The High Court held that the impugned orders were passed by an authority, who had competent jurisdiction and therefore, the impugned orders did not suffer from want of juristiction. The matters related to the period prior to 27.12.85.

In Twin City Glass Put Lts. v. Union of India , the question posed for consideration was "is an Addl. Collector of Central Excise, a Collector of Central Excise for the purpose of the Central Excises & Salt Act 1944". The Bombay High Court observed in para 12 of their judgment that in fiscal statutes many matters are to be left for the rules to be framed from time to time, and in para 13, the High Court observed that the rules are an intergral part of the enactment itself. Paras 13 & 14 extracted below:--

13. If the rules are framed, they could generally be treated as part of the Act itself. When such an effect is given to what was initially a subordiante legisalation, the subordinate legislation virtually gets the status of a statutory provision. Once that stage is reached, no one shall permit the imagination to be boggled or the effect to be underrated. The Rules are to be placed before the Parliament. Parliamentary vigil is. thus, assured in respect of such exercise of subordinate legislation. If not otherwise disturbed, the Rule would then have the efficacy and force almost in the same measure as the statutory provision in the Act itself. In such a situation, the Rule will almost become an integral part of enactment itself. It the Rule be not in conflict with the provision of the statute, then, there could not be ordinarily any interpretational problem. A problem may arise if the provision in the enactment amended later, creates an atmosphere of confrontation. Even in such a situation, the helpful aid of harmonious interpretation should be resorted to. so as to aviod head-on collusion and bring about a practicable pragmatic working method in relation to the different statutory provisions.

14. In the present case, the Rules did, what could have been done and the statute could have done. When the exercise was over, the resultant provision has gained effect and efficacy as if in the main enactment itself.

The High Court found the argument that the Additional Collector could not be treated as a Collector for the purposes of the Act as fallacious and held that - "if for the purpose of the rules, an Additional Collector is to be equated as a Collector, that equation would endure even for the purpose of the Act". The High Court held that the Additional Collector has the same powers as the Collector and that his responsibility and his duties are co-existent with those of the Collector of Central Excise as visualized under the Act.

We, therefore, consider that the Collector of Central Excise had a place and an important place in recovery proceedings even before the amendment made in the year 1985.

Whether Collector of Central Excise could serve notice under Section 11A:

22. At this, stage we could discuss the proposition that under Section 11A of the Act the notice was to be served only by the jurisdictional Asstt. Collector of Central Excise in view of the fact that the expression "a Central Excise Officer" in Section 11A (1) is followed by the expression "the Asstt. Collector of Central Excise" under Section 11A (2).

"Central Excise Officer" has been defined in Section 2(b) of the Act as any officer of the Central Excise Department or any person including an officer of the State Gevernment invested by the Central Board of Excise & Customs constituted under the Central Boards of Revenue Act 1963 with any of the powers of a Central Excise Officer under the Act. Central Excise Officer is a generic name given to all the officers of the Cental Excise Department. Any person could be called a Central Excise Officer if he has been invested with any of the powers of a Central Excise Officer under the Act by the Central Board of Excise & Customs. It is not a designation. It does not refer to any hierarchy in the Central Excise Department. On the other hand, the Asstt. Colector of Central Excise is a designation and refers to a position in the hierarchy of the Central Excise Department.

Reliance has been placed on the Board's Circular No. 34/84 CX6 dated 28.9.84 and Board's Clarification under F. No. 4/3/86 CXI (Part) dated 10.6.86, in support of the proposition that the show cause notice was to be issued only by the Asstt. Collector of Central Excise. Reference has also been made to the Statement of Objects and Reasons of the Central Excises and Salt (Amendment) Bill 1985- (Bill No. 206 of 1985).

It is seen from the Board's Circular No. 34/84 CX6 dated 28.9.84 that the extended period of limitation of 5 years under Section 11A of the Act was being indiscriminatory invoked; and extended period of limitation was being invoked without proper justification. It also appears from this circular that the show cause notices were being issued by officers lower in rank than the Asstt. Collector of Central Excise, inasmuch as under the said circular the Board directed that the show cause notice in cases where 5 years period was invoked should only be issued by the Asstt. Collector of Central Excise. It called for review of such show cause notices in the Collectorate Office. This circular only emphasised the need for due care in issuing the show cause notice where extended period of limitation was being invoked. It did not rule-out the issue of notice or confirmation of demand by an officer higher than the Asstt. Collector of Central Excise. It only provided that no officer lower than the Asstt. Collector of Central Excise should issue the show cause notice in which extended period of limitation was being invoked.

The Board's Clarification under F. No. 4/3/86 CXI (Part) dated 10.6.86 also in no way indicated that prior to the amendment in December. 1985, the Collector was not competent to issue show cause notice or decide the matter. Under Rule 6, the Collector could exercise all or any of the powers assigned to an officer under the Rules. Rules have been framed to carry into effect the purposes of the Act. In the scheme of the Act, the rules are integrated with the provisions of the Act. The powers to issue show cause notice in regard to duty of excise short levied or short paid etc. by reason of fraud, collusion or any wilful mis-statement or suppression of facts, and to decide such cases was conferred specifically to ensure that no authority lower than the Collector issue such notices and decide such cases after the amendment in December, 1985. There was no adjudicating authority higher than the Collector at the relevant time. The provisions were amended to ensure that a senior officer of the rank of Collector considered the matter and that there was no indicriminate use of the provisions regarding invoking the extended period of limitation. The Board's observations in their Circular No. 34/84 CX6 dated 28.9.84 referred to above, mentioned of such indiscriminate use of the powers demanding duty after invoking the extended period of limitation. We do not consider that this clarification iindicated that earlier all show cause notices were to be served only by the jurisdictional Asstt. Collector of Central Excise.

As regards the Statement of Object and Reasons of the Central Excises and Salt (Amendment) Bill 1985, we find that the statement in no way sought to analyse and establish the scheme of the Act and the Rules. It only referred to the expression used in the earlier provisions. It did not touch upon the provisions of Rule 6 and its application to the provisions of the Act.

Reliance has been placed on the Supreme Court's decision in the case of The Sole Trustee Loka Shikshana Trust v. Commissioner of Income Tax, Mysore from that decision is extracted below:--

32. In the case before us a reference was made merely to the fact that a certain reason was given by the Finance Minister, who proposed the amendment, for making the amendment. What we can take judicial notice of is the fact that such a statement of the reason was given in the course of such a speech. The question whether the object stated was properly expressed by the language of Section 2 (15) of the Act is a matter which we have to decide for ourselves as a question of Law. Interpretation of a statutory provision is always a question of Law on which the reasons stated by the mover of the amendment can only be used as an aid in interpretation if we think as I do in the instant case, that it helps us considerably in understanding the meaning of the amended law. We find no bar against such a use of the speech.

In that case the matter related to the meaning of the expression 'charitable purpose'. The provisions did not define a charitable purpose but purported only to indicate a concept of charity. The charitable purpose had not been earlier exhaustively illustrated. The Court had to discover the 'mischief sought to be remedied by the amendment under which the words "not involving the carrying on of any activity for profit" were added at the end of the definition in Section 2(15) of the Income Tax Act, 1961. According to the then existing provisions, 'charitable purpose' included relief of the poor, education, medical relief and the advancement of any other object of general public utility. It was after the expression "and the advancement of any other object of general public utility", the words "not involving the carrying on of any activity for profit" were added.

The question was as what was the real meaning and purpose of these words "not involving the carrying on of any activity for profit".

It was in such a situation that the Supreme Court observed that "interpretation of a statutory provision is always a question of law on which the reasons stated by the mover of the amendment can only be used as an aid in interpretation".

We find that in the present case in the Statement of Objects and Reasons indicated only the factual position.

Similarly, in the case of Devadoss (dead) by LR's and Anr. v. Veera Makali Amman Koil Athalur AIR 1988 SC 750, the matter was entirely different. In order to understand the background of the Tamil Nadu Amendment Act 27/66 which amended Act 23/63, the Supreme Court referred to the Statement of Objects and Reasons of the Bill which preceded Tamil Nadu Act 27/66. The Supreme Court referred to their earlier decision in the case of Narain Khamman v. Parguman Kumar Jain wherein it was stated that though the Statement of Objects and Reasons accompanying a legislative bill could not used to determine the true meaning and effect of the substantive provisions of a statute, it was permissible to refer to the same for the purpose of understanding the background, the antecedent state of affairs, the surrounding circumstances in relating to the statute and the evil which the statute sought to remedy. The Supreme Court observed that it was permissible for the court to take notice of "the evil which was sought to be remedied".

We find that in the Statement of Objects and Reasons of the Central Excises & Salt (Amendment) Bill 1985 no ambiguity in the earlier provisions had been referred to. The relevant extracts from the Statement of Objects and Reasons of the Central Excises & Salt (Amendent) Bill 1985, are given below:

2. Opportunity is also being availed of to make certain other amendments in the Act in the light of the experience gained in the implementation of the Act. The main amendments proposed are as follows :

(a) Show cause notice in regard to duty of exicse short-levied or short-paid, etc. by reason of fraud, collusion, or any wilful mis-statement or suppression of facts should be issued, and such cases decided, by the Collector or Central Excise instead of the Asstt. Collector of Central Excise as at present.

Under 'Mischief Rule' according to the Heydon's case-1584(3) Co Rep 7A. four aspects were to be discerned and considered :

(1) What was the common law before the making of the Act;

(2) What was the mischief and defect for which the common law did not provide.

(3) What remedy the Parliament hath resolved and appointed to cure the disease of the common wealth and

(4) the true reason of the remedy.

It was added "and then the office of all the judges is always to make such construction as shall suppress the mischief and advance the remedy and to suppress subtle inventions and evasions for continuance of the mischief (refer Allahabed High Court decision in the case of Northern Indian Hotels Ltd. v. Commissioner of Sales Tax-1984 (55) STC 68 (Allahabad).

The Statement of Objects and Reasons in this case did not refer to any 'mischeif which the amending provisions sought to remedy. We consider that the reliance on the observations in para- 32 of the judgment in the case of the Sole Trustee Loka Shikshana Trust v. Commissioner of Income Tax, Mysore was not appropriate.

In this regard reference has also been made to Andhra Pradesh Full Bench decision in the case fo K. Pamanna v. State Transport Appellate Tribunal Andhra Pradesh Hyderabad and Ors. . In that case, the matter related to the power of the State Transport Authority (STA) to alter the conditions of a permit granted by it under the Motor Vehicles Act, 1939 (Since repealed), The permits in question were issued by the STA. The High Court observed that the expression "the transport authority" occuring in Sub-rule (1) of Rule 260 of that Act was referrable only to the transport authority which had granted the original permit. The use of the definite article 'the' preceding the words "transport authority" un-mistakably leads to the conclusion that variation had to be granted by the same authority which had granted the main permit. The definite article 'the' cannot be construed as the indefinite article 'a'. Such a construction, the High Court observed was totally impermissible. According to the High Court it would amount to re-writting the rule contrary to the statutory intendment.

We find that the Full Bench of the Andhra Pradesh High Court in that case rejecting the contention of the counsel for the Andhra Pradesh State Road Transport Corporation had taken note of the fact that in the hierarchical set up under the Motor Vehicles Act 1939, the Regional Transport Authority (RTA) was a subordinate authority with limited territorial jurisdiction whereas the STA was a higher authority exercising jurisdiction over the whole of the State. The Full Bench referred to the judgment of the Supreme Court in State of Rqjasthan v. Afoor Mohammed wherein the Supreme Court had observed that it was clear from Sub-section (3) clause (b) of the Motor Vehicles Act 1939 that the STA could perform the duties and functions of the RTA under certain circumstances.

Under the provisions of the Act, the expression 'Central Excise Officer" includes all the officers of the Central Excise Deptt. The Asstt. Collector is only one of the different middle level officers in the Department. There are officers subordinate to him and there were officers higher than him in the hierarchial set up of the Central Excise Department. Thus, the restricted meaning given to the expression "a Central Excise Officer" in Sub-section (1) of Section 11A is not in conformity with the scheme of the Act.

We, therefore, do not find any merit in the proposition that the notice under Section 11A was to be served only by the jurisdictional Asstt. Collector of Central Excise.

Are the provisions of Rule 9(2) redundant:

23. Another proposition advanced on behalf of the assessees is that any demand for the duty leviable but not levied has to be made only under Section 11A and that the provisions of Rule 9(2) of the Rules have become redundant from 6.8.1977 onwards after the amendment in the then Rule 10.

For the understanding the place of Rule 9(2) in the scheme of the levy and collection of central excise duties, we may have to refer again to the charging Section 3 of the Act. Under Section 3, read with Section 2(g) of the Act, the manner in which the central excise duties are to be levied and collected, is the manner as prescribed by the Rules. The rates at which the duty is to be levied and collected on the excisable goods are the rates as setforth in the Central Excise Tariff. During the relevant time, it was the First Schedule to the Act. The provisions relating to the levy and refund of and exemption from duty during the relevant time were contained in Chapter III of the Rules. Rule 9A prescribed the date for determination of duty and tariff valuation. Under that Rule 9A the rate of duty and tariff valuation was to be the rate and valuation in force on the date of removal of the excisable goods from the factory or the warehouse. For certain specific situations, there were separate provisions in (he said Rule 9A. In other parts of the Rules, there were other specific provisions relating to un-manufactured products, the manufactured products, warehousing, goods covered by the scheme popularly known as self-removal procedure (SRP) etc. After the determination of the duty, the duty was required to be paid, as per the provisions contained in the Rules, before the removal of the goods. Under Rule 7, every person who produces, cures or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such person as may be designated in or under the authority of the rules, whether the payment of such duty or duties is secured by Bond or otherwise. Under Rule 9(1) the time and manner of payment of duty is prescribed. It is provided in that Rule 9(1) that no excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto which may be specified by the Collector in this behalf whether for consumption, export or manufacture of any other commodity in or outside such place until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in the rules or as the Collector may require, and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form.

The above provisions were subject to certain other provisions in the rules. There were also provisions relating to the facility of maintenance of account current for payment of duty. etc.

It is thus seen that Rule 7 provided for a positive act of commission pay the duty. Rule 9(1) provided that do not remove the excisable goods without payment of duty. These are two basic postulates for the levy of duty. If you do not do what that provisions of Rule 7 commands and do what the provisions of Rulr- 9(1) forbid, then certain consequences will follow. These are the consequences will follow. These are the consequences provided under Rule 9(2). Rule 9(2) provided that if any excisable goods are in contravention of the provisions of Sub-rule (1) deposited in or removed from any place specified in that Sub-rule (1) then the producer or manufacturer thereof shall pay the duty leviable on such goods upon written demand within the period specified in Section 11A of the Act, by the proper officer. It was also provided that such producer or manufacturer shall also be liable to a penalty and the excisable goods shall be liable to confiscation. For the producers, manufacturers, and private warehouse licencees working under SRP, separate provisions as to confiscation and penalty were as contained in Rule 173Q. Penalties were also provided in different rules for different contraventions of the Law. The basic scheme for the levy, payment and recovery of duty as provided in Rule 9, however, remains in spite of specific provisions for different manufacturers, excisable goods and different situations. It could not be said that any scheme in the Act or the Rules had made these provisions redundant.

It has been argued that the provisions of Rule 9 had application only to the excisable goods which were not covered by the scheme of Chapter VIIA of the Rules relating to SRP, and that this Rule was applicable only to the excisable goods which were covered by the scheme of assessment popularly known as Physical Control System. The scheme under Chapter VILA related to the removal of excisable goods on determination of duty by the producers, manufacturers, or private warehouse licensees. Rule 173A, inter alia, provided that the provisions of Chapter VIIA shall apply to such excisable goods as the Central Government may, by notification in the Official Gazette, specify in this behalf, and where there is a conflict between the provisions of Chapter VIIA and the provisions contained in any other Chapter, in relation to such excisable goods, the provisions of Chapter VILA shall prevail. As we have seen above the provisions of Chapter III relates to the levy payment of duty and refund of duty. During the relevant time, it also provided for the exemption from duty. Rule 9 relates to the time and manner of duty. The provision that no excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, until the excise duty leviable thereon had been paid at such place and in such manner as is prescribed in the Rules, relates to all excisable goods, whether they are covered by the scheme of SRP or Physical Control System. There is no conflict between these provisions and the provisions contained in Chapter VIIA in this regard. It had been argued that Rule 9 provides that no excisable goods could be removed under Rule 9(1) except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form, and that, under SRP no such application is prescribed and thus, the whole of the rule is in applicable to SRP goods. Rule 173A provides that where there is a conflict between the provisions of Chapter VIIA and the provisions contained in any other Chapter then in relation to the excisable goods, the provisions of Chapter VILA shall prevail. It is only that provision which is in conflict that was hit by Rule 173A. If for the excisable goods covered by the scheme of SRP there was no requirement of presentation of an application in the proper form and for obtaining the permission of the proper officer on the form, then only such requirement with regard to the application will not be applicable to SRP goods. It does not mean that the other provisions, which were not in conflict with the provisions as contained in Chapter VIIA of the rules will also be hit by the provisions of Rule 173A.

An argument has also been advanced that after the amendment to the then Rule 10 from 6.8.1977 when for the non-levy also the provisions of Rule 10 were made applicable, the provisions of Rule 9(2) became redundant. Rule 10 related to the recovery of duties not levied or not paid or the duties which and had been short levied or not paid in full; it did not provide as how it was to be taken that the duty had not been levied or paid or had been short levied or not paid in full. This Rule did not provide for the lime and manner of payment of duty. The time and manner of payment of duty was provided by Rule 9(1), and Rule 9(2) provided for the consequences if the excisable goods had been removed in contravention of Sub-rule (1) of Rule 9. It also provided for not only the demand of duty but also for levy of penalty and for the liability to confiscation of the offending goods. The Rule 10 was a simple recovery procedure and came into picture only when the provisions relating to the levy and payment of duties had been contravened.

Relevancy and the applicability of the provisions of Rule 9(2) had been dealt with by the Supreme Court in the case of N.B. Sanjana, Asstt. Collector of Central Excise, Bombay v. Elphinstone Spinning & Weaving Mills Co. Ltd. . The Supreme Court observed that in order to attract Sub-rule (2) of Rule 9 the goods should have been removed clandestinely and without assessment. In that case before the Supreme Court the goods--the grey cloth manufactured was sent to the other factory of the respondents for being processed and manufactured into leather cloth and imitation leather cloth. The respondents had filled in the necessary forms prescribed by the Rules. The finished goods were also removed after filling in form AR I prescribed by the Rules. The Excise Inspector Incharge, Leather Cloth Division had made an assessment, in the appropriate portion of the relevant forms showing the rate of duty and the amount of total duty payable as 'nil' and had affixed his signature under such assessment memorandum. Thus, the goods and been removed with the express permission of excise authorities and after order of assessment, the duty liability being nil. The Supreme Court observed that such a situation will not bring the case under Sub-rule (2) of Rule 9. The Apex Court also took note of the fact that Sub-rule (2) was a penal provision inasmuch as it is provided therein that apart from the duty payable, the party will also be made liable to a penalty and he also incurs the risk of the goods being confiscated. It was also observed that Rule 9(2) applies only to a case where there had been an evasion from payment of duty as was also clear from the decision of the Supreme Court in the case of J.K. Steel Ltd. v. U.O.I. . There is nothing in this judgment to say that Rule 9(2) had no purpose. It had a purpose and that purpose had been indicated by the Supreme Court as to forbid the removal of the goods in contravention of the provisions of Sub-rule (1) of Rule 9.

It is also clear that Sub-rule (2) is a penal provision and in addition to the demand of duty it also provides for imposing penalty on the person concerned and confiscation of the offending goods. At that time, provisions regarding recovery of duties or charges short levied were contained in Rule 10 and Rule 10A. The Supreme Court did not consider the provisions of Rule 9(2) as redundant but considered that these provisions as contained in Rule 9(2) had a purpose when the goods had been removed in contravention of the provisions contained in Rule 9(1). Where there was an element of deliberate evasion, the provisions of Rule 9(2) were applicable (refer Union Carbide Co. Ltd. v. Asstt. Collector of Central Excise ; where there was no

intimation to the excise authorities about the manufacturing activity or process of removal, these provisions were applicable (refer Rishi Enterprises, Bombay v. CCE, Bombay ; where no licence was obtained for the manufacture of excisable goods and removal was effected without payment of duty, the provisions of Rule 9(2) were invokable (refer Shree Shanker Industries. Bombay v. CCE. Bombay . Further the cause for action is provided by these provisions as to when the demand could be made upon the producer or manufacturer.

Both the earlier Rule 10 or later Section 11A were in the nature of recovery provisions. They were for the recovery of the dues after the cause of action for recovery of dues had arisen. Recovery provisions came into the picture only after the basic postulates for levy of the duty had been infringed. They provided for issue of notice but cause had to be found in the Rules relating to the levy and payment of duty. Thus, Rule 9 even for demand of duty occupied an important position in the scheme of excise law and procedure. Further, for the non-levy or non-payment of duty the rule may provide for the imposition of penalty and confiscation of the offending goods. Rule 9(2) provided for such penalty and confiscation. Rule 173Q also provided for penalty and confiscation. When the Rules provided for liability to penalty and confiscation in a case of non-levy, non-payment of duty, etc. and any of the condition of Rule 9(2) are satisfied then Rule 9(2) read with the provisions of Rule 173Q or other relevant Rules could take care of such adjudication of penalty and confiscation. In particular, where duty had not been levied or paid by reason of fraud, collusion or wilful misstatement or suppression of facts, etc. penal provisions under Rule 9(2) or 173Q or other relevant rules may be attracted.

Thus, we do not agree with the proposition that the provisions of Rule 9(2) were redundant during the period in question.

24. The only decision of the Tribunal in which it had been held that the Collector of Central Excise could not have exercised the powers vested in the Asstt. Collector under the provisions of Section 11A(2) of the Act, is that of in the case of Meghmani Dyes and Intermediates, Baroda v. CCE, Baroda 1991 (17) ETR 434. In coming to the view that the Collector of Central Excise could not have exercised the powers vested in the Asstt. Collector under the provisions of Section 11A(2) of the Act, the majority had relied upon the Supreme Court decision in the case of S. Kannan and Ors. v. Secretary Karnataka State Road Transport Authority . It has been pleaded on behalf of the

Revenue before us that this deision of the Supreme Court was not relevant to the issue before us. On the other hand, the Counsel for the assessees and the intervenors had relied upon this decision. On going through the Supreme Court's decision in the case of S. Kannan we find that the decision in that case was rendered in the specific facts and circumstances of the matter before the Hon'ble Supreme Court which arose under the provisions of the Motor Vehicles Act, 1939. Under Sub-section (7) of Section 63 of the Motor Vehicles Act 1939, State Transport Authority (STA) in each State was empowered to issue, subject to certain conditions and after complying with the procedure laid down in different sections of the Act, regular All India tourist permits. STA was to be constituted for the whole State. Such all India tourist permits were to be issued subject to various rules, and were for the purpose of promoting tourism. The number of vehicles which could be granted such all India permits by the STA in different States was to be specified by the Central Government. The provisions of various rules were to be applied in relation to such permits. Such permits could be granted and were to be effective without renewal for such period not less than 3 years and not more than 5 years as the STA concerned specified. Under Section 62 of the said Act, Regional Transport Authority (RTA) could grant temporary permits to the transport vehicles, without following the procedure laid down in Section 57 in the circumstances enumerated, in that Section 62. RTA was to be constituted for one or more regions in a State. The temporary permits to be granted by RTA were to be granted for a limited period not in any case to exceed 4 months and were to be for the use of a transport vehicle temporarily--

(a) for the conveyance of passengers on special occasions such as to and from fairs and religious gatherings, or

(b) for the purposes of a seasonal business, or

(c) to meet a particular temporary need, or

(d) pending decision on an application for the renewal of a permit.

There were certain other restrictions with regard to route, area, number etc. subject to which temporary permits could be granted by the RTA. In certain eventualities, STA could perform the functions and discharge the duties of RTA. Section 44(3) of that Act provided that a STA could perform the duties of a RTA

(1) where there was no RTA

(2) where STA thought it fit or if so required by a RTA, to perform those duties in respect of any route common to two or more regions.

In that case before the Supreme Court none of these conditions under which a STA could perform the functions and discharge the duties of a RTA are satisfied. There was no express provision in the Statute which provided that the STA could always and without any fetter enjoy the power of the RTA.

The question arose whether the powers conferred on the RTA under Section 62 could be exercised by the STA. In that Act, there was a specific provision providing for the situation under which the duties of RTA could be performed by STA as indicated above. It was in such a situation that the Supreme Court observed that "it is equally not possible to accept the submission that when a power is conferred on a lower authority that power can always be enjoyed by the authority higher in the hierarchy in relation to the lower authority".

The Supreme Court had analysed the imperatives for issuing temporary permits under Section 62 of that Act. It was to meet particular temporary needs, to meet some temporary or emergency requirement, to avoid inconvenience to travelling public without renewal of already granted permit was to take time. It was in such a situation that the Supreme Court observed that "an authority having jurisdiction over a comparatively small area is favourably placed to notice a situation as contemplated by Section 62. Therefore, the power is conferred on Regional Transport Authority and not the State Transport Authority to grant temporary permit in the circumstances set-out in Section 62 because State Transport Authority has jurisdiction over the whole State and the State Transport Authority exercising the power under Section 63(7) will have to have an All India perspective. Therefore, the Statute did not confer such power on State Transport Authority because by its very nature the Regional Transport Authority having jurisdiction over a comparatively smaller area would be better equipped to appreciate and deal with the needs of the travelling public of a temporary character or pending the renewal of the permit". The Supreme Court had not ruled that in no circumstance the power conferred on the lower authority could be exercised by the higher authority.

We consider that the scheme, purposes and the situations under the Central Excises Act are entirely different than those under the Motor Vehicles Act. The Supreme Court had not ruled out the exercise of powers by a higher authority, when such powers were conferred on a lower authority. There are specific provision in Rule 6 empowering the Collector to exercise the powers of his subordinates. Without applying the provisions of Rule 6 to the provisions of the Act an anamolous situation arises which had to be avoided.

We, therefore, consider the reliance placed on the S. Kannan's case by the Bench in Meghmani Dyes was not correct.

25. The main challenge of the assessees, to the proposition that under Section 11A when read with Rule 6, the Collector of Central Excise was empowered to adjudicate the demands, is on the ground of the status of the rules. There is no dispute that the Central Excise Rules represent a delegated legislation. The question however, is not of the equality of the rules with the Act but their application in comprehending the provisions of the Act. With this question is related, their application in defining the rights and obligations of the tax payers and powers and responsibilities of the tax collectors. We are dealing with a fiscal statute wherein while on the one hand tax payers are asked to make fiscal sacrifices, on the other hand considerable powers affecting the rights of the tax payers are placed in the hands of officers of different grades. The whole scheme rests on the hierarchical set up under which more and more responsibilities are cast on the senior officers. Seen in this background relatively higher powers placed in the hands of the senior officers are in the interest of both the tax payers and the tax administration.

Now, we examine some of the case law cited on behalf of the assessees in this regard.

Gadde Venkateswara Rao v. Govt of Andhra Pradesh and Ors. :

It was a case where the powers to establish and maintain Primary Health Centres was vested in the Panchayat Samithi. There was no provision vesting the said power in the Government. The village selected for locating the Primary Health Centre was expected to give two acres of site free and 50% cash contribution, which was not to be less than Rs. 10,000/-. Certain statutory powers were conferred on the Panchayat Samithi under the Andhra Pradesh Panchayat Sarnithis and Zilla Parishads Act, 1959. Certain rules were however made under which the Panchayat Sarnithis were deprived of their powers to select a place for establishing the Primary Health Centre for which the people under the Sarnithis had contributed land & money. It was with this background that the Supreme Court observed "the rules, therefore, in so far as they transfer the power of the Panchayat Samithi to the Government, being inconsistent with the provisions of the Act, must yield to Section 18 of the Act.

Rule 6 was in the Central Excise Rules when the recovery provisions were contained in the rules. In the year 1980, the recovery provisions which were jalready existing in the rules were incorporated in the Act. Now power as such was transferred from one authority to other. The Customs, Central Excises and Salt & Central Boards of Revenue (Amendment) Bill 1977 (Bill No. 149 of 1977) was introduced in Parliament on 3.12.1977. By Clause 24 new Section 11A was inserted in the Act after Section 11. According to the Statement of Objects and Reasons the bill sought to carry-out certain amendments in the Act. Essentially, the amendments were intended to remove certain practical difficulties experienced in the operation of the Central Excises Laws and doubts regarding the interpretation of certain important provisions therein. According to the notes on Clauses "Section 11A seeks to incorporate in the Act the existing provision contained in the Central Excise Rules relating to recovery of duties not levied or not paid or short levied or short paid". The bill was enacted on 6.6.1978 as Act No.25 of 1978, and the provision relating to Section 11A was Section 21 in the Customs, Central Excises & Salt and Central Boards of Revenue (Amendment) Act 1978. Section 21 of the said Amendment Act of 1978 came into force on 17.11.80 vide Notf. No. 182/80 CE dt. 15.11.80. Under Notf. No. 177/80 CE dated 12.11.80 Rule 10 was omitted from the rules with effect from 17.11.80.

We, therefore, consider that the decision aforesaid is not applicable to the facts of the case.

Commissioner oj Income Tax, Madras v. S. Chenniappa Mudaliar :

Rule 24 of the Income Tax (Appellate Tribunal) Rules 1946, as amended in the year 1948, enabled the Tribunal to dismiss an appeal for default in appearance of the appellants. The Supreme Court observed that Rule 24 as amended in the year 1948, though was not ultra vires Section 5A(8) of the Income Tax Act 1922, was repugnant to the provisions of Section 33(4) of the said Act, and hence must give way to the provisions of the Act. The Supreme Court held that the Appellate Tribunal was bound to give a proper decision on question of fact as well as law which could only be done if the appeal was disposed of on the merits and not dismissed owing to the absence of the appellants.

As we have discussed above, there is no repugnancy as between the provisions of Rule 9(2) and the provisions of Section 11A.

Dhoomsingh v. Prakash Chandra Sethi and Ors. :

The matter before the Hon'ble Supreme Court arose on an election petition under the Representation of the People Act 1951.

There was no provision in the said Act permitting intervention of an elector of the constituency in all contingencies of failures of the election petition, either due to the collusion or fraud of the original election petitioner or otherwise. The Supreme Court observed that it may be a case of casus omissus and cited the rule of construction of statutes from the craies on Statute Law 6th Edition pages 69-70. It was observed as under:

The Legislature in its wisdom has chosen to make special provisions for the continuance of the election petition only in the case of its withdrawal or abatement. It has yet not thought it fit to make any provision in the Act permitting intervention of an elector of the constituency in all contingencies of failure of the election petition either due to the collusion or fraud of the original election petitioner or otherwise.

The Supreme Court added:

"It is not necessary for this Court to express any opinion as to whether the omission to do so is deliberate or inadvertent. It may be a case of casus omissus. It is a well known rule of construction of statutes that "a statute even more than a contract, must be construed ut res magis valeat quam pereat, so that the intentions of the legislature may not be treated as vain or left to operate in the air". A second consequence of this rule is that "a statute may not be extended to meet a case for which provision has clearly and undoubtedly not been made." See pages 69 and 70 of Craies on Statute law-6th Edition.

We find no relevancy of these observations to the present issue before us. Prior to 17.11.1980, Rule 10 was in the Rules. The Rule 10 was bodily lifted from the Rules and incorporated in the Act. There was no intention of the legislature to change the situation as operating before 17.11.1980. No rights and obligations of the tax payers were changed. There is nothing in the scheme to suggest that any change was intended in the position of the Collector of Central Excise.

Smt Shrist Dhawan v. M/s. Shaw Brothers :

It was a case under the Delhi Rent Control Act 1958. In para 19, the Supreme Court had observed as under:

No statutory authority or Tribunal can assume jurisdiction in respect of subject matter which the statute does not confer on it and if by deciding erroneously the fact on which jurisdiction depends the Court or Tribunal exercises the jurisdiction then the order is vitiated. Error of jurisdictional fact renders the order ultra vires and bad [Wade Administrative Law],

As the provisions of Central Excises Act are integraged with the provisions of the Central Excise Rules and as there is no repugnancy in the provisions of Rule 6, even when the Asstt. Collector of Central Excise is specifically named in Section 11A, we consider that in the scheme of things, the Collector of Central Excise did not lack jurisdiction to adjudicate the matter. We also take note of the fact that in all the matters placed before us, contraventions of various provisions of the rules were also alleged which called for imposition of penalty and confiscation of goods and that with regard to those contraventions the Collector of Central Excise had jurisdiction.

Hotel Bala and Ors. etc. etc. v. State of Andhra Pradesh and Ors. etc. etc. :

The question raised in that case was how far is it permissible to refer to the rules made under the Act while judging the legislative competence of a legislature to enact a particular provision (refer para 29 of the judgment). It was a case of Constitutional validity of the levy of sales tax, the question being whether the tax levied was the one with reference to the sale or purchase of goods. It was contended before the Supreme Court that certain provisions of the Gujarat Sales Tax Act, the U.P. Sales Tax Act and the A.P. General Sales Tax Act were ultra vires the powers of the State Legislature in so far as they sought to levy a tax on use, consumption or consignment in the guise of a purchase tax. The Constitutional validity of Section 15B of the Gujarat Sales Tax Act 1969 as substituted by the Gujarat Sales Tax (Amendment) Act 6 of 1990 was under consideration, Section 15B was introduced by Amendment Act of 1986. It provided for levy of an additional purchase tax on raw material purchased by a manufacturing dealer in case he used the said raw material for the manufacture of other goods which he despatched to his own place of business or to his agent's place of business situated outside the State but within India. The Supreme Court held that the tax imposed by Section 15B could not be characterised as a consignment tax. It was contended on behalf of the appellants that if Section 15B was read together with Rule 42E of the Gujarat Sales Tax Rules inserted by GSR 1090 (64) T./H. dt. 1.5.90, then the purchase tax levied under Section 15B would really be a consignment tax. Rule 42E provided that in assessing the purchase tax levied under Section 15B. the assessee shall be granted a drawback, set-off or as the case may be. refund of the whole of the purchase tax paid in respect of purchase of goods effected on or after 1.4.1986 and which goods have been used by him as raw material, processing material or as consumable stores in the manufacture of taxable goods, subject to certain conditions. It was in such a situation where the Constitutional validity of a provision in the Act was being challenged on the strength of a rule made under the Act that the Supreme Court considered as how far was it permissible to refer to the rules made under an Act while judging the legislative competence of a legislature to enact a particular provision. The Supreme Court observed that the necessity and significance of the delegated legislation was well accepted and needed no elaboration: even so the rules represent subordinate legislation. They could not travel beyond the purview of the Act and that unless specifically so provided, the rules do not become part of the Act.

There is no dispute that the rules represent delegated legislation. But as we have mentioned above, the issue before us is not the equation of the rules with the Act but their role in giving effect to the provisions of the Act. As enacted by the Parliament the provisions of the Act have to look to the rules for carrying into effect their purpose. Without the assistance of the rules, the purposes of the Act could not be carrfied out. We are not concerned with the validity of the Act, but with the role of Rule 6 in comprehending the scheme for recovery of duties under Section 11A. We do not. consider that the observations of the Hon'ble Supreme Court in the case of Hotel Balaji in any way affect the position of the Collector of Central Excise when the provisions were shifted from the rules to the Act.

Atma Steels Pvt. Ltd. and Ors. v. Collector of Central Excise, Chandigarh 1984 (17) ELT 331 (Tribunal):

The Tribunal had observed that the rules do not acquire the same status as that of Statute. We consider that it is not the question of status but workability that has to determine the issue before us for consideration. Prior to 17.11.1980, the analogous provisions were contained in Rule 10. Rule 10 in one form or the other had been there in the rules since the framing of the rules in the year 1944. Prior to 8.12.1951. there was only Rule 10, and the Rule 10A. was added by Notf. dated 8.12.1951. Rules 10 and 10A were substituted by a consolidated new Rule 10 vide Notf. No. 267/77 CE dt. 6.8.1977. Section 11A came into force with effect from 17.11.1980 by virtue of Notf. No. 176/80 CE dt. 12.11.80 and subsequent Notf. No. 182/ 80 CE dt. 15.11.80. Simultaneously by virtue of Notf. No. 177/80 CE dt. 12.11.80, Rule 10 was omitted. The Larger Bench had relied upon the authority of Madhya Pradesh High Court decision in the case of Gwalior Rayon Mfg. (Weaving) Co. v. UOI . We find that in para 68 of the decision in the case of Atma Steels Pvl. Ltd. the Larger Bench of the Tribunal had observed as under :

68. We have, however, as against that, an authority of Madhya Pradesh High Court, where a Bench of equal strength, in a later judgment, and after taking full note of the above quoted Allahabad High Court case, expressed a contrary view, on similar facts, holding that there being continuity of provisions on the subject of demand, for short levy or non-levy inasmuch as, on one occasion rules were replaced by another set of rules, and on the second occasion the contents of the rules got transferred to the statute and as such proceedings, already commenced by issuance of the show cause notice under Rule 10A could continue, irrespective of the fact that said rule was subsequently removed from the relevant provisions.

The Madhya Pradesh High Court in the case of Gwalior Rayon Mfg. (Weaving) Co. v. UOI had observed that it is settled that rule framed under the Act is a part thereof and has to be construed as such for all purposes. Therefore, rules made under a statute must be treated as if they were in the Act itself both for the purpose of construction and also for the purpose of obligation.

In the case of Commissioner of Wealth Tax v. Dominic Joseph 1992 ITR 195 at page 412 (Kerala), the Kerala High Court had also observed that the rules made under a Statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act and are to be judicially noticed for all purposes of construction or obligation.

Thus, the Larger Bench decision of the Tribunal in the case of Atma Steels Pvt. Ltd. does not rule against the treatment of the rules as if they were in the Act itself, both for the purpose of construction and also for the purpose of obligation. It is not necessary that for meeting these purposes the rules have to be placed at the pedestal of the Act and even when playing the role of delegated legislation they could serve their intended purpose both with regard to construction and obligation.

An argument has been advanced that as the Act during the relevant time did not say that the rules on being made will be deemed as if enacted in the Act, the provisions of Rule 6 could not be applied to construe the expressions used in Section 11 A. Reference has been made to the Supreme Court's decision in the case of Hotel Balqji and Ors. etc. etc. v. State of Andhra Pradesh and Ors. etc. etc. . The question before the Supreme Court was how far is it permissible to refer to the rules made under an Act while judging the legislative competence of a legislature to enact a particular provision. The Supreme Court observed as under:

This argument raises in turn the question: how far is it permissible to refer to the Rules made under an Act while judging the legislative competence of a legislature to enact a particular provision? The necessity and significance of the delegated legislation is well-accepted and needs no elaboration at our hands. Even so, it is well to remind ourselves that Rules represent subordinate legislation. They cannot travel beyond the purview of the Act. Where the Act says that Rules on being made shall be deemed "as if enacted in this Act", the position may be different. (It is not necessary to express any definite opinion on this aspect for the purpose of this case). But where the Act does not say so, the Rules do not become part of the Act. Sri Mehta relies upon the following statement of law in Halsbury's Laws of England (3rd Edn.) Vol. 36 at page 40:

Where a statute provides that subordinate legislation made under it is to have effect as if enacted in the statute such legislation may be referred to for the purpose of construing a provision in the statute itself. Where as statute does not contain such a provision, and does not confer any power to modify the application of the statute by subordinate legislation, it is clear that subordinate legislation made under the statute cannot alter or vary the meaning of the statute itself where it is unambiguous, and it is doubtful whether such legislation can be referred to for the purpose of construing an expression in the statute, even if the meaning of the expression is ambiguous.

The observations were made by the Supreme Court in the content of judging the legislative competence of a legislature to enact a particular provision. The Supreme Court had noted that it was not necessary to express any definite opinion on the aspect that where the Act says that rules on being made shall be deemed as if enacted in the Act, then the Rules could go beyond the purview of the Act.

Under Section 38 all rules made and notifications issued under the Act were to be published in the Official Gazette. Further, every rule made under the Act was to be laid as soon as may be after it is made, before each House of Parliament while it is in session for a total period of 30 days which may be comprised in one session or in two or more successive sessions. If before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be. Any such modification or annulment shall however be without prejudice to the validity of anything previously done under that rule.

Even when the rules are not deemed to be as enacted in the Act, they are to be judicially noticed for all purposes of construction or obligation. Whether the provisions provide that the rules were deemed as enacted in the Act or not, they continue to remain delegated legislation but it does not deprive them their due place in the scheme of the Act.

In the case of Chief Inspector of Mines and Anr. v. Karam Chand Thaper etc. , the Sub-section (4) of Section 31 of the Mines Act 1923 laid-down that regulations and rules made under that Act shall be published in the Official Gazette and on such publication shall have effect as if enacted in the Act. The Mines Act 1923 was repealed by Section 88 of the Mines Act 1952. The question for consideration was whether the Mines Regulations 1926 framed under Section 29 of the Mines Act 1923 survived the repeal of the Mines Act 1923 by the Mines Act 1952. It was pleaded on behalf of the respondents that as the 1926 Regulations were part of the Mines Act 1923, and as the 1923 Act was repealed by Section 88 of the 1952 Act, the 1926 Regulations as part of the 1923 Act stood repealed and ceased to have legal existence on the day the 1952 Act came into force. Applying the rule of harmonious construction and after saying that "to harmonise is not however to destroy", the Supreme Court observed in para 20 as under :--

(20). The true position appears to be that the Rules and Regulations do not lose their character as rules and regulations, even though they are to be of the same effect as if contained in the Act. They continue to be rules subordinate to the Act, and though for certain purposes, including the purpose of construction, they are to be treated as if contained in the Act, their true nature as subordinate rule is not lost. Therefore, with regard to the effect of a repeal of the Act, they continue to be subject to the operation of Section 24 of the General Clauses Act.

The Apex Court held that Coal Mines Regulations, 1926 continued to be in force even after the repeal of the Mines Act 1923 under which they were framed and were to be deemed to be regulations made under the Mines Act 1952 which was re-enacted with modifications on repeal of 1923 Act.

In the case of Kali Pada Chowdhury and. Ors. v. UOI and Ors. . the matter related to the Coal Mines Regulations 1957 framed under the Mines Act 1952. The Regulation 127(3) of the Coal Mines Regulations 1957 was framed under the Mines Act 1952 in exercise of the powers conferred on the Central Govt, by Section 57 of the Mines Act 1952. Under Section 59(5), the Regulations published in the gazette had the effect as if enacted in the Act. The Supreme Court had held in that case that the regulations framed in 1957 have been duly framed and published under Section 59(5) and as such they shall have effect as if enacted in the Act.

Under Section 38 of the Act the Rules made under the Act are required to be published in the Official Gazette and are to be laid before the Parliament. While they continue to remain delegated legislation, unless there is any repugnancy between the Act and the rules, the rules for all practical purposes are to be treated as a fitting instrument for construing the provisions of the Act.

Thus, the subordinate legislative character of the rules does not come in the way of the Collector of Central Excise in exercising the powers of the Asstt. Collector of Central Excise even after the omission of Rule 10 and simultaneous incorporation of Section 11A.

Jurisdiction of Collector of Central Excise to adjudicate the demands under Section 11 A:

26. The jurisdiction of the Collector of Central Excise to adjudicate the demands under Section 11A had also been challenged on the ground that prior to 27.12.1985 only the Asstt. Collector of Central Excise was mentioned in that Section; the provisions relating to jurisdiction had to be strictly construed and that the legislative intent as gathered from the expressed language in Section 11A in favour of the proposition that only the Asstt. Collector of Central Excise was competent to adjudicate the demands under Section 11A,

We have analysed the place of the Collector, Central Excise in the recovery proceedings, in para 21 above. We have also indicated that for imposition of penalty and for liability of the goods to confiscation the provisions of Section 11A did not confer any power on the Asstt. Collector of Central Excise. We have also referred to the scheme of the Act and the rules and have indicated the act that the provisions of earlier Rule 10 were incorporated in the Act with no indication of any change in the place and role of the Collector of Central Excise. The Asstt. Collector, Central Excise is a middle level officer in the excise hierarchy. The expression 'central excise officer' also covers the officers junior to the Asstt. Collector of Central Excise in Central Excise hierarchy such as Inspectors and Superintendents. We consider that when the expression 'Asstt. Collector of Central Excise' was used in Section 11 A, it was to ensure that no officer lower than the Asstt. Collector of Central Excise could adjudicate the demand under that Section. As regards, the officers higher to the Asstt. Collector of Central Excise, the provisions of Rule 6 continued to remain operative when the provisions of Rule 10 were shifted from the Rules to the Act.

Under Section 33, the Central Board of Excise & Customs could confer on any officer the powers of adjudication as indicated in that Section. Under Section 37(2)(XX), the Central Board of Excise & Customs or Collector of Central Excise were authorised to provide by written instructions for supplemental matters arising out of any rule made under Section 37. Under Section 37A, the Central Govt, could direct that any power exercisable by the Board under the Act would be exercisable also by a Collector of Central of Central Excise empowered in this behalf by the Central Govt. Under Rule 4 of the Rules, the Central Board of Excise & Customs could appoint such persons as it thinks fit to be central excise officers, or to exercise all or any of the powers conferred by the rules on such officers. These provisions clearly indicate that all the officers have to work under the scheme of the Act and in compliance with the instructions issued by the Central Board of Excise & Customs and Collector of Central Excise.

Section 11A(2) provides that the Asstt. Collector of Central Excise shall, after considering the representation, if any, made by the person on whom the notice is served under Sub-section (1). determine the amount of duty of excise 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. The use of expression 'shall does not mean that no Senior Officer than the Asstt. Collector of Central Excise could adjudicate the matter.

In the case of Lakshmanasami Gounder v. CIT Selvamani and Ors. 1991(2) SCALE 179 at page 956, the Supreme Court had construed the expression 'shall' in para 5 of their judgments as under:

5. It is settled law that the word 'shall' be construed in the light of the purpose the Act or Rule that seeks to serve. It is an invariable rule that even though the word 'shall' is ordinarily mandatory but in the context or if the intention is otherwise, it may be construed to be directory. The construction ultimately depends upon the provisions itself, keeping in view the intendment of the enactment or of the context in which the word 'shall' has been used and the mischief it seeks to avoid. Where the consequence of failure to comply with any requirement of a provision is provided by the statute itself, the consequence has to be determined with reference to the nature of the provision, the purpose of enactment and the effect of noncompliance thereof. In its absence the consequence has to be determined with reference to the effect of the non-compliance of the provision of the legislature. Mere use of the word 'shall' need not be given that connotation in each and every case that the provision would be invariably interpreted to be mandatory or directory. But given due consideration to the object, design, purpose and scope of the legislation, the word shall be construed and interpreted in that design and given due emphasis. Section 36 obligates the Sale Officer Tahsildar that he shall publish the date and place of sale. The object thereby is an invitation to the public at large that the notified property would be brought to sale at that specified time and place and that they are invited to participate, if they do desire. To reiterate for emphasis and continuity that the object of the sale is to secure the maximum price and to avoid arbitrariness in the procedure adopted before sale and to prevent underhand dealings in effecting sale and purchase of the debtor's property. As a responsibility as such Officer and a duty towards the debtor, the sale officer should conduct the sale strictly in conformity with the prescribed procedure under the statute and the rules as the case may be. Such due and wide publicity would relieve the debtor from the maximum liability he owes and payable to the creditor. This responsibility is not only salutory to vouchsafe bona fides in the conduct of the sale officer but also to ensure fairness in the procedure adopted in bringing the property of the debtor to sale. Considered from this perspective the non-compliance of Section 36 i.e. , omission to mention the place of sale would visit with deprivation of the property to the debtor for an inadequate sale consideration due to absence of competing bidders. Thus, we hold that specification of the date and place of sale shall be mandatory. The forms either 7 or 7A are only procedural and they should be in conformity with Section

36. The form cannot prevail over the statute. The omission of specification of the place of sale in the form renders the sale not merely irregulate but also invalid.

In the case of Luxco Electonics v. Commissioner of Sales Tax U.P. , Lucknow 1981 (48) STC at page 540, the Allahabad High Court had with regard to the expression 'shall' referred to the Maxwell on the interpretation of Statutes and Craw Ford on the construction of Statutes and also referred to the authoritative case law on the subject. The relevant extracts are given below:

Maxwell on the Interpretation of Statutes (Twelfth Edition, on page 314) States:

The first such question is: when a statute requires that something shall be done, or done in a particular manner or form, without expressly declaring that shall be the consequence of noncompliance, is the requirement to be regarded as imperative (or mandatory) or merely as directory (or permissive)? In some cases, the conditions or forms prescribed by the statute have been regarded as essential to the act or thing regulated by it, and their omission has been held fatal to its validity. In others, such prescriptions have been considered as merely directory, the neglect of them involving nothing more in liability to a penalty, if any were imposed, for breach of the enactment.

This passage illustrates the fact that no hard and fast rule can be laid down for holding in what circumstances a provision of the statute is to be treated as imperative or directory. In Montreal Street Rly. Co. v. Normandin1 it was similarly stated that it was impossible to lay down any general rule for determining whether a provision is imperative or directory. The general rule for adjudging as to whether a staute is imperative or directory was broadly stated in the case of Liverpool Borough Bank v. Turner, where Lord Campbell, L.C., said : "No universal rule can be laid down for the construction of statutes, as to whether mandatory enactments shall be considered directory only or obligatory with an applied nullification for disobedience. It is the duty of Courts of Justice to try to get at the real intention of the legislature by carefully attending to the whole scope of the statute to be construed.

Lord Penzance in Howard v. Bodington1 observed:

I believe, as far as any rule is concerned, you cannot safely go further than that in each case you must look to the subject-matter; consider the importance of the provision that has been disregarded, and the relation of that provision to the general object intended to be secured by the Act; and upon review of the case in that aspect decide whether the matter is what is called imperative or only directory.

The Supreme Court has approved of this approach. It has dealt with the question in a number of cases, but we think that it will be sufficient for the purposes of this case to refer to the decision in the case of State of U.P. v. Babu Ram Upadhya. On page 764 of the Reports their Lordships referred to the case of Hari Vishnu Kamath v. Ahmad Ishaque3, wherein it was held that the use of the word "shall" in a statute was not conclusive and then quoted the following passage:

They (the rules) are well-known, and there is no need to repeat them. But they are all of them only aides for ascertaining the true intention of the legislature which is the determining factor, and that must ultimately depend on the context."

The following quotation from Crawford "On the Construction of Statutes", at page 516, is also helpful in this connection:

The question as to whether a statute is mandatory or directory depends upon the intent of the legislature and not upon the language in which the intent is clothed. The meaning and intention of the legislature must govern, and these are to be astertained, not only from the phraseology of the provision, but also by considering its nature, its design, and the conse-quences which would follow from construing it the one way or the other.

Their Lordships then formulated the relevant rules of interpretation in such cases in paragraph 29, at page 765. It was observed that "when a statute uses the word 'shall', prima facie, it is mandatory, but the court may ascertain the real intention of the legislature by carefully attending to the whole scope of the statute. For ascertaining the real intention of the legislature the cost may consider, inter alia, the nature and the design of the statute, and the consequences which would follow from construing it one way or the other, the impact of other provisions whereby the necessity of complying with the provisions is question is avoided, the circumstance, namely, that the statute provides for contingency of the non-compliance with the provisions, the fact that the noncompliance with the provisions is or is not visited by some penalty, the series or trivial consequences that flow therefrom, and, above all, whether the object of the legislation will be defeated or furthered.

We may now discuss some of the case law cited before us in this regard.

J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of Uttar Pradesh and Ors. :

The Supreme Court had observed that in the interpretation of statutes the Courts always presume that the legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have effect. These assumptions will have to be made in the case of rule making authority also.

The shifting of the recovery provisions from the rules to the Act, was to provide in the Act what was earlier provided in the delegated legislation. It had no effect on the overall scheme of the Act and the Rules.

In the case of Prabhat Solvent Extraction Industries Pvt. Ltd. v. State of Gujarat 1982 STC 49 at page 322, the High Court of Gujarat at Ahmedabad had observed that the principle that a statute must be read as a whole is equally applicable to different parts of the same Section or Rule. The High Court observed that it is well established that the words of a statute when there is doubt about their meaning are to be understood in the sense in which they best harmonise with the subject of the enactment and the object which the legislature has in view. If there are two possible constructions of a statute then that which is in consonance with the object and purpose of the enactment and accords with reason and justice may be preferred. The Hon'ble High Court referred to the judgments of the Supreme Court and observed as under. (Page 341):

The rule of construction which is firmly established is that every Clause of a statute should be construed with reference to the context and other clauses of the Act, so as, as far as possible, to make a consistent enactment of the whole statute or series of statutes relating to the subject-matter. The principle that the statute must be read as a whole is equally applicable to different parts of the same section or rule. The section or rule must be construed as a whole whether or not one of the parts is a saving clause or a proviso. It is an elementary rule, as pointed out by the Supreme Court in State of Bihar v. Hiralal , that

construction of a section is to be made of all the parts together and that it is not permissible to omit any part of it; the whole section should be read together. Sub-sections in this section must be read as parts of an integral whole and as being interdependent, each portion throwing light, if need be, on the rest (see Mandanlal Fakirchand v. Shree Changdeo Sugar Mills . Indeed, as Viscount Simonds said in Attorney-General v. H.R. H. Prince Ernest Augustus of Hanover (1957) 1 All ER 49 (HL):

No one should profess to understand any part of a statute or of any other document before he has read the whole of it. Until he has done so, he is not entitled to say that it, any part of it, is clear and unambiguous.

Official Trustee West Bengal and Ors. v. Sachindra Nath Chatterjee and Anr. :

The Supreme Court had observed that before a Court could be held to have jurisdiction to decide a particular matter, it must not only have jurisdiction to try the suit brought but must also have the authority to pass the orders sought for. It is not sufficient that it has some jurisdiction in relation to the subject matter of the suit. Its jurisdiction must include the power to hear and decide the questions at issue, the authority to hear and decide the particular controversy that has arisen between the parties.

Under Section 11A of the Act, the Asstt. Collector Central Excise had no authority to pass any order with regard to penalty and confiscation. In case the show cause notice proposed penalty and confiscation then under Section 11A alone the Asstt, Collector of Central Excise could not embark upon the adjudication. Under Section 33 his powers are notified and he can not go beyond those powers. If the assessee argues that no penalty was leviable on him, could the Asstt. Collector of Central Excise give relief under Section 11A? The Supreme Court had held in para 15 of the Official Trustee West Bengal, [supra) as under:

What is relevant is whether he had the power to grant the relief asked for in the application made by the settlor. That we think is the essence of the matter.

Thus, the jurisdiction of the Asstt. Collector of Collector of Central Excise has to be seen with reference to the demands of justice and the relief sought for by the tax payers.

Sone Valley Portland Cement Co. Ltd. v. General Mining Syndicate Pvt. Ltd. :

The Supreme Court while dealing with a case under the Bihar Land Reforms Act 1950 had observed that sometimes light may be thrown upon the meaning of an Act by taking into consideration 'parliamentary expositions' as revealed by the later Act which amends the earlier one, to clear-up any doubt or ambiguity. This principle has to be followed where a particular construction of the earlier Act will render the later incorporated Act ineffectual or otiose or inept.

The effect of 1985 amendment was to take away the powers of the officers lower than the Collector of Central Excise when the extended period of limitation was being invoked. Earlier, there was reported to be indiscriminate use of extended provisions. The show cause notices invoking extended period of limitation could be issued by any central excise officer. The Central Board of Excise & Customs under F.No. 208/38./82 CX 6 (Circular No. 24/83 CX6) dated 24.11.1983 had issued instructions that where the five years clause under Section 11A of the Act was sought to be invoked, the show cause notice should clearly state the facts as how the assessee committed fraud or had entered into a collusion or had made wilful mis-statement or what facts were suppressed. The representations continued to be received from the trade that the period of 5 years under Section 11A was still being indiscriminately invoked. The Board took a serious view of the issue of such show cause notices without proper justification. It was stressed that in no case should a show cause notice invoking the 5 year period be issued unless the facts or circumstances leading to fraud, collusion, wilful mis-statement or suppression of facts have been prima facie established. Such facts and circumstances should invariably be brought out in the show cause notice issued [Refer Board's Circular No.34/84 CX 6 dated 28.09.1984).

The changes effected in the year 1985 had to be seen in the light of such representations from the Trade. Although earlier Collector of Central Excise could use powers under Rule 6 but now it was built in the Section itself. The jurisdiction of the officers lower than the Collector of Central Excise was ousted. It does not mean that Rule 6 was made redundant. Rule 6 remained and even when the powers were conferred on an officer subordinate to the Collector of Central Excise, the Collector of Central Excise, could exercise the powers by virtue of the provisions of Rule 6.

Utkal Contractors & Joinery Pvt. Ltd. and Ors. etc. v. State of Orissa and Ors. :

In this case the Supreme Court observed that a statute is best understood if one knows the reasons for it. The reason for a statute is the safest guide to its interpretation. The words of a staute take their colour from the reason for it. There are external and internal aids to discover the reason for a statute. The external aids are Statement of Objects and Reasons when the bill is presented to Parliament, the reports of Committees which preceded the bill and the reports of Parliamentary Committees. Occasional excursions into the debates of Parliament are permitted. The internal aids are the preamble, the scheme and the provisions of the Act. The Supreme Court added that no provision in the statute and no word of the statute and no word of the statute may be construed in isolation. Every provision and every word must be looked at generally before any provision or word is attempted to be construed. The selling and the pattern were important. It was also observed that it was important to remember that Parliament does not waste its breath unnecessarily. Just as Parliament is not expected to use unnecessary expressions, Parliament is also not expected to express itself unnecessarily. Even as Parliament does not use any word without meaning something, Parliament does not legislate where no legislation is called for. Parliament, cannot be assumed to legislate for the sake of legislation, nor can it be assumed to make pointless legislation. Parliament does not indulge in legislation merely to state what it is unnecessary to state or to do, what is already validly done. Parliament may not be assumed to legislate unnecessarily.

The Customs, Central Excises & Salt & Central Boards of Revenue (Amendment) Bill 1977 (Bill No. 149 of 1977) was introduced in the Parliament on 3.12.1977. By Clause 24, new Section 11A was inserted in the Central Excises & Salt Act, 1944, after Section 11. The Statement of Objects and Reasons is extracted below:

Statement of Objects & Reasons:

The Bill seeks to carry out certain amendments in the Customs Act. 1962 and the Central Excises & Salt Act. 1944. Essentially the amendments are intended to remove certain practical difficulties experienced in the operation of Customs and Central Excises Laws, and doubts regarding the interpretation of certain important provisions therein, to provide facilities to exporters and to increase the minimum punishment for smuggling. Some of the amendments to the Customs Act and the Central Excises and Salt Act are similar in nature.

The bill also seeks to amend the Central Boards of Revenue Act, 1963. with a view to raise the maximum strength of the members of each of the two Boards (the Central Board of Direct Taxes and the Central Board of Excise and Customs) as it has become necessary in view of the phenomenal increase in the responsibilities of the two Boards.

The notes on clauses appended to the Bill explain in detail the various provisions thereof.

The notes on Clauses with reference to Clause 24 are extracted below:--

Clause 24.--This clause seeks to insert new Sections 11A. 1 IB and 11C in the Central Excises and Salt Act. Section 11A seeks to incorporate in the Act the existing provision contained in the Central Excise Rules relating to recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. Similarly, new Section 11B seeks to incorporate in the Act the time limit of six months provided in the Central Excise Rules for claiming refund of duties paid in excess. It also imposes a prohibition that no claim for refund, except as otherwise provided by or under the Central Excises and Salt Act, shall be entertained. It is being further provided that the provisions of this section shall also apply to a claim for refund of any amount collected as duty of excise though the goods in respect of which such amount was collected were in fact not liable to duty of excise or were exempt from such duty and no court shall have any jurisdiction in respect of such claim. New Section 11C seeks to provide that if the Central Government is satisfied that there has been a uniform practice or near uniform practice prevailing all over India for assessment of any goods, the Government may direct that the duty in excess of that payable in accordance with such practice shall not be required to be paid for the period during which the Government considers that such practice was prevalent.

As explained in the notes on clauses, Section 11A sought to incorporate in the Act the already existing provision contained in Rule 10 of the Rules relating to recovery of duties not levied or not paid or short levied or short paid. It was a legislative device to provide in the Act, what was earlier already provided in the delegated legislation with no corresponding effect on the administration of the levy or the exercise of powers, as was in operation before such incorporation in the Act.

Commissioner of Income Tax, Madras v. Sheik Abdul Kadir Maracayar & Co. AIR 1928 Madras 257:

This was a case of re-opening of the assessment, which was already completed, under the provisions of the Income Tax Act 1922. When the Asstt. Commissioner of Income Tax had set aside the order of re-assessment, the Commissioner of Income Tax took over the proceedings for revfiew/revision. The High Court observed that the re-assessment proceedings should have been started before the power to levy penalty was exercised. The High Court observed that so far as any assessment made by the subordinate officer is concerned, there was nothing in Section 33 of the said Act which prevented the Commissioner from enhancing the assessment made, on the materials available, and that if on the materials with reference to any original assessments itself, it appeared to the Commissioner of Income Tax that there had been any concealment within the meaning of Section 28, then Section 33 would undoubtedly empower the Commissioner of Income Tax to levy panalty.

The situation dealt with in the reference before the Madras High Court was entirely different. The powers were different. We do not consider that this decision is relevant to the issue before us.

Jawahar v. State. :

The issue before the Allahabad High Court was whether an additional district magistrate could sanction a prosecution under Section 39 of the Arms Act 1878 without being empowered by the State Govt, to do so. The High Court observed that the requirement of a sanction was an essential condition of a prosecution, as contained in Section 39 of the Arms Act 1878. It was conceded on behalf of the State that the State Govt, had not directed the Addl. District Magistrate concerned to sanction prosecution under the Arms Act.

We do not consider that this decision has any relevancy to the facts under consideration in the present proceedings.

Gujarat State Fertilizer Co. Ltd. and Anr. v. UOI and Ors. 1988 (34) ELT 442 (Gujarat) :

In this case the show cause notice was issued on 15.01.1987 by the Superintendent of Central Excise demanding central excise duty for a period exceeding six months. Under Proviso to Sub-section (1) of Section 11A, and the Collector of Central Excise could issue a show cause notice if the proviso to Sub-section (1) of Section 11A was to be invoked. The Gujarat High Court held that the impugned notice was illegal and in contravention of Sub-section (1) of Section 11A.

The show cause notice in those proceedings was issued after the amendment in 1985. There is no dispute that after amendment made in 1985, a show cause notice in case where extended period of limitation was to be invoked, was required to be issued by the Collector of Central Excise.

Atlas Exporters and Anr. v. K.V. Irniraya ACCAE :

The Bombay High Court had observed that there was no justification in importing the definition of the Chief Controller of Imports and Exports as contained in the Exports (Control) Order 1977 while construing the provisions contained in the various paras of the Imports & Exports Hand Book. The power of review contemplated in paras 155(2) and 156 was exercisable by the Chief Controller of Imports & Exports alone.

It was a case of exercising the powers of review vested in the Chief Controller of Imports & Exports, by junior officers. In the present proceedings, the issue is not of exercising the powers by junior officers but by the senior officer by virtue of provisions in Rule 6 of the Central Excise Rules.

We, therefore, consider that the challenge to the jurisdiction of the Collector of Central Excise to adjudicate the demand under Section 11A on the ground that prior to 27.12.1985 only the Asstt. Collector was mentioned in that Section, has no basis.

Section 11A is a complete code for recovery of duties:

27. It has been argued that the provision of Section 11A of the Act is a complete code, and any reference in a show cause notice to Rule 9(2) was redundant. Reliance has been placed on the Tribunal decision in the case of Pharma Research & Analytical Lab. v. Collector of Central Excise, Madras. . The Tribunal had relied upon the Calcutta High Court decision in ITC Ltd. and Anr. v. UOI and Ors. , wherein the High Court had held that under the

scheme of the Act, Section 11A was provided as a substantive provision and a complete code for realisation of duty in case of short levy and short payment.

There may not be any dispute that Section 11A is a complete code, but it is a code only for the recovery of duties. It was contended before the Calcutta High Court that Section 11A was a mere machinery section and that the powers therein could not be exercised independently and that the powers therein could only be exercised in connection with an appeal or revision as provided in Section 35A or Section 35EE. The High Court observed:

When the language of Sections 11A, 35A and 35EE of the said Act are clear and when they are independent provisions, the scope and ambit of Section 11A cannot be curtailed.

Section 11A does not provide for assessment. It does not provide for penalty and confiscation. There are a number of penalty provisions in the rules. It does not refer to them. Thus while it is a complete code for recovery of duty not levied or not paid, short levied or short paid, etc, it in no way curtails the scope of other provisions. The provisions of Section 11A are independent of the provisions of Rule 9(2) which had adopted the period of limitation as provided in Section 11A, by reference. It means that the powers under Rule 9(2) could be invoked only within the period of limitation mentioned in Section 11A of the Act. This adoption of Section 11A by reference does not dilute the powers under Rule 9(2). In fact. Rule 9(2) in addition to the recovery of duty, also refers to the contravention of the law leading to the recovery of duty and also provides for liability to penalty and confiscation. The Hon'ble High Court in the aforesaid decision has observed as under:

Even interpreting a revenue statute, the court should examine the substance and not merely the form of the language and should mould the taxing statute, so far as possible, to achieve the legislative intend and also to meet with the change of social needs. It is no longer the duty of the court to interpret statute strictly to help the evasion. Its duty is to construe in a manner which will suppress the evasion of tax or duty.

Special v. General:

28. A reference has been made to the Supreme Court decision in the case of Ashoka Marketing Ltd. and Anr. v. Punjab National Bank and Ors. , wherein the Supreme Court had observed that the

special provisions should prevail over the general provisions. It has been contended that Section 11A is a special provision which should have a precedence over Rule 9(2). Para 50 of the aforesaid Supreme Court decision is extracted below:

50. One such principle of statutory interpretation which is applied to be is contained in the latin maxim: leges posteriores priores conterarias abrogant (later laws abrogate earlier contrary laws). This principle is subject to the exception embodied in the maxim: generalia specialibus non derogant (a general provision does not derogate from a special one). This means that where the literal meaning of the general enactment covers a situation for which specific provision is made by another enactment contained in an earlier Act, it is presumed that the situation was intended to continue to be dealt with by the specific provision rather than the later general one (Benion: Statutory Interpretation pp. 433-34).

In the case of ITC Ltd. and Anr. v. U.O.I. and Ors. , the Calcutta High Court had observed that under the scheme of the Central Excise Act, Section 11A was provided as a substantive provision and a complete code for realisation of excise duty in case of short levy or short payment. Rule 9(2) is in force since 27.11.1948 and is also a complete code in itself and it provides for not only recovery of duty but imposition of penalty and confiscation of goods as well. The period of limitation for making the demand is provided in Rule 9(2) from 16.08.1977 through legislation by reference, with the advantage that any amendment and modification in Section 11A with regard to the period of limitation will be automatically applied to Rule 9(2) as well (refer Supreme Court decision in the case of State of Kerala v. Attesee (Agro Industrial Trading Corporation) 1989 (72) STC 10. SC and Andhra Pradesh High Court in Hotel Dwaraka, Hyderabadvs. U.O. I. 1985 STC 58 at 241 Andhra Pradesh, Hyderabad. The relevancy and the applicability of Rule 9(2) has been established by a number of authoritative judicial pronouncements. The Tribunal in the case of Nobel Soya House Ltd., Mandi Deep v. Collector of Central excise, Indore 1992 (20) ETR 20, after analysing the case law on the subject had held that since provisions of Section 11A as a whole could not be imported in Rule 9(2), it could not be contended that Rule 9(2) was not independent of Section 11A. Relevant extracts from the Tribunal decision are given below:

In respect of the arguments that a show cause notice under Rule 9(2) has to be issued by the Collector when it alleges suppression of facts it is noticed that recently the issue had come up before the Hon'ble High Court of Allahabad, in the case of kanpur Cigarettes (Pvt.) Ltd., Calcutta v. Collector of Central Excise and Ors. reported in 1992 (38) E.C. Rule 325 (All.) Para 9 of the Allahabad High Court decision is of relevance and is reproduced below:

The first contention of the learned Counsel for the petitioner is based upon the assumption that the show cause notice is issued beyond the period of six months prescribed by Section 11-A(1) of the Act. As we shall presently point out. this assumption is not . well-founded. Secondly, as pointed hereinbefore, the notice is not only issued under Section 11-A (demanding the duty not paid or short-paid), but it also proposes to levy penalties under Rules 9, 52A, 210 and 226. Rule 9(2) provides that if any exercisable goods are, in contravention of Sub-rule (1), deposited in or removed from any place specified therein, the producer or manufacturer thereof shall pay the duty leviable on such goods upon written demand within the period specified in Section 11A of the Act by the proper officer and shall also be liable to penalty which may extend to two thousand rupees, and such goods shall be liable to confiscation." What would be the relevant date from which the six months period should be computed under Rule 9(2)? Would it not be the date on which the illegal deposit or illegal removal is discovered? Is it possible or permissible to read the definition of relevant date' in Clause (it) of Sub-section (3) of Section 11A into Rules 9(2) merely because Rule 9(2) imports the period of limitation specified in Section 11A? Similarly, Rule 52A provides that no excisable goods shall be delivered from a factory except under a gate pass signed by the owner of the factory and countersigned by the proper officer." Sub-Rule (5) provides for penalty and confiscation of goods, in cases of violation of the requirement. No period of limitation is prescribed in Sub-rule (5) of Rule (5) of Rule 52A. It does not even prescribe who is the proper authority to levy the penalty and/or to confiscate the goods thereunder. Rule 210 provides generally that a breach of these rules shall, where no other penalty is provided herein or in the Act, be punishable with a penalty which may extend to one thousand rupees and with confiscation of the goods in respect of which the offence is committed." This Rule does not prescribe any period of limitation, nor does it specify the authority competent to levy the penalty and/or to confiscate the goods. Rule 226 prescribes the manner in which books shall be maintained by a manufacturer. At the same time, it provides that any person, who fails to maintain the books in the manner prescribed, shall be liable to penalty which may extend to two thousand rupees and further all the goods of which due entry has not been made in such books, account or register, shall be liable to confiscation. This Rule also does not prescribe any period of limitation. Evidently, the period of limitation under all these Rules should be the date, on which the illegality or the infraction of the Rules is discovered. From this point of view, we find it difficult to say that the show cause notice as a whole is barred by limitation. Now coming back to Section 11A, we find it difficult to record any finding at this stage, this writ petition, that the show cause notice is barred even under Section 11A. Several instances of evasion of duty are mentioned in the show cause notice. Para 2 of the show cause notice refers to certain irregularities having been committed during the period 30.9.1985 to 6.10.1985. Para 3 again refers to certain other irregularities committed during the same period i.e. during the week ending on 6.10.1985. Several paragraphs in the show cause notice refer to various periods during which irregularities and infractions are said to have taken place, which have given rise to the demand in question. If respect of each instance, the relevant date may be different. Suffice it to say that it is not possible to say that, ex Jade, the show cause notice is barred by limitation and if so, we cannot interfere by way of a writ petition at this stage. We think it necessary to reiterate that under the show cause notice, not only the duty is sought to be demanded but penalties are also sought to be levied and the goods are also sought to be confiscated. The confiscation of goods and levy of penalties is under various Rules and we have already pointed out hereinabove that action under these Rules is neither governed by any period of limitation, nor can it be said that the notice thereunder is barred by limitation, even assuming that six months' limitation applies (As we have mentioned hereinabove, from the relevant date, i.e. the date on which the irregularities were discovered the show cause notice .is within the period of six months). In such state of affairs, we decline to interfere at this stage of the proceedings. Let the petitioner submit his explanation and orders be passed according to law whether it shall be open to him. If he is aggrieved by the final orders that are passed to adopt such remedies as are open to him under law.

Both Section 11A and Rule 9(2) have their own place in the scheme of Central Excise Law. They could not be categorised as of special/general provision. Even if for the sake of argument, it is assumed that Rule 9(2) is a general provision, we find that Section 11A does not apply to all cases.

In Raja Gopalachari v. Corporation of Madras. , the Supreme Court observed that "a special provision should be given effect to the extent of its scope leaving the general provision to control cases where the special provision does not apply".

The same principle is also found in South India Corporation v. Secretary, Board of Revenue where the law has been stated in the following terms:

It is settled law that a special provision should be given effect to the extent of its scope leaving the general provision to control cases where the special provision does not apply".

(Also refer Eastern Ore Corporation v. Commercial Tax Officer, Vishakhapatanam--1974 STC 33 at 129 Andhra Pradesh, Hyderabad).

29. In the case of Life Insurance Corporation of India v. Escorts Ltd. and Ors.--MR 1986 SC 1370. the matter related to the purchase of shares of India Company by non-resident company for which permission of the Reserve Bank of India was required. The question was whether such a permission was required to be obtained prior to the purchase of the shares or such a permission could also be ex post facto. The expression used in the relevant Section 29(1) of the Foreign Exchange Regulation Act 1973, was "general or special permission of the Reserve Bank of India". The expression was not qualified by the word 'previous' or "prior'. In some other provisions, the expression 'permission' was qualified by the word 'previous'. The Supreme Court observed that the traditional norms of statutory interpretation must yield to broader notions of the national interest, and that Parliament did not intend to adopt too rigid an attitude in the matter and it was therefore, left to the Reserve Bank of India than whom there could be no safer authority in whom the power may be vested to grant permission, previous or ex post facto, conditional or un-conditional. It was in such a situation that the observations were made that the significance of the use of the qualifying word in one provision and its non-use in another provision may not be disregarded.

On this basis, it is argued that the expression "a Central Excise Officer" in Sub-section (1) of Section 11A should be read as "the Asstt. Collector of Central Excise", the same expression as in Sub-section (2) of Section 11A. The Central Excise Officer and the Asstt. Collector of Central Excise are not the same expression. In the Supreme Court decision the expression was 'permission' at one place with the qualifying word 'previous', and at other place without any qualifying word. The Supreme Court observed that the Parliament deliberately avoided the qualifying word 'previous' in Section 29(1) so as to invest the Reserve Bank of India with certain degree of elasticity in the matter of granting permission to non-resident companies to purchase shares in Indian companies. We do not find any justification to read a "Central Excise Officer" as "the Asstt. Collector of Central Excise" whether by a contextual situation or the object and design of the legislation.

Insertion of Section 12A (re-numbered as Section 12E):

30. Section 12A inserted by Section 4 of the Central Excises & Salt (Amendment) Act 1985 (79 of 1985), and renumbered as Section 12E w.e. f. 20.9.1991 vide Notf. 30/91 CE (N.T.) dt. 19.9.91 by Section 7 of the Central Excises & Customs Laws (Amendment) Act 1991 (40 of 1991), provided that a Central Excise Officer may exercise the powers and discharge the duties conferred or imposed under the Act on any other central excise officer who is subordinate to him.

The Central Excises & Salt (Amendment) Act 1985 provided for a number of changes in the Central Excise & Salt Act 1944. It inserted Sections 9AA, 12A, 37B and 37C, and amended Sections 11A, 35D and 37. It also provided for transfer of certain pending proceedings. The Statement of Objects and Reasons of the Central Excises & Salt (Amendment) Bill 1985--Bill No. 206 of 1985, introduced in Lok Sabha on 16.12.85 (which was enacted as Amendment Act of 1985 as above) is extracted below:

(Page B-5 of 23 ELT)

STATEMENT OF OBJECTS AND REASONS OF THE CENTRAL EXCISE AND SALT (AMENDMENT) BILL, 1985--BILL NO. 206

OF 1985 INTRODUCED IN LOK SABHA ON 16-12-1985

The Central Excise and Salt Act, 1944 provides for the levy and collection of duties of excise on all excisable goods specified in the First Schedule to that Act. The Central Excise Rules, 1944 have been made under Section 37 of the Act. The said rules, inter alia, provide for the charging of fees for the inspection of excisable goods intended for export out of India and for any other service rendered by the Central Excise Officers. The rules also provide for the service of decisions, orders, etc., under the Act or the rules made thereunder. The Committee on Subordinate Legislation of the Lok Sabha have observed that there is no enabling power in the Act to charge fees for services rendered by the Central Excise Officers and that the provisions for service of any decisions, orders, summons or notices issued under the Act or the rules made thereunder should be provided for in the Act instead of in the rules. It is proposed to accept the recommendations of the Committee and make suitable amendments in the Act.

2. Opportunity is also being availed of to make certain other amendments is the Act in the light of the experience gained in the implementation of the Act. The main amendments proposed are as follows:

(a) show cause notice in regard to duty of excise short-levied or short-paid, etc. by reason of fraud, collusion or any willful mis-statement: or suppression of facts should be issued, and such cases decided, by the Collector of Central Excise instead of the Assistant Collector of Central Excise as at present:

(b) power is proposed to be given to the Central Board of Excise and Customs to issue instructions to the Central Excise Officers for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods.

3. The Bill seeks to achieve the above objects.

NEW DELHI ;

The 16th December, 1985.

Viswanath Pratap Singh

Insertion of Section 12A on 27.12.85 did not mean that before 27.12.85, the Collector of Central Excise could not exercise the powers of his subordinate officer under the Act. No fundamental alteration in the scheme of the law with reference to exercise of the powers by the Collector of Central Excise is indicated. Having regard to the complexity of problems which the task of tax administration involves, delegated legislation is a necessity and in the context of the Central Excise Law was inevitable. With the growth of excise and developing case law, a number of provisions which were in the rules were incorporated from time to time in the Act. One such illustration is that of Rule 8 which was shifted to the Act as Section 5A in the Act. It does not mean anything more than taking over by the enabling Act which earlier it had delegated to the rule making authority.

In a case where long standing basic provisions are shifted in the above manner, unless the contrary intention is un-mistakably pointed out by the words used it has to be taken that no fundamental alteration in the scheme of the law hitherto in operation was intended. We may refer to the rule of construction from Maxwell cited with approval and applied by the Supreme Court in M.K Ranganathan v. Govt, of Madras. :-

One of these presumptions is that the legislature does not intend to make any substantial alteration in the law beyond what it explicitly declares either in express terms or by clear implication or in other words, beyond the immediate scope and object of the statute. In all general matters, outside these limits, the law remains un-disturbed. It is in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights or depart from the general system of law without expressing its intention with irresistible clearness.

(refer page 546 of the law of Central Excise by V. J. Taraporevala & S.N. Parikh IInd Edition).

The argument that even after insertion of Section 12E in the Act providing for exercise of powers by the Collector of Central Excise, Rule 6 was left in the rules and thus, it has to be taken that Rule 6 only related to the powers under the Rule, has no force. There had been challenge to the show cause notice issued under Rule 10, that after the shifting of the provisions to the Act in the form of Section 11A, the proceeding, will not survive. Although Madhya Pradesh High Court in Gwalior Rayon Mfg. (Weaving) Co. v. U.O. I had ruled that the proceedings do survive, the provisions were left in the rules so as to cover the powers under the Rules and the powers earlier exercised under the Act. Penalty:

31. The Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa 1978 ELT J-159 had held that no penalty was imposable for technical or venial breach of legal provisions or where the breach flows from the bona fide belief that the offender was not liable to act in the manner prescribed by the statute. Under Orissa Sales Tax Act penalty could be imposed for failure to register as a dealer--Section 9(1) read with Section 25(1)(a) of the Act. It was found that those in charge of the affairs of the company in failing to register the company as a dealer had acted in the honest and genuine belief that the company was not dealer. Para 7 from that decision is extracted below:-

7. Under the Act penalty may be imposed for failure to register as a dealer: Section 9(1) read with Section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An Order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the Company in failing to register the Company as a dealer acted in the honest and genuine belief that the Company was not a dealer. Granting that they erred, no case for imposing penalty was made out.

The bona fides will be known only at the time of the adjudication. No final view could be taken at the notice stage. Notice contains only allegations. When the Asstt. Collector of Central Excise had no power under Section 11A to adjudicate penalty, how could he decide that no penalty was called for.

In the case of Bakeman's Home Products Pvt Ltd. v. Collector of Customs. Bombay , the Tribunal had observed that when notice relating to proposal for demand of differential duty was without jurisdiction, action for confiscation and penalty could not survive.

Whether the demand is justified or not had to be decided through adjudication proceedings. Penalty and confiscation whether justified or not had also to be adjudged by the proper officer. As we have seen the Asstt. Collector of Central Excise under Section 11A had no power with regard to the penalty and confiscation; therefore, the reliance on these decisions is without any basis.

Right of Appeal:--

32. in the case of Garikapati Veeraya v. AT. Subbiah Choudhry and Ors. , the Supreme Court in para 23 of their decision had held as under:

23. From the decisions cited above the following principles clearly emerge:

(i) That the legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding.

(ii) The right of appeal is not a mere matter of procedure but is a substantive right.

(iii) The institution of the suit carries with it the implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the career of the suit.

(iv) The right of appeal is a vested right and such a right to enter the superior Court accrues to the litigant and exists as on and from the date the lis commences and although it may be actually exercised when the adverse judgment is pronounced such right is to be governed by the law prevailing at the date of the institution of the suit or proceeding and not by the law that prevails at the date of its decision or at the date of the filing of the appeal.

(v) This vested right of appeal can be taken away only by subsequent enactment, if it so provides expressly or by necessary intendment and not. otherwise.

The right of appeal arises at the stage of institution of the suit, from the date the his commences and is to be governed by the law prevailing at the date of the institution of the suit or proceeding. In para 20 of that decision, the Supreme Court had observed "the Bench of this Court held, following the leading privy council decision and some of the other decisions referred to above, that the right of appeal was a matter of substantive right and not merely a matter of procedure, that this right became vested in a party when the proceedings were first initiated and that such right could not be taken away except by express enactment or necessary intendment". In the present case the right of appeal could be taken as arising as on the date of show cause notice. Before the issue of show cause notice, there was no proceeding no allegation, no obligation and no right of appeal. Para 12 of the decision of the Karnataka High Court at Bangalore in the case of Engg. Systems Pvt. Ltd. v. U.O.I. is extracted below:

12. Mr, Chander Kumar however contends that having regard to the scheme of the Act, it will not be open to the Board under Rule 4 to call upon any Central Excise Officer to perform the duties which the Act specifically confers on a particular Officer in a particular manner. Therefore, it is unguided and arbitrary resulting in excessive delegation of authority not permissible in terms of Section 37 of the Act. We find ourselves in some difficulty to accede to that contention. Rule 4 does no more than provide for the Authority that shall make appointments of Central Excise Officers. The term 'Central Excise Officer' is a defined term. Under Clause (b) of Section 2 of the Act, "Central Excise Officer" means any officer of the Central Excise Department or any person (including an officer of the State Government) invested by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 with any of the powers of a Central Excise Officer under that Act, does not make any provisions for the mode and manner of appointment of the Central Excise Officers. Therefore, in order to bring to effect the provisions of the Act, someone must be vested with the power to make the appointment of various officers who are required to perform different and distinct functions giving effect to the provisions of the Act. It is in the light of that legal necessity, Legislature delegates in its wisdom to the executive power. Therefore, legislature enactments provision empowering the executive to make rules to give effect is common knowledge. In the case of the Act under consideration, similar provision is made is not disputed.

As the show cause notice was answerable to the Collector of Central Excise, the notices had a right of appeal as available when the order is passed by the Collector of Central Excise. The Supreme Court in the case of GarUcapati Veeraya v. N. Subbiah Choudhry and Ors. (supra) had held in para 13 as under:--

The right of appeal vests in the parties at the date of the suit and is governed by the law prevailing at that time and the date of the decree or of the filing of the appeal does not affect this right unless some subsequent enactment takes away this right expressly or by necessary intendment.

In the case of Hossein Kasam Dada (1) Ltd. v. State of Madhya Pradesh and Ors. , the Supreme Court had' observed that the right of appeal was a matter of substantive right, and preexisting right of appeal was not destroyed by the amendment if the amendment is not made retrospective by express words or necessary intendments.

The right of appeal becomes vested in the party when the proceedings are initiated. The proceedings are initiated by way of issue of show cause notice. The assessee on the basis of the facts and circumstances of the case when is asked to show cause to the Collector of Central Excise, his right of appeal is vested accordingly. Subsequently, his right could not be taken away but before the initiation of the proceedings, no right of appeal exists,

Thus we consider that the exercise of the powers by the Collector of Central Excise did not adversely affect the right of appeal of the assessees.

Guidelines:

33. In quasi-judicial functions, there is an obligation to adopt the judicial approach and to comply with the basic requirements of justice. Under the Rule of Law, tax payers have certain basic rights which have been emphasised by the Supreme Court from time to time.

In the case of Asia Tobacco Co. Ltd. v. U.O.I. and Anr. , the High Court of Madras had observed that it was for the authorities to decide how best in a given case to recover excise duty, which had been evaded and how to deal with such cases of evasion. Para 10 from the judgment is extracted below :

10. The other contention that there are no guidelines to show under what circumstances the Director of Anti-evasion (Central Excise) is to act, is also without any substance. It is implicit in the several provisions of the Act that the officers referred to in the Act have to exercise their powers in furtherance of the object of the Act. Along other things, Section 11 A, and particularly the proviso thereto, takes care of the powers to be exercised to recover excise duty in the case of evasion, it is for the authorities to decide how best in a given case to recover excise duty which has been evaded and how to deal with such cases of evasion. In certain cases, evasion may involve persons from different parts of the country when the activities of a manufacturer are spread all over the country. In the instant case, the allegations made in the show cause notice disclose, at least prima facie, that there is an evasion on a large scale by activities in different places in India and that would itself be enough to show that, at least prima facie, the power cannot be said to be either abused or exercised mala fide. The power to invest a Central Excise Officer with the powers of the Collector of Central Excise, or other officers, is vested in the highest authority under the Act and the possibility of abuse of the power cannot thus be assumed.

In the case of ITC Ltd. and Anr. v. U.O.I. and Ors. , the Calcutta High Court had observed :

'The twin Sections--Sections 11A and 11B were introduced in the interest of the Revenue as well as the assessee and that is the reason why the legislature had not laid down any condition precedent and/or restriction in the matter of exercise of its powers under Section 11A or 11B of the said Act.

In the case of Orient Paper Mills Ltd. v. U.O.I. . the Supreme Court had held that no authority however high can control the decision of a judicial or a quasi-judicial authority. While functioning as quasi-judicial officer, the officers should not allow their judgments to be influenced by administrative considerations or by the instructions or directions given by their superiors. Any such directions from above is invalid and will only vitiate the quasi-judicial proceedings. Para 8 from that judgment is extracted below:--

8. If the power exercised by the Collector was a quasi-judicial power as we hold it to be, that power cannot be controlled by the directions issued by the Board. No authority however high placed can control the decision of a judicial or a quasi-judicial authority. That is the essence of our judicial system. There is no provision in the Act empowering the Board to issue directions to the assessing authorities or the appellate authorities in the matter of deciding disputes between the persons who are called upon to pay duty and the department. It is true that the assessing authorities as well as the appellate authorities are judges in their own cause: yet when they are called upon to decide disputes arising under the Act they must Act independently and impartially. They cannot be said to act independently if their judgment is controlled by the directions given by others. Then it is a misnomer to call their orders as their judgments; they would essentially be the judgments of the authority that give the directions and which authority had given those judgments without hearing the aggrieved party. The only provision under which the Board can issue directions in Rule 233 of the Rules framed under the Act. That rule says that the Board and the Collector may issue written instructions providing for any supplemental matters arising out of these Rules. Under this rule the only instruction that the Board can issue is that relating to administrative matters: otherwise that rule will have to be considered as ultra vires of Section 35 of the Act.

Shri Ram Krishna Dalmia and Ors. v. Justice S.R. Tendolker and Ors. :

In this case Notification No. SRO 2993 dated 11.12.1956 issued by the Govt, of India in exercise of the powers conferred on it by Section 3 of the Commissions of Enquiry Act (LX of 1952) was challenged under Article 226 of the Constitution. The matter related to the constitutionality of the Act and the Notification on the ground that it was violative of Article 14 of the Constitution. The Supreme Court referred to their earlier decision of the Constitutional Bench of seven judges in Budhan Choudhry v. State of Bihar. . wherein it was observed that while Article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order however, to pass the test of permissible classification, two conditions must be fulfilled namely (1) that the classification must be founded on an intelligible differential which distinguishes persons or things that are grouped together, from others left out of the group, and (2) that the differential must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different basis namely geographical or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration.

The Supreme Court had enunciated the principles which had to be borne in mind by the Court when it is called upon to adjudge the constitutionality of any particular law attacked as discriminatory and violative of the equal protection of the laws. Among other principles, it had been established that it must be presumed that the laws are directed to problems made manifest by experience.

In these proceedings, we are not concerned with the constitutionality of the provisions of the law.

State of Andhra Pradesh and Anr v. Nalla Raja Reddy and Ors. :--

The matter related to the assessment of land revenue under the provisions of the Andhra Pradesh Land Revenue (Additional Assessment) and Cess Revision Act 1962 (Act 22 of 1962), as amended by the Andhra Pradesh Land Revenue (Additional Assessment) and Cess Revision (Amendment) Act 1962 (Act 23 of 1962). The constitutional validity of the different provisions of the Act had been challenged. The Supreme Court on the study of the material placed before them came to a conclusion that the classification adopted in the Amendment Act had no reasonable relation to the objects sought to be achieved namely imposition of fair assessments and rationalisation of the revenue assessment structure. The Supreme Court observed that an arbitrary method had been introduced displacing the earlier equitable and reasonable method adopted in the revenue administration of the State of Andhra Pradesh. The provisions prescribing the machinery for assessment were also found to be un-reasonable and it was observed that in fact, the taxing statute did not provide any machinery of assessment. At page 1469, the Hon'ble Supreme Court observed as under:--

(page 1469--The instant case, as we have pointed. But in the earlier, the whole scheme of ryotwari settlement was given up so far as the minimum rate was concerned and a flat minimum rate was fixed in the case of dry lands without any reference to the quality or fertility of the soil and in the case of wet lands a minimum wet rate was fixed and it was sought to be justified by correlating it to the ayacut. Further, the whole imposition of assessment was left to the arbitrary discretion of the officers not named in the Act without giving any remedy to the assessees for questioning the correctness of any the important stages in the matter of assessment, such as ayacut. taram. rate or classification or even in regard to the calculation of the figures. Not only the scheme of classification, as pointed out by us earlier, has no reasonable relation to the objects sought to be achieved, viz. fixation and rationalisation of rates but the arbitrary power of assessment conferred under the Act enables the appropriate officers to make unreasonable discrimination between different persons and lands. The Act, therefore, clearly offends Article 14 of the Constitution.

The facts of the case and the observations of the Hon'ble Supreme Court had no relevancy to the controversy before us.

Northern India Caterers Pvt. Ltd. and Anr. v. State of Punjab and Anr. :

It was a case of the validity of the Punjab Public Premises and Land (Eviction and Rent Recovery) Act XXXI of 1959. The appellants had contended that the Act discriminated between the occupants of public premises and those of private property, and also discriminated between the former inter se and therefore, infring the right of the petitioners of equality before law and equal protection under Article 14 of the Constitution. Certain powers have been bestowed on the Estate Officer and Collector Capital Project Chandigarh, under Section 5 of the Act. The Supreme Court observed that Section 5 conferred discretion to the Collector Capital Project and there were no guiding principles or policy under which the said Collector had to decide the matter. In para 11 the Hon'ble Supreme Court observed as under:--

(11) It is well settled that if a law were to provide for differential treatment for amongst persons similarly situated, it violates the equality clause of Article 14. In the State of West Bengal v. Anware Section 5 of the W.B. Special

Courts Act, 1950 was challenged as in fringing Article 14. The majority judgment held that the procedure laid down by the court for trial by the Special Courts varied substantially from that laid down for the trial of offences generally under the Code of Criminal Procedure and that the Act did not classify or lay down any basis for classification of cases which may be directed to be tried by the Special Courts but left it to the uncontrolled discretion of the State Government to direct cases which it liked to be tried by the Special Courts. The language of Section 5(1) vested the State with unrestricted discretion to direct any case or class of cases to be tried by the Special Courts, not a discretion to refer cases where it is of opinion that a speedier trial is necessary. The majority held that a rule of procedure laid down by law comes as much within the purview of Article 14 as rules of substantive law and that it was necessary that all litigants who are similarly situated are able to avail themselves of the same procedural rights for relief and for defence with like protection and without discrimination. If it is established that the person complaining has been discriminated against as a result of legislation and denied equal privileges with others occupying the same position it would be enough to make such a law violative of Article 14. In Surqj Mall Mohta and Co. v. A.V. Visvanatha Sastri , the challenge was to Section

5(4) of the Taxation and Income (Investigation Commission) Act, 1947. The contention was that Section 5(4) gave arbitrary power to the Commission to pick and choose the evaders of income-tax as it liked and therefore the sub-section was highly discriminatory in character. This Court held that Sub-section (4) of Section 5 dealt with the same class of persons who fell within the ambit of Section 34 the Income-tax Act, 1922, that both Section 34 of the Income-tax Act and Section 5(4) of the Investigation Act dealt with persons who had similar characterisitcs and similar properties, the common characteristics being that they were persons who had not truly disclosed their income and had evaded payment of taxation of income, that the procedure prescribed by the. Investigation Act was substantially more prejudicial and more drastic to the assessee than the one under the Income-tax Act and that, therefore, Section 5(4) in so far as it affected persons proceeded against under that sub-section was a piece of discriminatory legislation and offended Article 14. It appears that after that decision, Parliament amended Section 34 of the Income-tax Act providing for the cases of those very persons who originally fell within the ambit of Section 5(1) of the Investigation Act to be dealt with under the amended Section 34 and under the procedure of the Income-tax Act. As a result of the amendment both categories of persons, viz., those who came within the ambit of Section 5(1) as well as those who came within the ambit of Section 34 of the Income-tax Act now formed one class. That being the effect of the amendment, it was urged in Shree Meenakshi Mills Ltd., Mdurai v. A. V. Visvanatha Sastri , that

assuming that Section 5(1) of the Investigation Act was based on a rational classification that classification had, because of the amendment of Section 34 become void, as the classfication which saved it from the mischief of Article 14 had become ineffective, its distinctive characteristics having disappeared, and that the persons falling within the class defined in Section 5(1) now be longed to the same class as was dealt with by Section 34 as amended. This Court accepted the contention and held that as a result of the said amendment Section 34 as amended operated on the same field as Section 5(1) of the Investigation Act, assuming that the latter was based on a rational classification, and that, therefore, it became void and unenforceable as being discriminatory in character/ Similartly, in Banarsi Das v. Cane Cmmissioner, Uttar Pradesh. AIR 1963 1417, Rule 23 of the U.P. Sugar Factories Rules. 1938 was impeached on the ground that it provided two different procedures either of which could be followed by the Cane Commissioner. Raghubar Dayal, J. who gave a dissenting opinion was of the view that the rule was discriminatory and should, therefore, be struck down as contravening Article 14. Hidayatullah, J. who spoke for the majority agreed with him on principle that if--

it could be said that the rule as framed, allows the Cane Commissioner to discriminate between one party and another then the rule must offend. Article 14.

He, however, construed the rule to mean that the parties, instead of leaving the dispute to the decision of the Commissioner, could go to arbitration with his permission. On this construction, he held that where there are two procedures, one for every one and the other, if the disputants voluntarily agree to follow it, there would be no discrimination because discrimination can only be found to exist if the election is with someone else who can exercise his will arbitrarily. The principle which emerges from these decisions is that discrimination would result if there are two available procedures one more drastic or prejudicial to the party concerned than the other and which can be applied at the arbitrary will of the authority.

Before us, there is no challenge to the constitutionality of the provisions. There is no question also of any differential treatment to the persons similarly placed. Every case under Section 11A of the Act has to be taken up for initiating proceedings and has to be decided on the basis of its own facts and circumstances. The Collector of Central Excise is a senior officer. The powers had been bestowed on him with this understanding.

The Honble Supreme Court had stated in Mata Jog Dobey v. H.C. Bhare . refer para 16 of Ram Krishna Dalima and Ors. {supra) that "a discretionary power is not necessarily a discriminatory power and that abuse of power is not to be easily assumed where the discretion is vested in the Govt, and not in a minor official.

Thus, challenge to the power of the Collector of Central Excise under Section 11A read with Rule 6, on the ground that these are no guidelines in Section 11A, is not sustainable.

34. On careful consideration of the matter in all relevant aspects, we are of the view that the decision in the case of Meghmani Dyes and Intermediates, Barodavs. Collector of Central Excise, Baroda 1991 (17) ETR 434 did not lay down the correct law. and that even before 27.12.1985. the Collector of Central Excise was competent to adjudicate the demands under Section 11A of the Act. References are answered accordingly.

35. The appeals be now posted before the respective Benches for hearing.

K. Sankararaman, Member (T) for Himself and on Behalf of U.L. Bhat, J. (President):--

1. While agreeing with the conclusion arrived at by Brother Shri Lajja Ram that a Collector of Central Excise was competent to adjudicate demands under Section 11A of Central Excise Act 1944 before the amendment of that section with effect from 27.12.1985, we would like to make the following observations:

2. The controversy is on the question whether the power conferred on a "Collector" under Rule 6 of Central Excise Rules, 1944 (Rules, for short) to perform the duties or exercise the powers of an officer under the said rules enabled him to perform the functions of Assistant Collector under Section 11A of the Central Excise Act (Act, for short) during the period 17.11.1980 to 26.12.1985, though during the period that section referred to only "Assistant Collector".

3. The rival contentions as this question are that the Collector did not have such a power as pleaded by the appellants on the one hand and that he had such a power by virtue of Rule 6 as argued on behalf of the respondents-Collectors. The main thrust of the arguments advanced in support of the former plea is based on the judgment of the Supreme Court in S. Kannan and Ors. v. Secretary, Karnataka State Road Transport Authority . It was this decision that was followed by the Tribunal in the Meghmani Dyes case 1991 (17) ETR 434 for holding that the Collector could not perform the functions of an Assistant Collector under Section 11A of the Act during the aforesaid period. On the other hand it is contended in reply that the said decision was in the context of the Motor Vehicles Act, 1939. on the question whether the power exercisable by a Regional Transport Authority for issue of temporary permit under Section 62 of that Act could be exercised by the higher authority, namely, State Transport Authority. The conclusions in the negative on the above question, it is contended, cannot apply to the present case under the Central Excise Act in view of the provisions of Rule 6 and the special position that the Central Excise Rules occupy for carrying into effect the purposes of Central Excise Act. It has, therefore, been contended that the power available to the Collector qua Central Excise Rules will be equally available in respect of functions in terms of the provisions of the Central Excise Act.

4. On behalf of the appellant, the contentions raised are that if the adjudication of a notice under Section 11A of the Act which is required to be decided by the Assistant Collector is, instead, decided by the Collector, the appellant would lose one level of appellate remedy. If the case is decided by the Assistant Collector as required in terms of Section 11A of the Act, the first appeal would be to Collector (Appeals) and if that is to be challenged, an appeal to the Tribunal would lie. Thus two appeals would be available before statutory authorities. If, however, the adjudication is done by the Collector, instead of by the Assistant Collector, the appeal will be before the Tribunal. In the process, the assessee loses one stage of appellate remedy and hence the taking over by the Collector of the adjudication power of Assistant Collector would deprive the assessee of his right of having two stages of appeals. Such a course is, it is argued, therefore, not permissible. That the adjudication of notices under Section 1 ] A of the Act was to be done by the Assistant Collector, it was argued, is clear from the Statement of Objects and Reasons relating to the Central Excise and Salt (Amendment) Act, 1985 which inter alia, amended Section 11A of the Act. It was stated therein that the amendment provided that show cause notice in regard to duty of excise short levied or short paid by reason of fraud, collusion of any wilful mis-statement or suppression of facts should be issued and such cases decided by the Collector of Central Excise, instead of the Assistant Collector of Central Excise, "as at present". It was urged that this made it clear that notices in such cases were to be adjudicated by the Assistant Collector till the amendment dated 27.12.85. It is also submitted that if the Collector were also co-adjudicate such cases, which by law were to be adjudicated by the Assistant Collector, such action will be subject to uncertainties due to lack of any guideline as to which cases will be left to the Assistant Collector and which will be taken over by the Collector.

5. On the central question involved in these appeals, namely, whether the power granted to the Collector by Rule 6 of the Rules to perform the duties or exercise the powers assigned to an officer under the Rules will extend to functions under the Act, contentions raised by the two sides differ sharply in the light of the judgment of the Supreme Court in the case of S. Kannan v. Secretary, Karnataka Road Transport Authority, referred to above. There was a difference of opinion among the Members of the Tribunal who heard the Meghamani case on the question, the majority of two Members holding that the Kannan case laid down that the powers conferred upon an officer or authority cannot be exercised by a higher officer or authority. The dissenting member, however, held that the judgment in the Kannan case had been decided taking into account the provisions of the Motor Vehicles Act which were not relevant for the questions to be decided in respect of adjudication of notice under the Central Excise Law. The relevant paragraph of the Supreme Court judgment in the Kannan case is extracted below :

15. It was, however, urged that Section 44(3) contemplates a situation where a State Transport Authority has to perform the duties of Regional Transport Authority and. therefore, the expression 'Regional Transport Authority' in Section 62 would either comprehend State Transport Authority or would not at least exclude the power conferred on the lower authority to be enjoyed by the higher authority. Section 44(3) would not render any help in this behalf because it merely provides that a State Transport Authority can perform the duties of a Regional Transport Authority where there is no such authority or where, if it thinks fit or if so required by a Regional Transport Authority, to perform those duties in respect of any route common to two or more regions. None of these conditions under which a State Transport Authority can perform the functions and discharge the duties of a Regional Transport Authority are satisfied and therefore, it is difficult to accept the submissions that the expression 'Regional Transport Authority' used in Section 62 will comprehend State Transport Authority. It is equally not possible to accept the submission that when a power is conferred on a lower authority that power can always be enjoyed by the authority higher in the hierarchy in relation to the lower authority. There is no express provision in the statute which provides that the State Transport Authority can always and without any fetter enjoy the power of the Regional Transport Authority and in the absence of such provision it is difficult to read merely on the basis of verticle hierarchy wherever the lower authority is mentioned in the statute, the higher authority be included therein. Viewed from this angle, we do not propose to undertake the exercise of ascertaining whether State Transport Authority can be said to be higher Authority in relation to Regional Transport Authority.

6. In Paragraph 14 of the Supreme Court judgment, the relevant portion of which is extracted below the rationale for conferring on the Regional Transport Authority the power to issue temporary permit which the State Transport Authority was held to be not empowered has been spelt out:

Section 62 confers powers on the Regional Transport Avithority to grant temporary permit. A Regional Transport Authority is set up for a region. The jurisdiction of the Regional Transport Authority extends over a region which is usually a small part of the State because for the purpose of the Act State has to be devided into regions. Power to grant temporary permit is conferred on Regional Transport Authority, amongst others to meet a particular temporary need. A Regional Transport Authority having jurisdiction over a comparatively small area may be able to gauge, notice of appreciate a particular temporary need for which a temporary permit can be granted for a period but not exceeding months without following the procedure prescribed in Section 57. The same power can be enjoyed pending the renewal of an already granted permit. By its very nature Section 62 caters to a situation where permits to operate vehicles may be granted for a short period to meet some temporary or emergency requirement or where time is likely to be spent in processing an application for renewal of a permit and in the interregnum the travelling public may not be put to inconvenience on account of non-availability of vehicles with permits (See Madhya Pradesh Stale Road Transport Corporation v. Regional Transport Authority, Raipur). An authority having jurisdiction over a comparatively small area is favourably placed to notice a situation as contemplated by Section 62. Therefore, the power is conferred on Regional Transport. Authority and not the State Transport Authority to grant temporary permit in the circumstances set out in Section 62, because State Transport Authority exercising the power under Section 63(7) will have to have an all-India perspective. Therefore, the statute did not confer such power on State Transport Authority because by its very nature the Regional Transport Authority having jurisdiction over a comparatively smaller area would be better equipped to appreciate and deal with the needs of the travelling public of a temporary character or pending the renewal of a permit. There is intrinsic evidence in the language of Section 62 that it was meant to be used by Regional Transport Authority for dealing with a situation within its small area.

7. These paragraphs have been considered in the view expressed by the third Member of the Tribunal in the Meghmani case. As observed by him. the Supreme Court had taken note of the fact that, for issuing the temporary permit, the Regional Transport Authority was better equipped to appreciate and deal with the needs of the travelling public of a temporary character in the small region assigned to it rather than the State Transport Authority and hence that it is not always that superior authority could enjoy the authority of the lower authority in the hierarchy. Applying the test to the proceedings in Central Excise it was observed by the third Member that it cannot be held that the Assistant Collector had special knowledge or in an way specially placed for purpose of adjudication of any matter relating to short levy as compared to the position of the Collector in that regard.

8. Section 11A of the Act was introduced with effect from 17.11.1980. Prior to its introduction, proceedings for recovery of short levied or short paid duty were regulated under Rule 10 of the Rules. During that period by virtue of Rule 6, a Collector was empowered to take over the function of an Assistant Collector. When Rule 10 was rescinded and Section 11A introduced to deal with such cases, there was no indication that the Parliament intended to divest the Collector of the powers that were available to him to act under Rule 10 through Rule 6. The circumstances existing in the context of the Motor Vehicles Act considered by the Supreme Court do not obtain with reference to Section 11A of Central Excise Act and the Collector is not disabled from performing the functions of the Assistant Collector unlike the State Transport Authority vis-a-vis Regional Transport Authority for the purpose of issue of temporary permit under the Motor Vehicles Act.

9. The exercise of powers under Section 11A of the Act by the Collector of recovery of short levied or short paid duty is consistent with other action to be taken by the Collector on allied matters arising from such short payment. In appropriate cases where there is such short payment on account of fraud and intention to evade payment of duty, the Rules provide for confiscation of the offending goods and plant and machinery and imposition of penalty on the manufacturer and other persons concerned. There are guidelines in this regard and the powers of the Assistant Collector are limited by value. In a given case, if the value of goods involved or the amount of penalty imposable exceeds the powers of the Assistant Collector and fall under the jurisdiction of the Collector, it is necessary that all the aspects involved, namely, demand of duty, confiscation of goods and plant and machinery and imposition of penalty are dealt with and decided by the Collector. Otherwise, there will be multiple adjudications, one by Assistant Collector under Section 11A of the Act for demand of duty and the other by the Collector for confiscation and imposition of penalty with possibility of conflict of findings. Another anomalous possibility has been pointed out. in the dissenting order of the third Member in the Meghmani Dyes cases. The question of approval of classification lists and price lists under Rules 173B and 173C respectively is to be decided by the Assistant Collector. Since the Collector could also perform such functions in view of Rule 6, the Collector could also decide such matters. If, in such cases, any recovery action under Section 11A of the Act is to be taken, it will be anomalous if that is to be taken by the Assistant Collector as the classification list or price list, as the case may be, may have been approved by the Collector himself. The exercise of powers under Section 11A of the Act by the Collector in appropriate cases will avoid such anomalous situations that will be without prejudice to the exercise of the function under Section 11A of the Act by the Assistant Collector in routine cases or in cases within his value jurisdiction. Hence the adjudication of notices under Section 11A of the Act by the Collector in appropriate cases by drawing upon the empowering provisions of Rule 6 will be in order and it cannot be held that Collector lacked jurisdiction. Such a position is in accordance with the judgment of the High Court of Madhya Pradesh in Gwalior Rayon Manufacturing (Urg) Co. v. Union of India, . In paragraph 14 of the judgment (page 850 of the report) it was observed by the Court as follows:

'It is settled that a Rule framed under the Act is a part thereof and has to be so construed for all purposes. In Slate of U.P. v. Bahuram , the Supreme Court, on the basis of

Maxwell on Interpretation of Statutes. 10th Edition, pp. 50-51, held as follows:--

Rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act, and are to be judicially noticed for all purposes of construction or obligation".

It is, therefore, clear that only for the purpose of construction but also for the purpose of obligation thereunder, rules made under a statute must be treated 'as if they were in the Act' itself.

15. It follows that Rule 10 of the Excise Rules, which was in force till 17.11.1980 formed a part of the Central Excises and Salt Act, 1944, under which it was framed and when it ceased to exist from that date, Section 11A contained in the Act itself, which is similar, was brought into force simultaneously maintaining the continuity. The result is that the relevant provision which was in force till 17.11.1980 in the shape of a rule forming part of the Act continued without any break from 17.11.1980 in the shape of a provision in the main Act itself. This is, therefore, a case where there has neither been any repeal nor omission of an enactment but continuance of the same provision throughout as a part of the Act. the only difference being that prior to 17.11.80 it was in one part of the Act and subsequent to that date it is in another part of the same Act. Where the same provision continues in the same Act, the difference being only in the part of the Act where it is contained, it is difficult to appreciate how the principles relating to repeal or omission an enactment can apply or a saving clause is needed to continue the proceedings initiated prior to such a change being brought about by shifting the provision from one part of the Act to another. It is merely a case of shifting the provision from one part of the Act to another without any break in its continuity.'

10. That the powers conferred on Collector under Rule 6 could extend to functions under the Act also is consistent with the judgment of the High Courts of Karnataka and of Bombay on the question whether the definition of Collector as including an Additional Collector as per Rule 2(ii) of the Rules would extend to discharge of functions of Collector under Section 11A of the Act, after its amendment with effect from 27.12.1985. The decisions are in Engineering Systems Pvt. Ltd. v. Union of India and Twin City Glass Pvt. Ltd. v. Union of India .

It was held in these cases that the Additional Collector could perform the fuinctions of the Collector under Section 11A of the Act by virtue of the definition of term "Collector" in Rule 2(ii) of the Rules which included "Additional Collector". Consistent with the decisions of the High Courts is the conclusion that Collector had the power to exercise the function of the Assistant Collector under Section 11A of the Act.

11. It is argued on behalf of the appellant that the adjudication of notices under Section 11A of the Act by the Collector would deprive the aggrieved persons of one level of appeal namely, appeal to the Collector (Appeals) as the appeal in such cases will lie to the Tribunal. Such a position was there before 17.11.80 when notices were issuable under Rule 10. The loss of one stage of appeal before the Collector (Appeals) is to be viewed in the context of the adjudication itself being performed by a Collector equal in rank to the Collector (Appeals). Such a grievance does not however, invalidate the exercise of powers under Section 11A of the Act by the Collector for the first stage adjudication.

12. For the foregoing reasons we agree with the conclusion reached by Brother Lajja Ram that the decision of the Tribunal in the case of Meghmani Dyes and Intermediates, Baroda v. Collector of Central Excise, Baroda did not lay down the correct law and that even before 27.12.1985 a Collector of Central Excise could adjudicate the demands under Section 11A of the Act.