R. Jayaraman, Member (T)
1. All the aforesaid appeals are filed by the Collector of Central Excise, Bombay II, against a single order of the Collector of Central Excise (Appeals) Bombay, bearing No. SKM-67 to 72/B-II-344 to 349/88 (File No. V-2 (68) 2199 to 2204/88) dated 13-1-1989.
2. Brief fact for the purpose of disposal of these appeals can be stated as below.
3. The respondents herein paid duty only on the job work charges and when the RT-12 returns were filed for the relevant period, the Supdt. made endorsements on the RT-12 returns pointing out short levy on this ground and directed the respondents to make the payment. The respondents went in appeal against the RT-12 assessment before the Collector (Appeals), who, in the aforesaid order, held that the lower authority has not followed the procedure under Section 11A of the Central Excises and Salt Act, 1944 and hence held that the demands raised by the Supdt. on RT-12 returns are not sustainable in law. He, therefore, set aside the demands and allowed the appeals of the respondents herein. The department has come up in appeals against the order of the Collector (Appeals).
4. Shri K.M. Mondal, the learned SDR for the Department, stated that short levies were pointed out with regard to the assessment returns for the months of July 78, October 78, November 78, December 78, February 79 and March 79. In all these cases baring July 78, short levy has been pointed out and the assessment completed and they were also received by the assessee within the time limit. The Collector (Appeals) has not appreciated the provision of Rule 1731, wherein the Assessing Officer is required to point out the short levy on the RT-12 returns and which should be paid by debit in the PLA within a period of ten days. He also stated that it is a settled law that assessment is a quasi-judicial function and hence the appellants have also taken the assessment on RT-12 returns by way of appeal before the Collector (Appeals). He also contended that in the case of (the judgment of the Bombay High Court) Swan Mill Ltd. Bombay and Anr. v. Union of India and Ors. reported in 1989 (25) ECR18 (Bombay), the High Court has held that where assessment under Rule 1731 of the Central Excise Rules has been completed, demand notice under Section 11A of the Central Excises and Salt Act is unnecessary and irrelevant and not called for. They have also taken into consideration the judgment of the Supreme Court in Collector of Central Excise v. Kosan Metal Products Ltd. reported in 1988 (38) ELT 573 (SC) and held that notwithstanding the aforesaid judgment of the Supreme Court, demand made on RT-12 returns in terms of Rule 1731 is perfectly valid and no notice under Section 11A of the Act is called for. He also referred to the decision of the South Regional Bench in the case of Collector of Central Excise, Bangalore v. Karnataka Scooters Ltd. reported in 1983 ECR 745D (Cegat Madras), wherein the South Regional Bench held that the amount indicated by the Supdt. on the RT-12 return is payable and should have been debited to the personal Ledger Account within ten days of the receipt of the RT-12 by the assessee. He also contended that since the assessment or RT-12 is a quasi judicial function and is an adjudication order, there is no need for another parallel proceedings by issue of show cause notice. He therefore pleaded that the order of the Collector (Appeals) is required to be set aside and the matters be remanded for consideration of the respondents appeals on merits.
5. After hearing Shri K.M. Mondal, the learned SDR, we also referred to him the recent decision of the CEGAT Special Bench 'D' in Vipul Dyes Chemicals Pvt. Ltd. v. Collector of Central Excise reported in 1989 (44) ELT 724 (Tribunal), wherein the 'C' Bench, after considering the various judicial pronouncements, including the judgments of the Supreme Court have held that demand raised on RT-12 returns are not valid and endorsements on RT-12 cannot be valid for the purpose of limitation under Section 11A of the Act. That Bench also held that the endorsement or demand made on RT-12 returns would not save limitation. Shri K.M. Mondal, the learned SDR, however, contended that a different view has been taken by the South Regional Bench, which has been cited by him and since this decision is of two Members and the decision of the South Regional Bench has not been taken into account, this should not be binding on this Bench.
6. After hearing Shri K.M. Mondal, the learned SDR, we did not call on the other side to argue.
7. The admitted fact that there are no notices issued under Section 11A of the Central Excises and Salt Act and demands are said to be enforced on the basis of endorsement made on RT-12 returns. The argument of Shri Mondal can be broadly categorised as below. Bombay High Court in Swan Mills case has distinguished the verdict of the Supreme Court decision of Kosan Metal Product Ltd. The Bombay High Court has held that the assessment made under Rule 1731 is valid and demands arising out of such assessments are enforceable and no proceedings under Section 11A of the Act are called for. This judgment of the Bombay High Court does not appear to lay down case law, since they themselves observe in para 13 as below. "The above views are our prima facie views in the matter and expressed only for the disposal of the present appeals which are against the interlocutory order." Hence when the decision of the Supreme Court directly on the point is available, that is binding on us and has to be respected. In the case decided by the South Regional Bench, it is observed that the decision of the Supreme Court was not available before them and since the decision of the South Regional Bench was prior to the decision of the Supreme Court. In view of this position, we find that there are no compelling reasons to disagree with the findings of the Special Bench 'C' in the case of Vipul Dyes Chemicals Pvt. Ltd. (supra), the relevant observation of the Tribunal are reproduced as below:
"Shri Gujral cited before us a number of authorities in support of his proposition that demands arising as a consequence of finalisation of Assessment Returns (RT-12) should be preceded by a proper show cause notice and adjudication proceedings. It is not necessary to refer to all of them. In the case of Union of India and Ors. v. Madhu Milan Syntex Private Ltd. - 1988 (35) ELT 349 (SC), the Supreme Court has clearly laid down that before any demand for duty is made on any person chargeable in respect of non levy or short levy or under payment of duty, a notice requiring him to show cause why he should not pay the amounts specified in the notice, must be served on him. This was with reference to the provisions of Section 11A of the Central Excises & Salt Act which are in pan materia with the provisions of Rule 10. In the case before the Supreme Court, the Counsel for the Union of India contended that, inter alia, though no prior show cause was given and the petitioners were not given an opportunity to show cause was given after the demand was made and the demand confirmed after hearing and hence it must be regarded as valid. The Counsel submitted that post facto show cause notice should be regarded as adequate in law. This contention was negatived by the Court which held that a notice and an opportunity of making representation against the notice and of being heard were essential before a demand could be created against an assessee. This was emphasised by the Supreme Court in its judgment in the case of Gokak Patel Volkart Ltd. v. Collector of Central Excise, Belgaum -1987 (28) ELT 53 (SC). The Supreme Court judgment in Collector of Central Excise, Baroda v. Kosan Metal Products Ltd. -1988 (38) ELT 573 (SC) squarely applied to the facts of the present case. The Court held that when any duty of excise has not been levied or paid or has been short levied or short paid, a demand for recovery of such amount must be made under Section 11A of the Central Excises & Salt Act and not by an entry on the RT12 Returns which cannot be taken to be a proper show cause notice. The Court referred, with approval, to the judgment of the Kerala High Court in Good Shepherd Rubber Company, Palghat v. Inspector of Central Excise, Palghat and Ors. - 1978 (2) ELT (J-66). This judgment, which was of a Learned Single Judge, was confirmed by a Division Bench of the High Court and this judgment is reported in 1978 (2) ELT (J-471). The view taken was that pointing out short levy on Assessment Returns with a direction to pay the amount would not be sufficient compliance with the requirements to Rule 10 which stipulated the issue of a proper show cause notice followed by proper adjudication proceedings before any short levied duty amount could be demanded and recovered.
The issue has come up before the Tribunal also on many occasions. In the case of Collector of Central Excise, Calcutta v. Indian Iron & Steel Co. -1988 (19) ECR 465, the question arose as to whether if demands were raised on RT-12 returns and show cause notice was issued subsequently beyond the period of limitation, the demands would be valid. The Tribunal held that if in such circumstance the show cause notice was issued after the period of limitation provided in Section 11A of the Central Excises and Salt Act, is would be barred by limitation and the fact that endorsements and demands were made on RT-12 Returns would not save limitation."
8. From the above, we are convinced that it has become a settled law that short endorsement made on RT-12 Return cannot save limitation under Section 11A, unless they are followed up by proper show cause notice issued under Section 11A.
9. Shri K.M. Mondal contended that the endorsement on RT-12 returns are giving reasons and they could be construed as show cause notices mentioning of Section 11A cannot vitiate the notice.
We have carefully gone through the endorsements. We find that though reasons for raising the demand are given, it cannot be construed as a notice, because no opportunity for show cause is being given and it is a direction for payment and is in the nature of a direct demand.
10. Following the ratio of the decision of the Supreme Court and the decision of the CEGAT Special Bench 'C' in the case of Vipul Dyes Chemicals Ltd., we hold that the appeals filed by the department are not sustainable and accordingly we dismiss the same.