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1991 DIGILAW 846 (MAD)

Carbonink Products v. Government of India

1991-11-12

A.S.ANAND, KANAKARAJ

body1991
Judgment :- KANAKARAJ, J The appellant is a small scale industry, manufacturing carbon sheets. They purchase "Copying Tissue paper", paying Central Excise duty at 30% under Item 17(2) of the Central Excise Tariff. They manufacture carbon sheets by coating the tissue paper with a thermosetting ink paste, non-drying oils, pigments and dyes, by means of a suitable coating roller and equalising rod and passing through chilled rolls. According to the appellant, the carbon paper thus manufactured by them cannot be brought within the definition of "paper" and will not fall under Tariff Item 17(2). But the Superintendent of Central Excise, Salem-7, issued a notice on 13-11-1979 calling upon the appellant to take out a licence in Form XIV for the clearance of carbon paper. W.P. 5812 of 1979 filed by the appellant, at that stage, was dismissed as premature on 18-9-1980. The 2nd respondent passed orders on 6-6-1981, holding that the carbon paper will fall under Tariff Item 17(2), and not under stationery articles, falling under residuary Item 68 of the Central Excise Tariff. The show cause notice preceding the said order had referred to clearance of goods without payment of duty to the tune of Rs. 2, 25, 538.70 and a demand was made under Rule 10 of the Central Excise Rules, 1944. In the final order of the 2nd respondent, dated 6-6-1981, this demand was confirmed. 2.The appellant, thereupon, filed W.P. 5419 of 1981 seeking to prohibit the 2nd respondent from demanding the said excise duty as per the order dated 6-6-1981. The one and only ground raised in support of the said Writ Petition was that the carbon paper will not fall under Tariff Item 17(2). In answer to the Writ Petition, the respondents rightly pleaded that after the year 1976, Tariff Item 17 had been made more comprehensive and the demand was in order. It was also brought to the notice of the court that the appellant took out licence under Tariff Item 17(2) on 26-6-1980 and started paying duty under protest. The demand of Rs. 2, 25, 538.70 was only in respect of the period from 1-4-1979 to 26-6-1980 when the appellant cleared the goods by wrongly availing of the exemption under Notification 89 of 1979. The demand of Rs. 2, 25, 538.70 was only in respect of the period from 1-4-1979 to 26-6-1980 when the appellant cleared the goods by wrongly availing of the exemption under Notification 89 of 1979. 3.The learned single Judge who heard the Writ Petition decided the only issue argued before him, namely, whether the carbon paper will properly fall under Tariff Item 17(2) and relying on various decisions on the point held in favour of the Revenue. Hence, this present Writ Appeal. In the grounds of appeal, apart from the merits of the case, a point relating to limitation under Sec. 11A of the Central Excise Act, 1944 is raised and it is urged that the demand is barred by limitation. It is also pointed out that Rule 10 of the Central Excise Rules was not in existence at the time of the show cause notice, dated 26-11-1980 and hence the entire proceedings are without jurisdiction. 4.InCollector of Central Excisev. Krishna Carbon Paper Co.,1988 AIR(SC) 2223, 1988 (S3) SCR 12, 1989 (1) SCC 150 , 1988 (4) JT 762 , 1988 (2) SCALE 880 , 1989 (20) ECR 273, 1989 (72) STC 280, 1988 (2) Scale 880 , 1988 (37) ELT 480 , 1989 (19) ECC 32, 1989 UPTC 188, 1989 SCC(Tax) 42, the Supreme Court noticed the language of the entry during 1975, 1976 and 1982 and held that after the amendment in 1976, carbon paper was covered by item 17(2) of Central Excise Tariff. Conceding this position, learned counsel for the appellant urges only the point about the incorrect reference to Rule 10 of the Central Excise Rules and that even assuming Sec. 11A of the Act was alone meant to be applies, the claim is barred by limitation as provided in Sec. 11A itself. Though this point was not argued before, the learned single Judge, we are inclined to permit the appellant to argue the point because it goes to the root of the matter and if upheld the demand of the revenue will be time-barred and consequently without jurisdiction. 5.Sec. 11A of the Act was introduced by Act 25 of 1978 and came into force with effect from 17-11-1980. On and from that date, Rule 10 of the Central Excise Rules went out of the Statute Book. 5.Sec. 11A of the Act was introduced by Act 25 of 1978 and came into force with effect from 17-11-1980. On and from that date, Rule 10 of the Central Excise Rules went out of the Statute Book. Therefore, the reference to Rule 10 of the Rules in the show cause notice, dated 26-11-1980 is clearly a mistake. But in the final order dated 6-6-1981, the 2nd respondent has referred to Sec. 11A of the Act as having replaced Rule 10 of the Rules. Therefore, the mere quoting of a wrong provision of law in the show cause notice will not vitiate or invalidate the proceedings.6.The more substantial point is one of limitation prescribed in Sec. 11 A of the Act. Sec. 11A(1) is as follows :- 11A.(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.' Relevant date is defined in Sec. HA(3)(ii) of the Act. We have already noticed that the demand relates to the non-levy of duty for the period from 1-4-1979 to 26-6-1980. The show cause notice being dated 26-11-1980, the demand for the period prior to 26-5-1980 seems to be barred by limitation unless the revenue can invoke the Proviso to Sec. 11A(1) of the Act. We have already noticed that the demand relates to the non-levy of duty for the period from 1-4-1979 to 26-6-1980. The show cause notice being dated 26-11-1980, the demand for the period prior to 26-5-1980 seems to be barred by limitation unless the revenue can invoke the Proviso to Sec. 11A(1) of the Act. These aspects of the case have not been gone into by the 2nd respondent because the point was not raised. We therefore feel that with a view to safeguard the interest of the assessee and the revenue, the proper course would be to remand the matter back to the 2nd respondent. As rightly contended by the counsel for the revenue, the appellant should have filed an appeal against the order dated 6-6-1981. We do not, however, propose to deny relief on the ground of alternative remedy because the matter has been pending in the court since 1981 and after 10 long years it would not be proper to ask the appellant to approach the appellate authority. In this connection, we adopt the reasoning of one of us (Kanakaraj, J) inMadura Coats Ltd.v. Assistant Collector of Central Excise 1990 (48) ELT 321 (Madras)]. 7.The order, dated 6-6-1981 is set aside. The appellant will be given an opportunity to file a fresh explanation to the show cause notice, dated 26-11-1980. The 2nd respondent will consider the plea of limitation in the light of Sec. 11A(1) and the Proviso and decide whether the demand of excise duty for the period from 1-4-1979 to 26-6-1980 or for any portion of the period is within the prescribed time and pass a fresh order. The Writ Appeal is allowed. The order of the learned single Judge is set aside. Instead of the prayer in the Writ Petition, the impugned order dated 6-6-1981 is set aside and the matter remitted back to the 2nd respondent for passing a fresh order in the light of the directions given supra. There will be no order as to costs.