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2017 DIGILAW 603 (JK)

Jammu Casting Pvt. Ltd. v. Union of India

2017-08-10

ALOK ARADHE, SANJEEV KUMAR

body2017
1. In this Intra Court Appeal, the appellant has assailed the validity of order dated 08.10.2010 passed by the learned Single Judge, by which the writ petition preferred by the appellant has been dismissed and the plea of appellant that Rule 96ZO (3) of the Central Excise Rules, 1944 (hereinafter referred to as the Rules of 1944) and Section 3 (A) of the Central Excise Act 1944 be held ultra vires the Constitution, was rejected. In order to appreciate the grievance of the appellant, few facts need mention, which are stated infra. 2. The appellant is engaged in the manufacture of M.S. Ingots/billets falling under the sub headings 7206.90 and 7207.90 of the schedule of Central Excise Tariff Act, 1985 and are chargeable to duty in terms of section 3 of the Central Excise Act, 1944 read with notification No. 30/97-CE(NT) dated 01.08.1997. The appellant by communication dated 04.08.1997 opted to pay duty in terms of Rule 96ZO(3) of Central Excise Rule, 1944. The Commissioner, Central Excise, Chandigarh-II vide order dated 11.11.1997 initially determined the annual capacity production of the unit as 9600 MT under Rule 3 (4) of Induction Furnace Annual Capacity Determination Rules 1997 (hereinafter to be referred as the Rules of 1997). The appellant vide communication dated 30.06.1999 intimated to the Commissioner, Central Excise regarding erection of a new electric furnace of 4 MT. 3. The appellant started commercial production on new furnace of 4 MT on 01.10.1999. Thereafter, by communication dated 20.09.1999, the appellant intimated regarding commissioning of new furnace of 4 MT in place of 3 MT and further stated that they shall be using one of the old crucible, i.e., 3 MT as stand by. After the commissioning of new 4 MT furnace, the unit started commercial production of non-allay steel ingots through 4 MT furnace with effect from 01.10.1999 but one of the crucibles already existing furnace of 3 MT capacity was got sealed. The other crucible of 3 MT furnace was left unsealed to serve as stand by to the new 4 MT furnace. The appellant vide communication dated 15.12.1999 sought permission to unseal the old 3 MT furnace, pursuant to which the aforesaid furnace was unsealed on 21.12.1999 while 4 MT furnace was simultaneously sealed. On 01.03.2000 4 MT furnace was unsealed and 3 MT furnace was sealed simultaneously. 4. The appellant vide communication dated 15.12.1999 sought permission to unseal the old 3 MT furnace, pursuant to which the aforesaid furnace was unsealed on 21.12.1999 while 4 MT furnace was simultaneously sealed. On 01.03.2000 4 MT furnace was unsealed and 3 MT furnace was sealed simultaneously. 4. It is the case of the respondents that annual capacity of production of the factory producing ingots or non-alloy steel is to be determined in accordance with the Rules of 1997. Accordingly, the Superintendent of Central Excise vide communication dated 21.02.2000 requested the appellant to pay and discharge the duty liability from 20.09.1999 on 7 MT furnaces installed capacity. Thereafter, on 04.10.2001 a show cause notice was issued to the appellant. The appellant filed reply to the show cause notice on 11.12.2001. The Commissioner, Central Excise vide order dated 26.02.2002 adjudicated the annual capacity of production of the unit as 22400 MT with effect from 01.10.1999 and further directed the appellant to discharge the duty liability for the period from 01.10.1999 to 31.03.2000 in terms of Rule 96ZO (3) of the Rules of 1944. Being aggrieved, the assessee filed an appeal before the Custom Excise and Gold (Control) Appellate Tribunal (herein after referred to as the Tribunal), which vide order dated 01.01.2003 upheld the order passed by the Commissioner Central Excise. 5. The appellant thereupon assailed the validity of the aforesaid order in OWP No. 72/2003, by which quashment of orders dated 26.02.2002 and 01.01.2003 passed by the Commissioner Central Excise and the Tribunal respectively was sought. The appellant also sought relief that the Rule, 96ZO (3) of the Rules as well as section 3A of the Act be declared ultra vires the Constitution. The learned Single Judge vide order dated 08.10.2010 inter alia held that in terms of Rule 4 of Rules of 1997, the capacity of production for any part of the year or for any change in the total furnace capacity has to be calculated on pro-rata basis of annual production capacity and the annual production cannot be determined on the basis of the furnaces since both of them were not being run simultaneously. It was further held that issue regarding sealing or unsealing of furnaces is only for the purposes of claiming abatement from duty and not for the purposes of determining the annual capacity of production. It was further held that issue regarding sealing or unsealing of furnaces is only for the purposes of claiming abatement from duty and not for the purposes of determining the annual capacity of production. The learned Single Judge by placing reliance on the decision of the Supreme Court in the case of Commissioner of Central Excise and Customs vs. Venus Castings (P), ltd. (2000) 4 SCC 206 as well as decision of the Supreme Court in the case of Supreme Steels and General Mills and others (2002) 9 SCC 645 upheld the validity of section 3A of the Act and Rule, 96ZO (3) of the Rules and accordingly, the writ petition was dismissed. In the aforesaid factual background, this Intra Court Appeal has been filed. 6. Learned senior counsel for the appellant submitted that section 3A of the Act was incorporated in the Statute Book on 14.5.1997. However, the aforesaid provision was omitted on 11.05.2001 and was again incorporated in the Statute Book by way of amendment with effect from 10.05.2008. It is pointed out that Rule, 96ZO was incorporated in the Rules with effect from 25.07.1997. However, the same was omitted with effect from 01.03.2001. It is submitted that show cause notice was issued to the appellant on 04.10.2001 and the determination of the liability was made on 04.10.2001 after section 3A and Rule, 96ZO were omitted from the Statute Book. Therefore, no proceeding for recovery of the amount could have been initiated against the appellant after omission of the charging provision and proceeding will not be saved by section 38A, which was incorporated by Finance Act, 2001. It is also submitted that for a period from 2001 till 2008, the charging provision, namely, section 3A of the Act was not in the existence, therefore, the decision rendered by the Supreme Court in the case of Fibre Boards (P) ltd, Banglore vs. Commissioner of Income Tax, Banglore, (2015) 10 SCC 333 does not apply to the fact situation of the case. It is also urged that load factor capacity is relevant for consideration for determining the furnace capacity. It is also submitted that the respondents had sanctioned electric load of 2 MVA, therefore, it was not possible to run two furnaces simultaneously. It is also urged that load factor capacity is relevant for consideration for determining the furnace capacity. It is also submitted that the respondents had sanctioned electric load of 2 MVA, therefore, it was not possible to run two furnaces simultaneously. It is also urged that every furnace has two crucibles and from the communication as well as punchnama prepared by the officers of the respondents, it is evident that one furnace was sealed by the officer of the respondents. It is submitted that the case of the appellant as well as Yumna Alloys are similar and liability in case of Yumna Alloys is decided by taking into account annual capacity of furnace only, therefore, the appellant is also entitled to parity and the capacity of the appellant ought to have been determined at 4 MT. Lastly, it is urged that validity of Rule, 96ZP has been referred to for consideration to the larger Bench of the Supreme Court. However, the issue with regard to validity of Rule, 96ZO (3) as well as section 3A of the Act was not raised by the learned senior counsel. 7. On the other hand, learned counsel for the Revenue has submitted that once the appellant opts payment under Rule, 96ZO (3), he cannot avail section 3 (4) of the Act. It is also submitted that the issue of effect of omission of provision has already been settled by the Supreme Court as well as by this Court and is no longer res integra. It is further submitted that while omitting section 3A of the Act, section 38A was incorporated by amending the Act, which is pari materia with section 6 of the General Clauses Act and the case of the appellant is covered under Clauses (b), (c) & (e) of section 38 A of the Act. It is further submitted that the plea that after omission of the provisions, the proceeding cannot be initiated, cannot be permitted to be raised in this Intra Court Appeal for the first time as the same was not raised before the learned Single Judge. In support of his submissions, learned counsel for the respondents has referred to the decision of the Supreme Court in the case of Commissioner of Customs, Mumbai vs. Toyo Engineering India Ltd. 2006 (7) SCC 592 . 8. It is submitted that the decision in the case of Rayala Corporation Private ltd. Vs. In support of his submissions, learned counsel for the respondents has referred to the decision of the Supreme Court in the case of Commissioner of Customs, Mumbai vs. Toyo Engineering India Ltd. 2006 (7) SCC 592 . 8. It is submitted that the decision in the case of Rayala Corporation Private ltd. Vs. Director of Enforcement, New Delhi, 1970 AIR SC 494 does not apply to the fact situation of the case as in the aforesaid case, there was no saving clause and the order passed by the learned Single Judge is perfectly justified, which does not call for any interference. Learned counsel for the respondents also referred to the judgment rendered by the Supreme Court in the case of Shree Bhagwati Steel Rolling Mills vs. Commissioner of Central Excise, Chandigarh, rendered in Civil writ petiton No. 15029 of 2005 dated 30.10.2006, M/s Shree Bhagwati Steel Rolling Mills vs. Commissioner of Central Excise and anr., Civil appeal No. 4280 of 2007, M/s Fibre Boards (P) ltd. Bangalore vs. Commissioner of Income tax, Bangalore, Civil Appeal Nos. 5525-5526 of 2005 and decision rendered by this Court in EXAP No. 01/2007 decided on 20.07.2017. 9. We have considered the submissions made by the learned counsel for the parties and have perused the record. Before proceeding further, it is apposite to take note of the relevant statutory provisions. The relevant extract of section 3A, which existed at the relevant time, reads as under: "Section 3A. Power of Central Government to charge excise duty on the basis of capacity of production in respect of notified goods: (1) Notwithstanding anything contained in section 3, where the Central government, having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of duty in regard to such goods or such other factors as may be relevant, is of the opinion that is necessary to safeguard the interest of revenue, specify, by notification in the Official Gazette, such goods as notified goods and there shall be levied and collected duty of excise on such goods in accordance with the provisions of this section. (2) Where a notification is issued under sub-section (1), the Central Government may, by rules, provide for determination of the annual capacity of production, or such factor or factors relevant to the annual capacity of production of the factory in which such goods are produced, by the Commissioner of Central Excise and such annual capacity of production shall be deemed to be the annual production of such goods by such factory: Provided that where a factory producing notified goods is in operation only during a part of the year, the production thereof shall be calculated on proportionate basis of the annual capacity of production. (3) The duty of excise on notified goods shall be levied, at such rate as the Central Government may, by notification in the Official Gazette, specify, and collected in such manner as may be prescribed: Provided that, where a factory producing notified goods did not produce the notified goods during any continuous period of not less than seven days, duty calculated on a proportionate basis shall be abated in respect of such period if the manufacturer of such goods fulfils such conditions as may be prescribed. (4) Where an asessee claims that the actual production of notified goods in factory is lower than the production determined under sub section(2), the Commissioner of Central Excise shall, after giving an opportunity to the assessee, to produce evidence in support of his claim, determine the actual production and determine the amount of duty payable by the assessee with reference to such actual production at the rates specified in sub section (3)" 10. By Finance Act 2001 dated 11.5.2001, provisions of the Act were amended. By section 121, section 3A of the Act was omitted and by section 131, section 38A of the Act was incorporated in the statutes, which reads: "131. Insertion of new section 38A- After 38 of the Central Excise Act, the following section shall be inserted and shall be deemed to have been inserted on and from the 28th day of February, 1944 , namely:- 38A. Insertion of new section 38A- After 38 of the Central Excise Act, the following section shall be inserted and shall be deemed to have been inserted on and from the 28th day of February, 1944 , namely:- 38A. Effect of amendment etc., of rules, notifications or orders.- Where any rule, notification or order made or issued under this act or any notification or order issued under such rule, is amended, repealed superseded or rescinded, then unless a different intention appears, such amendment, repeal supersession or rescinding shall not- (a) revive anything not in force or existing at the time at which the amendment, repeal, supersession or rescinding takes effects, or (b) affect the previous operation of any rule, notification or order so amended, repealed, superseded or resinded or anything duly done or suffered thereunder or (c) after any right, privilege, obligation or liability acquired, accrued or incurred under any rule, notification or order so amended or repealed, superseded or rescinded; or (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed under or in violation of any rule, notification or order so amended, repealed superseded or rescinded or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege , obligation, liability, penalty, forfeiture or punishment as aforesaid and any such, investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty forfeiture or punishment may be imposed as if the rule, notification, or order, as the case may be, had not been amended, repealed, suspended or rescinded." 11. From the perusal of section 38A (c) it is evident that it shall not effect right, privilege, obligation or liability acquired, accrued or incurred under any rule, notification or order so amended or repealed, superseded or rescinded. The Supreme Court in the case of Rayala Corporation Private ltd (supra) while dealing with the provision of Defence of India Rule, 1962 in context of violation of provisions of Foreign Exchange Regulation Act, 1947, held that the complaint filed against the petitioner after omission of the Rule 132A of the Foreign Exchange Regulations, cannot be continued as there was no saving clause. The aforesaid decision was considered by the Supreme Court in the case of M/s Fibre Board (P) ltd. (supra) in which Supreme Court held that ratio laid down in the case of Rayala Corporation Private ltd. The aforesaid decision was considered by the Supreme Court in the case of M/s Fibre Board (P) ltd. (supra) in which Supreme Court held that ratio laid down in the case of Rayala Corporation Private ltd. (supra) cannot be said to be a ratio decidendi at all and is in the nature of obiter dicta, as it would be superfluous to state that word 'repeal' would not include omission. It was also held that in the case of Rayala Corporation Private ltd. (supra) the previous decision rendered by Constitutional Bench of the Supreme Court in the case of State of Orissa vs. MA Tulloch and Co, (1964) 4 SCR 461 was not considered. Accordingly, it was held that omission would be covered under expression „repeal? as used in section 6 of the General Clause Act. The aforesaid position of law is reiterated by the Supreme Court in the case of M/s Bhagwati Steel Rolling mills vs. Commissioner of Central Excise and ors. rendered in Civil Appeal No. 4280 decided on 24.11.2015. 12. Admittedly, the liability in the instant case pertains to the period from 01.10.99 to 31.03.2000. Section 3A of the Act was omitted on 11.5.2001. Thus, during the period of liability of the appellant, section 3A of the Act was in existence. Therefore, in view of the section 38A (c) of the Act, liability of the appellant, which was acquired during the period for which charging section as well as Rules were in vogue, cannot be wiped out. Therefore, contention of the appellant that liability to pay the excise duty was itself wiped out, cannot be accepted. 13. The annual capacity of induction furnace is to be determined in the manner prescribed in Rule 3 of the Rules of 1997. Rule 3 is reproduced below for facility of reference: “The annual capacity of production referred to in rule 2 shall be determined in the following manner namely: (1) The Commissioner of Central Excise (hereinafter referred to as the Commissioner) shall call for an authenticated copy of manufacture’s invoice or trader invoice who have supplied or installed the furnace or crucible to the induction furnace unit and ascertain the total capacity of the furnaces installed in the factory on the basis of such invoice or document. (2) It is invoice or document referred to in sub rule (1) is not available for any reason with the manufacture then the commissioner shall ascertain the capacity of the furnaces installed in the induction furnace unit on the basis of the capacity of comparable furnaces installed in any other factory in respect of which the manufacturers invoice or other document indicating the capacity of the furnace available or if not so possible on the pass of any other material as may be relevant for this purpose the Commissioner may if he so desires consult any technical authority for this purpose. (3) The annual capacity of production of ingots and billet or non allay steel in respect of such factory shall be deemed to be as determined by applying the following formula.: ACP= (TCF) 3200 ACP = Annual capacity of production of the factory producing ingots and billets of non allay steel in metric tones and TCP= Total capacity of the trances installed in the factory producing ingots and billets of non allay steel in metric tones.” 14. From the perusal of the aforesaid rules as well as order passed by the Commissioner Central Excise, it is evident that annual production capacity of the furnaces of the appellant has been carried out in terms of Rule 3 (2) of the Rules with the help of technical expert and after physical measurement of the furnaces, order dated 09.03.1998 was passed. The aforesaid order was upheld by the Tribunal and it has been held by the Tribunal that in case of the closure of the furnaces for continuation but not less than seven days as per paragraph 6 (3) of the instructions, the appellant shall be entitled to abatement in the duty. In case the furnaces of the appellant were not functional, the appellant would be entitled to seek abatement of the duty from the authorities. It is well settled legal proposition that the appellant cannot claim negative equality. In case any benefit has been illegally granted to Yumna Allays, the appellant cannot claim the same benefit on the principle of parity. So far as the decision rendered by the Supreme Court in the case of Shree Bhagwati Steel Rolling Mills (supra) is concerned, in paragraph 42 the Supreme Court has only held that sanctioned load would be relevant factor for taking into account the furnace capacity. So far as the decision rendered by the Supreme Court in the case of Shree Bhagwati Steel Rolling Mills (supra) is concerned, in paragraph 42 the Supreme Court has only held that sanctioned load would be relevant factor for taking into account the furnace capacity. In the instant case, there is no dispute with regard to the furnace capacity of the appellant. Therefore, we do not find any ground to interfere with the order passed by the Commissioner Central Excise as well as the Tribunal. 15. The submissions made on behalf of learned senior counsel for the appellant that after omission of the section 3A of the Act, proceeding against the appellant cannot be initiated, does not deserves acceptance in view of the Section 38A (c) of the Act. Similarly, contention that decision rendered in the case of Fibre Board (P) ltd. (Supra) as well as Shree Bhagwati Steel Rolling Mills do not apply to the fact situation of the case, cannot be accepted as even in absence of charging section, liability remains and the proceeding for recovery of the amount of duty due from the appellant can be made under section 132 of the Finance Act, 2001. The submission of learned senior counsel that furnace capacity ought to have been assessed 4 MT only, also does not deserve acceptance as under the Rules of 1997, furnace capacity is to be determined on the basis of installed furnace capacity as per the formula prescribed thereunder. 16. This Court while dealing with the similar issue in EXAP No. 1/2007 decided on 24.07.2017 has taken a view that omission of provision would amount to repeal and liability of the asessee cannot be wiped out despite omission of the provision. 17. In view of the preceding analysis, we do not find any merit in this appeal. In the result, the same fails and is hereby dismissed.