SUPREME COURT OF INDIA
Duncans Industries Limited
Vs
Commissioner of Central Excise, New Delhi
Civil Appeal No. 754 of 2001 with C.A. Nos. 4075-4076 of 2001
(Ashok Bhan and Markandeya Katju (Cj), JJ)
22.08.2006
ASHOK BHAN, J.
These civil appeals are directed against the common impugned order Nos. 829 and
830 of 2000, dated 4-10-2000 passed by the Customs, Excise & Gold (Control)
Appellate Tribunal (hereinafter referred to as "the Tribunal") in
Appeal Nos. E/1622/99-A and E/2095/2000-A. Revenue has filed Civil Appeal Nos.
4075-4076 of 2001 against the deletion of duty demand of Rs. 17, 67, 13, 315/-
raised in the show cause notice dated 1-10-1986 for the period September 1981
to February 1983 and the assessee has filed Civil Appeal No. 754 of 2001
against the levy of penalty of Rs. One crore. Since these appeals are directed
against the common order passed by the Tribunal, we also propose to dispose
them of by a common order. The facts are common in both the sets of appeals.
2. This case has a chequered history and has had various round of litigation in
different forums. In order to determine the controversy and the point involved
in these appeals the following facts may be noticed.
3. M/s. National Tobacco Company Limited, Agarpara, a manufacturer of
cigarettes falling under erstwhile Central Excise Tariff Item No. 4-11(2), and
holder of Central Excise Licence L-4 No. 3/84 for the manufacture of
cigarettes, was merged with M/s. Mirpara Tea Company effective from 1-4-1977.
Consequent to this, it became a Division of newly formed M/s. Duncans Agro
Industries Limited, Calcutta. Thereupon, Central Excise Licence L-4 No.
1-Cig/I/V/78 dated 18-2-1978 for the manufacture of cigarettes was issued to
M/s. National Tobacco Company.
4. In April 1984, M/s. National Tobacco Company was demerged from M/s. Duncans
Agro Industries Limited and was made a wholly owned subsidiary of M/s. Duncans
Agro Industries Limited in the name and style of M/s. New Tobacco Company. M/s.
Duncans Agro Industries Limited, is the respondent in the two appeals filed by
the Revenue and the appellant in Civil Appeal No. 754 of 2001 and would be
referred to as the assessee.
5. As a result of demerger, a new Central Excise Licence No. L-4 No.
1/Cig/IV/Khar/85 dated 9-3-1985 was issued to M/s. New Tobacco Company Limited
for the manufacture of cigarettes.
6. As there was some dispute as to whether excise was leviable on manufacturing
cost plus manufacturing profit and post manufacturing cost and profits arising
from post manufacturing operations, the provisional assessments were made from
July, 1973 to February, 1983. Final assessments were to be made later. On
8-5-1984, Assistant Collector of Central Excise, Calcutta issued a show cause
notice to the assessee for the period July, 1973 to February, 1983 calling upon
the assessee to show cause as to why :-
"the deductions claimed on account of freight, interest on freight,
rebate, octroi, interest on receivables and tariff rate of duty from the
wholesale price should not be disallowed and why the charges on account of
freight, interest on freight, rebate, octroi and interest on receivables should
not be included in the assessable value and also why the cost of C.F.C. packing
charged and realized by them from the buyers should not be included in the
assessable value under Section 4(1 )(a) and Section 4(4)(d)(i) of Central
Excise & Salt Act, 1944 and why price of each product should not be
approved accordingly."
7. Collector of Central Excise, Delhi issued another show cause notice on
1-10-1986 to the assessee for the period September, 1981 to February, 1983
alleging that the assessee has willfully mis-declared assessable value of
cigarettes from time to time during the period from September, 1981 to
February, 1983 in the Central Excise documents. Price Lists with fraudulent
intent to evade the payment of correct amount of duty and thereby they have
short paid Central Excise duty amounting to Rs. 97, 55, 56, 362/-. Accordingly,
the assessee was called upon to show cause as to why :-
"(a) the duty short paid amounting to Rs. 97, 55, 56, 362.00 as per
Annexure 'D' should not be demanded under Rule 9(2) of the Central Excise
Rules, 1944 read with the proviso of sub-section (1) to Section 11A of the
Central Excise and Salt Act, 1944.
(b) Penalties should not be imposed on them under Rules 9(2), 52A(5), 210 &
226 of the Central Excise Rules, 1944."
8. Assessee being aggrieved filed a Civil Writ Petition No. 1708 of 1987 in the
Delhi High Court on the ground that the show cause notice dated 1-10-1986
issued to the assessee alleging contravention of the central excise duty in
respect of cigarettes manufactured and cleared from the factory at Agarpara
during the period September, 1981 to February, 1983 and also addendum to the
show cause notice dated 3-10-1986 was in excess of the jurisdiction and/or
without authority of law inasmuch as the assessee had been paying the excise
duty on the basis of the provisional assessments pursuant to filing of
provisional price lists and till the price lists and the assessments were
finalised a show cause notice could not be issued. According to the petitioner
Section 11A of the Central Excises Salt Act, 1944 (for shot "the
Act") could not be invoked in cases where duties are paid under provisional
assessment made under Rule 9B of the Central Excise Rules, 1944 (for short
"the Rules") without first finalizing the assessment. The Division
Bench of the High Court dismissed the writ petition by its order dated
12-8-1988 reported in Duncans Agro Industries Ltd. v. Union of India & Ors
- 1988 Indlaw DEL 70 (Del.)- Contention of
the assessee that the cause of action for invoking Section 11A would accrue
only from the relevant date defined under Section 11A which in case of
provisional assessment means the date of adjustment of duty after final
assessment under Rule 9B was rejected. This judgment became final and is
binding between the parties. This Court later took a contrary view in Serai
Kella Glass Works Pvt. Ltd. v. Collector of Central Excise, Patna 0 (S.C. 0.
9. Collector of Central Excise, Delhi took up for hearing the proceedings
arising from the show cause notice dated 1-10-1986 and disposed of the same on
27-3-1991 with the interim directions, which are as under :-
"I direct the Divisional Assistant Collector, Kharda Division of
Calcutta-II Collectorate to make final assessment in the case under Rule 9B(5)
of the Central Excise Rules, 1944, for the period covered by the instant show
cause notice as early as possible. He may use the material contained in the
instant show cause notice as independent material to support the final
assessment after according an opportunity to the manufacturer/other parties
concerned to meet the case and after considering the cause show. He is further
directed to intimate the undersigned as soon as he completes the said
provisional assessment. Thereafter this show cause notice will be taken up for
adjudication."
10. In this order the Collector of Central Excise, Delhi gave three fold
directions to the Divisional Assistant Collector, Kharda Division of Calcutta -
II. namely, (1) To make final assessment in the case under Rule 9B(5) of the
Rules for the period covered by the instant show cause notice (1-10-1986) as
early as possible; (2) He could use the material contained in the show cause
notice dated 1-10-1986 as independent material to support the final assessment
after affording an opportunity to the manufacturer/other parties concerned to
meet the case and after considering the show cause; (3) He was further directed
to intimate the Collector of .Central Excise, Delhi as soon as he completes the
provisional assessment; and (4) The show cause notice dated 1-10-1986 was to be
taken up for adjudication thereafter.
11. The assessee being aggrieved filed an appeal before the Appellate Tribunal
at New Delhi, which was disposed of on 9-12-1997. The assessee challenged the
finding/observation made by the Collector of Central Excise, Delhi that
"thereafter this show cause notice will be taken up for adjudication"
on the ground that after finalising of the assessment there would be nothing
left for the Collector of Central Excise, Delhi for consideration or decision
and therefore, this sentence in the order should be set aside. The appeal was
disposed of by observing :-
"We do not understand the impugned order as recording a finding overruling
the contention raised by the appellant the collector had no jurisdiction to
adjudicate on the strength of show cause notice dated 1-10-86 or as to whether
after finalisation of assessments anything would be left for the Collector to
decide. Thereafter the appellant "cannot have any grievance. It is open to
the appellant to raise these aspects if after finalisation of assessment the
Collector takes up the proceeding before him for adjudication in this matter.
With this observation, the appeal is disposed of."
[Emphasis supplied]
12. Thus the liberty to take up this point was reserved with the assessee after
the finalisation of the proceedings.
13. In pursuance to the interim directions issued by the Collector of Central
Excise, Delhi in its order dated 27-3-1991 the office of the Assistant
Collector Central Excise, Kharda Division, Calcutta issued addendum dated
20-2-992 incorporating the contents of the show cause notice dated 1-10-1986 in
the show cause notice dated 8-5-1984 thereby assuming jurisdiction to
adjudicate all issues raised in both the show cause notices.
14. The two show cause notices were finally adjudicated by the Assistant
Collector Central Excise, Kharda Division, Calcutta by its order dated
11-1-1996. The assessable value was determined and consequent thereupon demand
was raised by finalizing assessments for the entire period from July, 1973 to
February, 1983.
15. On 3-7-1996 show cause cum demand notice was issued by the Superintendent,
Office of the Assistant Collector Central Excise, Kharda Division, Calcutta on
the basis of adjudication order dated 11-1-1996 quantifying the amount of short
levy for the period July, 1973 to February, 1983. Assistant Collector Central
Excise, Kharda Division, Calcutta adjudicated the show cause cum demand notice
dated 3-7-1996 confirming the demands (short levy of Rs. 386, 45, 71, 192.69
and Rs. 66, 45, 136.19 in respect of cigarettes and smoking mixtures
respectively.
16. The assessee being aggrieved against the order of Assistant Collector
Central Excise, Kharda Division, Calcutta filed an appeal before the
Commissioner (Appeals) Central Excise, Calcutta. Commissioner of Appeals by his
order in appeal dated 25-7-1997 accepted the appeal and remanded the matter to
the Assistant Collector Central Excise, Kharda Division, Calcutta for
recomputation of the duty afresh in the light of the decision of this Court in
Government of India v. Madras Rubber Factory (S.C. . Assistant
Collector, Central Excise, Kharda Division, Calcutta in compliance of the order
of remand dated 25-7-1997 of the Commissioner of Appeals Central Excise,
Calcutta recomputed the amount of duty short paid as Rs. 16, 6, 94, 320.34 and
Rs. 8, 13, 683.29 after adjusting Rs. 5.97 crores pre-deposited in the light of
the judgment of this Court in Madras Rubber Factory's case (supra). This order
was later on corrected by issuing a corrigendum and the amount was reduced.
17. After finalization of the proceedings by the Assistant Collector Central
Excise, Kharda Division, Calcutta the Commissioner of Central Excise, Delhi
passed an order-in-original in show cause notice dated 1-10-1986 determining
Rs. 17.67 crores as due as duty liability and imposing a penalty of Rs. One crore.
18. Assessee being aggrieved filed Appeal No. E/1622/99-A/92E/ 2095/2000-A,
which has culminated in the impugned order. Tribunal accepted the appeal
partly. Duty liability was set aside as it had already been adjudicated in the
earlier proceedings but upheld the levy of penalty. While deleting the duty
liability the Tribunal observed thus :-
"From this, it is clear that the Collector had left the duty demand raised
in the show cause notice dated 1-10-1986 also to be included in the
finalisation of the provisional assessment which was pending from 1973. The
Revenue had not challenged that order. Pursuant to that order, the Assistant
Collector had issued an Addendum to the assessees on 20-2-1992 making the
materials relied upon in the show cause notice dated 1-10-1986 as part of the
materials for finalising the assessments and the duty demand was finalised
after assessees made their representations. That duty demand became final as
the Revenue did not challenge it. The order passed on the assessees' appeal
against that duty demand was also not challenged by both sides. We, therefore,
hold that the duty demand made by the Assistant Collector was a consolidated
demand and that demand having become final, no second demand could be made in
another adjudication proceeding by the Commissioner. Accordingly, we set aside
the duty demand of over Rs. 17 crores made in the impugned order."
19. Revenue being aggrieved has filed Civil Appeal Nos. 4075-4076 of 2001
against the deletion of the duty liability and the assessee has filed the Civil
Appeal No. 754 of 2001 against the order maintaining the levy of penalty.
20. Another fact which needs to be noticed is that after the Assistant
Collector Central Excise, Kharda Division, Calcutta finalized the assessment
order dated 3-12-1996, the Assistant Collector Central Excise, issued show
cause notice dated 27-5-1998 stating therein that the order-in-original dated
12-12-1997 the extra amounts realised as "additional consideration"
was not taken into consideration and accordingly a demand of Rs. 21.58 crores
was made on the assessee. In the meantime, Kar Vivad Samadhan Scheme, 1998 (for
short "the KVS Scheme") was introduced by Finance
(No. 2) Act, 1998. Pursuant to the said scheme the assessee filed a
declaration under Section 89 of the Finance (No- 2) Act,
1998 in respect of the KVS Scheme. An order under the KVS Scheme was
passed in pursuance to which the assessee paid the demand raised under the said
scheme.
21. Counsel for the parties have been heard at great length.
22. The issue before the Assistant Collector Central Excise, Kharda Division,
Calcutta was for the determination of the assessable value of the goods for the
period July, 1973 to February, 1983 i.e. the period covered by the show cause
notice dated 8-5-1984. The issue before the Commissioner of Central Excise,
Delhi was also for determination of the assessable value of the goods for the
period September, 1981 to February, 1983, the period covered by show cause
notice dated 1-10-1986. The show cause notice dated 1-10-1986 was issued
against 20 persons including the assessee company. As regards the assessee, for
the period September, 1981 to February, 1983, the Commissioner of Central
Excise passed the order dated 27-3-1991 directing the Assistant Commissioner to
determine the assessable value taking into consideration the materials
contained in show cause notice dated 1-10-1986. This he did by noticing the
correct position of law laid down by this Court in the case of Union of India
v. Godrej & Boyce Mfg. Co. (Pvt.) Ltd., {Civil Appeal No. 12824 of 1989
decided on 8-3-90). The Assistant Collector Central Excise, Kharda Division,
Calcutta thereafter issued addendum dated 20-2-1992 incorporating the
allegations made in show cause notice dated 1-10-1986 in the show-cause notice
dated 8-5-1984. The effect of the order passed by the Commissioner of Central
Excise, Delhi was that the Assistant Collector Central Excise, Kharda Division,
Calcutta alone had the jurisdiction to finally adjudicate and determine the
assessable value of the goods cleared from the assessee's factory for the
entire period and the consequent duty liability. Either party wishing to
dispute the determination made by the Assistant Collector Central Excise,
Kharda Division, Calcutta had to do so by invoking the right of appeal to the
Commissioner of Appeals, Tribunal and the Supreme Court. In addition the
Department could have invoked the short levy provision under Section 11A within
a period of six months or invoked the extended period of limitation of 5 years
under proviso to Section 11A provided the conditions laid down in the proviso
were satisfied. The two show cause notices were finally adjudicated by the
Assistant Collector Central Excise, Kharda Division, Calcutta on 11-1-1996. The
assessable value determined and consequent demand was raised by finalizing
assessments for the entire period July, 1973 to February, 1983. If the revenue
was aggrieved by the above proceedings it was incumbent upon them to either
invoke the right of appeal against that order under Section 35E(2) or issue a
short levy notice under Section 11A within six months. Neither of these two
options having been invoked, the order attained finality as against the
revenue.
23. It need not be emphasized that there could not be two assessments for the
same period.
24. This apart finally determined as due for the entire period of 10 years from
the assessee having been settled under the Kar Vivad Samadan Scheme, 1998,
there is no scope for any further review or determination of that issue by any
authority under the Act.
25. In Hira Lal Hari Lal Bhagwati v. CBI. (S.C , at page 274 this
Court observed :-
"We have carefully gone through the Kar Vivad Samadhan Scheme, 1998 and
the certificate issued by the Customs Authorities. In our opinion, the GCS is
immune from any criminal proceedings pursuant to the certificates issued under
the said Scheme and the appellants are being prosecuted in their capacity as
office-bearers of the GCS. As the customs duty has already been paid, the Central
Government has not suffered any financial loss. Moreover, as per the Kar Vivad
Samadhan Scheme, 1998, whoever is granted the benefit under the said Scheme is
granted immunity from prosecution from any offence under the Customs Act, 1962 including the offence of evasion of
duty. In the circumstances, the complaint filed against the appellants is
unsustainable."
and at page 280 it was observed :
"The Kar Vivad Samadhan Scheme certificate along with CBI v. Duncans Agro
Industries Ltd. - 2, and Sushila Rani v.
CI.T. - judgments clearly absolve the appellants herein from all charges
and allegations under any other law once the duty so demanded has been paid and
the alleged offence has been compounded. It is also settled law that once a
civil case has been compromised and the alleged offence has been compounded, to
continue the criminal proceedings thereafter would be an abuse of the judicial
process."
26. Thus, after the grant of certificate under the Kar Vivad Samadan Scheme,
1998 as having settled the dispute and payment of the amount determined no
further proceedings could be initiated or proceeded with for the period in
question.
27. For the reasons stated above, we do not find any substance in the appeals
filed by the Revenue. Accordingly, Civil Appeal Nos. 4075-4076 of 2001 are
dismissed and the order passed by the Tribunal in this respect is affirmed.
28. Taking up the appeal of the assessee, it may be noted that the proposed
penalty was under Rule 9(2) and 52A. This Court in N.B. Sanjana v. Elphin-
stone Spg. & Wvg. Mills Co. Ltd. (S.C. , at page 348 held as
under :-
"To attract sub-rule (2) of Rule 9, the goods should have been removed in
contravention of sub-rule (1). It is not the case of the appellants that the
respondents have not complied with the provisions of sub-rule (1). We are of
the opinion that in order to attract sub-rule (2), the goods should have been
removed clandestinely and without assessment. In this case there is no such
clandestine removal without assessment. On the other hand, goods had been
removed with the express permission of the Excise authorities and after order
of assessment was made. No doubt the duty payable under the assessment order
was nil. That, in our opinion, will not bring the case under sub-rule (2)."
29. In the present case there is not even an allegation much less finding by
the department that there has been any clandestine removal of goods without
assessment. As such the penalty is liable to be set aside. The matter having
been settled in the Kar Vivad Samadan Scheme, 1998 the question of
determination of the duty payable or levy of penalty did not arise. In our
view, the Tribunal clearly erred in upholding the levy of penalty. Accordingly,
Civil Appeal No. 754 of 2001 filed by the assessee is accepted and the penalty
levied is ordered to be deleted.
30. These two sets of appeals are disposed of in the above terms leaving the
parties to bear their own costs.
J