Indian Textile Paper Tube Company Limited vs Collector of Customs, Madras

M.M. Punchhi, J

Has the Central Government violated the bar of limitation while exercising suo moto revisional powers u/s 131 of the Customs Act, 1962 is the limited question which crops up for consideration in the instant appeal against the judgment and order of the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi dated September 3, 1984 passed in Appeal No. CD (SB) (T) 1604/81-C.

The appellant imported a consignment of top line tube winder endless belts valued at Rs, 31,101/-. The consignment came from the United Kingdom and was covered under a Bill of Entry dated 6-8-1979. The goods were assessed to duty under heading 40.05/16 (3) at 40% plus counter-veiling duty at the rate of 25% under Item 16-A (4) of the Customs Tariff Act, 1975. The appellant lodged a refund claim with the Assistant Collector on grounds which are factual in nature, asserting that the goods had not correctly been assessed to duty and that they should have been assessed under a different heading 59.16/17 of the Customs Tariff Act, 1975. On 12-10-1979 the claim for refund was rejected by the Assistant Collector by an order. On appeal by the appellant the Appellate Collector of Customs took a different view as to the nature of the consignment imported and assessed it to duty under heading 59.16/17 allowing the appeal with consequential relief. On the report of the Collector of Customs the Government issued a suo moto show cause notice dated 21-11-1981 prima facie being of the view that the Appellate Collector was not correct in classifying the goods under heading 59.16/17 of the Customs Tariff Act, 1975, as also that the original classification under heading 40.05/16 (3) done by the Assistant Collector was also not in order. The matter thus was sent to the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi where the plea of limitation was raised by the appellant besides raising factual pleas with regard to the nature of the consignment and its liability to be classified under an appropriate head. The Tribunal, instead, on facts classified the consignment as articles of plastic under heading 39.07 of the Customs Tariff Act, 1975 and not under heading 59.16/17 as done by the Appellate Collector and thus set aside the order of the Appellate Collector allowing the revision.

The plea of time bar raised by the appellant was repelled by the Tribunal in the following words:

On the question of time bar we find that the Appellate Collector issued the orders on 4-7-1981, the show cause notice was issued on 21-11-1981 and served on the party on 24-11-1981. The show cause notice has therefore been issued within the period of six months. Section 131(5) of the Customs Act, 1962 refers to a case of non levy and short levy. For those cases the time limit of Section 128 would be applicable. Section 131(3) provides for the Central Government to annul or modify any order passed u/s 128 or 130. The Supreme Court in 1983-ELT-1596 held as follows:-

The provisions contained in Section 131(5) of the Act speak of limitation only with regard to non-levy or short-levy. It is significant that Section 131(5) does not speak of any limitation in regard to revision by the Central Government of its own motion to annul or modify any order or erroneous refund of duty. The provisions contained in Section 131(5) with regard to non-levy or short levy cannot be equated with erroneous refund inasmuch as the three categories of errors in the levy are dealt with separately.

That was a case of refund. In 1984 ECR 701 it was held that Section 131(3) of the Customs Act, 1962 empower the Central Government to annul or modify any order passed under that Act and that the time limit provided in Section 131(5) would not be applicable to the notice issued under 131(3). Further 'relevant date' as provided under the third proviso to Section 36(2) will be computed from the date of passing of the Appellate Order and not from the date of passing the order by the original assessing authority. The show cause notice is therefore in time.

Learned counsel for the appellant has confined this appeal to the question of limitation. The fact that the consignment was classifiable under head 39.07 of the Customs Tariff Act, 1979 remains in these circumstances unquestioned. Section 131 of the Customs Act, 1962 is as follows:

REVISION BY CENTRAL GOVERNMENT-(1) The Central Government may, on the application of any person aggrieved by-

(a) any order passed u/s 128, or

(b) any order passed u/s 130 otherwise than on the application of any aggrieved person, or

(c) any order passed on the application of any aggrieved person u/s 130 where the order is of the nature referred to in either of the provisions to Sub-section (1) of that section, annul or modify such order.

(2) An application under Sub-section (1) shall be made within six months from the date of the communication to the applicant of the order against which the application is being made:

Provided that the Central Government may, if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the aforesaid period of six months, allow it to be presented within a further period of six months.

(3) The Central Government may of its own motion annual or modify any order passed u/s 128 or Section 130.

(4) No order enhancing any penalty or fine in lieu of confiscation or confiscating goods of greater value shall be passed under this Section-

(a) in any case in which an order passed u/s 128 or Section 130 has enhanced any penalty or fine in lieu of confiscation or has confiscated goods of greater value ; and

(b) in any other case, unless the person affected by the proposed order has been given notice to show cause against it, within one year from the date of the order sought to be annulled or modified.

(5) Where the Central Government is of opinion that any duty of customs has not been levied or has been short-levied, no order levying or enhancing the duty shall be made under this section, unless the person affected by the proposed order is given notice to show cause against it within the time-limit specified in Section 28.

The Tribunal seems to take the view that Sub-section (3) of Section 131, if employed, eclipses Sub-section (5) of Section 131. In other words, the Tribunal seemingly is of the view that when the Central Government on its own motion proposes to annul or modify any order passed u/s 128 or Section 130 then it is not fettered by the time-limit specified in Section 28 even though it entertains the opinion that any duty of customs has either not been levied or has been short-levied. This approach appears to us to be wholly erroneous. There is nothing in the language of Sub-section (3) to suggest that it over powers or renders otiose Sub-section (5). Both the subsections need not militate against each other, components as they are of the singular power conferred by the legislature on the Central Government for revision. The harmonious way to read these sub-sections would be that the Central Government is empowered on its own motion to annul or modify any order passed u/s 128 or Section 130, but if it is an order whereby any duty of customs has either not been levied or has been short-levied, the Central Government can levy or enhance the duty by giving the person affected by the proposed order a notice to show cause against it but within the time-limit specified in Section 28, which is six months from the date of the order.

Section 28 envisages three kinds of errors in regard to custom duties. One is non-levy. This means that the goods were not classified to duty whereas they could be. The second is short-levy. In this could be included a case in which the goods could be classified in one Entry but were erroneously classified under another Entry resulting in short-levy of customs duty, or the like. The third is the case of erroneous refund. This category springs up in the process of assessment only where two kinds of errors, i.e., non-levy or short-levy, may occur and lead to an erroneous refund. Since levy is linked to assessment, a case for refund may arise which may be erroneous. These are the three categories of known errors in regard to duties."

In Geep Flashlight Industries Ltd. Vs. Union of India (UOI) and Others, this Court had occasion to deal with a case of erroneous refund and while examining the scope of Section 28 of the Act ruled as follows:

The provisions contained in Section 28 of the Act speak of non-levy, short-levy, and erroneous refund. The provisions state that notice of non-levy, short-levy or erroneous refund should be given within six months from the relevant date. Section 28(3) states what the 'relevant date' means. In the case of duty not levied, the 'relevant date' is the date on which the proper officer makes an order for the clearance of the goods. In a case where duty is provisionally assessed u/s 18 of the Act, the relevant date is the date of adjustment of duty after the final assessment. In a case where duty has been erroneously refunded, the relevant date is the date of refund. In any other case, the relevant date is the date of payment of duty.

It can thus be clearly gathered that in cases of duty not levied or short-levied the "relevant date" is the date on which the concerned officer makes some orders for the clearance of the goods on payment of no duty or the date of adjustment of duty on framing the final assessment, as the case may be.

Now reverting to the facts of the instant case it is evident that the goods were classified and assessed to duty under one heading, say A, on 6-8-1979 whereafter claim for refund was made by the appellant which was rejected by the Assistant Collector on 12-10-1979. The exercise of the Assistant Collector in levying duty under heading A, when it should have been levied under another heading, say C, despite the appellant's claim that it should be still under another heading, say B, was a case of short-levy in so far as the goods were classified as attracting lesser duty under heading A whereas higher duty should have been attracted on classifying it under heading C. So the orders of levy of duty had two facets. The duty from the point of view of the appellant had been excessively levied necessitating him to challenge the same and seek refund. On the other hand, from the point of view of the revenue the duty had been short-levied giving rise cause to have it levied under proper heading. If these two facets are understood in the right perspective, it was incumbent on the Central Government to exercise its suo moto power under Sub-section (3) read with Sub-section (5) of Section 131 within six months from 6-8-1979, the date when the duty was short-levied and undeniably the Central Government did not take such timely step even though it had a cause to do so. The appellant, however, made claim for the refund of the excess duty levied taking shelter under another heading and on its refusal by the Assistant Collector on 12-10-1979 had its appeal accepted on 2-5-1981 from the Appellate Collector who ordered refund. The Central Government then got a cause to take suo moto action u/s 131(3) of the Customs Act, 1962 to annul or modify the order of the Appellate Collector, or the actual refund itself under that order, in accordance with Geep Flashlight Industries (supra). It being a case of erroneous refund subsection (3) of Section 131 was attracted and not Sub-section (5) of Section 131 as at that point of time it was not a case of non-levy or short-levy, and these two categories of errors could not be equated with the error of erroneous refund inasmuch as these three categories of errors are treated separately in the scheme of things. Merely because the Central Government had the power to suo moto revise the orders of refund passed by Appellate Collector it does not follow a fortiori that it had the power to revise the order of short-levy at that stage. The ultimate analysis is that if there was an error of short-levy in the order of the Assistant Collector in classifying goods at A instead of C as claimed by the revenue and not classifying them at B as claimed by the importer, then on the grant of relief by the Appellate Collector classifying them under heading B, can at best give occasion to the Central Government to annul or modify the classification brought under head B, and so as to leave it classified at heading A, but could not have it re-classified under heading C unless the exercise was undertaken within the period of limitation prescribed u/s 28 as required under Sub-section (5) of Section 131 of the Customs Act, 1962. The error committed by the Tribunal, for the view afore-expressed, is so patent that it cannot be allowed to go uncorrected as a tolerable error. Inevitably this appeal is to be, and is, hereby allowed, modifying the orders of the Tribunal passed in Appeal No. CD (SB)(T) 1604/81-C so as to revive the order of the original assessment dated 6-8-1979 and the order of the Assistant Collector of Customs, Madras dated 12-10-1979, keeping upset the orders dated 2-5-1981 of the Appellate Collector of Customs, Madras passed in Appeal No. C/3/212/80.

The appellant shall have their costs.