The Bombay Dyeing and Manufacturing Co. Ltd. vs Union of India (UOI) and Others

M.L. Pendse, J.—This is an appeal preferred by the original petitioners against judgment dated November 23, 1985 delivered by Mr. Justice Bharucha in Writ Petition No. 1867 of 1981. The learned single Judge dismissed the petition in view of the fact that the issue involved in the petition stands concluded by judgment of Justice Mrs. Manohar in Writ Petition No. 1420 of 1981 (Kamala Mills Ltd. v. Union of India) [1985] 6 ECC 238 . The judgment of Justice Mrs. Manohar was challenged in Appeal No. 5 of 1986, but the appeal was dismissed by the Division Bench by judgment dated October 13, 1987, and the decision of Mrs. Justice Manohar was upheld. In view of the decision of the Division Bench, the main contention in the appeal stands concluded.

Shri Bharucha, learned Counsel appearing on behalf of the appellants, submitted that the appellants were served with two show cause notices dated December 22, 1976 and January 31, 1978. The department claimed that duty was evaded for the period commencing from March 1, 1974 to October 31, 1976 in respect of the first show cause notice, while in respect of the second show cause notice the period commenced from November 1, 1976 and ended with May 31, 1977. Shri Bharucha urged that in answer to the show cause notice the appellants claimed that the part of the demand was time barred, but the Assistant Collector, Central Excise, Bombay, Division "C" by order dated September 12, 1980 rejected the contention and confirmed both the demands in respect of two show cause notices. The learned counsel submitted that the total demand was Rs. 6,65,159.95, but by a subsequent letter dated January 31, 1986 the Assistant Collector informed the Appellants that the part of their demand, that is of Rs. 3,33,584.34 was time barred and the amount payable by the appellants was Rs. 3,31,575.41. Shri Bharucha submitted that even this demand is not correct. The learned counsel urged that the limitation prevalent at the time of issue of first show cause notice was one year prior to the date of notice in accordance with Rule 10 of the Central Excise Rules, and therefore, the show cause notice dated December 22, 1976 cannot travel beyond 22nd December, 1975. As regards the second show cause notice dated January 31, 1978, the the period of limitation was regulated by Section 11-A of the Central Excise Act, which came into operation with effect from August 6,1977, and the Excise Collectorate could have demanded short levy duty only for a period of six months prior to the date of show cause notice. Shri Bharucha, therefore, submitted that under the second show cause notice the period which could be covered was only six months prior to January 31, 1978. The submission of Shri Bharucha in respect of both the show cause notices is correct and deserves acceptance. Indeed the merit of the submission was also realised by the Assistant Collector as the demand was substantially reduced on realisation that the part of the demand was time barred. Shri Devdhar, learned counsel appearing for the revenue, is unable to point out the basis for reduction of demand by about Rs. three lakhs nor could give break-up of the demand as modified by Asstt. Collector.

In these circumstances, the proper course to be followed is to set aside the order dated September 12, 1980 passed by the Assistant Collector and order passed by the Collector of Central Excise in appeal and by Mr. Justice Bharucha on Writ Petition No. 1867 of 1981 and remit the proceedings back to the Assistant Collector for fresh disposal in the light of the observations made in the judgment.

Accordingly, appeal is partly allowed. The order of the learned single Judge is set aside and so also the order passed by the Appellate Collector, Central Excise and the Assistant Collector, Central Excise and proceedings are remitted back to the Assistant Collector for a fresh disposal. The Assistant Collector would only examine the question as to which part of the demand under two show cause notices dated December 22, 1976 and January 31, 1978 was within period of limitation and accordingly assess the appellants and pass the final order. The appellants shall pay the balance amount found due by the Assistant Collector with interest at the rate of 12% per annum from February 10, 1986 till realisation. In case the appellants fail to deposit the amount within a stipulated period, then it is open for the Assistant Collector to recover the amount by enforcing bank guarantees. The appellants undertake to keep the bank guarantees alive for a period of four weeks from the date of the order to be passed by the Assistant Collector.

In the circumstances of the case, there will be no order as to costs.