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CASE NO.: Appeal (civil)  7868 of 1995

PETITIONER: ITW Signode India Ltd.                                   

RESPONDENT: Collector of Central Excise                      

DATE OF JUDGMENT: 19/11/2003

BENCH: CJI, S.B. Sinha & Dr. AR. Lakshmanan.

JUDGMENT: J U D G M E N T

S.B. SINHA, J.

                The primal question involved in this appeal which arises out a  judgment and order of the Customs, Excise & Gold (Control) Appellate  Tribunal dated 6.4.1995 revolves round the effect of a validating  statute.

BACKGROUND FACTS:

       The appellant manufactures and deals in box strappings.  For the  said purpose they receive duty paid cold rolled steel strips.  Several  processes are undertaken for manufacturing the end product.

                The appellant allegedly informed the Superintendant of Central  Excise about the processes undertaken by them contending that the  resultant product falls under Tariff Item No. 26AA(iii) and no further  excise duty is leviable thereupon.  The Assistant Collector by a letter  dated 25.6.1983 stated that the box strappings made out of the duty paid  cold rolled steel strips would be classifiable under Tariff Item 68 and  not under Tariff Item 26AA(iii).  The appellant protested thereagainst  by a letter dated 2.7.1983 inter alia contending that having regard to  the ISI specifications and certain judicial pronouncements, Tariff Item  68 would not be applicable.  The Assistant Collector by an order dated  11.7.1983 held:

"Considering all aspects, the cold rolled strips  known as box strappings continue to be cold rolled  strips under Tariff item 26AA (iii).  The painting  and waxing on the product does not change the  classification of the product.

       As the raw material, cold rolled strips has  discharged its duty liability under T.I. 26AA(iii)  and the resultant product continues to be cold  rolled strips under T.I. 26AA (iii), no further  duty liability arises."

       The said order is said to have become final.  Thereafter on or  about 4.2.1986 a classification list was filed by the appellant  effective from 1.3.1986 stating that box strappings are made by cutting  duty paid steel strips under the column "particulars of other goods  produced or manufactured and intended to be removed by the assessee".   Reference in this behalf was also made to the order of the Assistant  Collector dated 11.7.1983. The said classification list filed by the  appellant was approved by the Assistant Collector.  However, by a notice

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dated 8.4.1987, the Collector, Central Excise called upon the Appellant  herein to explain as to why processes undertaken by them would not  amount to manufacture with immediate effect and why an amount of Rs.  1,13,82,247/- should not be levied on the basis that the goods should be  classified under chapter sub-heading 7308.90 of the Central Excise  Tariff Act, 1985 upon invoking Rule 9(2) of the Central Excise Rules,  1944 read with the provisions of Section 11A of the Central Excise  Rules.

       The appellants contend that the issue as regard classification was  raised with the Department even in 1983, whereupon the Assistant  Collector vide his letter dated 11.7.83 held that the process carried  out by the appellants does not amount to manufacture since the product  continues to be a strip and accordingly there was no change in the  classification, i.e., it will fall under Tariff Item 26AA(iii).  This  order has not been challenged by the department and thus it has become  final and conclusive.  Thereafter, all along the appellants have filed  classification lists right from 1986 claiming the classification as  strips under Tariff Item 26AA under the old Tariff according to the  order passed by the Assistant Collector.  All the classification lists  described the process manufacture adopted by the appellants.  This was  finally approved by the department without any modification in favour of  the appellants.  This classification continued even for the period  effective from March 1987.  Thus, no demand could have been raised  against the appellant under Section 11A for the past period since there  was no short levy and in any event no suppression can be attributed to  the appellants.

       A reply to the show cause was filed by the appellant highlighting  the processes undertaken.  The Collector by his order dated 24.9.1987  held that the processes undertaken by the appellant do not amount to  manufacture and as such their product is classifiable under Chapter 72  only.  An appeal thereagainst was filed by the respondents before the  Appellate Tribunal.   

       The matter was heard by three members of the Tribunal who  constituted the Bench.  Three  separate orders in the matter were passed  on 6.4.1995.  The Member (Judicial) in his order proposed to remit the  matter to the Collector for a de novo consideration on the merit;  whereas the Vice-President and the Member (Technical) decided the merit  of the matter against the appellant.  The majority of the Appellant  Tribunal classified the box strappings in running length and in coil  under heading 73.08 as articles of iron or steel.  However, none of the  members took into consideration the question as to whether the demand  made by revenue was barred by limitation.  Aggrieved thereby and  dissatisfied therewith the appellant is in appeal before us.

REFERENCE TO CONSTITUTION BENCH AS REGARD SHORT-LEVY:

       Having regard to the conflict of decision in Ballarpur Industries  Ltd. Vs. Asstt. Collector of Customs & Central Excise [1995 Supp (3) SCC  429] and Rainbow Industries (P) Ltd. Vs. Collector of Central Excise,  Vadodara [(1994) 6 SCC 563] the question was referred to a Constitution  Bench.  This Court in Collector of Central Excise, Baroda Vs. Cotspun  Ltd. [(1999) 7 SCC 633] (wherein one of us V.N. Khare, CJI was a member)  overruled the decision of this Court in Ballarpur Industries (supra) and  held that the Rainbow Industries (supra) has correctly laid down the  law.

AMENDMENT IN SEC. 11A:

       The Parliament thereafter amended Section 11A of the Central  Excise Act, 1944 by Act No. 10 of 2000 which was published in the

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Gazette of India on 12.5.2000 and the same was given a retrospective  effect and retroactive operation from 27.12.1985.   

REFERENCE TO THIS BENCH REGADING VALIDATING ACT:

       The appellants herein therafter questioned the vires of the said  provision.  It is also not in dispute that the said question came up for  consideration before a two-Judge Bench of this Court in Easland  Combines, Coimbatore Vs. Collector of Central Excise, Coimbatore [(2003)  3 SCC 410] wherein the validity of the Amendment was upheld.

       However, when this matter was placed before another Division Bench  it referred the matter to a three-Judge Bench by an order dated 20th  February, 2003 opining:

"Earlier this appeal was adjourned awaiting the  judgment of this Court in C.A. No. 2693 of 2000,  Easland Combines v. Collector of Central Excise,  Coimbatore, 2003 (152) E.L.T. 39 (S.C.). When  this appeal is taken up for hearing today, Mr.  Bajpai, the learned Counsel appearing for the  Revenue, invited our attention to the judgment  in Easland Combines (supra) and submitted that  the point involved in this appeal is covered by  the said judgment. In Collector of Central Excise, Baroda v.  Cotspun Ltd., [(1999) 7 SCC 633], a Constitution  Bench of this Court laid down as follows : "14. The levy of excise duty on the basis  of an approved classification list is the  correct levy, at least until such time as  to the correctness of the approval is  questioned by the issuance to the assessee  of a show cause notice. It is only when  the correctness of the approval is  challenged that an approved classification  list ceased to be such. 15. The levy of excise duty on the basis  of an approved classification list is not  a short levy. Differential duty cannot be  recovered on the ground that it is a short  levy. Rule 10 has then no application." The Parliament has amended Section 11A of the  Central Excise Act, 1944 by Finance Act, 2000  (10 of 2000) with effect from November 17, 1980  with a view to change the basis of the judgment  in the afore-mentioned case. The question  whether the amendment has changed the basis of  the judgment in Cotspun’s case (supra), is the  question that arises in this case. The same  question came up for consideration of this Court  in Easland Combines (supra). A bench of two  learned Judges took the view that the amendment  which conferred power to correct the errors or  mistakes in approval, acceptance or assessment  relating to the rate of duty on or valuation of  excisable goods cannot be said to be  unreasonable. It was further held that with  retrospective effect, the legislature has  empowered the Central Excise Officer to set at  naught the erroneous approval of classification  list or acceptance of price list or assessment  order, and, on that premise, it was laid down, "Hence, it is held that in view of the  amendment of Section 11A(1), the decision

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rendered by this Court in Cotspun’s case  (supra) would not be a good law. Show  cause notice for correcting errors or  mistakes in approval, acceptance or  assessment relating to the rate of duty on  or valuation of excisable goods under the  provisions of the Act or the Rules made  thereunder could be issued within the  prescribed period." Having gone through the judgment carefully and  given our anxious consideration to the said  judgment in Easland Combines (supra), we are  unable to agree with the view taken by the bench  of two learned Judges in regard to either the  import of the amendment or the effect thereof  and, in our view, the amendment does not alter  the basis of the judgment in Cotspun’s case  (supra). We, therefore, consider it appropriate to refer  the appeal to a bench of three learned Judges. The Registry is directed to obtain the orders of  Hon’ble the Chief Justice for listing the case  before a bench of three learned Judges."

       That is how the matter is before us.

SUBMISSIONS:         Mr. V. Lakshmikumaran, the learned counsel appearing on behalf of  the appellant would submit that by reason of the amendment made in  Section 11A of the Act, the basis of the decision in Cotspun (supra) had  not been taken away.  The learned counsel would urge that in Cotspun  (supra) it has categorically been held that Rule 10 which was in pari  materia with Section 11A of the Act as unamended did not deal with  classification lists or related to the reopening of the draft  classification lists which having been exclusively provided for Rule 173  B, by amending Section 11A the basis of the said judgment cannot said to  have been removed.   

       The learned counsel would argue that in Cotspun (supra) it has not  only been held that Sub-Rule (5) of Rule 173B deals with classification  lists but therein the question as regard different stages for correct  levy had been laid down.   

       Mr. Lakshmikumaran would contend that levy of excise duty on the  basis of an approved classification list would not be a short levy and  as such differential duty could not be recovered on the said premise and  in that view of the matter Section 11A of the Act will have no  application.

       Submission of the learned counsel is that Section 11A of the Act  as amended only provides that even if the short levy is based on the  approved classification list, show cause notice can be issued, but the  same cannot be said to be sufficient to get over the basis of the  judgment/Constitution Bench in Cotspun (supra).  Once it is held in  Cotspun (supra), Mr. Lakshmikumaran would argue, that the levy based on  the approved classification list is not short levy, the entry point in  Section 11A must be held to have been closed.  According to the learned  counsel, by reason of the amendment as also the retrospective effect  given thereto the short levy having been redefined for the purpose of  Section 11A contrary to what had been held in Cotspun (supra), it must  be held that even now there is no short levy of duty.   

       The learned counsel further submitted that the Tribunal  misdirected itself in holding that the processes undertaken by the  appellants on the duty paid cold rolled steel strappings amounts to

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manufacture in terms of Section 2(f) of the Central Excise Act, 1944.   

       According to the learned counsel, having regard to the processes  undergone the resultant product would not attain any new and distinct  character so as to warrant fresh levy of duty.  In other words, Mr.  Lakshmikumaran would contend, that the characteristics of cold rolled  strip which is the starting material are retained in the box strappings.   Relying on the decision of Gujarat Steel Tubes Ltd. Vs. State of Kerala  [1989 (42) ELT 513] it was urged that galvanization of pipes undertaken  for the purpose of making them weather proof would not bring into  existence a new commodity and even by a circular dated 9.2.1994 the  Board of Excise and Customs has clarified that the process of  galvanization does not amount to manufacture.   

       As regard question of classification , the learned counsel would  submit that box strappings is classifiable under 7211.31 as strip only  and not under 7308.90.  Heading 7308, it was contended, covers other  articles of iron or steel and in that view of the matter, the box  strappings can be called as article of steel.  Even after the processes  undertaken for the end product, the box strappings remain as strips.  It  was argued that in any event having regard to the fact that heading 7308  covers other articles of iron and steel covering articles of steel in  individual pieces like bottom steel, nails, rivets, ranges etc, it  cannot be equated with the product in question, i.e., box strappings  which are in running length in coil form and not individual pieces.  In  any view of the matter, box strappings being covered as cold rolled  strips i.e. IS: 5872-1973, the same is not classifiable under 7308.90.   

       The learned counsel would contend that in the instant case, the  proviso appended to Section 11A of the Act is not attracted inasmuch as  the extended time period specified thereunder would have application  only when the short levy is occasioned on account of fraud, collusion,  willful mis-statement or suppression of facts with an intent to evade  payment of duty.  In that view of the matter the period of limitation  for issuing a show cause notice would be six months and not five years.   In support of the aforementioned contention, reliance has been placed on  Padmini Products Ltd. Vs. CCE [1989 (43) ELT 195], P&B Pharmaceuticals  Ltd. Vs. CCE [2003 (153) ELT 14] and Pushpam Pharmaceuticals Ltd. Vs.  CCE [1995 (78) ELT 401].

       In this connection, the learned counsel has drawn our attention to  the fact that the issue of classification had been raised by the  appellant since 1983 and the same had been approved and even received  the seal of approval by the Collector.   

       The learned counsel would lastly contend that even if the product  in question is held to be dutiable the appellant should be allowed to  take the Modvat credit of the duty paid on the cold rolled steel strips.

       Mr. Dhruv Mehta, learned counsel appearing on behalf of the  respondent, on the other hand, would submit that by reason of amendment  carried out in Section 11A of the Central Excise Act by Act No. 10 of  2000, the basis of judgment in Cotspun has been removed inasmuch as the  words "erroneously refunded" in the unamended Act had been supplemented  by "whether or not such non-levy or non-payment, short-levy or short- payment or erroneous refund, as the case may be, was on the basis of any  approval, acceptance or assessment relating to the rate of duty on or  valuation of excisable goods under any other provisions of this Act or  the rules made thereunder".  According to the learned counsel, what was  exclusively provided for by Rule 173B has now specifically been included  in Section 11A of the Act.

       Mr. Mehta would urge that Section 11A, as it now stands, provides  for reopening of approved classification lists and by reason of a show  cause notice issued in terms thereof, the correctness of approval itself

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can be questioned and in that view of the matter the ratio of the  judgment as laid down in paragraph 13 of the Cotspun (supra) has been  removed.   

       Relying heavily on M/s. Easland Combines (supra), the learned  counsel would argue that the Cotspun (supra) could not have been  rendered if the amended provisions of Section 11A of the Act had been in  existence at the time of the said decision.   

       As regard the question as to whether the processes undertaken by  the appellant for obtaining the end product known as box strappings  would amount to manufacture or not, the learned counsel would submit  that the several stages of processes which are undertaken by the  appellant is a clear pointer to the fact that the same amounts to  manufacturing. The learned counsel would contend that this Court should  not interfere with such a finding of fact.   

       Reliance in this behalf has been placed on Aditya Mills Ltd. Vs.  Union of India [(1988) 4 SCC 315].

       On the question of classification, the learned counsel would  submit that the judgment and order of the Tribunal does not suffer from  any misdirection in law inasmuch as once it is held that the processes  undertaken by the appellants lead to the manufacture of a distinct and  identifiable product known in the marked as box strappings having regard  to the fact that there is no substantial heading for box strappings and  as such the product has rightly been classified as sub-heading 7308.90.   

       As regard the question of limitation and MODVAT, the learned  counsel would submit that as the said question had not been raised  before the Tribunal we should not permit the appellant to do the same  before this Court for the first time.

VALIDATING STATUTE:

Relevant Statutory Provisions:

       Rule 10 of the Central Excise Rules, 1944, as it stood, read as  under: "10. Recovery of duties not levied or not paid or short- levied or not paid in full or erroneously refunded.-- (1) When any duty has not been levied or paid or has  been short-levied or erroneously refunded or any duty  assessed has not been paid in full, the proper 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 to whom the refund has erroneously been  made, or which has not been paid in full, requiring  him to show cause why he should not pay the amount  specified in the notice: Provided that: (a)     where any duty has not been levied or paid or has  been short-levied or has not been paid in full by  reason of fraud, collusion or any wilful mis- statement or suppression of facts by such person  or his agent, or (b)     where any person or his agent, contravenes any of  the provisions of these rules with intent to evade  payment of duty and has not paid the duty in full,  or (c)     where any duty has been erroneously refunded by  reason of collusion or any wilful mis-statement or  suppression of facts by such person or his agent,  the provisions of this sub-section shall, in any

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of the cases referred to above,  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 period of six  months or five years, as the case may be. (2) The Assistant Collector of Central Excise shall, after  considering the representation, if any, made by the person  on whom notice is served under sub-rule (1), determine the  amount of duty due from such person (not being in excess of  the amount specified in the notice) and thereupon such  person shall pay the amount so determined.         (3) For the purposes of this rule,- (i)     "refund", includes rebate referred to in  rules 12 and 12A;  (ii)    "relevant date" means,- (a) in the case of excisable goods on  which duty of excise has not been levied  or paid or on which duty has been short  levied or has not been paid in full, the  date on which the duty was required to be  paid under these rules; (b) in the case of excisable goods on  which the value or the rate of duty has  been provisionally determined under these  rules, the date on which the duty is  adjusted after final determination of the  value or the rate of duty, as the case may  be; (c) in the case of excisable goods on  which duty has been erroneously refunded  the date of such refund."                  Rules 173B and 173C of the Central Excise Rules read as under: "173B ASSESSEE TO FILE LIST OF GOODS PRODUCED  FOR APPROVAL OF THE PROPER OFFICER  (1) Every assessee, shall file with the proper  officer for approval a list in such form as the  Collector may direct (in quintuplicate) showing,  -  (a) the full description of -  (i) all excisable goods produced or manufactured  by him,  (ii) all other goods produced or manufactured by  him and intended to be removed from his factory,  and  (iii) all the excisable goods already deposited  or likely to be deposited from time to time  without payment of duty in his warehouse;  (b) the Chapter, heading No. and sub-heading  No., if any, of the Schedule to the Central  Excise Tariff Act, 1985 (5 of 1986) under which  each goods fall;  (c) the rate of duty leviable on each such  goods; and (d) such other particulars as the Collector may  direct,  (2) The proper officer shall, after such inquiry  as he deems fit, approve the list with such  modifications as are considered necessary and  return one copy of the approved list to the  assessee who shall, unless otherwise directed by  the proper officer, determine the duly payable  on the goods intended to be removed in

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accordance with such list.

(2A)All clearances shall, subject to the  provisions of rule 173 CC, be made only after  the approval of the list by the proper officer.   If the proper officer is of the opinion that on  account of any inquiry to be made, in the matter  or for any other reason to be recorded in  writing, there is likely to be delay in  according the approval, he shall, either on a  written request made by the assessee or on his  own accord, allow such assessee to avail himself  of the procedure prescribed under rule 9B for  provisional assessment of the goods. (3) Where the assessee disputes the rate of duty  approved by the proper officer in respect of any  goods, he may, after giving an intimation to  that effect to such officer, pay duty under  protest at the rate approved by such officer. (4) If in the list approved by the proper  officer under sub-rule (2) any alteration  becomes necessary because of-  (a)     the assessee commencing production,  manufacture or warehousing of goods not  mentioned in that list, or (b)     the assessee intending to remove from  his factory any non-excisable goods not  mentioned in that list, or (c)     a change in the rate or rates of duty  in respect of the goods mentioned in  that list or, by reason of any  amendment to the Schedule to the  Central Excise Tariff Act, 1985 (5 of  1986) change in the Chapter, Heading  No. and Sub-heading No.         the assessee shall likewise file a fresh  list or an amendment of the list already filed  for the approval of such officer in the same  manner as is provided in sub-rule (1) (5) When the dispute about the rate of duty has  been finalized or for any other reasons  affecting rate or rates of duty a modification  of the rate or rates of duty is necessitated,  the proper Officer shall make such modification  and inform the assessee accordingly. (6) The Collector may exempt by a general order  any class of assesses who manufacture wholly  goods which, for the time being, are exempt from  paying duty, from filing the list under sub-rule  (1): Provided that as and when duty exemption is  withdrawn or modified or no longer applicable,  the assessee shall comply with the provisions of  sub-rule (4) as if he had filed a list earlier  and the list had been approved with ’nil’ rate  of duty. 173C ASSESSEE TO FILE PRICE-LIST OF GOODS  ASSESSABLE AD VALOREM.  (1) Every assessee who produces, manufactures or  warehouses goods which are chargeable with duty  at a rate dependent on the value of the goods,  shall file with the proper officer a price-list,  in such form and at such manner and in such  intervals as the Collector may require, showing  the price of each of such goods and the trade

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discount, if any, allowed in respect thereof to  the buyers along with such other particulars as  the Central Board of Excise and Customs or the  Collector may specify.:  (2) Prior approval by the proper officer of the  price-list filed by an assessee under sub-rule  (1) shall be necessary only, where the assessee  -   (i) sells goods to or through related person as  defined in section 4 of the Act; or  (ii) uses such goods for manufacture or  production of other goods in his factory; or  (iii) clears such goods for free distribution;  or  (iv) clears such goods in any other manner which  does not involve sale to a non-related person;  or  (v) clears the goods of the same kind and  quality from his factories located in the  jurisdiction of different Collectors of Central  Excise or Assistant Collectors of Central Excise  or (vi) submits a fresh price-list or an amendment  of the price-list already filed with the proper  officer and which has the effect of lowering the  existing value of the goods.                  ***                     *** (5) Subject to the provisions of rule 173CC, an  assessee specified in sub-rule (2) shall not  clear any goods from a factory, warehouse or  other approved place of storage unless the  price-list has been approved by the proper  officer.  In case the proper officer is of the  opinion that on account of any enquiry to be  made in the matter or for any other reasons to  be recorded in writing, there is likely to be  delay in according approval, he shall either on  a written request made by the assessee or of his  own accord allow such assessee to avail himself  of the procedure prescribed under rule 9B for  provisional assessment of the goods."

       Section 11A  of the Central Excise Act, 1944 introduced from  15.11.1980 reads as follows:

"11A. Recovery of duties not levied or not paid or short-levied  or short-paid or erroneously refunded.-- (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 mis-statement 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 Central  Excise Officer the words "Collector of Central Excise and  for the words "six months"  the words "five years" were

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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."                   Clause 97 of the Finance Act provided that in Sub-Section (1) of  Section 11A of the Act following shall be added:-- "(a) in the opening portion, for the  words "erroneously refunded", the words  "erroneously refunded, whether or not such  non-levy or non-payment, short-levy or  short payment or erroneous refund, as the  case may be was on the basis of any  approval, acceptance or assessment  relating to the rate of duty on or  valuation of excisable goods under any  other provisions of this Act or the rules  made thereunder", shall be substituted and  shall be deemed to have been substituted  on and from the 17th day of November, 1980; (b) for the words "six months", wherever  they occur, the words "one year" shall be  substituted;  (c) after the proviso and before the  Explanation the following provisos shall  be inserted, namely:- "Provided further that where the amount of  duty which has not been levied or paid or  has been short- levied or short-paid or  erroneously refunded is one crore rupees  or less a notice under this sub-Section  shall be served by the Commissioner of  Central Excise or with his prior approval  by any officer subordinate to him: Provided also that where the amount of  duty which has not been levied or paid or  has been short-levied or short-paid or  erroneously refunded is more than one  crore rupees, no notice under this sub- section shall be served without the prior  approval of the Chief Commissioner of  Central Excise".

       Section 11A after amendment by Section 110 of the Finance Act,  2000 reads as under: "11A. Recovery of duties not levied or not paid or short- levied or short-paid or erroneously refunded.-- (1) When any duty of excise has not been levied or  paid or has been short-levied or short-paid or  erroneously refunded, whether or not such non-levy or  non-payment, short-levy or short payment or erroneous  refund, as the case may be, was on the basis of any  approval, acceptance or assessment relating to the  rate of duty on or valuation of excisable goods under  any other provisions of this Act or the rules made  thereunder a Central Excise Officer may, within one  year 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

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or erroneously refunded by reason of fraud, collusion  or any wilful mis-statement or suppression of facts,  or contravention of any of the provisions of this Act  or of the rules made thereunder with an 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 "one year", 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  one year or five years, as the case may be." COTSPUN:

       In Cotspun (supra) classification lists were filed in terms of  Rule 173 B of the Central Excise Rules and the same had been approved by  Revenue.  The approval classified the NES yard under old Tariff Item 19- I(2)(a)(2)(e).  A notice to reopen the assessment was issued on 28th  September, 1977 in respect of the period February, 1977 to May, 1977  inter alia on the ground that the NES yarn ought to have been correctly  classified under old Tariff Item 19-I(2)(F).  Another notice was issued  for a subsequent period.  The contention of the assessee was that the  approved classification list could not be reopened and, therefore, the  demand for differential duty could not be enforced.  The Assistant  Collector upheld the assessee’s contention whereas the Appellate  Collector reversed the same.    The Tribunal held that the revised  assessment could be made effective only prospectively from the date of  the show cause notices and not with reference to earlier removals made  under approved classification lists.  An appeal was filed thereagainst  by the Revenue.  This Court noticed that in terms of Rule 173B which  deals with self-removal procedure, an assessee is required to file  before the proper Excise officer or approval a list of the goods that he  proposes to clear containing a description of the goods produced or  manufactured by him, the goods that he intends to remove and all  excisable goods already deposited or likely to be deposited without  payment of duty in his ware house and to indicate the tariff entry under  which he intends to fall, rate of duty leviable thereon and such other  particulars as may be required.  In terms of Sub-rule (2) of Rule 173B  the proper officer was required to determine the duty payable on the  goods upon making an enquiry in that regard.  Provision for a dispute as  to the approved rate of duty was made in Clause (3).  Sub-rule (5) of  Rule 173B reads as under:

"(5) When the dispute about the rate of duty  has been finalized or for any other reasons  affecting rate or rates of duty a modification  of the rate or rates of duty is necessitated,  the proper Officer shall make such modification  and inform the assessee accordingly."

       In Rainbow Industries (supra), it was held:

"Once the Department accepted the price list,  acted upon it and the goods were cleared with  the knowledge of the Department, then, in  absence of any amendment in law or judicial  pronouncement, the reclassification should be  effective from the date  the Department issued  the show cause notice.  The reason for it is  clearance with the knowledge of the Department  and no intention to evade payment of duty."

       The reason for arriving at the aforementioned conclusion, thus,  was that clearance had been made with the knowledge of the Department

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and there had been no intention to evade payment of duty.        

       However, in Ballarpur Industries (supra), this Court had held that  reclassification would operate retrospectively.  In Ballarpur Industries  (supra), Rainbow Industries (supra) was distinguished stating that the  observations made therein were confined to the facts of that case.   Placing reliance on Rule 10 which was in pari materia with unamended  Section 11A, it was observed:

"The Bench placed reliance upon Rule 10 and  held that, on a plain reading of that provision  as also of Section 11-A, the show-cause notice  which could be issued within the time-limit  prescribed under the relevant provision could  only be in relation to the duty of excise for a  period prior to the issuance of show-cause  notice. There could be no reason for the  issuance of a show-cause notice for the period  subsequent to the notice as in that case the  necessary corrective action could always be  taken. But Rule 10 with which we are concerned  as well as Section 11-A to which a reference is  made in the case of Rainbow Industries ((1994) 6  SCC 563), the show-cause notice which must be  issued within the time frame prescribed in the  said provisions must relate to a period prior  thereto as the purpose of the show-cause notice  is recovery of duties or charges short-levied,  etc. We, therefore, find it difficult to accept  the contention that the ratio of the decision in  Rainbow Industries ((1994) 6 SCC 563) is that  under Section 11-A past dues cannot be demanded.  We must, therefore, reject that contention".

       The controversy, thus, revolved round the question as to whether  until the proposal for modification of the classification was mooted,  the earlier classification would operate or as to whether duty in  accordance with law also could be demanded.   

       The Constitution Bench analyzing the provisions of Rule 10 and  Rule 173B observed:

The levy of excise duty on the basis of an  approved classification list is the correct  levy, at least until such time as to the  correctness of the approval is questioned by the  issuance to the assessee of a show-cause notice.  It is only when the correctness of the approval  is challenged that an approved classification  list ceases to be such.  The levy of excise duty on the basis of an  approved classification list is not a short  levy. Differential duty cannot be recovered on  the ground that it is a short levy. Rule 10 has  then no application.  VALIDATION ACT:

       Section 11A as amended by Finance Act, 2000 brings about  absolutely a different situation.   

       Statement of Objects and Reasons for amending Section 11A reads,  thus:

"Clause 106 seeks to validate certain action

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taken under Section 11A of the Central Excise  Act with retrospective effect from 17th November,  1980, so as to prescribe that the notices issued  under the said section for non-recovery or  short-recovery or erroneous refund of duties for  a period of six months or five years in certain  situations will prevail notwithstanding any  approval, acceptance or assessment of duty under  the provisions of the Central Excise Rules. The  clause also seeks to validate actions taken in  the past on this basis in conformity with the  legislative intention. This amendment has become  necessary to overcome certain judicial  pronouncements."

       Further, Clause 110 of the Finance Act validating actions taken  under Section 11A provides as under:-- "110.(1) Any notice issued or served on any  person under the provisions of Section 11A of  the Central Excise Act during the period  commencing on and from the 17th day of November,  1980 and ending on the date on which the Finance  Act, 2000 receives the assent of the President  (hereinafter referred to as the said period)  demanding duty on account of non-payment, short  payment, non-levy, short-levy or erroneous  refund within a period of six months or five  years, as the case may be, from the relevant  date as defined in Clause (ii) of Sub-section  (3) of that section shall be deemed to be and to  always have been, for all purposes, validly and  effectively issued or served under that section,  notwithstanding any approval, acceptance or  assessment relating to the rate of duty on or  value of, the excisable goods by any Central  Excise Officer under any other provision of the  Central Excise Act or the rules made thereunder. (2) Any action taken or anything done or  purporting to have been taken or done under  Section 11A of the Central Excise Act at any  time during the said period shall be deemed to  be and to have always been, for all purposes, as  validly and effectively taken or done as if Sub- section (1) had been in force at all material  times and, accordingly, notwithstanding anything  contained in any judgment, decree or order of  any court, tribunal or other authority,- (a) all duties of excise levied, assessed  or collected during the period specified  in Sub-section (1) on any excisable goods  under the Central Excise Act, shall be  deemed to be and shall be deemed to always  have been, as validly levied, assessed or  collected as if Sub-section (1) had been  in force at all material times; (b) no suit or other proceedings shall be  maintained or continued in any court,  tribunal or other authority for the refund  of, and no enforcement shall be made by  any court of any decree or order directing  the refund of any such duties of excise  which have been collected and which would  have been validly collected if Sub-section  (1) had been in force at all material  times;

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(c) recovery shall be made of all such  duties of excise which have not been  collected or, as the case may be, which  have been refunded but which would have  been collected or, as the case may be,  would not have been refunded, if Sub- section (1) had been in force at all  material times. Explanation.--"For the removal of doubts, it is  hereby declared that no act or omission on the  part of any person shall be punishable as an  offence which would not have been so punishable  if this section had not come into force."

THE LAW OPERATING IN THE FIELD:         A validation Act removes actual or possible voidness, disability  or other defect by confirming the validity of anything which is or may  be invalid.

       In Shri Prithvi Cotton Mills Ltd. & Anr. Vs. Broach Borough  Municipality & Ors. [(1969) 2 SCC 283], it was pointed out that a  legislature does possess the power to validate statutes and to pass  retrospective laws.  The Court, however, laid down:   "When a Legislature sets out to validate a tax  declared by a court to be illegally collected  under an ineffective or an invalid law, the  cause for ineffectiveness or invalidity must be  removed before validation can be said to take  place effectively. The most important condition,  of course, is that the Legislature must possess  the power to impose the tax, for, if it does  not, the action must ever remain ineffective and  illegal. Granted legislative competence, it is  not sufficient to declare merely that the  decision of the Court shall not bind for that is  tantamount to reversing the decision in exercise  of judicial power which the Legislature does not  possess or exercise. A court’s decision must  always bind unless the conditions on which it is  based are so fundamentally altered that the  decision could not have been given in the  altered circumstances. Ordinarily, a court holds  a tax to be invalidly imposed because the power  to tax is wanting or the statute or the rules or  both are invalid or do not sufficiently create  the jurisdiction. Validation of a tax so  declared illegal may be done only if the grounds  of illegality or invalidity are capable of being  removed and are in fact removed and the tax thus  made legal. Sometimes this is done by providing  for jurisdiction where jurisdiction had not been  properly invested before. Sometimes this is done  by re-enacting retrospectively a valid and legal  taxing provision and then by fiction making the  tax already collected to stand under the re- enacted law. Sometimes the Legislature gives its  own meaning and interpretation of the law under  which the tax was collected and by legislative  fiat makes the new meaning binding upon courts.  The Legislature may follow any one method or all  of them and while it does so it may neutralise  the effect of the earlier decision of the court  which becomes ineffective after the change of  the law. Whichever method is adopted it must be

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within the competence of the legislature and  legal and adequate to attain the object of  validation. If the Legislature has the power  over the subject-matter and competence to make a  valid law, it can at any time make such a valid  law and make it retrospectively so as to bind  even past transactions. The validity of a  Validating Law, therefore, depends upon whether  the Legislature possesses the competence which  it claims over the subject-matter and whether in  making the validation it removes the defect  which the courts had found in the existing law  and makes adequate provisions in the Validating  Law for a valid imposition of the tax."

       In M/s. Ujagar Prints and Others (II) Vs. Union of India and  Others [(1989) 3 SCC 488] wherein after considering various decisions,  this Court held thus:

"A competent legislature can always validate a  law which has been declared by courts to be  invalid, provided the infirmities and vitiating  infactors noticed in the declaratory judgment  are removed or cured. Such a validating law can  also be made retrospective. If in the light of  such validating and curative exercise made by  the legislature - granting legislative  competence - the earlier judgment becomes  irrelevant and unenforceable, that cannot be  called an impermissible legislative overruling  of the judicial decision. All that the  legislature does is to usher in a valid law with  retrospective effect in the light of which  earlier judgment becomes irrelevant. (See Shri  Prithvi Cotton Mills Ltd. Broach Borough  Municipality ((1969) 2 SCC 283 : (1970) 1 SCR  388 (1971) 79 ITR 136)).  66. Such legislative experience of validation of  laws is of particular significance and utility  and is quite often applied, in taxing statues.  It is necessary that the legislature should be  able to cure defects in statues. No individual  can acquire a vested right from a defect in a  statute and seek a windfall from the  legislature’s mistakes. Validity of legislations  retroactively curing defects in taxing statues  is well recognised and courts, except under  extraordinary circumstances, would be reluctant  to override the legislative judgment as to the  need for and the wisdom of the retrospective  legislation. In Empire Industries Ltd. v. Union  of India ((1985) 3 SCC 314 : 1985 SCC (Tax) 416  : 1985 Supp 1 SCR 292), this Court observed :  .... not only because of the paramount  governmental interest in obtaining adequate  revenues, but also because taxes are not in the  nature of a penalty or a contractual obligation  but rather a means of apportioning the costs of  government amongst those who benefit from it.  In testing whether a retrospective imposition of  a tax operates so harshly as to violate  fundamental rights under Article 19(1)(g), the  factors considered relevant include the context  in which retroactivity was contemplated such as  whether the law is one of validation of a taxing

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statute struck down by courts for certain  defects; the period of such retroactivity, and  the degree and extent of any unforeseen or  unforeseeable financial burden imposed for the  past period etc. Having regard to all the  circumstances of the present case, this Court in  Empire Industries case ((1985) 3 SCC 314 : 1985  SCC (Tax) 416 : 1985 Supp 1 SCR 292) held that  the retroactivity of the amending provisions was  not such as to incur any infirmity under Article  19(1)(g)."

       In Delhi Cloth & General Mills Co. Ltd. and Another Vs. State of  Rajasthan and Others [(1996) 2 SCC 449] a question arose as to whether a  village which was not held to have been included within the limits of a  town municipality as mandatory provisions in that part had not been  followed could be so included with retrospective effect by a Validating  Act by seeking to set at naught a full Bench decision of the Rajasthan  High Court.  Referring to Prithvi Cotton Mills (supra) it was held: "15. In the case of the village of Raipura  there was a preliminary notification calling for  objections to the extension of the limits of the  Kota Municipality to include it, but it was not  followed by a final notification. In the case of  the village of Ummedganj there was a  notification extending the limits of the Kota  Municipality to include it, but it had not been  preceded by a notification inviting the  objections of the public thereto. Later, another  notification was published whereby the village  of Ummedganj was excluded from the limits of the  Kota Municipality. The provisions of Sections 4  to 7 of the 1959 Act and the earlier provisions  of the 1951 Act in the same behalf were,  therefore, not met in the case of either the  village of Raipura or the village of Ummedganj.  The Full Bench of the Rajasthan High Court has  held that these provisions were mandatory and  that judgment has become final.  16. The Validating Act provides that,  notwithstanding anything contained in Sections 4  to 7 of 1959 Act or in any judgment, decree,  order or direction of any court, the villages of  Raipura and Ummedganj should be deemed always to  have continued to exist and they continue to  exist within the limits of the Kota  Municipality, to all intents and for all  purposes. This provision requires the deeming of  the legal position that the villages of Raipura  and Ummedganj fall within the limits of the Kota  Municipality, not the deeming of facts from  which this legal consequence would flow. A legal  consequence cannot be deemed nor, therefrom, can  the events that should have preceded it. Facts  may be deemed and, therefrom, the legal  consequences that follow."           As Sections 4 to 7 of Rajasthan Municipalities Act, 1959 remained  unamended which were mandatory, the defect was held to have not been  cured.

       Yet again in K. Shankaran Nair (Dead) through LRs. Vs. Devaki Amma  Malathy Amma and Others [(1996) 11 SCC 428] this Court followed the  aforementioned as well as and other decisions of this Court.  It was  observed:

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"It becomes at once clear that once this Court  struck down the rule concerned permitting  compulsory retirement of a government servant  the very basis of the earlier judgment upholding  such an exercise got knocked off and was totally  obliterated from the Statute-Book. Consequently  the very foundation of the judgment vanished.  Such a judgment would obviously become baseless  lacking the very foundation on which it could  operate. The very foundation of an earlier  judgment can be displaced by either a competent  legislature enacting a retrospective provision  for that purpose or by a competent court  deciding the legal provision concerned on which  such judgment is based as ultra vires and void.  In either case the very foundation and legal  substitution of such judgment will vanish  retrospectively. In such an eventuality the law  could be said to have been totally displaced  from the very inception of enactment of such a  law and consequently any judgment based on such  a non-existing law as found in retrospect could  obviously lack efficacy and consequential force  of res judicata."

       In Bakhtawar Trust and Others Vs. M.D. Narayan and Others [(2003)  5 SCC 298], one of us (Khare, CJI) speaking for the Bench upon noticing  some of the decisions referred to hereinbefore and other decisions  observed that the questions which were required to be posed and answered  are:

(i)     what was the basis of the earlier decision; and (ii)    what, if any, may be said to be removal of that basis?

       Upon considering the relevant provisions therein it was held that  the basis of the decision of the High Court had undergone a change  having regard to the change in the Zonal Planning Regulations which now  changed the law, which the High Court was bound to take the view in  terms of the changed law.  This Court held:

"It is well settled by the decisions of this  Court that when a validity of a particular  statute is brought into question, a limited  reference, but not reliance, may be made to the  Statement of Objects and Reasons. The Statement  of Objects and Reasons may, therefore, be  employed for the purposes of comprehending the  factual background, the prior state of legal  affairs, the surrounding circumstances in  respect of the statute and the evil which the  statute has sought to remedy. It is manifest  that the Statement of Objects and Reasons  cannot, therefore, be the exclusive footing upon  which a statute is made a nullity through the  decision of a Court of law."

       In Easland Combines (supra), this Court held:

"In our view, there is no substance in this  submission. As stated earlier, the relevant  amended portion of Section 11A inter alia makes  it abundantly clear that when any duty of excise  has been short levied or short paid, whether or

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not such short levy or short payment was on the  basis of any approval, acceptance or assessment  relating to the rate of duty on or valuation of  excisable goods under any other provisions of  the Act or the rules, the Central Excise  Officer, can within one year from the relevant  date, serve notice on the person chargeable with  the duty, which has been short levied or short  paid, requiring him to show cause why he should  not pay the amount specified in the notice. This  amendment changes the entire basis or foundation  of the judgment rendered in Cotspun’s case  (supra). The entire discussion in the said case  is based upon rule 173B which dealt with  classification list and that assessee must  determine the excise duty which is payable by  him on the goods which he intends to remove in  accordance with approved classification list.  The Court based its reasoning by holding "Rule  10 does not deal with classification list or  relate to reopening of approved classification  lists. That is exclusively provided by Rule  173B." The Court further held that the levy of  excise duty on the basis of approved  classification list is not short levy and the  differential duty cannot be recovered on the  ground that it is a short levy and Rule 10 then  has no application. After the amendment of law,  this reasoning of the judgment would no longer  survive. It is true that the levy of excise duty  on the basis of approved classification list or  price-list or the assessment order is correct  levy till such time as the correctness of the  approved classification list or price list or  till the assessment order is set aside. However,  with retrospective effect, the legislature has  empowered the Central Excise Officer to set at  naught the erroneous approval of classification  list or acceptance of price list or assessment  order. What was provided by Rule 173B is now  specifically provided by Section 11A."  

       We may notice that in Widia (India) Ltd. and Others Vs. State of  Karnataka and Others [(2003) 8 SCC 22], this Court held: "It is true that normally tax would not be  levied with retrospective effect but at the same  time to validate the tax which was levied, after  removing the defects pointed out by the previous  decision, the State Government could exercise  its powers under Section 3(1) of the Act and it  cannot be said that it has acted beyond its  jurisdiction. Therefore, it cannot be held that  notification dated 23rd September, 1998  empowering the authority to levy and collect tax  w.e.f. 1.4.1994 to 6.1.1998 is, in any way,  illegal or erroneous. The defects pointed out in  Avinyl Polymers’s case (supra) are removed and,  therefore, it cannot be said that the  notification dated 23.9.1998 is, in any way,  illegal. In a situation like the present one  where notifications levying tax were held to be  illegal, for validating such levy, the State  Government has issued the aforesaid  notification. It is not pointed out that the

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said notification is discriminatory between the  goods imported from other States and similarly  goods manufactured or produced within the  State."

APPLICATION OF THE LAW:

       The Statements of Objects and Reasons for enacting a statute can  be read for a limited purpose.  In Cotspun (supra) this Court held that  Rule 10 does not deal with classification list or relate to reopening of  the approved classification list.  According to the Constitution Bench,  the same is exclusively provided by Rule 173B.  

       Section 11A deals with a case when inter alia excise duty has been  levied or has been short-levied or short-paid.  The word "such"  occurring after the words "whether or not" refers to non-levy, non- payment, short-levy or short-payment or erroneous refund.  It is,  therefore, not correct to contend that the word "such" indicates only  such short-levy which has been held to be non-existent in Cotspun having  regard to Rule 173B.  Such short-levy or non-levy may be on the basis of  any approval, acceptance or assessment relating to the rate of duty on  or valuation of excisable goods.  Thus, any approval made in terms of  Rule 10, in the event, any mistake therein is detected, would also come  within the purview of the expression "such short-levy or short- payment".  Such notice is to be served on the person chargeable with  the duty which inter alia has been short-levy or short-paid.

       It is true that Rule 173B has not been amended.  But even if the  same has not been done, it would not make a material difference as now a  comprehensive provision has been made in the primary Act, and, thus, a  rule framed thereunder even in case of conflict must give way to the  substantive statute.  It is a well-settled principle of law that in case  of a conflict between a substantive act and delegated legislation, the  former shall prevail inasmuch as delegated legislation must be read in  the context of the primary/ legislative act and not the vice-versa.

       The procedure laid down under Rule 173B of the Rules has  specifically been included in the Act.  Furthermore, by reason of the  amended Act a provision has been made for reopening the approved  classification lists.  It is a procedural provision in terms whereof  statutory authorities are required to determine as to whether the  earlier classification was correctly done or not.  The said authority  upon giving an opportunity of hearing the parties may come to the  conclusion that decision on the approval granted need not be reopened  and even if the same is reopened, the reasons therefor are to be stated.   As the provision of Section 11A is a recovery provision as regards non- levy or non-paid or short-levy or short-paid or erroneously refunded  duties by reason of the said amendment the Parliament had merely  provided that an approval on the basis of a classification list inter  alia in case of a short-levy can be recovered if a finding is arrived at  that the goods had undergone a short-levy.  For the aforementioned  purpose, Clause 110 of the Finance Act, validating actions taken under  Section 11A can be taken into consideration whereby and whereunder a  legal fiction is created.

       The effect of creating such legal fiction is well-known and need  not be reiterated.  [See Bhavnagar University Vs. Palitana Sugar Mill  Pvt. Ltd. and others (2003) 2 SCC 111, State of Karnataka Vs.  Vishwabharathi House Building Coop. Soc. & Ors. (2003) 2 SCC 412, High  Court of Judicature for Rajasthan Vs. P.P. Singh and Anr  2003 (4) SCC  239 and Dipak Chandra Ruhidas Vs. Chandan Kumar Sarkar (2003) 7 SCC 66]

       Before us, the constitutionality of Section 11A as amended in the  year 2000 has not been questioned.         

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       Cotspun (supra) was decided when the matters relating to  classification, approval thereof as also short-levy or upon detection of  a mistake were governed by the rules.  Rule 10 and Rule 173 B were to be  read in conjunction with each other and the Constitution Bench merely  followed the said principle of interpretation of statute.  A different  situation has arisen now having regard to the fact that not only the  substantive provision dealing with the consequence of non-levy, non- payment or short levy or short-payment or erroneous refund but also has  laid down the procedure therefor.

       A statute, it is trite, must be read as a whole.  The plenary  power of legislation of the Parliament or the State Legislature in  relation to the legislative fields specified under Seventh Schedule of  the Constitution of India is not disputed.  A statutory act may be  enacted prospectively or retrospectively.  A retrospective effect  indisputably can be given in case of curative and validating statute.   In fact curative statutes by their very nature are intended to operate  upon and affect past transaction having regard to the fact that they  operate on conditions already existing.  However, the scope of the  validating act may vary from case to case.

       For the reasons aforementioned, we are of the opinion that the  Section 11A of the Act as amended is a valid piece of legislation.

LIMITATION:

       Having answered the reference, we are of the opinion that this  Court in the peculiar facts and circumstances of this case at this stage  need not go into the question as to whether the processes undertaken by  the appellant would amount to manufacture or whether the classification  of goods under sub-heading 7308.90 is correct, in view of the fact that  the question as regard limitation and availability of MODVAT had not  been considered.

       It is not in dispute that in terms of Section 11A a show cause  notice for short-levy could have been issued only within six months from  the relevant date.  Only in the event, such short-levy was imposed on  account of fraud, collusion, willful mis-statement or suppression of  facts with an intent to evade payment of duty on the part of the  manufacturer, the extended period of limitation of five years could be  invoked.

       The appellant herein in paragraph 15 of reply dated 2nd June, 1987  categorically stated that such classification has been made to the  knowledge of the Department.  It was contended:

"On the contrary all the processes were carried  out openly and they itself had come up for  detailed consideration and eventually the  decision was taken under Assistant Collector’s  order dated 14.7.83 after due application of  mind and it would, therefore, be incredible to  allege as is sought to be done that the  department was not in a position to get first- hand knowledge of the various processes  adopted."                  The appellant further had contended: "We deny each and every allegation contained in  the show cause notice.  We submit that from the  legal point of view the classification cannot be  changed as proposed in the show cause notice,  nor does the factual position warrant  modification of the classification.  When  Heading/Sub-heading 7211.31 is specific (cold

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rolled strips), the goods cannot be consigned to  7308.90 which is not specific and is a residuary  item.  As long as the subject goods were not  classifiable under T.I 68 when it existed, they  cannot attract the corresponding sub-heading  7308.90.  We also submit that Rule 9(2) cited in  the show cause notice is not applicable since  there was no clandestine clearances."

       It is, therefore, evident that the contention of the appellant was  that Rule 9(2) cited in the show cause notice was not applicable.  But,  unfortunately, despite the same it had not been adverted to by the  tribunal.  We must notice that the appellant herein succeeded before the  Appellate Collector.  The Revenue went up in appeal.  The Tribunal was,  therefore, bound to take the aforementioned question into consideration  inasmuch a finding of fact was required to be arrived at that the period  of limitation for issuing such notices under Section 11A of the Act  would depend upon the question as to whether such short-levy was due to  any act of fraud, collusion, willful, mis-statement or suppression of  facts, the extended period of limitation of five years could not have  been invoked.

       Such an extended period of limitation can be invoked only on a  positive act of fraud etc. on the part of assessee is found.  Such a  positive act must be in contradistinction to mere inaction like non- taking of licence etc.  It has to be pleaded and established. [See  Padmini Products (supra), P&B Pharmaceuticals Ltd. (supra) and Pushpam  Pharmaceuticals Ltd. (supra)]

       Even in Easland Combines(supra) this Court held: "It is settled law that for invoking the  extended period of limitation duty should not  have been paid, short levied or short paid or  erroneously refunded because of either fraud,  collusion, wilful misstatement, suppression of  fact or contravention of any provision or rules.  This Court has held that these ingredients  postulate a positive act and, therefore, mere  failure to pay duty and/or take out a licence  which is not due to any fraud, collusion or  willful misstatement or suppression of fact or  contravention of any provision is not sufficient  to attract the extended period of limitation."

       The question of limitation involves a question of jurisdiction.   The findings of fact on the question of jurisdiction would be a  jurisdictional fact.  Such a jurisdictional question is to be determined  having regard to both fact and law involved therein.  The Tribunal, in  our opinion, committed a manifest error in not determining the said  question, particularly, when in the absence of any finding of fact that  such short-levy of excise duty related to any positive act on the part  of the appellant by way of fraud, collusion, willful mis-statement or  suppression of facts, the extended period of limitation could not have  been invoked and in that view of the matter no show cause notice in  terms of Rule 10 could have been issued.   

       Furthermore, even if the short-levy, if any, is to be recovered,  the appellant was entitled to raise a question that he is entitled to  adjust the duty upon taking MODVAT credit of the duty paid on cold  rolled steel strips.  These aspects of the matter, in our opinion,  required to be gone into by the Tribunal.   

CONCLUSION:

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       For the reasons aforementioned, the impugned judgment cannot be  sustained which is set aside and the matter is remitted to the Tribunal  for consideration thereof afresh in accordance with law and in the light  of the observations made herein.  This appeal is allowed in part but  without any order as to costs.