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CASE NO.: Appeal (civil)  2350 of 2002

PETITIONER: M/s. Pahwa Chemicals Pvt. Ltd.                           

RESPONDENT: The Commissioner of Central Excise, New Delhi            

DATE OF JUDGMENT: 24/02/2005

BENCH: S. N. Variava,Dr. AR. Lakshmanan & S. H. Kapadia

JUDGMENT: J U D G M E N T WITH CIVIL APPEAL NO. 406 OF 2004 S. N. VARIAVA, J.

       Civil Appeal No. 2350 is filed against the Judgment dated 19th  July, 2001 passed by the Customs, Excise & Gold (Control) Appellate  Tribunal (for short ‘CEGAT’) and Civil Appeal No. 406 of 2004 is filed  against the Judgment dated 25th June, 2003 passed by CEGAT.   Both  these Appeals can be disposed off by this common Judgment as the  parties are the same and the question involved is the same.           Briefly stated the facts are as follows: The Appellants are engaged in manufacture of Textile Printing  Adhesives falling under Chapter Heading No. 3402 of the Central  Excise Tariff Act, 1985.  The Appellants were claiming benefit of  Notification No. 1 of 1993 as amended and Notification No. 16 of 1997.   Show-cause-notices were issued to them alleging that they were not  entitled to the benefit of the Notifications as they were using the logo  of "ATR" belonging to one M/s. ATR St. Moritz A.G., Switzerland.     Duty and penalty was demanded from them for having suppressed the  facts and non-payment of duty.   The Appellants replied to the notices.    However, the Deputy Commissioner confirmed the demand of  Rs.26,74,875.75 and imposed a penalty of Rs. 26,00,000/-.            The Appellants filed an Appeal before the Commissioner of  Central Excise (Appeals).  They inter alia contended that, as  suppression has been alleged, the Superintendent who had issued the  show-cause-notices was not competent to issue the show-cause- notices and the Deputy Commissioner was not competent to  adjudicate.   The Commissioner (Appeals) upheld the contention that  the show-cause-notices were wrongly issued and had been wrongly  adjudicated by the Deputy Commissioner in excess of powers vested in  him by the Central Board of Central Excise (for short ‘Board‘).   The  Commissioner (Appeals) remitted the matter back with the following  directions:- "I.     If the matter does not really merit invocation of  suppression of facts, willful misstatement, etc., the  superfluous words may be got deleted from the  subject Show Cause Notices by issuing suitable  corrigenda and the matter may be re-adjudicated by  the competent adjudicating authority.  The SSI  Notification Nos. may also be duly amended and  substituted by Notifications in force during the  periods of demand.

II.     If the charge of misstatement suppression of facts  etc. is to be retained, fresh Show Cause Notices may  be issued in supersession of the impugned Show  Cause Notices in line with the instructions contained  in the two circulars referred to above.

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III.    While re-adjudicating the matter, the appellants’  contention that vide their letter dated 1.4.99, they  had sent a specimen of the label to be used by them  and that this specimen shows that their own brand  name was more prominently displayed than the  foreign brand name and that the price should be  treated as cum-duty price should be examined in the  light of the various CEGAT decisions available on this  subject."

                Aggrieved by the directions given, the Appellants filed an Appeal.   CEGAT by its Order dated 19th July, 2001 held that the Commissioner  (Appeals) should not have remitted the matter back with the above  directions and directed the Commissioner (Appeals) to decide the  matter on merits.   CEGAT also held on merits that the Appellants  were not entitled to the benefits of the above mentioned Notifications  as they used the brand name of another Company on their products.    Aggrieved by this Order the Appellants have filed Civil Appeal No. 2350  of 2002.          No stay was granted in this Appeal, therefore, the Commissioner  (Appeals) adjudicated and confirmed the demand by an Order dated  17th July, 2002.  The Appellants then filed an Appeal before CEGAT  wherein the only contention taken was that the Superintendent had no  jurisdiction to issue show-cause-notices and the Deputy Commissioner  had no jurisdiction to adjudicate.   CEGAT has dismissed the Appeal by  the Order dated 25th June, 2003.  The Appellants have filed Civil  Appeal No. 406 of 2004 against this Order.           It must be mentioned that the only point agitated is that the  Superintendent had no jurisdiction to issue the show-cause-notices  and that the Deputy Commissioner had no jurisdiction to adjudicate.  This is because in an earlier round it has already been held by CEGAT,  by its order dated 17th October, 2000 that the Appellants are not  entitled to the benefit of the Notifications.  Against that Order Civil  Appeal No.4050 of 2001 is pending before this Court.         In order to consider this point it is necessary to see the relevant  provisions.            Section 11A, as it stood, prior to 14th May, 1992 reads as  follows: "SECTION 11A. Recovery of duties not levied or not  paid or short-levied or short-paid or erroneously  refunded.\027(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  willful 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  substituted.

       Explanation.\027Where the service of the notice is

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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.

       (2) The Assistant Collector of Central Excise or, as  the case may be, the Collector of Central Excise shall, after  considering the representation, if any, made by the person  on whom notice is served under sub-section (1), determine  the amount of duty of excise 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 section,--

(i)     "refund", includes rebate of duty of excise  on excisable goods exported out of India or  on excisable materials used in the  manufacture of goods which are exported  out of India;

(ii)    "relevant date" means, --

(a)     in the case of excisable goods on which  duty of excise has not been levied or  paid or has been short-levied or short- paid\027

(A)     where under the rules made  under this Act a monthly return,  showing particulars of the duty  paid on the excisable goods  removed during the month to  which the said return relates, is  to be filed by a manufacturer or  producer or a licensee of a  warehouse, as the case may be,  the date on which such return is  so filed; (B)     where no monthly return as  aforesaid is filed, the last date on  which such return is to be filed  under the said rules; (C)     in any other case, the date on  which the duty is to be paid  under this Act or the rules made  thereunder;

(b)     in a case where duty of excise is  provisionally assessed under this Act or  the rules made thereunder, the date of  adjustment of duty after the final  assessment thereof; (c)     in the case of excisable goods on which  duty of excise has been erroneously  refunded, the date of such refund.

Thus, under Section 11A, as it then stood, whenever it was alleged  that there was fraud, collusion, willful misstatement or suppression of  facts, the show-cause-notices could only be issued by the Collector.   As the Act itself laid down a requirement, it has been held, in a  number of authorities, that a show-cause notice issued and/or  adjudication done by an officer below the rank of a Collector would be  invalid as such an officer had no jurisdiction.  

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       With effect from 14th May, 1992 Section 11A was amended and  the word "Collector" was deleted and the words "Central Excise  Officer" were incorporated.  Thus, the Legislature purposely and  knowingly made a change whereby it was no longer required that  where allegations of fraud, collusion, willful misstatement or  suppression of facts are made, a Collector should issue a show-cause  notice or adjudicate the same.  Now a Central Excise Officer also has  the jurisdiction.         Section 2(b) of the Act defines a "Central Excise Officer" as  follows: "2(b).   "Central Excise Officer" means the Chief  Commissioner of Central Excise, Commissioner of Central  Excise, Commissioner of Central Excise (Appeals),  Additional Commissioner of Central Excise, Deputy  Commissioner of Central Excise, Assistant Commissioner of  Central Excise or any other officer of the Central Excise  Department, or any person (including an officer of the  State Government) invested by the Central Board of Excise  and Customs constituted under the Central Boards of  Revenue Act, 1963 (54 of 1963) with any of the powers of  a Central Excise Officer under this Act."

Thus, even an Additional Commissioner or an Assistant Collector or a  Deputy Commissioner or any other Officer of the Central Excise or any  person invested by the Board with the power of the Central Excise  Officer would be a Central Excise Officer.  Even though the Legislature  made this change, the Board issued a Circular dated 27th February  1997 which reads as follows:

       "I am directed to say that the Board has decided to  review the powers of adjudication with the objective that  cases are decided expeditiously, there is even distribution  of workload and various doubts in this regard are clarified.

       2. In this connection, the following facts and legal  position has been taken into consideration:-

(i)     By virtue of Clause (a) of Section 33 of  Central Excise Act, 1944, Commissioners  can adjudicate the cases of confiscation and  penalty without limit.   This power has been  delegated to Deputy Commissioners by CBR  Notification No.12-C.Ex., dated 17th May,  1947, to Assistant Commissioners of Central  Excise by CBR Notification No.8-C.E., dated  2nd September, 1944 and to Superintendent  of Central Excise by CBR Notification  No.93/59, dated 28th November, 1959. (ii)    So far as the confirmation of duty is  concerned, it is observed that Section 11A  empowers any Central Excise Officer to  issue the notice and determine the duty  due. (iii)   Likewise, the "proper officer" i.e.  Jurisdictional Central Excise Officer can  issue notice and adjudicate the demands  under Rule 9(2)/Rule 57-I/Rule 57U of  Central Excise Rules, 1944. (iv)    In order to bring about uniformity and  objectivity the Board issued instructions  defining powers of adjudication of specified  Central Excise Officers taking ’duty involved’  as the criterion.

       3.  Those show cause notices where adjudication

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orders are not passed upto 28th February, 1997, will be  adjudicated as provided hereinafter :-

(A)     All cases involving fraud, collusion, any willful  mis-statement, suppression of facts, or  contravention of Central Excise Act/Rules made  thereunder with intent to evade payment of  duty and/or where extended period has been  invoked in show cause notices, (including  Modvat cases, Rule 9(2) cases of this type) will  be adjudicated by :-

(Amt. of duty involved)

Commissioners           -       Without limit

Addl. Commissioners    -  Upto Rs. 10 lakhs

(B)     In respect of cases which do not fall  under the category (A) above, will be  adjudicated by :-

(Amt. of duty involved)

Commissioners           -       Without limit

Addl. Commissioners/    -  Above Rs. 2 lakhs                  Dy. Commissioners           and upto Rs. 10 lakhs

               Assistant Commissioner  -  Upto Rs. 2 lakhs

Notwithstanding the powers of Assistant Commissioners to  adjudicate the cases involving duty amount upto Rs. 2  lakhs only as above, all cases of determination of valuation  and/or classification other than those covered under  Category (A) above, will be adjudicated by the Assistant  Commissioners without any limit as hitherto, as also  Modvat disputes, other than those at category (A) above.

(C)     Cases related to issues mentioned under first  proviso to Section 35B(1) of Central Excise  Act, 1944 would be adjudicated by the Addl.  Commissioners/Dy. Commissioners without  any monetary limit, as was the position under  Board’s Circular No. 13/93-CX., dated 15th  October, 1993.

4.      The value of goods/conveyance, plants,  machinery and building etc., liable to confiscation will not  alter above powers of adjudication which will solely depend  upon the amount of duty/Modvat credit involved on the  offending goods.

5.1 In respect of cases covered under Category (A)  of Para 3 above, the show cause notices will be issued by  the same rank of officers who will adjudicate them.   Wherever the posts of Commissioner-I and Commissioner- II (Judicial) are in existence, the show cause notices will  be issued by Commissioner-I.

5.2     In respect of cases covered under Category (B)  of Para 3 above, show cause notices will be issued by the  Range Superintendent where they are to be adjudicated by  the Assistant Commissioner and such notices will be issued  by Assistant Commissioner when they are adjudicated by

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Dy. Commissioner/Addl. Commissioner/Commissioner.

5.3     In respect of cases covered under category (C)  of Para 3 above, show cause notices will be issued by  Assistant Commissioner.

6.      The definition of expression "Commissioner"  contained in Rule 2(ii) was amended by Notification No.  11/92-C.E. (N.T.), dated 14-5-1992.  Accordingly, an  Additional Commissioner of Central Excise is not a  Commissioner for the purposes of appeal.  Therefore,  appeal against the Order-in-Original passed by an Addl.  Commissioner of Central Excise shall lie to the  Commissioner of Central Excise (Appeals) and not to the  CEGAT.

7.      All Previous Board’s Circulars relating to issue  of show cause notices and their adjudications except the  Circular No. 13/93-C.X., are hereby rescinded.   

8.      An immediate exercise should be undertaken  thereafter to take the stock of the pendencies as on 1st  March and transfer of the relevant files and records to  respective adjudicating authorities by 15th March, 1997  under proper receipt.  This re-cast figures should be  reflected suitably in the Monthly Technical Report of March,  1997 to be submitted in April, 1997.

9.      Receipt of this Circular may please be  acknowledged.

10.     The trade and field formations may be suitably  informed."                  

By clauses 3(A) and 5.1 of this Circular, the Board is directing that in  cases of fraud, collusion, willful misstatement or suppression of facts  the notice must be issued and adjudication must take place by the  Commissioner without limit and by the Deputy Commissioner up to a  limit of Rs.10,00,000/-.   Thereafter the Board by another Circular  dated 13th August, 1997 reiterated the above position.         The Appellants place strong reliance upon these two Circulars  and submit that by virtue of these Circulars the Superintendent had no  jurisdiction to issue the show-cause-notices and that the Deputy  Commissioner had no jurisdiction to adjudicate.           As noted above, the Legislature has purposely omitted the word  "Collector" from the proviso to Section 11A and replaced it with the  words "Central Excise Officer".   It is the Act which confers jurisdiction  on the concerned Officer/s.  The Act permits any Central Excise Officer  to issue the show-cause notices even in cases where there are  allegations of fraud, collusion, willful misstatement and suppression of  facts.  The question therefore is: Can the Board override the provisions  of the Act by issuing directions in the manner in which it is done and if  the Board cannot do so then what is the effect of such Circulars?         In order to consider the powers of the Board one needs to see  certain provisions of the Act.  Section 2(b) defines the "Central Excise  Officer" and it is mentioned therein that any Officer of the Central  Excise Department or any person who has been invested by the Board  with any of the powers of the Central Excise Officer would be a Central  Excise Officer. Thus, the Board has power to invest any Central Excise  Officer or any other Officer with powers of Central Excise Officer.  By  virtue of Section 37B the Board can issue orders, instructions or  directions to the Central Excise Officers and such Officers must follow  such orders, instructions or directions of the Board.  However, these  directions can only be for the purpose of uniformity in the classification

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of excisable goods or with respect to levy of duties of excise on such  goods.  It is thus clear that the Board has no power to issue  instructions or orders contrary to the provisions of the Act or in  derogation of the provisions of the Act.  The Board can only issue such  direction as is necessary for the purpose of and in furtherance of the  provisions of the Act.   The instructions issued by the Board have to be  within the four corners of the Act.  If, therefore, the Act vests in the  Central Excise Officers jurisdiction to issue show-cause-notices and to  adjudicate, the Board has no power to cut down that jurisdiction.   However, for the purposes of better administration of levy and  collection of duty and for purpose of classification of goods the Board  may issue directions allocating certain types of works to certain  Officers or classes of Officers.  The Circulars relied upon are, therefore,  nothing more than administrative directions allocating various types of  works to various classes of Officers.  These administrative directions  cannot take away jurisdiction vested in a Central Excise Officer under  the Act.  At the highest all that can be said is Central Excise Officers,  as a matter of propriety, must follow the directions and only deal with  the work which has been allotted to them by virtue of these Circulars.   But if an Officer still issues a notice or adjudicates contrary to the  Circulars it would not be a ground for holding that he had no  jurisdiction to issue the show cause notice or to set aside the  adjudication.            The Tribunal has in its order dated 25th June, 2003, inter alia,  held as follows:- ".....Further, at the relevant time as per the  provisions of Section 11A(1) proper officer which  includes Superintendent is competent to issue the  show cause notice.  Board’s Circular is only the  administrative direction which does not cause any  prejudice to the Appellants....."

In our view this is absolutely correct.  We, therefore, see no infirmity  in the Judgment dated 25th June, 2003.  We hold that the  Superintendent had jurisdiction to issue show-cause-notice and the  Deputy Commissioner had jurisdiction to adjudicate.         As we have held that the concerned Officers had jurisdiction, we  see no infirmity in the Order dated 19th July, 2001 directing the  Commissioner (Appeals) to dispose of the Appeal.         In view of the above, we see no reason to interfere. The Appeals  stand dismissed.  There will be no Order as to costs.