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PETITIONER: GTC INDUSTRIES LTD.

       Vs.

RESPONDENT: COLLECTOR OF CENTRAL EXCISE, NEW DELHI

DATE OF JUDGMENT:       22/07/1997

BENCH: S. P. BHARUCHA, V. N. KHARE

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T                  THE 22ND DAY OF JULY, 1997 Present:               Hon’ble Mr. Justice S. P. Bharucha               Hon’ble Mr. Justice V. N. Khare                       J U D G M E N T      The following Judgment of the Court was delivered: S.P. BHARUCHA, J.      The assessee  is in  appeal against  an  order  of  the Customs, Excise and Gold (Control) Appellate Tribunal.      We set out the facts only insofar as they relate to the three issues which are canvassed at the Bar.      The assessee,  a cigarette  manufacturing company,  was issued a  show cause  notice on 26th August, 1983 in respect of its  Bombay factory.  A demand for excise duty in the sum of Rs.  28.93 crores was raised for the period 1978 to 1983. On 19th April, 1984 a second show cause notice was issued to the assessee.  It was  in respect  of its Baroda factory. It related to period 1978 to 1983 and demanded Rs. 35.82 crores by way  of excise  duty. On 2nd September, 1985 a third show cause notice was issued to the assessee which related to its Bombay and Baroda factories. It sought to make they assessee and two  of its job workers liable to excise duty in the sum of Rs.  13.37 crores  for the  period 1st July, 1978 to 30th June, 1980.  The third  show cause  notice was issued by the Deputy Director of Anti Evasion, Central Excise, New Delhi.      In 1984  the assessee  filed a writ petition before the High Court  at Bombay  challenging  the  first,  show  cause notice. At  subsequent stages  the writ petition was amended so that  the second  and third  show cause notices were also subjected to  challenge. On  20th June,  1984 the High Court permitted the  Revenue to  proceed with  the adjudication of the first show cause notice, but directed:      "The order  signed by the concerned      officer as  provided  herein  above      will not  be  communicated  to  the      respondents nor  will be  concerned      officer or any other officer of the      Excise   Department    inform   the      respondents of  the fact  that  the

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    order has been passed and/or signed      by the concerned office."      On 18th June, 1991 the High Court noted that orders had been passed  in the  adjudication proceedings  and  directed that the sealed cover in which the orders had been placed be opened and  the orders  shown to  learned  counsel  for  the assessee and  the Revenue;  also, that  the  Revenue  should supply copies  of the  orders to  the assessee’s  advocates. Only 21st  July, 1994  the  High  Court  directed  that  the assessee and/or the Revenue "may file appeal to the Tribunal against the said orders within two months from today..." and "If the  said appeal  is filed  by the  petitioners  or  the respondents, as  the case  may be, the Tribunal to entertain the said  appeal on  merits without  taking the objection of limitation."      On 29th May, 1992 the Central Board of Excise & Customs made an  order under the provisions of Section 35E(1) of the Central Excise and Salt Act, 1944 directing the Commissioner (L &  A) as  Collector of  Central Excise  to apply  to  the Tribunal for  determination of  the questions therein stated which arose out of the adjudication order dated 21st August, 1987 passed  by the Director (L & A) on the three show cause notices, heard  and dealt  with together.  The order  of the Central Board was endorsed, amongst others, to the Principal Collector of Central Excise, New Delhi.      On 16th  September, 1994  the  assessee  filed  appeals before the  Tribunal against  the  said  adjudication  order insofar as  it related  to the  first and  second show cause notices, which was adverse to it.      On   14th    December,   1995    an   application   for clarification/directions was  made by  the Commissioner (L & A), Customs  and Central  Excise, New Delhi to the Tribunal. The application stated that an appeal had been lodged by the applicant against  the said  adjudication order on that day, namely, 18th  December, 1995. It stated that since a copy of the Boards  order under  Section 3E(1) had not been endorsed to the  applicant, although there was a direction to file an appeal, he  did not have knowledge of the direction until he was  informed   by  the  Deputy  Director  (Investigations); Directorate General,  Anti Evasion,  New Delhi by his letter dated 7th December, 1996. The application submitted that the date of  communication of  the Boards’ order should be taken to be  the date  on which  the applicant was informed of it, i.e., 7th  December, 1995;  accordingly, the appeal that was being filed should be taken on record and listed for hearing on 14th  December 1995  along with  the two appeals filed by the assessee.      On 25th  March, 1996 the tribunal passed the order that is under appeal. It referred to the orders of the High Court and held  that the  elective date  of the  said adjudication order was not the date on which it was originally signed but the date  on which  the  sealed  envelope  had  been  opened pursuant  to   the  High  Court’s  direction  and  the  said adjudication order  show to  counsel for  the  parties.  The contention that the Boards’ order had been passed beyond the period stipulated  in Section 35E was, therefore, negatived. The Tribunal  referred to  the application made to it by the commissioner (L  & A),  New Delhi and accepted his case that he came  to know of the Boards’ order only on or immediately after 7th  December, 1995.  Accordingly, it  held  that  the Revenue’s appeal  against the said adjudication order was in time. The Tribunal then noted the contention of the assessee that the  assessment order had traversed beyond the scope of the grounds  contained in  the first  and second  show cause notices.  The   Tribunal  saw  no  reason  why  the  details

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regarding extra  profit margin  submitted in  the third show cause notice  should not  be looked  into for the purpose of the first  and second  show cause  notices. It held that the allegations contained  in the  third show cause notice which are relevant and apposite to the period covered by first and second show cause notices can be looked into for the purpose of adjudication."      It is  submitted on  behalf of  the assessee  that  the Board’s order,  directing that  an appeal should be filed by the Revenue  against the said adjudication order, was passed after the  expiry of  the period  specified in  that behalf. Secondly, that,  in any  event, the  filing of the Revenue’s appeal was  beyond time. Thirdly, that the Tribunal exceeded its jurisdiction  in ordering that the allegations contained in the third show cause notice should be looked into for the purpose of  adjudication, on remand, of the first and second show cause notices.      Section 35E(1)  empowers the  Board  to  call  for  and examine the  record of any proceeding in which the Collector of Central  Excise, as an adjudicating authority, has passed any decision  or order  under the  Act for  the  purpose  of satisfying itself  as to the legality and propriety thereof, It can  direct the  Collector to  apply to  the Tribunal for determination of such points as arise out of the decision of order as  are specified  by the  Board. Sub-section  (3)  of Section 35E  requires that no order shall be made under such section (1)  after the  expiry of  one year from the date of the decision or order of the adjudicating authority.      The said  adjudication order  was made  on 21st August, 1987. The  Boards’ order  was made  on 29th May, 1992. Prima facie, the Boards’ order was well beyond the permitted time. The learned  Additional Solicitor General, appearing for the Revenue, relied  upon the order of the High Court dated 20th June, 1984 which required that the adjudication order should not be  communicated to the assessee but should be kept in a sealed envelope. He submitted that it was in consonance with the spirit  of the  order of  the High  Court that  the said assessment order  had not  been looked at by the Board under the provisions  of Section  35E  and  that,  therefore,  the period during  which the said assessment order remained in a sealed envelope  should not  be taken into consideration; in other words, that the said assessment order should be deemed to bear  the date  on which  it was  removed from the sealed envelope, i.e.,  18th June, 1991, from which date the appeal was in time.      The High  Court’s order  dated 20th June, 1984 required the Revenue  not to  communicate to  the assessee  the  said assessment  order.   It  imposed   no  restriction   on  the activities of  the Revenue.  That this is so is borne out by the terms  of the  subsequent order  of the High Court dated 18th June,  1991 in which the Revenue was directed to supply copies of  the  said  assessment  order  to  the  assessee’s advocates. The  examination of  the said assessment order by the Board  under section  35E of  the  Act  was  in  no  way inhibited by any order of the High Court nor was the passing of an  order directed  to the  assessing authority hold that the Boards’  order was passed after the period prescribed in that behalf by Section 35E of the Act.      This    brings    us    to    the    application    for clarification/direction  made  by  the  Commissioner  (L&A). Customs and  Central Excise,  New Delhi  to the  Tribunal on 13th December,  1995. It  stated,  as  aforesaid,  that  the Revenue’s  appeal   should  be   entertained   because   the Commissioner (L  & A), Customs and Central Excise, New Delhi had not  been endorsed  a copy of the Boards’ order and that

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he had been informed thereof only on 7th December, 1995. The Boards’ order  was  endorsed  to  the  Principal  Collector, Central Excise,  New Delhi.  The third show cause notice, in respect of  which the  Revenue filed  the appeal  before the Tribunal, was  issued by  an officer  in the  Central Excise Collectorate at  New Delhi,  The requirement  of Section 35E that the  communication or  the Boards’ order should be made was satisfied  long before 7th December, 1995. Consequently; the Revenue’s  appeal was  filed long  after the permissible period of three months.      It is  to be  noted that  the High  Court by  its order dated 21st  July,  1994,  permitted  the  assessee  and  the Revenue to  file appeals against the said adjudication order within two  months, but  the Revenue  did not take advantage thereof and filed its appeal only on 13th December, 1994.      The Tribunal  found no legal difficulty in holding that the allegations  contained in  the third  show cause  notice should be looked into for the purpose of adjudication of the first  and   second  show   cause  notices.  We  find  great difficulty in  upholding the  Tribunal’s view. As we see it, each show  cause notice  must be limited to the case that is made out  therein by  the Revenue.  It  is  not  within  the jurisdiction of  the Tribunal  to direct otherwise; to do so is to go beyond its purely adjudicatory function.      The appeals  are allowed to the extent aforestated. The appeal filed  by the  Revenue before the Tribunal is held to be beyond  time and it shall not be entertained. The hearing on remand  of the  first and second show cause notices shall proceed, but limited to the case made out in each on its own merits.      No order as to costs.