M/S. THE BOMBAY DYEING AND MFG. CO. LTDNER OF CENTRAL EXCISE versus THE COMMISSIONER OF CENTRAL EXCISE on 9 December 2019

[2019] 17 S.C.R. 1057

M/S. THE BOMBAY DYEING AND MFG. CO. LTD.

v.

THE COMMISSIONER OF CENTRAL EXCISE

(Civil Appeal No. 5297 of 2008)

DECEMBER 09, 2019

[A. M. KHANWILKAR AND DINESH MAHESHWARI, JJ.]

Central Excise Act, 1944 – s.11A – If applicable to cases ofprovisional assessment – Appellant, engaged in manufacture ofcotton and man-made fabrics, filed writ petitions inter alia seekingdirection that excise duty is not payable in respect of yarnprocessed further in it’s composite mills in the manufacture offabrics – Also sought interim reliefs – Granted by High Court –Appellant executed bonds in Form B-13 referable to r.9B, 1944Rules and also furnished Bank guarantee (BG) for equivalentamount of the differential duty in respect of the fabric in question– Interim relief modified on 14.05.85 – Writ petitions disposed ofon 10/12.03.93 – Assistant Collector of Central Excise informedthe appellant that s.11A was not applicable to the facts of thepresent case – Appellant asserted that the Show Cause Noticeu/s.11A was mandatory – Appellant was called upon to payRs.35,92,234.67/- in view of order dtd. 14.05.85 failing which thedepartment was to take steps to enforce the BG – Personal hearinggiven to the appellant – Demand of excise duty confirmed byAssistant Collector of Excise – Appeals by the appellant beforeappellate authorities were dismissed – High Court also dismissedthe appeal – Held: s.11A as applicable at the relevant time, wouldapply to cases of recovery of duties not levied or not paid or short-levied or short-paid etc. – Case at hand, however, would comewithin the dispensation predicated by r.9B, 1944 Rules, which dealswith provisional assessment to duty – Appellant cannot be allowedto approbate and reprobate- for inviting the High Court to passinterim order stipulating that the appellant would execute bondsin Form B-13 referable to r.9B of the Rules and continue to filemonthly RT-12 returns from time to time, on which endorsementswere made indicating that it is a case of provisional assessment –Appellant cannot now be permitted to urge that it had not submittedto the process of provisional assessment as such for lack of a

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Aspecific order of the concerned authority in that behalf – Standtaken by the parties as recorded in order dtd. 10/12.03.93, islimited to accepting the fact that if notice is required to be given,it will be given and it will be open to the appellant to file responseand the authorities would take decision after giving opportunity– Nothing more can be read into it – Said order in no wayBextricated the appellant from the process to which it had voluntarilysubmitted itself at its own volition, namely, u/r.9B of the Rules –Thus, it was not a case of duty not levied or not paid or short-levied or short-paid – It is certainly not an order to undo theobligation accepted by voluntarily executing the bonds in theCprescribed format i.e. Form B-13 referable to r.9B- to treat theprocess as provisional assessment until the disposal of the writpetitions – Also, authorities later on passed the final order afterthe disposal of the writ petitions – A priori, they did not violate anydirection contained in order dtd. 10/12.03.93 and for havingproceeded in accordance with law for the period between 25.05.81Dto 13/14.05.85 – Order of the High Court is to be understood inproper perspective and not to give undue advantage to or bestowfavour on the appellant and deprive the legitimate State exchequer– Central Excise Rules, 1944 – r.9 r/w r.49 ; r.9B – Excise Duty.

Dismissing the appeal, the CourtE

Conclusion

Dismissing the appeal, the CourtE

HELD: 1.1 In the writ petitions, the appellant had assertedthat the fabric manufactured by the appellant was not amenableto excise duty as it was not removed from the premises withinthe meaning of Rules 9 and 49 of the Rules. Indisputably, thepurport of the stated Rules has been finally answered byFSupreme Court in M/s. J.K. Cotton Spinning and Weaving MillsLtd. & Anr. vs. Union of India & Ors. after resolving theconflicting opinions of different High Courts including of the HighCourt of Delhi. The stand taken by the appellant in the writpetition has been negatived by this Court, in the said decision.GThus, the question relating to liability to pay excise duty wasnot and could not have been disputed by the appellant at leastafter this decision. [Para 18] [1077-C-D]

1.2 The appellant voluntarily furnished requisite bonds inForm B-13 referable to Rule 9B supported by bank guaranteeHfor equivalent amount of the differential duty. It is not an undertaking filed pursuant to the order of the Court. Concededly,the order disposing of the writ petitions does not absolve theappellant from the said bonds ; nor the endorsements madethereon and on the monthly RT-12 returns, indicating that it wasa provisional assessment have been ordered to be effaced. Theorder dated 10/12.3.1993 passed by the High Court of Delhi,disposing of the writ petitions filed by the appellant in no wayextricate the appellant from the process to which the appellanthad voluntarily submitted itself at its own volition, namely, underRule 9B of the Rules. Thus, it was not a case of duty not leviedor not paid or short-levied or short-paid. The understanding ofthe parties was absolutely clear that the appellant was liable topay excise duty, but for the exposition of the High Court of Delhiin J.K. Cotton Spinning & Weaving Mills Co. Ltd. & Ors.. Theappellant is obliged to fulfill its statutory obligations includingthose arising from the undertaking/bonds in Form B-13 andcannot resile from the process to which it had submitted itselfwithout any demur, namely under Rule 9B of the Rules. [Para20] [1077-G-H; 1078-A-D]

J.K. Cotton Spinning & Weaving Mills Co. Ltd. & Ors.v. Union of India & Ors. (1981) 8 ELT 887 (Del.) -referred to.

1.3 In Rohit Mills Ltd., the Supreme Court dealt with twosituations referred to therein. First, where Show Cause Noticesunder Section 11A of the Act have been served and the claimdoes not cover any period beyond six months from the date ofreceipt of the notices. Second, where there is dispute as towhether the notice under Section 11A had been issued or not.In the present case, none of the above is attracted ; and for thesame reason the exposition in paragraphs 30 to 33 of M/s. J.K.Cotton Spinning and Weaving Mills Ltd. on which reliance hasbeen placed by the appellant, would be of no avail to theappellant. Section 11A of the Act as applicable at the relevanttime, would apply to cases of recovery of duties not levied ornot paid or short-levied or short-paid etc. The case at hand,however, would come within the dispensation predicated by Rule9B of the Rules, which deals with provisional assessment toduty.[Paras 20-22] [1078-D-G; 1082-D]

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1060SUPREME COURT REPORTS

ARohit Mills Ltd. & Ors. v. Union of India & Ors.(1988) 18 ECR 17 SC ; M/s. J.K. Cotton Spinning andWeaving Mills Ltd. & Anr. v. Union of India & Ors.(1987) (Supp) SCC 350 : [1988] 1 SCR 700 – heldinapplicable.

B1.4 The stand taken by the parties as recorded in the orderdated 10/12.3.1993, is limited to accepting the fact that if noticeis required to be given, the same will be given and in that caseit will be open to the appellant to file response thereto andfurther, the authorities would take decision after givingopportunity to the assessee. Nothing more can be read into theCorder dated 10/12.3.1993 passed by the High Court of Delhi. Itis certainly not an order to undo the obligation accepted by theassessee by voluntarily executing the bonds in the prescribedformat, namely, Form B-13 referable to Rule 9B of the Rules-to treat the process as provisional assessment until the disposalDof the writ petitions. The authorities later on passed the finalorder after the disposal of the writ petitions. A priori, theauthorities have not violated any stipulation or directioncontained in the order dated 10/12.3.1993 passed by the HighCourt of Delhi and for having proceeded in accordance with lawfor the period between 25.5.1981 to 13/14.5.1985. [Paras 24, 25]E[1084-B-D]

1.5 Similarly, the exposition of this Court in Metal Forgingsand Hindustan National Glass & Industries Ltd. to urge thatspecific order was required to be passed before an assessmentis treated as a provisional assessment, will be of no availFconsidering the execution of bonds in Form B-13 by theappellant-assessee at its own volition, which is referable toprovisional assessment procedure under Rule 9B of the Rules.Once the appellant submitted itself to that procedure withoutany demur pending disposal of the writ petitions, it is not openGto later on resile therefrom. Permitting the assessee to do so,would inevitably result in giving undue advantage and favour tothe assessee, who had invoked the remedy under Article 226of the Constitution of India and sought interim protection onoffering to execute bonds in Form B-13 as is noted in the Prayerclause (a) of the civil miscellaneous petition(s). For the sameHreason, the circular issued by the Government of India pressed into service will be of no avail to the appellant.The appellantcannot be allowed to approbate and reprobate - for inviting theHigh Court of Delhi to pass interim order stipulating that theappellant would execute bonds in Form B-13 referable to Rule9B of the Rules and continue to file monthly RT-12 returns fromtime to time, on which endorsements have been made indicatingthat it is a case of provisional assessment. The appellant cannotnow be permitted to urge that it had not submitted to the processof provisional assessment as such for lack of a specific order ofthe concerned authority in that behalf. The order passed by theHigh Court of Delhi on 10/12.3.1993, will have to be understoodin proper perspective and not to give undue advantage to orbestow favour on the appellant and thereby deprive thelegitimate State exchequer. [Paras 31, 32] [1087-H; 1088-A-D-F]

The Bhopal Sugar Industries Ltd. v. The Income TaxOfficer, Bhopal [1961] 1 SCR 474 ; R.B.F. RigCorporation, Mumbai v. Commissioner of Customs(Imports), Mumbai (2011) 3 SCC 573 : [2011] 2 SCR691 ; Metal Forgings & Anr. v. Union of India & Ors.(2003) 2 SCC 36 ; Kalabharati Advertising v. HemantVimalnath Narichania & Ors. (2010) 9 SCC 437 :[2010] 10 SCR 971 ; Jagmittar Sain Bhagat & Ors. v.Director, Health Services, Haryana & Ors. (2013) 10SCC 136 : [2013] 8 SCR 77 – held inapplicable.

J.K. Cotton Spinning and Weaving Mills Co. Ltd. v.Collector of Central Excise (1998) 3 SCC 540 : [1998]2 SCR 102 ; The Jam Shri Ranjitsinghji Spg. & Wvg.Mills Co. Ltd. & Anr. v. Union of India & Ors. (2007)109 Bom LR 2167 ; Commissioner of Central Excise,Calcutta v. Hindustan National Glass & Industries Ltd.(2005) 3 SCC 489 : [2005] 2 SCR 744 ; CoastalGases and Chemicals Pvt. Ltd. v. Assistant Collectorof Central Excise, Visakhapatnam & Ors. (1997) 7SCC 223 – referred to.

Case Law Reference

(1981) 8 ELT 887 (Del.)(1988) 18 ECR 17 SC

referred toPara 1held inapplicablePara 6

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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5297of 2008.

DFrom the Judgment and Order dated 13.09.2007 of the HighCourt of Judicature at Bombay in Central Excise Appeal No. 237 of2006.

Kavin Gulati, Sr. Adv., Mrs. Nandini Gore, Ms. TahiraKaranjawala, Ms. Natasha Sahrawat, Arjun Sharma, Mrs. ManikEKaranjawala, Advs. for the Appellant.

A.K. Sanghi, Arijit Prasad, Sr. Advs., B.V. Balaram Das,Mullapudi Ram Babu, Ms. Alka Agrawal, B. Krishna Prasad, Advs.for the Respondent.

The Judgment of the Court was delivered byF

A. M. KHANWILKAR, J.

1. This appeal is directed against the judgment and order dated13.9.2007 passed by the High Court of Judicature at Bombay in CentralExcise Appeal No. 237 of 2006. Briefly stated, the appellant is engagedin manufacture of cotton and man-made fabrics. According to theGappellant, the fabric manufactured by the appellant was not amenableto excise duty since it was for captive consumption and not to beremoved for the purposes of sale or for consumption as envisaged underRule 9 read with Rule 49 of the Central Excise Rules, 1944 (for short,‘the Rules’). On this assertion and relying on the decision of the HighHCourt of Delhi in J.K. Cotton Spinning & Weaving Mills Co. Ltd. &

M/S. THE BOMBAY DYEING AND MFG. CO. LTD. v. THECOMMISSIONER OF CENTRAL EXCISE [A. M. KHANWILKAR, J.]

Ors. vs. Union of India & Ors.[1], the appellant filed two writ petitionsunder Article 226 of the Constitution of India before the High Court ofDelhi being Civil Writ Petition Nos. 1234/1981 and 1235/1981. Thereliefs claimed in both petitions are identical except that they pertain toseparate periods. We may reproduce the reliefs claimed in Writ PetitionNo. 1235/1981, for the sake of convenience. The same read thus: - “(a) Issue a suitable writ, order or direction declaring thatduty of excise is not payable in respect of yarn (Cottonand man made) processed further in the petitioner’scomposite mills in the manufacture of fabrics:

(b) Issue writ of certiorari or any other suitable writ, orderor direction in the nature thereof quashing and settingaside the decisions and directives of the Central Boardof Excise, respondent No.2, contained in circular lettersdated 6.10.1976 (Annexure A), 24.9.1980 (Annexure B)and to quash the notices dated 23.4.1981 (Annexure C)and all similar notices referred to in the statement(Annexure D), dated 7.1.1981 (Annexure G) and dated9.3.1981 (Annexure H):

(c) Issue a writ of mandamus or any other appropriate writ,order or direction in the nature thereof, restraining therespondents from levying or collecting duty of excise inrespect of yarn obtained by the petitioner at anintermediary stage in its composite mill for furtherprocessing in the manufacture of fabrics and to directthe Board, respondent No.2, to cancel and/or withdrawthe decisions and directives contained in circular lettersdated 6.10.76 (Annexure A) and 24.9.80 (Annexure B)and to direct respondent 3 and 4 to cancel and/orwithdraw the notice dated 23.4.1981 (Annexure C),23.2.81 (Annexure G) and all similar notices referredto in the statement (Annexure D), dated 7.1.1981(Annexure G) and 9.3.1981 (Annexure H) and torestrain defendants 3 and 4 from taking any steps or/proceedings pursuant to and in accordance with theaforesaid directives and notices.

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(d) Issue a writ of prohibition or any other appropriate writ,order or direction in the nature therefore, restraining therespondent from collecting duty of excise on yarnobtained by the petitioner in its composite mill which isfurther processed in the manufacture of fabrics.

(e) Issue appropriate writ, order or direction directing therespondent to refund the amount of duty illegallyrecovered from the petitioner in respect of yarn obtainedin the petitioner’s composite mills and further processedin the manufacture of fabrics for the period commencingfrom 15.7.1977 in respect of cellulosic spun yarn andnon-cellulosic spun yarn and from 17.3.1972 and inrespect of cotton yarn and from 15.7.77 upto the dateof disposal of the present writ petition and in particularthe amounts referred to in statement (annexure E)together with interest at the rate of 12% p.a. and in thealternative to direct Respondents No.3 and 4 to grantthe refund as per refund claims dated 13.5.1981 (colly.); (f) In the alternative and without prejudice to the aforesaidprayers, to issue a writ of mandamus or any other writ,order or direction in the nature thereof direction therespondent not to collect duty of excise in respect ofyarn upon sizing thereof processed in the manufactureof fabrics.

(g) In the alternative and without prejudice to the aforesaidprayers, issue writ of prohibition or any other writ, orderor direction in the nature thereof, restraining therespondents from levying or collecting duty of excise inrespect of yarn processed within the petitioner’scomposite mills on the basis of the weight of yarn aftersizing thereof.

(h) To pass such other and further orders as may bedeemed just and proper in the facts and circumstancesof this case; and

(i) Award costs of the writ petition in favour of thepetitioner.”

2. During the pendency of the aforementioned writ petitions, theappellant filed Civil Miscellaneous Petition Nos. 1698/1981 and 1699/1981 in the concerned writ petitions, praying for interim reliefs. Forthe sake of convenience, the reliefs claimed in Civil MiscellaneousPetition No. 1699/1981 filed in Writ Petition No. 1235/1981 arereproduced below: -

“(a) grant order of stay permitting the petitioners forthwithto further process and use cellulose and non-cellulosicspun yarn, man-made filament yarn and cotton yarn inits composite mill in the manufacture of man-madefabric, cotton fabric and woollen fabric at nil rate of dutyand to clear cotton fabrics forthwith upon payment ofduty in respect of cotton fabric only (without paymentof duty on cotton yarn) upon the petitioners undertakingto furnish the requisite bond in Form B-13 Rule 9Bsupported by a bank guarantee for an amount equivalentto 25% of the differential duty in respect of such yarnwithin three weeks hereof and to restrain the respondent3 to 4 from taking any action or proceedings pursuit tothe directives of the Board, respondent No.2 (AnnexuresA and B to the writ petition) and notices dated 23.4.1981(Annexure C to the writ petition), and all similar noticesreferred to in the Statement (Annexure D), dated7.1.1981 (Annexure G to the Writ Petition) and 9.3.1981(Annexure H to the Writ Petition):

(b) grant exparte ad interim stay in terms of prayer (a)hereinabove : and

(c) pass such other and further orders as may be deemedjust and proper.”

3. The High Court of Delhi vide order dated 25.5.1981, whileissuing notice on the said miscellaneous petitions, granted interim reliefin terms of Prayer clause (a) reproduced above. In furtherance of thesaid interim relief, the appellant furnished an undertaking dated 2/10.3.1983 in order to secure the payment of differential tax to theDepartment of Revenue, Ministry of Finance (for short, ‘theDepartment’) in the event of dismissal of its writ petitions. The formatof that undertaking was in conformity with the prescribed undertakingin Form B-13 referable to Rule 9B of the Rules, submitted by the A

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Aassessee in the case of provisional assessment. Later on, the HighCourt modified the interim relief on 14.5.1985. The relevant portion ofthe modified interim relief reads thus: - “…there will be no stay with regard to future payments. Duringthe pendency of the Writ Petition, where will be stay in respectBof 50% of the disputed amount of duties claimed by therespondents as arrears on the condition that the applicant furnishBank Guarantees or renew the Bank Guarantees alreadyfurnished and keep it in force till the disposal of the writ petition.With regard to the balance of 50% of the arrears of duty whichis disputed, 25% of it shall be paid within 3 months from today.CWith regard to the remaining 25%, the parties will pay the samein two equal installments of 12½% each in every succeedingquarter. The 25% payment which is the first payment shall bemade on or before 14[th] August, 1985, the second installment shallbe made on or before 14[th] November, 1985 and the third andDthe last installment to complete the 50% will be paid on or before20[th] February, 1986.

There arrears of disputed duty which are required to be paid isonly in respect of unsized yarn. Any duty claimed on sized yarnwill not be paid by virtue of this order.

EThere will be no duty payable on the sized yarn even for futuretill disposal of the writ petition.

If any payments have been made through disputed, the samewould be adjusted in accordance with what is provided in theorder passed by us today……”F

4. Pursuant to the modified interim relief, the appellant deposited50% of its liability towards central excise duty in installments andcontinued to make future payments. The writ petitions were eventuallydisposed of on 10/12.3.1993 in the following terms: -

“Counsel for the parties are agreed that this case is covered byGthe orders and directions issued by the Supreme Court in CivilMiscellaneous Petitions No.8869 of 1988 and others in CivilAppeals Nos.323 of 1984 and others in Rohit Mills Ltd. v. Unionof India, dated 28[th] April, 1988 and it will be open to the petitionerto raise such other contention available to it before the adjudicatingHauthority in response to the show-cause notices.

Accordingly, we dispose of the writ petition in terms of theaforesaid orders of the Supreme Court, which should be read aspart of our order. No order as to costs.”

5. Consequent to the disposal of the writ petitions, the AssistantCollector of Central Excise vide letter dated 26.3.1993 addressed tothe appellant, informed the appellant that Section 11A of the CentralExcise Act, 1944 (for short, ‘the Act’) was not applicable to the factsof the present case. For, the amount was secured by the bankguarantee furnished by the assessee in terms of the interim order passedby the High Court of Delhi. Yet an opportunity was offered to theappellant to send its response. The said letter of the Assistant Collectorreads as follows: - “OFFICE OF THE ASSTT. COLLECTOR OF CENTRALEXCISE: DIVISION F-I 2[ND] FLOOR, MADHU INDUSESTATE: P.B. MARG, WORLI, BOMBAY-13

F.No.FI/FI/V(18)-3/81/1735 Bombay, the 26[th] March, 1993

M/s. Bombay Dyeing & Manufacturing Co. Ltd.,(spring Mills), G.D. Ambedkar Road,Bombay-14.

Gentlemen,

SubDelhi High Court CW.P. No.1235/81

M/s. Bombay Dyeing & Mfg. Co. Ltd.

Versus

Union of India and OTHERS

Please refer to various correspondences exchanged on the abovesaid state subject.

I have been directed to inform you that the aforesaid case waslisted on 12.3.93 before Hon’ble the Chief Justice and Hon’bleMr. Justice Anil Dev Singh, Delhi High Court, New Delhi.

The aforesaid case is decided in view of the orders passed bythe Supreme Court of India in the case of M/s. Rohit Mills Ltd. (copyattached herewith for your information and for further action please).

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Before complying the aforesaid orders of the Supreme Court ofIndia in case of M/s. Rohit Mills Ltd., on which case the DelhiHigh Court has disposed of the instant writ petition, this officewould like to bring to your notice as under:

‘As regards applicability of Section 11A and encashment of BankGuarantee, it is pertinent to refer to the Hon’ble Supreme Court’sorder in Writ Petition No.848 of 1984 filed by M/s. BhilwaraProcessor Ltd. and others, wherein the issue was in dispute i.e.,whether department can enforce Bank Guarantees executed interms of Court’s order without issuing Show Cause cum DemandNotice under section 11A. In the above case, also, an interimorder was passed on 20.2.84 by the Hon’ble Supreme Court ofIndia restraining the department from levying and recovering thedisputed portion of the duty of excise on the condition thatpetitioners of the case shall furnish the bank guarantee. The Bankguarantee was furnished and the writ petition was dismissed bythe Hon’ble Supreme Court of India on 4.11.88. Thereafter thedepartment asked the petitioners to take steps to enforce theBank guarantee. Aggrieved with this action, they filed aMiscellaneous Writ Petition before Supreme Court of India statingthat since no Show Cause cum Demand Notice was issued underSection 11A, no recovery beyond the period of 6 months can beeffected. The above petition of M/s. Bhilwara Processors Ltd.was dismissed by Hon’ble Supreme Court of India by its orderdated 29.11.88 (reported in Judgment Today Vol. (4) NovemberPart 1988 (83) 330).

The similar order was passed by Rajasthan High Court vide orderdt. 9.12.1988 in C.W.P. No.4441/88. In this case under similarcircumstances, M/s. Modern Suitings also made the samegrievances before Rajasthan High Court. The Hon’ble RajasthanHigh Court placing reliance on the order dt. 29.11.1988 passedby the Hon’ble Supreme Court of India in the case ofM/s. Bhilwara Processors Ltd. observed as under:- “Be that as it may, we are of the opinion that once orders of aCourt, stay order is sought in respect of recovery of Excise Dutyor any other duty for that matter and the stay order is conditional,on furnishing Bank Guarantee, if ultimately the writ petition isdismissed and stay order is vacated, the Bank guarantee can become encashable immediately. Therefore, we need not go intothis question as to whether Section 11A is or is not attracted,we are of the opinion that because the petitioner furnished theBank guarantee, makes secured a stay order which wasconditional as a result of which levy and recovery was stayedonce writ petition has been dismissed and the stay order has beendismissed ……. The Bank guarantee has become encashable,neither it will be proper nor equitable for this Court to say ormake an order that the Bank guarantee should not beencashed…………..”

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With the above observation, we dismiss the writ petition with noorder as to cost.”

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In view of the facts of the case discussed above, the Section11A is not applicable in the instant case since the amount wassecured by the Bank guarantee furnished by the assessee interms of the stay order of Hon’ble Delhi High Court.”

However, complying the orders given by the Supreme Court ofIndia in case of M/s. Rohit Mills Ltd., this office would like toknow whether petitioner desires Show Cause cum DemandNotice to be issued by the respondent i.e., Union of India, forthe recovery of outstanding dues. If yes, the same may beconfirmed by 31.3.93 so as to enable this office to take the actionas directed by the Hon’ble Supreme Court of India in case ofM/s. Rohit Mills Ltd. However, it will be nothing but thepostponement of payment of Central Excise Duty, which islegitimate right of the Union of India, which was deprived by youby filing the instant writ petition, since 1981. If no, the consentletter should be submitted to this office for encashment of Bankguarantees, as early as possible.

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Your early reply is awaited in this matter.

GYours faithfully,Sd/- Illegible(C.K. NIRBHAVANE)ASSISTANT COLLECTORCENTRAL EXCISE DN. FIBOMBAY-I”H

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6. The appellant in its response sent on 11.5.1993, asserted thatthe Show Cause Notice under Section 11A of the Act was mandatoryand moreso in light of the decision of this Court dated 28.4.1988 in RohitMills Ltd. & Ors. vs. Union of India & Ors.[2] The saidcommunication reads thus: - 11[th ]May, 1993

B“OUR RE. NO. SM/E-1

The Assistant Collector of Central Excise,Division F-1, IInd Floor,Madhu Industrial Estate,P.B. Marg, Worli,Bombay-400013.

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Dear Sir,

Your Ref. F.No.IV/CL-VI/30-84/FI/93/2295

Dated 2[nd] April, 1993.

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Sub:Delhi High CourtWrit Petition No.1235/1981Bombay Dyeing & Mfg. Co. Ltd.(Spring Mill Unit) Vs. UOI & Ors.

1. This has reference to your above letter whereby you haveEintimated the date of hearing for finalizing the classification listin respect of cotton yarn and man made Yarn. Your attention isalso drawn to your earlier letter F.No.FI/PI/V(18)-3/81/1705 dated26.3.1993, whereby you desired us to intimate whether your wouldlike a show cause notice to be issued u/s 11A of the Act.

2. We would draw your kind attention to the order passed bythe Hon’ble High Court of Delhi dated 10.3.1993 whereby theabove writ petition was disposed of on the basis of the orderpassed by the Hon’ble Supreme Court in the case of Rohit MillsLtd. For your ready reference, we enclose herewith a copy ofthe aforesaid order passed in the case of Rohit Mills.

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3. The directions issued by the Hon’ble High Court in the abovematter on the basis of the directions issued as in the case of RohitMills contemplate that adjudication has now to be done pursuantto a Notice under Section 11A of the Act. It is specifically H2 1988 (18) ECR 17 SC

directed that in cases where such notice has been not issued,the Assistant Collector may issue such notice which should notgo beyond 6 months. In the present case, no show cause noticeunder Section 11A has been issued and as such, as per thedirection of the Hon’ble Supreme Court in the case of Rohit MillsLtd., which direction also forms part of the order of the Hon’bleHigh Court disposing also forms part of the order of the Hon’bleHigh Court disposing of the above writ petition, your are nowrequired to issue a Notice under Section 11A of the Act. Onreceiving such a notice, we shall raise our objections thereto andwe reserve our right to do so.

4. You have kindly intimated that the hearing in the above matteris now fixed for 11.5.1993. We may mention here that beforeany hearing is taken up a show cause notice under Section 11Awill have to be first issued and an opportunity be given to us toreply to the Notice. In this connection we may also mention thatas per the orders of the Hon’ble High Court dated 10.3.1993,we have been given specific liberty to raise such othercontentions as are available, before the adjudicating authority inrespect to the show cause notice. We reserve our right to raisesuch contention as may be advised, in reply to the said showcause notice.

5. Although our contentions would be raised after the show causenotice under Section 11A is issued, we may clarify here that, inany event, no duty of excise is payable in respect of yarn afterit is sized. In other words, duty of excise is not payable on thebasis of the weight of the sized yarn. This has been clearly heldin several decisions including the decision of the Hon’ble SupremeCourt in the case of J.K. Cotton Spg. & Wvg. Mills Co. Ltd.and another vs. UOI (1987 (32) ELT 234). The attempt earliermade to levy duty of excise at the stage after yarn is sized, ispatently illegal in view of the aforesaid decisions. The referencein your letter to provisional assessment is wholly irrelevant. Inthe first place, as per the directions of the Hon’ble High Court,adjudication has now to be done on the basis of show causenotice under Section 11A of the Act. Secondly for the reasonthat the provisionally if any, was in relation to dutiablity of yarnat the stage and the condition after sizing and did not relate tounsized yarn. In any event, the assessment has now to be done AB

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Ain terms of the directions of the Hon’ble High Court, after issuinga show cause notice under Section 11A of the Act. Theadjudication can only be gone in accordance with the directionsof the Hon’ble High Court.

6. We may mention here that although our contentions would beBraised as and when a show cause notice is received, we mayindicate that in any event, no duty of excise is payable in respectof the yarn obtained at the intermediate stage which is furtherprocessed within the factory, since it is not obtained at that stagein a marketable condition. We have already paid certain amountstowards duty of excise in respect of such yarn under protestCduring the pendency of the writ petition and upon decision of thisissue, we would be entitled to claim refund thereof.

7. Further contentions would be taken in reply to the show causenotice, which may be issued as per the directions of the Hon’bleSupreme Court. Under these circumstances, we would requestDyou to first issue a show cause notice under Section 11A of theAct and then give us an opportunity to file a reply thereto and ahearing in that respect. The hearing already fixed for 11[th] May,1993 may kindly be adjourned since the matter cannot beadjudicated without issuing a show cause notice under SectionE11A of the Act as per the directions of the Hon’ble High Court.

Yours faithfully,Sd/- Illegible[K.R. NAYAK]MANAGER”

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7. The Assistant Collector of Excise vide order-in-original dated19.8.1993 noted that the appellant had filed classified lists for its productswhich had been approved provisionally and the appellant had beendirected to pay excise duty. He also noted the objection of the appellantabout non-issue of a Show Cause Notice under Section 11A of the Act.GHowever, he proceeded to finalize the classification lists by noting thatthe classification lists filed earlier by the assessee were treated asprovisional.

8. In furtherance of the said order of the Assistant Collector, theRange Superintendent sent a letter dated 27.9.1993 to the appellantHstating that all the RT-12 returns for the period of May, 1981 to May,

1985 for the items 18A, 18-III and 18E which had been assessedprovisionally by the then Range Superintendent are assessed finally. Bythe same communication, he called upon the appellant to pay an amountof Rs.35,92,234.67 (Rupees thirty five lakhs ninety two thousand twohundred thirty four and sixty seven paise only) pursuant to the orderdated 14.5.1985 passed by the High Court of Delhi. This was followedby a notice dated 7.10.1993 from the Assistant Collector of CentralExcise addressed to the appellant reiterating the position that pursuantto the interim order passed by the High Court of Delhi, provisionalassessments had been made and necessary endorsements to that effectwere made on the classification lists, monthly RT-12 returns, etc.Further, the appellant was obliged to make good the arrears of disputedduty amounting to Rs.35,96,235/- (Rupees thirty five lakhs ninety sixthousand two hundred thirty five only) for the period starting from25.5.1981 to 13.5.1985, which had become payable. The appellant wascalled upon to pay the said amount within ten days, failing which theDepartment would take necessary steps to enforce the bank guaranteesand recover the dues from the appellant.

9. Subsequent to the above notice, an opportunity of personalhearing was also given to the appellant on 19/20.10.1993 with respectto the recovery of dues. It appears that during the hearing, the appellantreiterated its stand that the Show Cause Notice under Section 11A ofthe Act was essential, including in terms of the order of the High Courtof Delhi, dated 10/12.3.1993. The Assistant Collector of Excise,however, vide order-in-original dated 7/15.12.1993, confirmed thedemand of excise duty. He held that in the present case, the duty liabilityitself was in dispute and the assessment could be made final only whenthe question of duty liability was decided by the High Court of Delhi,and once that issue was resolved, the question of issuing notice underSection 11A of the Act does not arise, especially when the appellantitself had voluntarily executed B-13 bonds and the assessments weretreated as provisional, as evinced from the endorsements on monthlyRT-12 returns in that behalf.

10. The appellant carried the matter in appeal before theCommissioner of Central Excise (Appeals), who in turn, rejected theappeal vide order-in-appeal dated 31.5.2000. The Commissioner ofCentral Excise (Appeals) also upheld the demand for excise duty andrejected the plea taken by the appellant regarding the necessity to issuea Show Cause Notice under Section 11A of the Act.

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A11. The appellant then unsuccessfully carried the matter in appealbeing Appeal No. E/2747/2000 before the Customs, Excise and ServiceTax Appellate Tribunal (for short, ‘the CESTAT’). That appeal wasdismissed on 22.2.2006. Against that decision, the appellant filedCentral Excise Appeal No. 237/2006 before the High Court ofJudicature at Bombay under Section 35-G of the Act, which wasBeventually dismissed on 13.9.2007 following the decision of the DivisionBench of the same High Court dated 7.9.2007 in First Appeal No. 2597/2005 titled as The Jam Shri Ranjitsinghji Spg. & Wvg. Mills Co.Ltd. & Anr. vs. Union of India & Ors.[3].

12. To complete the narration of facts, it is relevant to mentionCthat the relied upon decision was assailed before this Court in CivilAppeal No. 1551/2008 by the assessee therein, which was summarilydismissed on 7.3.2008, presumably at the admission stage.

13. The sum and substance of the view taken in the relied uponjudgment, which involved similar facts, is that in a case such as thisDwhere B-13 bonds have been executed by the assessee and clearendorsement is made on the monthly RT-12 returns that it is a case ofprovisional assessment, the question of issuing a Show Cause Noticeunder Section 11A of the Act does not arise. The assessee in that casehad relied on the decisions of this Court, which have been distinguishedEas inapplicable to the fact situation of the case under consideration. Weshall advert to the detailed reasons noted in this decision a little later.

14. We may now advert to the issues raised by the appellant inthe present appeal. According to the appellant, primarily two questionsarise for consideration, which are as follows: -F“1) Whether the demand for Central Excise for the period25.05.1981 to 14.05.1985, as raised by the department, is barredby limitation?

This question in turn is dependent upon the issue whether theassessment in this case could be said to be provisionalGassessment.

2) Could the respondent authorities have ignored the bindingdirections of the Hon’ble High Court of Delhi vide its Order dated12.03.1993 to hold that no Show Cause Notice (SCN) was required in the present case as the assessments in question wereprovisional?”

15. It is urged that the purport of the order dated 10/12.3.1993passed by the High Court of Delhi, while disposing of the writ petitionsfiled by the appellant clearly obliged the Department to issue a ShowCause Notice under Section 11A of the Act and to proceed against theappellant only in the manner permissible under the said provision in lightof the dictum of this Court in Rohit Mills Ltd. (supra). It is urgedthat the dictum in Rohit Mills Ltd. (supra) formed part of the subjectorder of the High Court of Delhi and for which reason, it was not opento the Department to take a contrary stand. The approach of theauthorities in not complying with the said obligation cannot stand thetest of judicial scrutiny. On the other hand, if the authorities were tofollow the direction given by the High Court of Delhi, the demand forcentral excise duty for the period starting from 25.5.1981 to 13/14.5.1985would be clearly barred by limitation. It is then urged that had theauthorities adopted the route of provisional assessment, they wereobliged to expressly state that position by passing an order. In thepresent case, no such order has been passed by the authorities. Tobuttress the argument that it is incumbent upon the authorities to passformal specific order directing provisional assessment, reliance is placedon the circular issued by the Ministry of Finance (Department ofRevenue) bearing number 26/1989 dated 24.4.1989. It is urged thatthe fact that the appellant had executed B-13 bonds or the monthly RT-12 returns purportedly treated as provisional assessment, can never beheld against the appellant especially in light of the observation of theHigh Court of Delhi that a formal notice be issued to the appellant, whichwas the basis for disposing of the writ petitions. In support of the abovearguments, the appellant would rely on decisions of this Court in RohitMills Ltd. (supra); The Bhopal Sugar Industries Ltd. vs. TheIncome Tax Officer, Bhopal[4]; R.B.F. Rig Corporation, Mumbai vs.Commissioner of Customs (Imports), Mumbai[5]; Metal Forgings &Anr. vs. Union of India & Ors.[6]; J.K. Cotton Spinning and WeavingMills Co. Ltd. vs. Collector of Central Excise[7]; Commissioner ofCentral Excise, Calcutta vs. Hindustan National Glass & Industries 4 1961 (1) SCR 474

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ALtd.[8]; Kalabharati Advertising vs. Hemant Vimalnath Narichania& Ors.[9]; Jagmittar Sain Bhagat & Ors. vs. Director, HealthServices, Haryana & Ors.[10]; and Coastal Gases and Chemicals Pvt.Ltd. vs. Assistant Collector of Central Excise, Visakhapatnam &Ors.[11].

B16. The respondent, on the other hand, supported the reasonsrecorded by the authorities/Tribunal and would contend that being a caseof provisional assessment, the question of issuing a Show Cause Noticeto the appellant under Section 11A of the Act does not arise. Whereas,the authorities acted as per the mandate of law and proceeded to passfinal assessment orders after the disposal of writ petitions by the HighCCourt of Delhi, and before passing such orders, opportunity of hearingwas given to the appellant. According to the respondent, the order dated10/12.3.1993 of the High Court of Delhi did not create any impedimentfor the authorities to proceed against the appellant in accordance withlaw. At best, the tenor of the order would suggest that if a Show CauseDNotice is required to be issued and has not been so issued, authoritieswere free to issue such a notice and take decision thereon, after givingopportunity of hearing to the assessee. No more and no less. TheHigh Court of Delhi could not have issued any other direction againstthe respondent, which would be in the nature of prohibiting the statutoryfunctionary from discharging its statutory functions and obligations norEto absolve the appellant of its statutory obligation to pay excise duty,which otherwise was payable by the appellant but for filing of the writpetitions. Admittedly, the interim protection given to the appellant wasconditional and the appellant, acting upon the same, had submitted B-13 bonds, which pre-supposes that it was a case of provisionalassessment and could be proceeded further as per law, after the disposalFof the writ petitions. In that, it was not a case referable to Section11A of the Act. The respondent is placing heavy reliance on the decisionof the Division Bench of the High Court of Judicature at Bombay inthe case of The Jam Shri Ranjitsinghji (supra), which has beenupheld by this Court by dismissing Civil Appeal No. 1551/2008 onG7.3.2008. It is urged that the facts of the relied upon case and thepresent case are almost similar, if not identical. According to therespondent, the appeal is devoid of merits and the same be dismissed.

8 (2005) 3 SCC 4899 (2010) 9 SCC 43710 (2013) 10 SCC 136H11 (1997) 7 SCC 223

17. We have heard Mr. Kavin Gulati, learned senior counsel forthe appellant and Mr. A.K. Sanghi, learned senior counsel for therespondent.

18. After cogitating over the rival submissions, the core issue thatrequires to be immediately addressed is about the purport of the orderpassed by the High Court of Delhi dated 10/12.3.1993, while disposingof the writ petitions filed by the appellant. The said order will have tobe understood in the context of the stand taken by the appellant beforethe High Court. In the said writ petitions, the appellant had assertedthat the fabric manufactured by the appellant was not amenable toexcise duty as it was not removed from the premises within the meaningof Rules 9 and 49 of the Rules. Indisputably, the purport of the statedRules has been finally answered by this Court in M/s. J.K. CottonSpinning and Weaving Mills Ltd. & Anr. vs. Union of India & Ors.[12]after resolving the conflicting opinions of different High Courts includingof the High Court of Delhi. The stand taken by the appellant in thewrit petition has been negatived by this Court, in the said decision.Thus, the question relating to liability to pay excise duty was not andcould not have been disputed by the appellant at least after this decision.Concededly, the appellant had filed writ petitions taking clue from theexposition of the High Court of Delhi in J.K. Cotton Spinning &Weaving Mills Co. Ltd. & Ors. (supra @ F.N.1). That view hasbeen finally dealt with by this Court in M/s. J.K. Cotton Spinning andWeaving Mills Ltd. (supra @ F.N.12), fastening liability on theassessee to pay excise duty.

19. Additionally, it may be apposite to underscore the purport ofthe interim conditional stay granted by the High Court of Delhi whilstentertaining the writ petitions filed by the appellant. Initially, vide orderdated 25.5.1981, interim relief was granted in terms of the Prayer clause(a) of Civil Miscellaneous Petition No. 1699/1981, reproduced hitherto.By this Prayer clause, the appellant had expressed its willingness tofile undertaking/bond in Form B-13 referable to Rule 9B supported bybank guarantee for an amount equivalent to specified differential dutyin respect of the yarn in question. The said interim relief was thenmodified on 14.5.1985. The fact remains that the appellant voluntarilyfurnished requisite bonds in Form B-13 referable to Rule 9B supportedby bank guarantee for equivalent amount of the differential duty. It is A

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Anot an undertaking filed pursuant to the order of the Court. Concededly,the order disposing of the writ petitions does not absolve the appellantfrom the said bonds; nor the endorsements made thereon and on themonthly RT-12 returns, indicating that it was a provisional assessmenthave been ordered to be effaced. Suffice it to observe that the orderdated 10/12.3.1993 passed by the High Court of Delhi, disposing of theBwrit petitions filed by the appellant in no way extricate the appellantfrom the process to which the appellant had voluntarily submitted itselfat its own volition, namely, under Rule 9B of the Rules. Thus, it wasnot a case of duty not levied or not paid or short-levied or short-paid.The understanding of the parties was absolutely clear that the appellantCwas liable to pay excise duty, but for the exposition of the High Courtof Delhi in J.K. Cotton Spinning & Weaving Mills Co. Ltd. & Ors.(supra @ F.N.1). Understood thus, the appellant is obliged to fulfillits statutory obligations including those arising from the undertaking/bondsin Form B-13 and cannot resile from the process to which it hadsubmitted itself without any demur, namely under Rule 9B of the Rules.D

20. Indeed, the High Court of Delhi while disposing of the writpetitions vide order dated 10/12.3.1993, had adverted to the decisionof this Court in Rohit Mills Ltd. (supra). On a fair reading of thatdecision, it is obvious that the Court dealt with two situations referredto therein. First, where Show Cause Notices under Section 11A ofEthe Act have been served and the claim does not cover any periodbeyond six months from the date of receipt of the notices. Second,where there is dispute as to whether the notice under Section 11A hadbeen issued or not. In the present case, none of the above is attracted;and for the same reason the exposition in paragraphs 30 to 33 of M/s.

FJ.K. Cotton Spinning and Weaving Mills Ltd. (supra @ F.N.12),on which reliance has been placed by the appellant, would be of noavail to the appellant.

21. Section 11A of the Act as applicable at the relevant time,would apply to cases of recovery of duties not levied or not paid orGshort-levied or short-paid etc. The Section, as applicable at the relevanttime, read thus: - “11A.Recovery of duties not levied or not paid or short-leviedor short-paid or erroneously refunded. -

(1) When any duty of excise has not been levied or paid or hasHbeen short-levied or short-paid or erroneously refunded, whether or not such non-levy or non-payment, short-levy or short paymentor erroneous refund, as the case may be, was on the basis ofany approval, acceptance or assessment relating to the rate ofduty on or valuation of excisable goods under any other provisionsof this Act or the rules made thereunder, a Central Excise Officermay, withinone year from the relevant date, serve notice on theperson chargeable with the duty which has not been levied orpaid or which has been short-levied or short-paid or to whomthe refund has erroneously been made, requiring him to showcause why he should not pay the amount specified in the notice:

Provided that where any duty of excise has not been levied orpaid or has been short-levied or short-paid or erroneouslyrefunded by reason of fraud, collusion or any wilful mis-statementor suppression of facts, or contravention of any of the provisionsof this Act or of the rules made thereunder with intent to evadepayment of duty, by such person or his agent, the provisions ofthis 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 anorder of a Court, the period of such stay shall be excluded incomputing the aforesaid period of one year or five years, as thecase may be.

(1A) When any duty of excise has not been levied or paid orhas been short-levied or short paid or erroneously refunded, byreason of fraud, collusion or any wilful misstatement orsuppression of facts, or contravention of any of the provisionsof this Act or the rules made thereunder with intent to evadepayment of duty, by such person or his agent, to whom a noticeis served under the proviso to sub-section (1) by the CentralExcise Officer, may pay duty in full or in part as may be acceptedby him, and the interest payable thereon under section 11AB andpenalty equal to twenty-five per cent. of the duty specified inthe notice or the duty so accepted by such person within thirtydays of the receipt of the notice.

(2) Central Excise Officer shall, after considering therepresentation, if any, made by the person on whom notice isserved under sub-section (1), determine the amount of duty ofexcise due from such person (not being in excess of the amount AB

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specified in the notice) and thereupon such person shall pay theamount so determined:

Provided that if such person has paid the duty in full togetherwith, interest and penalty under sub-section (1A), the proceedingsin respect of such person and other persons to whom notice isserved under sub-section (1) shall, without prejudice to theprovisions of sections 9, 9A and 9AA, be deemed to beconclusive as to the matters stated therein:

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Provided further that, if such person has paid duty in part, interestand penalty under sub-section (1A), the Central Excise Officer,shall determine the amount of duty or interest not being in excessof the amount partly due from such person.

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(2A) Where any notice has been served on a person under sub-section (1), the Central Excise Officer,—

(a) in case any duty of excise has not been levied or paidor has been short-levied or short-paid or erroneouslyrefunded, by reason of fraud, collusion or any wilfulmisstatement or suppression of facts, or contraventionof any of the provisions of this Act or of the rules madethereunder with intent to evade payment of duty, whereit is possible to do so, shall determine the amount of suchduty, within a period of one year; and D

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(b) in any other case, where it is possible to do so, shalldetermine the amount of duty of excise which has notbeen levied or paid or has been short-levied or short-paid or erroneously refunded, within a period of sixmonths, from the date of service of the notice on theperson under sub-section (1).

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(2B) Where any duty or excise has not been levied or paid orhas been short-levied or short-paid or erroneously refunded, theperson, chargeable with the duty, may pay the amount of duty onGthe basis of his own ascertainment of such duty or on the basisof duty ascertained by a Central Excise Officer before serviceof notice on him under sub-section (1) in respect of the duty, andinform the Central Excise Officer of such payment in writing,who, on receipt of such information shall not serve any noticeHunder sub-section (1) in respect of the duty so paid:

Provided that the Central Excise Officer may determine theamount of short payment of duty, if any, which in his opinion hasnot been paid by such person and then, the Central Excise Officershall proceed to recover such amount in the manner specified inthis section, and the period of “one year” referred to in sub-section (1) shall be counted from the date of receipt of suchinformation of payment.

Explanation 1. —Nothing contained in this sub-section shall applyin a case where the duty was not levied or was not paid or wasshort-levied or was short-paid or was erroneously refunded byreason of fraud, collusion or any wilful mis-statement orsuppression of facts, or contravention of any of the provisionsof this Act or of the rules made thereunder with intent to evadepayment of duty.

Explanation 2. —For the removal of doubts, it is hereby declaredthat the interest under section 11AB shall be payable on theamount paid by the person under this sub-section and also onthe amount of short-payment of duty, if any, as may bedetermined by the Central Excise Officer, but for this sub-section.

Explanation 3 .—For the removal of doubts, it is hereby declaredthat no penalty under any of the provisions of this Act or therules made thereunder shall be imposed in respect of paymentof duty under this sub-section and interest thereon.

(2C) The provisions of sub-section (2B) shall not apply to anycase where the duty had become payable or ought to have beenpaid before the date on which the Finance Bill, 2001 receivesthe assent of the President.

(3) For the purposes of this section—

(i) “refund” includes rebate of duty of excise on excisablegoods exported out of India or on excisable materialsused in the manufacture of goods which are exportedout of India;

(ii) “relevant date” means,—

(a) in the case of excisable goods on which duty of excise hasnot been levied or paid or has been short-levied or short-paid—

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(A) where under the rules made under this Act a periodicalreturn, showing particulars of the duty paid on theexcisable goods removed during the period to which thesaid return relates, is to be filed by a manufacturer or aproducer or a licensee of a warehouse, as the case maybe, the date on which such return is so filed; B

(B) where no periodical return as aforesaid is filed, the lastdate on which such return is to be filed under the saidrules;

(C) in any other case, the date on which the duty is to beCpaid under this Act or the rules made thereunder; (b) in a case where duty of excise is provisionally assessed underthis Act or the rules made thereunder, the date of adjustment ofduty after the final assessment thereof;

(c) in the case of excisable goods on which duty of excise hasDbeen erroneously refunded, the date of such refund.”

22. The case at hand, however, would come within thedispensation predicated by Rule 9B of the Rules, which deals withprovisional assessment to duty. The same reads thus:- E“Rule 9B. Provisional assessment to duty.- (1)Notwithstanding anything contained in these rules,- (a) where the proper officer is satisfied that an assessee isunable to produce any document or furnish anyinformation necessary for the assessment of duty on anyFexcisable goods; or (b) where the proper officer deems it necessary to subjectthe excisable goods to any chemical or any other testfor the purpose of assessment of duty thereon; or

(c) where an assessee has produced all the necessaryGdocuments and furnished full information for theassessment of duty, but the proper officer deems itnecessary to make further inquiry (including the inquiryto satisfy himself about the due observance of theconditions imposed in respect of the goods after theirHremoval) for assessing the duty; the proper officer may, either on a written request made by theassessee or on his own accord, direct that the duty leviable onsuch goods shall, pending the production of such documents orfurnishing of such information or completion of such test orenquiry, be assessed provisionally at such rate or such value(which may not necessarily be the rate or price declared by theassessee) as may be indicated by him, if such assessee executesa bond in the proper form with such surety or sufficient securityin such amount, or under such conditions as the proper officerdeems fit, binding himself for payment of the difference betweenthe amount of duty as provisionally assessed and as finallyassessed.

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(3) The Collector may permit the assessee to enter into a generalbond in the proper form with such surety or sufficient securityin such amount or under such conditions as the Collectorapproves for assessment of any goods provisionally from timeto time:

Provided that, in the event of death, insolvency or insufficiencyof the surety or where the amount of the bond is inadequate,the Collector may in his discretion demand a fresh bond and may,if the security furnished for a bond is not adequate, demandadditional security.

(4) The goods provisionally assessed under sub-rule (1) may becleared for home consumption or export in the same manner asthe goods which are not so assessed.

(5) When the duty leviable on the goods is assessed finally inaccordance with the provisions of these rules, the dutyprovisionally assessed shall be adjusted against the duty finallyassessed, and if the duty provisionally assessed falls short of, oris in excess of the duty finally assessed, the assessee, shall paythe deficiency or be entitled to a refund as the case may be.”

23. Indisputably, the appellant voluntarily executed bonds in FormB-13 referable to Rule 9B of the Rules and also furnished bankguarantee for an amount equivalent to the differential amount of dutyin respect of the fabric in question. The authorities have madeendorsements on the bonds and on the monthly RT-12 returns filed by AB

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Athe assessee, indicating that it was a case of provisional assessment.Having submitted to that process, it is not open to the appellant to urgethat an express order of provisional assessment has not been passedby the authorities.

24. Be that as it may, the stand taken by the parties as recordedBin the order dated 10/12.3.1993, is limited to accepting the fact that ifnotice is required to be given, the same will be given and in that caseit will be open to the appellant to file response thereto and further, theauthorities would take decision after giving opportunity to the assessee.Nothing more can be read into the order dated 10/12.3.1993 passed bythe High Court of Delhi. It is certainly not an order to undo the obligationCaccepted by the assessee by voluntarily executing the bonds in theprescribed format, namely, Form B-13 referable to Rule 9B of the Rules- to treat the process as provisional assessment until the disposal ofthe writ petitions. It is also noticed that the authorities have later onpassed the final order after the disposal of the writ petitions.D25. A priori, the authorities have not violated any stipulation ordirection contained in the order dated 10/12.3.1993 passed by the HighCourt of Delhi and for having proceeded in accordance with law forthe period between 25.5.1981 to 13/14.5.1985.

26. Reverting to the decision of the Division Bench of the HighECourt of Judicature at Bombay in The Jam Shri Ranjitsinghji (supra),similar argument was considered and the High Court, after detailedanalysis, concluded that in a case such as the present one, it is not opento the assessee to insist for a notice under Section 11A of the Act, whichhas no bearing in cases of provisional assessment. The High Court ofFJudicature at Bombay, while dealing with similar arguments, observedthus:- “33. The question, therefore, to be considered is, firstly, whethercircumstances for making provisional assessment existed in thepresent case and secondly, whether a provisional assessmentGorder was made before clearance of the yarn for captiveconsumption?

34. With reference to the first contention, the argument of theappellant is that none of the circumstances for making provisionalassessment set out in Rule 9B existed in the present case.HMoreover, classification list and the price list were already

approved, and therefore, there was no scope for makingprovisional assessment. There is no merit in this contentionbecause under Rule 9-B(1)(c) of the 1944 Rules, even after theassessee has produced all the necessary documents and furnishedfull information for the assessment of duty it was open to theassessing officer to make provisional assessment either on awritten request made by the assessee or if the proper officerdeemed it necessary to make further inquiry. In the present case,admittedly there was a dispute pending before the Delhi HighCourt regarding the excisability of the yarn cleared for captiveconsumption. Pending final decision of the Delhi High Court, itwas open to the appellant to seek and to the proper officer toallow clearance of yarn for captive consumption on provisionalassessment basis. In fact, in the B-13 Bond it is recorded thatthe appellant had sought provisional assessment. Even if thecontention of the appellant that the B-13 Bond was executed atthe instance of the excise authorities, is accepted, in view of thefact that a dispute was pending before the Delhi High Court, itwas open to the proper officer to insist on clearing the yarn forcaptive consumption on provisional assessment basis.

35. The next question to be considered is, whether a provisionalassessment order was in fact made before clearance of yarn forcaptive consumption on provisional assessment basis? It is notin dispute that during the period from May, 1981 to May, 1984the appellant had cleared the yarn for captive consumption byexecuting B-13 Bond which is applicable to provisionally assessedgoods. It is pertinent to note that the Delhi High Court by itsinterim order had not directed the appellant to execute B-13Bond. Apart from B-13 Bond, there are various types of Bondsspecified in Appendix I to the 1944 Rules, which could beexecuted by the appellant. The fact that the appellant claims tohave executed the B-13 Bond at the instance of the revenueclearly shows that as per the directions given by the proper officer,the clearances have been effected on provisional assessment basisby executing B-13 Bond.

36. It is not the case of the appellant that B-13 bond wasexecuted inadvertently or by mistake. Therefore, havingconsciously cleared the yarn for captive consumption onprovisional assessment basis by executing B-13 Bond as directed ABC

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27. The decisions of this Court, to which our attention has beeninvited by the learned counsel for the appellant, have been consideredBby the High Court of Judicature at Bombay. The High Court rightlyobserved that the said decisions have no application to case ofprovisional assessment followed by a final assessment. While dealingwith those decisions, the Court observed thus:-

“39. At the outset, it may be noted that the observations madeCby the Apex Court in all the above cases regarding the issuanceof notice under Section 11-A of the 1944 Act was in the contextof the excise duty that became payable on account of the ApexCourt upholding the validity of the amendment to Rule 9 and 49of the 1944 Rules with retrospective effect from 28.2.1944.Obviously, the said observations were meant to apply to casesDwhere the final assessments were already made and not inrespect of cases where the assessments were provisional,because duty liability is determined only at the time of finalassessment. In other words, what is held in all the above casesis that, in spite of the retrospective amendment to Rule 9 and 49Eis upheld, where the assessments are already finalised the dutyunder the amended Rule 9 and 49 can be recovered only byissuing notice under Section 11A of the 1944 Act.

40. This is evident from the fact that in the case of J.K. CottonMills (supra) in respect of the clearances effected during theFpendency of the dispute, there was no direction to clear the goodson provisional assessment basis. In that case, neither the goodswere cleared by executing B-13 Bond nor there were anyendorsements made on the RT-12 returns to the effect that theassessments were provisional. Moreover, in the show causenotice issued by the revenue it was not even averred that theGgoods were cleared on provisional assessment basis. In fact,Assistant Collector in that case treated the assessments asprovisional solely on the premise that the matter was subjudiceand the basic argument of the revenue was that the stay grantedby the Delhi High Court virtually amounted to stay of service ofHnotice under Section 11-A of the Excise Act. In the facts of that case, where the assessments had attained finality and wherethere was no evidence whatsoever to establish that theclearances were effected on provisional assessment basis, theApex Court held that in the absence of an express order ofprovisional assessment made under Rule 9B, the assessmentscannot be treated as provisional.”

28. As noticed earlier, this decision of the High Court of Judicatureat Bombay was assailed by the assessee before this Court by way ofCivil Appeal No. 1551/2008, which came to be summarily dismissedon 7.3.2008. We are conscious of the fact that this Court hadsummarily dismissed the said appeal. Nevertheless, the view expressedby the High Court of Judicature at Bombay, as reproduced above,commends to us.

29. The appellant had placed emphasis on the decision in TheBhopal Sugar Industries Ltd. (supra) and R.B.F. Rig Corporation,Mumbai (supra) to contend that the Department cannot be permittedto take contrary position than the direction given by the High Court ofDelhi. For the reasons indicated hitherto, in our opinion, the basis ofthis submission is ill-founded. The authorities have not been nor couldbe prohibited by the High Court of Delhi from proceeding with thematter in accordance with law. In the present case, all that theauthorities have done is to follow the procedure consequent toprovisional assessment, by passing a final order and raising demand onthe basis of that order. The appellant, as a matter of fact, in terms ofthe conditional interim order is obliged to discharge its obligation in termsof the bonds executed in Form B-13 and the monthly RT-12 returnsfiled from time to time for the relevant period.

30. It is not necessary for this Court to dilate on the otherobservations in the decision of the High Court of Judicature at Bombayin The Jam Shri Ranjitsinghji (supra). For the same reason, it isnot necessary for us to deal with the exposition in Metal Forgings(supra). That decision has been pressed into service to assail thefinding of the Commissioner of Central Excise (Appeals), who hadobserved that the order passed to finalize the assessment based on theRT-12 returns itself be treated as Show Cause Notice. It is notnecessary to dilate further on this aspect.

31. Similarly, the exposition of this Court in Metal Forgings(supra) and Hindustan National Glass & Industries Ltd. (supra)

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Ato urge that specific order was required to be passed before anassessment is treated as a provisional assessment, will be of no availconsidering the execution of bonds in Form B-13 by the appellant-assessee at its own volition, which is referable to provisional assessmentprocedure under Rule 9B of the Rules. Once the appellant submitteditself to that procedure without any demur pending disposal of the writBpetitions, it is not open to later on resile therefrom. Permitting theassessee to do so, would inevitably result in giving undue advantageand favour to the assessee, who had invoked the remedy under Article226 of the Constitution of India and sought interim protection on offeringto execute bonds in Form B-13 as is noted in the Prayer clause (a) ofCthe civil miscellaneous petition(s). For the same reason, the circularissued by the Government of India pressed into service will be of noavail to the appellant. Further, the decisions in Kalabharati Advertising(supra) and Jagmittar Sain Bhagat (supra) will also be of no availto the appellant. For, the appellant had voluntarily executed the bondsand also filed monthly RT-12 returns, on which endorsement had beenDmade indicative of being a provisional assessment.

32. Taking overall view of the matter, we are of the consideredopinion that the appellant cannot be allowed to approbate and reprobate- for inviting the High Court of Delhi to pass interim order stipulatingthat the appellant would execute bonds in Form B-13 referable to RuleE9B of the Rules and continue to file monthly RT-12 returns from timeto time, on which endorsements have been made indicating that it is acase of provisional assessment. The appellant cannot now be permittedto urge that it had not submitted to the process of provisional assessmentas such for lack of a specific order of the concerned authority in thatFbehalf. The order passed by the High Court of Delhi on 10/12.3.1993,will have to be understood in proper perspective and not to give undueadvantage to or bestow favour on the appellant and thereby deprivethe legitimate State exchequer.

33. Resultantly, this appeal deserves to be dismissed and the sameGis accordingly dismissed with no order as to costs. Pending interlocutoryapplications, if any, shall stand disposed of.

Divya Pandey

Appeal dismissed.

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