Holding

The proviso to Section 11‑A authorises only the Collector of Central Excise to issue a show‑cause notice for the extended five‑year period, and a notice issued by a Deputy Collector under the proviso is invalid and cannot be treated as a valid six‑month notice.

Summary

AlcoBex Metals manufactured copper shells and blanks that were consumed without payment of excise duty between 1981 and 1985. The Deputy Collector of Central Excise, Jaipur, issued a show‑cause notice on 6 March 1986 invoking the proviso to Section 11‑A of the Central Excise Act, 1944, seeking recovery of duty, confiscation of goods and a penalty. The assessee challenged the notice on the ground that the Deputy Collector lacked jurisdiction to issue a notice under the proviso, which authorises only the Collector to act for a five‑year period when fraud or collusion is alleged. The Collector upheld the notice, but the Customs, Excise and Gold (Control) Appellate Tribunal held it invalid; the Revenue appealed. The Supreme Court affirmed that only the Collector can issue a notice under the proviso and that a notice issued by a Deputy Collector cannot be treated as a valid six‑month notice, dismissing the appeals with costs.

Issues considered

Whether a Deputy Collector, Central Excise, is competent to issue a show‑cause notice under the proviso to Section 11‑A of the Central Excise Act, 1944 for a period of five years.
Whether a show‑cause notice issued under the proviso can be treated as a valid notice under the main provision for the six‑month period.
What authority is required to issue a show‑cause notice when fraud, collusion, or wilful mis‑statement is alleged under Section 11‑A?

Legislation cited

Central Excise and Salt Act, 1944s. 11-A

Subjects

central exciseshow cause noticeSection 11-Acollector jurisdictionfraudcollusionnotice validityexcise duty recoveryCircular No. 8/87-CX-I

Judgment

- COLLECTOR OF CENTRAL EXCISE, JAIPUR
v
A
J
ALCOBEX METALS

MARCH 12, 2003

[SYED SHAH MOHAMMED QUADRI AND ASHOK BHAN, JJ.] B

Central Excises and Salt Act, 1944

S. 11 A(J), Proviso-Show cause notice-Authority competent to issue
Show cause notice issued by Deputy Collector Central Excise invoking proviso c
to s. 11-A(J) for extended period-Assessee challenging the notice as invalid-
Held, Proviso to s. 11-A(J) postulates satisfaction of the Collector on the
question offi'aud, collusion, or wilful mis-statement or .suppression offact or
contravention of the Act and the Rules made thereunde; for invoking a larger
period of jive years-During the relevant period such a notice could have D
been issued only by the Collector, Central Excise-Notice issued by Deputy
Collector is wholly without jurisdiction-Even for shorter period notice based
on the grounds contained in the proviso could be issued only by the Collector-
Contention to treat the show cause notice for shorter period of six months
cannot be accepted-Central Board of Excise and Customs, Circular No.81
87-CX-l dated July 21,1987-Notice-lssuing authority. E
Collector a/Central Excise v. Oil and Natural Gas Commission, (1998)
103 E.L.T. 3, relied on.

Collector ofCentral Excise, New Delhi v. M/s.Frick1ndia Limited, 12003]
4 sec 634, followed . F
..,
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4230-4231
.....-- of 1996 .

From the Judgment and Order dated 25.3.1991 of the Customs, Excise
and Gold (Control) Appellate Tribunal, New Delhi in A. No. E/2488/89-NRB G
in F.O. No. Misc/59/90-NRB and A/182/91-NRB.

I' T.L.V. Iyer, Sanjiv Sen and B. Krishna Prasad for the Appellant.

A.R. Madhav Rao, Aiok Yadav and V. Balachandran for the Respondent.
- 1057
H
I058 SUPREME COURT REPORTS [2003] 2 S.C.R.

A The following Order of the Court was delivered :

SYED SHAH MOHAMMED QUADRI. J. The short point that arises
in these appeals by the Revenue, against the order of the Customs, Excise
and Gold (Control ) Appellate Tribunal, New Delhi, is whether show cause
notice dated March 6, 1998 issued by the Deputy Collector, Central Excise,
B Jaipur, invoking proviso to Section 11-A of the Central Excise Act, 1944 is
valid in law?

The respondent-assessee manufacturers goods of copper and copper
alloys. Shells and blanks manufactured by it were cleared wi'.hout payment
C of excise duty and were captively consumed as in manufacture of pipes and
tubes during the period March l, 1981 to December 5, 1985. The Deputy
Collector, Central Excise, Jaipur, issued notice to the. assessee on March 6,
1986 invoking the proviso to Section 11-A of the Central Excise Act, 1944
(for short, 'the Act') to show cause why duty amounting to Rs. 11,83, 19476.94
leviable on shells and blanks for the period between March I, 1981 to
D December 5, 1985 should not be recovered, seized goods should not be
confiscated and penalty should not be imposed. In reply, the assessee, inter
alia, challenged the validity of the notice to show cause issued by the Deputy
Collector, Central Excise, Jaipur. By his order dated April 12, 1989, the
Collector, Central Excise Jaipur, upheld the validity of the said notice, partly
upheld the demand of duty, ordered confiscation of seized goods and imposed
E a penalty of Rs. 25 lakhs. The order of the Collector upholding the validity
of the said show-cause notice dated March 6, 1986 was assailed before the
Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (for
short, 'the Tribunal'). On March 25, 1991, the Tribunal, by majority, held the
show cause notice to be invalid. It is from that order of the Tribunal that the
F present appeals have arisen.

Mr. T.L.V. Iyer, learned senior counsel appearing for the appellant-
Revenue, c·~ntends that even ifthe notice is held to be invalid for the extended
period under the proviso, it has to be treated as valid for the shorter period
of six months.
G
To appreciate the contention of the learned counsel, it will be useful to
read Section 11-A of the Act, as it stood at the material date, insofar as it is [
relevant he.re :

"l l-A Recovery of duties not levied or not paid or short-levied or
H short-paid or erroneously refunded - "When any duty of excise has
. C.C.E. v. ALCOBEX METALS 1059
not been levied or paid or has been short-levied or short-paid or A
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 to whom the refund has erroneously been made,
requiring him to show cause why he should not pay the amount B
specified in the notice :

Provided that where any duty of excise has not been levied or paid
or has been short-levied or short-paid or erroneously refunded by
reason of fraud, collusion or any wilful mis-statement or suppression
of facts, or contravention of any of the provisions of this Act or of C
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', for the words 'six months', the words 'five
years' were substituted.
• D
Explanation-Where the service of the notice is stayed by an order of
a court, the period of such stay shall be excluded in computing the
aforesaid period of six months or five years, as the case may be."

From a perusal of the aforementioned section, it is clear that a Central
Excise Officer is empowered to issue notice to the person chargeable with the E
duty of excise which has not been levied or paid or has been short-levied or
short-paid or erroneously refunded within six months from the relevant dated
requiring him to show cause why he should not pay the ainount specified in
the notice. The proviso enables the Collector of Central Excise to issue such
a notice in respect of a period of five years instead of six months, if the non-
levy or non-payment or short"levy or short-payment or erroneous refund was F
by reason of fraud, collusion or any wilful mis-statement or suppression of

. facts or contravention of any of the provisions of the Act or the Rules made

- thereunder with an intent to evade payment of duty by such persons or his
agent. It is obvious that at the material date, the authority to issue the notice
to show cause under the proviso to Section 11-A of the Act, was the Collector G
of Central Excise.

Admittedly, the impugned notice was issued by the Deputy Collector,
Central Excise invoking the proviso to Section 11-A for the extended period
which postulates satisfaction of the Collector on the question of fraud, collusion
o;· wilful mis-statement or supersession of fact or contravention of any H
1060 SUPREME COURT REPORTS [2003] 2 S.C.R.

A provisions of the Act and the Rules made thereunder for invoking a larger
period of five years, i.e., from March I, 1981 to December 5, 1985. It follows
that such a notice could have been issued only by the Collector, Central
Excise as such the impugned notice issued by the Deputy Collector is wholly
without jurisdiction. This is the view taken by a Bench of two learned Judges
B of this Court in Collector of Central Excise v. Oil and Natural Gas
Commission, (1998) I03 E.L.T 3. This position is not seriously disputed by
the learned senior counsel.

The contention that the impugned notice be treated as valid in regard
to shorter period of six months is devoid of merit. Once the notice is issued t
C under the proviso for the larger period, it cannot be treated as notice under
main Section 11-A for shorter. period of six months To enable this -Court to
ascertain the content of the impugned notice issued to find out whether it is
severable as contended by the learned counsel, time was granted to the Revenue
to produce a CQPY thereof. In spite of the fact that a period of about eleven
months has elapsed from the last date of hearing, a copy of the notice has not
D been produced. A perusal of the order of the Collector shows that herecorded
the finding of suppression of fact. Even for shorter period notice based on the
grounds contained in the proviso could be issued only· by the Collector,
therefore, the contention to treat the show cause notice for shorter period of
six months cannot be accepted. This point was considered by a three-Judge
E Bench of this Court in the case of Collector of Central Excise, New Delhi v.
Mis.Frick India Limited in Civil Appeal Nos. 4421-4422 of2000 on December
14, 2000 wherein the judgment in Oil and Natural Gas Commission (supra)
was confirmed and central instructions of August 1987 were also referred to.

F
We may now advert to the Circular issued by the Central Board of
Excise and Customs, Circular No. 8/87-CX-I dated July 21, 1987 here. It
seems a doubt was entertained by the excise authorities as to the validity of
--
the notice issued by an authority lower in rank than the Collector necessitating
issuance of the Circular which reads as under:

"Interpretation of amended Section 11-A of the Central Excises
G & Salt Act, 1944 - Regarding.

A reference is invited to the amendment carried out in Section 11-A
of the Central Excises & Salt Act, 1944 by the Amendment Act of
19_85. In terms of the amended section, in cases where short levy etc.
has occurred by reason of fraud, collusion etc., it is provided that
H instead of a 'Central Excise Officer', the 'Collector' may, within
C.C.E. v. ALCO BEX METALS 1061
five years From the relevant date, serve notice on the person chargeable A
to duty which has not been levied or paid etc.

2. A doubt has been raised as to whether the proper officer for serving
the show-cause notice and deciding cases where, the period involve9
is below six months, but fraud, collusion, mis-statement of fact etc.
are alleged, would be the Collector, or the Assistant Collector of B
Central Excise in terms of the amended Section 11-A. The matter has
been examined in consultation with the Law Ministry. The relevant
portion of the opinion of the Law Ministry is reproduced below :-

'Where the non-levy, short levy, erroneous refund etc. is due to fraud,
collusion etc. the case will fall in the proviso to Section 11-A(I) and C
not in main sub-section of Sec. I J.. A(l). The period of limitation and
.~

the authority competent to issue the notice will be the ones provides
in the proviso. If fraud etc. is the ground for issue of notice, the
Competent Authority to issue such a notice would be the Collector of
Central Excise irrespective of the fact whether the notice is issued D
within six months or thereafter.'

3. The Board has accepted the aforesaid opinion of the Law Ministry.
Action in such matters may be taken in accordance with the said law
Ministry's opinion."

A perusal of the above-mentioned Circular shows that the Central Board E
of Excise and Customs also expressed the same view.

We, therefore, do not find any reason to interfere with the order under
challenge. The Civil Appeals are accordingly dismissed with costs.

R.P. Appeals dismissed. F