Holding

The Board’s order was beyond the one‑year period prescribed by Section 35E, making the revenue’s appeal time‑barred, and the Tribunal erred in allowing the third show cause notice’s allegations to be considered for the first and second notices.

Summary

GTC Industries Ltd., a cigarette manufacturer, was served with three show cause notices demanding excise duty for different periods and factories. The High Court allowed the revenue to adjudicate the first notice but ordered that the adjudication order not be communicated to the assessee, later directing that the sealed order be opened and shown to the parties. The Board of Excise & Customs issued an order under Section 35E(1) of the Central Excises and Salt Act, 1944 on 29 May 1992 directing the Collector to apply to the Tribunal, which was more than one year after the adjudication order dated 21 August 1987. The Tribunal entertained the revenue's appeal, holding it timely, and also allowed the allegations in the third show cause notice to be considered for adjudicating the first and second notices. The Supreme Court held that the Board’s order was beyond the statutory one‑year limitation, rendering the revenue’s appeal time‑barred, and that the Tribunal exceeded its jurisdiction by permitting the third notice’s allegations to be used for the first two notices. Consequently, the revenue’s appeal was dismissed and the adjudication of the first and second notices was to proceed limited to the facts of each notice.

Issues considered

Whether the Board’s order under Section 35E(1) of the Central Excises and Salt Act, 1944 was made within the one‑year limitation prescribed by Section 35E(3).
Whether the revenue’s appeal before the Customs, Excise and Gold (Control) Appellate Tribunal is barred by limitation.
Whether the Tribunal has jurisdiction to direct that allegations in a third show cause notice be considered for adjudication of the first and second show cause notices.
Whether the High Court’s order directing non‑communication of the adjudication order affects the limitation period for filing the Board’s order.

Legislation cited

Central Excises and Salt Act, 1944s. 35E(1), s. 35E(3)

Subjects

excise dutyshow cause noticelimitation periodSection 35Eadjudicationtribunal jurisdictionsealed enveloperevenue appeal

Judgment

'
'

A GTC INDUSTRIES LTD.
v.
COLLECTOR OF CENTRAL EXCISE, NEW DELHI

JULY 22, 1997

B (S.P. BHARUCHA AND V.N. KHARE, JJ.]

Central Excises and Salt Act, 1944: Sec. 35E(J)-Assessee-Cigarette
manufacturing company-Default in payment of excise du~Two show cause
notices issued-Subsequently third show cause notice issued-On chal-
" '

C lenge-High Court permitting Revenue to proceed with adjudication-But
directions issued for not communicating the orders-Subsequently sealed en-
velope opened and orders shows shown io parties-Appeal by Revenue against
the adjudication order-Held, appeal filed by the Revenue before the Tribunal
is beyond time-Cannot be entertained-Each show cause notice must be
D limited to the case made out therein-No jurisdiction for Tribunal to direct
that third show cause notice be looked into for the purpose of adjudication .•
of 1st and 2nd show cause notices-Direction of tribunal-Beyond its ad-
judicatory.function.

The appellant-assessee, a cigarette manufacturing Company, was
E issued two show cause notices demanding excise duty. Subsequently a third
show cause notice was issued to the assessee. A petition challenging the
show cause notices was filed before the High Court. The High Court 011
20th June 1984 while permitting the Revenue to proceed with adjudication
of the first show cause notice directed not to communicate the order
passed in the adjudication proceedings to the parties. By subsequent order
F dt. 18th June 1991 High Court gave directions for opening the sealed cover
and for showing the orders to the parties. A direction for filing appeal
against the adjudication order was passed by the High Court on 21st July
1994. The appeal filed by the assessee against the adjudication order on
the ground that the Board's order had been passed beyond the period
stipulated in Section 35E of the Central Excises and Salt Act, 1944 was
G dismissed by the Customs, Excise and Gold (Control) Appellate Tribunal.

Aggrieved by the order of the Tribunal, the appellant-assessee has
filed the present appeal.

The contention of the appellant-assessee was that the Board's, order,
H directing that an appeal should be filed by the Revenue against the
10
GTCINDUSTRIE.SLTD. v. C.C.E.,NEWDELHI 11

adjudication order, was passed after the expiry of the ~eriod specified in A
that behalf. It was further contended that the Tribunal exceeded its juris·
.J diction in ordering that the allegations contained in the third show cause
notice shonld be looked into for the purpose of adjudication, on remand
of the first and second show cause notices.,

The contention of the respondent was that the High Court directed B
that the adjudication order should not be communicated to the assessee
but should be kept in a sealed envelope. It was in consonance with the
· J spirit of the order that the said assessment order had not been looked into
by the Board under the provisions of section 35-E and therefore the period
during which the said assessment order remained in a sealed envelope C
should not be taken into consideration for filing an appeal.

Allowing the appeals, this Court

HELD: 1.1.The appeal filed by the Revenue before the Tribunal is D
beyond time and it shall not be entertained.

1.2. Section 35E(1) of the Central Excises and Salt Act, 1944 em-
powers 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 E
itself as to the legality and propriety thereof. It can direct the Collector to
apply to the Tribunal for determination of such points as arising out of
the decision or order as are specified by the Board. Sub-section (3) of
section 35-E requires that no order shall be made under sub- section (1)
after the expiry of one year from the date of the decision or order of the F
adjudicating authority. The Board's order was well beyond the permitted
time. [15-A-D]

1.3. The High Court's order required the Revenue not to communi·
cate the assessment order to the assessee. It imposed no restriction on the G
activities of the Revenue. The examination of the assessment order by the
Board under section 35-E 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 consequent upon such examination. Therefore, the
Board's order was passed after the period prescribed in that behalf by
section 35-E of the Act. [15-1<'-H] H
12 SUPREME COURT REPORTS (1997) SUPP. 3 S.C.R.

A 2. 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.
The view of the Tribunal 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 cannot be sustained. Each show cause
B 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. [16-E-G]

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 10858-
10860 of.1996.
c From the Judgment and Order dated 25.3.96 of the Customs Excise
and Gold (Contra!) Appellate Tribunal, Delhi in A. No. E/1846/95- A and
E/1864-66 of 1994-A.

J. Vellapalli and Mrs. Robina Nath. for Khaitan & Co. for the
D Appellant.

K.N. Bhat, S.D. Sharma, C.B. Babu and V.K. Verma for the Respon-
dents.

The Judgment of the Court was delivered by
E S.i>. BHARUCHA, J. T,he assessee is in appeal agairist 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.

F 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 reiated to
G period 1978 to 1983 and demanded Rs. 35.32 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 the 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 wa.; issued by the Deputy Director of Anti
H Evasion, Central Excise, New Delhi.
GTC INDUSTRIES LTD. v. C.C.E., NEW DELHI.[S.P. BHARUCHA, J.] 13

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 :
B
"The order signed by the concerned officer as provided herein
above will not be communicated to the respondents nor will the
concerned officer or any other officer of the Excise Department
inform the respondents of the fact that the order has been passed
and/or signed by the concerned officer." c
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. On 21st July, 1994 D
the High Court directed that the assessee'· and/or the Revenue "may file'
--i 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 respon•
dents, as the case may be, the Tribunal to entertain the said appeal on
merits without taking the objection of limitation." E
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 da.ted 21st August, 1987 F
passed by the Director (L & A) on the three show cause notices, heard
and dealt with together. The order of the Cental Board was endorsed,
amongst others, to the Principal Collector of Central Excise, New Delhi.

'b Oaln 16~h Sehpte~dberd'. 1d~94 .the adsses~ee ffiled ~ppe alsdbefohre fithe
1
Tn un agamst t e sa1 a JU 1cahon or er mso ar as 1t re ate to t e rrst
G
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 H
14 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A lodged by the applicant against the said adjudication order on that day,
namely, 13th December, 1995. It stated that since a copy of the Boards'
order under Section 35E(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 (Investiga-
B tions), Directorate General, Anti Evasion, New Delhi by his letter dated
7th December, 1996. The application submitted that the date of com-
munication 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.
c
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
effective 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
D opened pursuant to the High Court's direction and the said adjudication
order shown 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
E December, 1995. Accordingly, it held that the Revenue's appeal against the
said adjudication order was in time. The Tribunal then noted the conten-
tion of the assessee that the assessment order had travem;d beyond the
scope of the grounds contained in the first and second show ,cause notices.
The Tribunal saw no reason why the details regarding extra profit margin
F 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."

G It is submitted on behalf of the assessee that the Boards' 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
H ordering that the allegations contained in the third show ~ause notice
GTC INDUSTRIES LTD. v. C.C.E., NEW DELHI [S.P. BHARUCHA, J.] 15

should be looked into for the purpose of adjudication, on remand, of the A
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 B
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 or order as are specified by the Board.
Sub-section (3) of Section 35E requires that no order shall be made under
sub-section (1) after the expiry of one year from the date of the decision
or order of the adjudicating authority. C

The said adjudication order was made on 21st August, 1987. The
Boards' order was made on 29th May, 1992. Prima f acie, 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 D
Court dated 20th June, 1984 which required that the adjudic~tion 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 E
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.
F
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 G
~- 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 consequent upon such examination. We,
therefore, hold that the Boards' order was passed after the period
prescribed in that behalf by Section 35E of the Act. H
16 SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A 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 tlie Commissioner (L &
A), Customs and Central Excise, New Delhi had not been endorsed a copy
of the Boards' order and that he had been informed thereof only on 7th
B December, 1995. The Boards' order was endorsed to the Principal Collec-
!~ tor, 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 ·
I
"N officer in the Central Excise Collectorate at New Delhi. The requirement
r of Section 35E that the communication of the Boards order should be
!\ c 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,
f/,:
. ···n 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
E purpose of adjudication of the first and second show caus~ 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 Reve1me. It is not within the jurisdiction of the Trib!Jnal to direct
otherwise; to do so is to go beyond its purely adjudicatory f~nction.

F 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. ·
G No order as to costs.

S.V.K.I. Appeals allowed.