Holding

The limitation period under Section 28 does not apply to the Central Government’s suo motu power under Section 131(3) to annul or modify orders passed under Sections 128 or 130; therefore the show‑cause notice was not barred by limitation.

Summary

The appellant, Indian Textile Paper Tube Co. Ltd., imported goods that were initially classified under a higher duty heading and later obtained a refund order after the Appellate Collector re‑classified them under a lower duty heading. The Central Government, exercising suo motu power under Section 131(3) of the Customs Act, issued a show‑cause notice to annul the appellate order, alleging a mis‑classification and a short‑levy. The appellant contended that the notice was barred by the six‑month limitation prescribed in Section 28, read with Section 131(5). The Supreme Court held that the limitation period in Section 28 applies only to actions under Section 131(5) concerning non‑levy or short‑levy orders of the original assessing authority, and not to the Central Government’s suo motu power under Section 131(3) to modify appellate orders. Since no actual refund had been made, the limitation period could not be invoked. Consequently, the show‑cause notice was valid and the appeal was dismissed with costs.

Issues considered

Whether the Central Government’s suo motu action under Section 131(3) of the Customs Act is subject to the six‑month limitation period of Section 28.
Whether the limitation period applies when the order being annulled is an appellate order passed under Section 128.
Whether an order granting a refund constitutes an actual refund for the purpose of determining the 'relevant date' under Section 28.

Legislation cited

Customs Act, 1962s. 131, s. 28
Customs Tariff Act, 1975

Subjects

customs dutylimitation periodSection 28Section 131erroneous refundsuo motu revisionappellate ordershort‑levynon‑levy

Judgment

INDIAN TEXTILE PAPER TUBE CO. LTD.
A
v.
COLLECTOR OF CUSTOMS, MADRAS

MAY 4, 1990

B [SABYASACHJ MUKHARJI, CJ., P.B. SAWANT AND M.M.
PUNCHHI, JJ.]

Customs Act, 1962: Sections 28( 1), (3) and 131( 1), (3), (5)-Suo
motu revision by Central Government to annul/modify order of
erroneous refund of duty-Period of limitation-What is.

Mere order granting refund is not actual refund-Limitation to
run from date of actual refund.

The appellant imported Top Line Tube Winder Endless Belts
which were assessed to duty under heading 40.05 /16(3) at 40% plus
D countervailing duty at the rate of 25% under Item 16-A(4) of the
Customs Tariff Act, 1975.

Thereafter, the appellant made an application for refund of the
excess of duty so charged contending that the goods were in fact liable to
be classified under heading 59 .16 /l 7, and without countervailing duty.
E
The Assistant Collector rejected the claim by his order dated
October 12, 1979 and against it the appellant preferred an appeal under
Section 128 of the Customs Act, 1962 to the Appellate Collector who
allowed the appeal holding that the goods were classifiable under
heading 59.16/17.
F
The Government, however, issued a suo motu show cause notice
dated November 21, 1981 to the appellant under Section 131(3), asking
the appellant to show cause as to why the goods should not ~be classified
nnder heading 39.07 which attracted duty at 100% ad valorem, and also
as to why the order dated May 2, 1981 passed by the Appellate Collector
G shonld not be annulled.

Against the aforesaid show cause, the appellant preferred an
appeal to the Customs Excise and Gold Control (Appellate) Tribunal,
contending that the show cause notice was barred by limitation under
sub-section (5) of Section 131 read with Section 28 of the Act, which was
H six months from the date of short-levy, and in any case six months from
the date of the Appellate Order.
96
TEXTILE PAPER TUBE v. COLLECTOR OF CUSTOMS 97

The Tribunal dismissed the appeal holding that the notice was in A
time, and that the assessment proposed to be made under heading 39.07
was proper, and set aside the order of the Appellate Collector allowing
the revision.

In the appeal to this Court, the question for consideration was:
whether the Central Government violated the bar of limitation while B
exercising suo motu revisional powers under Section 131 of the Customs
Act, 1962.

Dismissing the appeal by a 2: I Majority, this Court,
HELD: (Sabyasachi Mukharji, CJ. and P.B. Sawant, J.-Per
Sawant, J.) c
I. The provisions of Section 131(5) and therefore the limitation
laid down in section 28 of the Act do not apply to the action taken by the
government under section 131(3). [103D]

Geep Flashlight Industries Ltd. v. Union of India, [1977] I SCR D
983, followed.

2. Even if it was held that the limitation as laid down in Section 28
would apply to the initiation of action under Section 131(3), since the
appellate order in the instant case, has only allowed the appeal of the
__ / ' appellant declaring him as being entitled to the refund, and no refund E
has yet been made the action of the Government under section 131(3) is
clearly not barred by limitation. [102G-H]

3. In the case of erroneous refund, the notice under section 28 of
the Act has to be given within six months from the date of 'actual'
refund. lf no refund has in fact been made, limitation cannot be said to F
arise inasmuch as the 'relevant ·date' under section 28 in the case of
)"--
erroneous- refund ·speaks of the date of refund. The Order granting
refund is not actual refund. Admittedly, in the instant case no refund
has bee.n made to the appellant under the appellate custon.s' order
dated May 2, 1981. Hence even if it is held that the provisions of sub-·
section (3) of Section 131 are governed by sub-section (5) thereof and, G
therefore, the limitation laid down under section 28 of the Act applied
to the action of the Government under section 131(3), the present show
cause notice is not barred by limitation. [103C-D]

4. It is clear from the provisions of sub-section (3) of Section 131
that it does not give power to the Central Government to act suo motu H
98 SUPREME COURT REPORTS [ 1990] 3 S.C.R.

to annul or modify an order passed by the original assessing authority.
A On the other hand, the provisions of sub-section (5) of Section 131
contemplate proceedings against actions of the original assessing
authority which have resulted in either not levying or short-levying the
goods. That sub-section by implication also covers cases of refunds,
when goods are cleared initially under a provisional assessment, and the
B final assessment shows that the assessee is entitled to a refund of duty
charged in excess earlier. But all the cases whether Of non-levy, short·
levy or of refund which are contemplated in sub-section (5) are cases
arising out of the acts of omissions and commissions of the original
>-
--(
assessing authority, and it is when such orders passed by the original
assessing authority which are sought to be annulled or modified, that
the provision of limitation contained in Section28 applies. [103G-H; 104A-BJ
c
5. Thus, the situations contemplated by sub-section (3) and by
sub-section (5) of Section 131 are mutually exclusive in that whereas
sub-section(3) speaks of the annulment or modification of the appellate
or revisional orders, sub-section (5) speaks of the orders passed by the
D original assessing authority. [104B]

6. Hence, the limitation applies when the Government seeks to
annul or modify orders of the original assessing authority under sub-
section (5) and not when the Government takes action to annul or
modify the appellate or revisional orders under sub-section (3). [J04C]
E
7. The above interpretation is also consistent with the provisions
of sub-sections (1) and (4) of Section 131. [104D]

8. The conclusion is inescapable that the limitation prescribed by
Section 28 is applicable when under sub-section (5) of Section 131 the
p Government seeks to annul or modify orders other than those passed
under Sections 128 and 130. It is not applicable to the action taken
under sub-section (J) for annulling or modifying orders passed under
Sections 128 and 130. [104G-H]

9. In the instant case, since the impugned show .cause notice is
G issued to annul /modify the order passed by the Appellate Collector of
Customs under Section 128, it is not barred by limitation. [105A]

(Per M.M. Punchhi, ].-dissenting)

l(a) Section 28 envisages three kinds of errors in regard to
H custom duties. One is non-levy. This means that the goods were not
TEXTILE PAPER TUBE .v. COLLECTOR OF CUSTOMS 99

·classified to duty whereas they could be. The second is short-levy. In A
this could be included a case in which the goods could be classified in
one Entry but were erroneously classified under another Entry result-
ing in short-levy of custom duty, or the like. The third is the case of
erroneous refund. This category springs up in the process of assessment
only where two kinds of error, i.e. non-levy or short-levy, may occur
B
and lead to an erroneous refund. [108H; I 09A]

(b) It is clear from section 28 that in case of duty not levied or
short-levied, the 'relevant date' is the date on which the concerned
officer makes some orders for the clearance of the goods on payment of
duty on framing the final assessment as the case may be. [109E]
c
Geep Flashlight Industries Ltd. v. Union of India & Ors., [1977] 1
SCR 983, referred to.

2. Since levy is linked to assessment, a case for refund may arise
which may be erroneous. [109A]
D
In the instant case, the Tribunal seems to take the view that
sub-section (3) of Section 131, if employed, eclipses sub-section (5) of
Section 13 t. It was of the view that when the Central Government on its
own motion proposes to annul or modify any order passed under Sec-
tion 128 or Section 130 then it is not fettered by the time-limit specified
in Section 28 ev~n though it entertains the opinion that any duty of E
customs has either not been levied or has been short-levied. This
approach appears to wholly erroneous. [108D-E]

3. There is nothing in the language of sub-section (3) to suggest
that it over powers or renders otiose sub-section (5). Both the sub-sec-
tions need not militate against each other, components as they are of the F
singular power conferred by the legislature on the Central Government
for revision. I108EJ

4. The harmonious way is, therefore, to read these sub-sections
would be that the Central Government is empowered on its own motion
to annul or modify any order passed under Section 128 or Section 130, G
hut if it is an order whereby any duty of customs has either not been
levied or has been short-levied, the Central Government can levy or
enhance the duty by giving the person affected by the proposed order a
notice to show-cause against it but within the time-limit specified in
Section 28, which is six months from the date of the order. [IOOF-G]
H
100 SUPREME COURT REPORTS [ 1990] 3 S.C.R.

A S. Merely because the Central Government had the power to suo
motu revise the orders of refund passed by the Appellate Collector it
does not follow a fortiori that it had the power to revise the orders of
short-levy atthat stage. [HOD]

6. The orders of levy of duty in the instant case, had two facets.
B
The duty from the point of view of the appellant had beeen excessively
levied necessitating him to challenge the same and seek refund. On the
other hand, from the point of view of the Revenue, the duty had been
short-levied giving rise cause to have it levied under proper heading. It
was incumbent on the Central Government to exercise its suo motu
power under sub-section (3) read with sub-section (S) of Section 131
c within six months from 6.8. 79, the date when the duty was short-levied
and undeniably the Central Government did not take such timely step
even though it had a cause to do so. The appellant, however, made
claim for the refund of the excess duty levied taking shelter under
another heading and on its refusal by the Assistant Collector on
D 12.10. 79 had its appeal accepted on 2.5.81 from the Appellate Collector
who ordered refund. The Central Government then got a cause to take
suo motu action under Section 131(3) of the Customs Act to annul or
modify the order of the Appellate
I
Collector or the actual refund itself
under that order. It being a case of erroneous refund sub-section (3) of
Section 131 was attracted and not sub-section (SJ of Section 131 as at
that point of time it was not a case of non levy or short-levy, and these
E two categories of errors could not be equated with the error of
erroneous refund inasmuch as these three categories of errors are
treated separately in the scheme of things. [I09H; 1OOA-B]

7. The error committed by the Tribunal, in the instant case, is so
patent that it cannot be allowed to go uncorrected as a tolerable error.
F The appeal has, therefore, to be allowed. The orders of the Tribunal
passed in appeal have to be modified so as to revive the order of the
original assessment dated 6.8. 79 and the order of the Assistant Collec-
tor of Customs dated 12.IO. 79, keeping upset the orders dated 2.5.81 of
the Appellate CollectorofCustoms. [HOG-HJ
G CIVIL APPELLATE JURISDICTION: Civil Appeal No 5014
of 1984 .
•
From the Judgment and Order dated 3.9.84 of the Customs
Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal
H No. 1604 of 1981-C in Order No. 674 of 1984-C.
TI;XTILE PAPER TUBE v. COLLECTOR OF CUSTOMS [SAWANT, J.] 101

A. !Subba Rao for the Appellant. A
'r Soli J. Sorabjee, Attorney General, Ms. Indu Malhotra and P.
Parmeshwaran for the Respondent.

The Judgment of the Court was delivered by
B
SA WANT, J. The appellant imported Top Line Tube Winder End·
dless Belts of the value of Rs.31, 101 from the United Kingdom under the
Bill of Entry dated 6.8.1979. The goods were assessed to duty under
heading 40.05/16(3) at 40% plus countervailing duty at the rate of 25%
under Item 16-A(4) of the Customs Tariff Act, 1975. The appellant
thereafter made an application for refund of the excess of duty so
charged contending that the goods were in fact liable to be classi-
c
fied under heading 59.16/17 and without countervailing duty. The
Assistant ·collector rejected the claim by his order of 12.10.1979.
Against it, the appellants preferred an appeal under Section 128 of the
Customs Act, 1962 (hereinafter referred to as the 'Act') to the
Appellate Collector of Customs. On May 2, 1981, the Appellate D
Collector allowed the appeal holding that the goods were classifiable
under heading 59.16/17.

2. On November 21, 1981, the Government issued a notice to
the appellant under Section 131(3) of the Act asking him to show cause
as to why the goods should not be classified under heading 39 .07 which E
../'
attracted duty at 100% ad valorem and also to show cause as to why
the order of 2nd May, 1981 passed by the Appellate Collector should
not be annulled. Against the said show cause notice, the appellant
preferred an appeal to CEGAT. The contention with regard to limita-
tion was that the show cause notice was barred by limitation as laid
down by sub-section (5) of Section 131 read with Section 28 of the Act, F
which was six months from the date of short-levy and in any case six
months from the date of the Appellate Order. The Tribunal dismissed
the appeal holding that the notice was in time and also further that the
assessment proposed to be made under heading 39.07 was proper. It is
against this decision of September 3, 1984 of the Tribunal that the
present appeal is preferred. G

3. Before us the only contention raised is that the show cause
notice was barred by limitation and hence, the Government had no
power to annul the Appellate Collector's Order under Section 131(3)
of the Act. The argument is that the limitation for initiating action
under sub-section (3) of Section 131 is laid down in sub-sectron (5) H
102 SUPREME COURT REPORTS [1990] 3 S.C.R.

thereof. For, the cases in which the Central Government wouta
'nitiate action under sub-section (3) can only be the cases either of the
cibsence of levy or of the short-levy or of refund. In any of the said
cases, the limitation laid down under sub-section (1) read with sub-
section (3) of Section 28 is six months. In the present case, the levy of
uuty was on 6.8.1979 and the order of the Appellate Collector was of
R May 2, 1981, while the show-cause notice was issued on November 21,
i'l81. In any case, therefore, the notice was beyond six months and
hence barred by limitation.

4. According to us, this contention is not available to the appel-
lant in view of the decision of this Court in Geep Flashlight Industries
Ltd. v. Union of India & Ors., [1977] 1 SCR 983 in which it is held that
c the provisions of Section 131(5) and therefore the limitation laid down
in Section 28 of the Act do not apply to the action taken by the
Government under Section 131(3). The relevant observations are as
follows:

D "Once the provmons contained in section 131(3) are
attracted, the Central Government may of its own motion
annul or modify any order passed under Section 128 or
Section 130. This provision is the power of Central
Government to annul or modify any order. This power is
exercised by the Central Government suo motu. Of course
E the power is to be exercised on giving notice to the person
concerned.
'

The provisions contained in section 131(5) of the Act
speaks of limitation only with regard to non-levy or short-
levy. It is significant that section 131(5) does not speak of
F any limitation in regard to revision by the Central
Government of its own motion to annul or modify any
order of erroneous refund of duty. The provisions con-
tained in section 131(5) with regard to non-levy or short-
levy cannot be equated with erroneous refund inasmuch as
the three categories of errors in the levy are dealt with
G separately."

5. Further, even if it was held that the limitation as laid down in
Section 28 would apply to the initiation of action under Section 131(3),
since the appellate order has only allowed the appeal of the appellant
declaring him as being entitled to the refund, and no refund has yet
H been made, the action of the Government under Section 131(3) is
TEXTILE PAPER TUBEv. COLLECTOR OF CUSTOMS [SAWANT,J.] 103

clearly not barred by limitation. Section 28 of the Act states that when
A
any duty has been erroneously refunded, the proper Officer may, with-
·--..- in six months from the relevant date, serve notice on the persons
chargeable with the duty to whom the refund has erroneously been
made, reg uiring them to show cause why they should not pay the
amount specified in the notice. Sub-section (3) of Section 28 then
defines the expression "relevant date" for the purposes of sub-section B
(1). Clause (c) of the said sub-section (3) states that the "relevant
date" in a case where duty has been erroneously refunded means the

~
date of refund. The decision in Geep Flashlight Industries Ltd. case
(supra) has while dealing with this very aspect pointed out that in the
case of erroneous refund, the notice under Section 28 of the Act has to
be given within six months from the date of "actual" refund. If no
refund has in fact been made, limitation cannot be said to arise inas- c
much as the "relevant date" under Section 28 in the case of erroneous
refund speaks of the date of refund. The Order granting refund is not
- actual refund. Admittedly, in the present case no refund has been
made to the appellant under the Appellate Customs Order dated May
2, 1981. Hence, even if it is held that the provisions of sub-section (3) D
of Section 131 are governed by sub-section (5) thereof and, therefore.
the limitation laid down under Section 28 of the Act applies to the
action of the Government under Section 131(3), the present show
cause notice ts not barred by limitation.

6. Even otherwise we are also of the view that the orders which E
/ are contemplated under sub-Section (3) of Section 131 are orders
passed under Section 128 or Section 130 only, namely, the order
passed in appeal by the Appellate Collector or in revision by the Board

r respectively. Sub-section (3) does not speak of any other order. That is
clear from the language of the said sub-section which reads as follows:

"(3) The Central Government may of its own motion
F

annul or modify any order passed under Section 128 or
Section 130".

It is, therefore, clear from the provisions of the said sub-section
that it does not give power to the Central Government to act suo motu G
to annul or modify an order passed by the original assessing autho-
rity. 0n the other harid, the provisions of sub-section (5) of Section
131 contemplate proceedings against actions of the original assessing
A authority which have resulted in either not levying or short-levying the
goods. That sub-section by implication also covers cases of refunds.
when goods are cleared initially under a provisional assessment, and H
104 SUPREME COURT REPORTS [ 1990] 3 S.C.R.

the final assessment shows that the assessee is entitled to a refund of
A
duty charged in excess earlier. But all the cases whether of non-levy,
short-levy or of refund which are contemplated in sub-section (5) are
cases arising out of the acts of omissions and commissions of the
original assessing authority, and it is when such orders passed by the
original assessing authority which ate sought to be annulled or modi-
B fied, that the provision of limitation contained in Section 28 applies.

Thus the situations contemplated by sub-section (3) and by
sub-section (5) are mutually exclusive in that whereas sub-section
(3) speaks of the annulment or modification of the appellate or
revisional orders, sub-section(5) speaks of the orders passed by
the original assessing authority. Hence, the limitation applies when
c Government seeks to annul or modify orders of the original assessing
authority under sub-section (5) and not when the Government takes
action to annul or modify the appellate or revisional orders under
sub-section (3).

D 7. This interpretation is also consistent with the provisions of
sub-sections (1) and (4) of Section 131. Sub-section (1) speaks only of
appellate and revisional orders passed under Sections 128 and 130
respectively and of no other order. Similarly, clauses (a) and (b) of the
sub-section (4) ma)ce a distinction between the appellate and revisional
orders passed under Sections 128 and 130 respectively. Where an
E appellate or revisional order has already been passed enhancing any
penalty or fine in lieu of confiscation or confiscating goods of greater
value, it does not permit Government to pass any order again enhanc-
ing the penalty or fine. It, however, permits passing of such order in
any other case, but within a period of one year from the date of the
order sought to be annulled or modified. Hence the legislature has in
F Section 131 all along maintained the distinction between the orders
passed under Sections 128 and 130, and other orders. Viewed from this
angle also, it is necessary to read the provisions of sub-section (3) of
Section 131 as being applicable only to orders passed under Sections
128 and 130 and the provisions of sub-section (5) as being confined to
orders other than those passed under Sect.ions 128 and 130.
G
8. Hence, the conclusion is inescapable that the limitation pres-
cribed by Section 28 is applicable when under sub-section (5) of Sec-
tion 131 the Government seeks to annul or modify orders other than
those passed under Sections 128 and 130. It is not applicable to the
action taken under sub-section (3) for annulling or modifying orders
H passed under Sections 128 and 130. Since in the present case the
TEXTILE PAPER TUBE v. COLLECTOR OF CUSTOMS [PUNCHHI, J.J 105

A
impugned show-cause notice is issued to annul/modify the order
-
~- passed by the Appellate Customs under Section 128, it will have to be
held that it is not bar.red by limitation.

9. In this view of the matter the appeal fails and is dismissed with B
costs.

~· PUNCHHI. J. Has the Central Government violated the bar
of limitation while exercising suo motu revisional powers under sec-
tion 131 of the Customs Act, 1962 is the limited question which crops
up for consideration in the instant appeal against the judgment and
c
order of the Customs, Excise & Gold (Control) Appellate Tribunal.
New Delhi dated September 3, 1984 passed in Appeal No. CD(SB)(T)
-- 1604/81-C.

D
The appellant imported a consignment of top line tube winder
endless belts valued at Rs.31, 101. The consignment came from the
United Kingdom and was covered under a Bill of Entry dated 6.8.
1979. The goods were assessed to duty under heading 40.05/16(3) at
40% plus counter-vailing duty at the rate of 25% under Item 16-A(4)
of the Customs Tariff Act, 1975. The appellant lodged a refund claim
E
/ with the Assistant Collector on grounds which are factual in nature,
asserting that the goods had not correctly been assessed to duty and

,-
.--
that they should have been assessed under a different heading 59.16/17
of the Customs Tariff Act, 1975. On 12.10.1979 the claim for refund
was rejected by the Assistant Collector by an order. On appeal by the
appellant the Appellate Collector of Customs took a different view as to
the nature of the consignment imported and assessed it to duty under
heading 59.16/17 allowing the appeal with consequential relief. On the
F

>---- report of the Collector of Customs the Government issued a suo motu
show cause notice dated 21.11.1981 prima facie being of the view that
the Appellate Collector was not correct in classifying the goods under
heading 59.16/17 of the Customs Tariff Act, 1975, as also that the
original classification under heading 40.05/16(3) done by the Assistant G
Collector was also not in order. The matter thus was sent to the
Customs, Excise & Gold (Control) Appellate Tribunal, New _Delhi
_.-l. where the plea of limitation was raised by the appellant besides raising
factual pleas with regard to the nature of the consignment and its
liability to be classified under an appropriate head. The Tribunal,
H
106. SUPREME COURT REPORTS [ 1990] 3 S.C.R.

A instead, on facts classified the consignment as articles of plastic under
heading 39.07 of the Customs Tariff Act, 1975 and not under heading
59.16/17 as done by the Appellate Collector and thus set aside the
order of the Appellate Collector allowing the revision.

The plea of time bar raised by the appellant was repelled by the
B Tribunal in the following words:

"On the question of time bar we find that the Appellate ~·
Collector issued the orders on 4. 7 .1981, the show cause
notice was issued on 21.11.1981 and served on the party on
24 .11. 1981. The show cause notice has therefore been
issued within the period of six months. Section 131(5) of
c the Customs Act, 1962 refers to a case of non levy and short
levy. For those cases the time limit of section 128 would be
applicable. Section 131(3) provides for the Central
Government to annul or modify any order passed under
section 128 or 130. The Supreme Court in 198J-ELT-1596
D held as follows:-

'The provisions contained in section 131(5) of the Act
speak of limitation only with regard to non-levy or
short-levy. It is significant that section 131(5) does
not speak of any limitation in regard to revision by
E the Central Government of its own motion to annul '
or modify any order or erroneous refund of duty. The
provisions contained in section 131(5) with regard to
non-levy or short levy cannot be equated with
erroneous refund inasmuch as the three categories of
errors in the levy are dealt with separately.'
F
That was a case of refund. In 1984-( 16)-ELT-332 (Collector
of Customs, Bombay v. Nav Bharat Enterprises, New
Delhi,) it was held that section 131(3) of the Customs Act,
1962 empower the Central Government to annul or modify
any order passed under that Act and that the time limit
G provided in section 131(5) would not be applicable to the
notice issued under 131(3). Further 'relevant date' as pro-
vided under the third proviso to section 36(2) will be com-
puted from the date of passing of the Appellate Order and
not from the date of passing the order by the original
assessing authority. The show cause notice is therefore in
H time."
TEXTILE PAPER TUBE v. COLLECTOR OF CUSTOMS [PUNCHHI, J .] 107

Learned counsel for the appellant has confined this appeal to the
A
question of limitation. The fact that the consignment was classifiable
under head 39.07 of the Customs Tariff Act, 1979 remains in these
circumstances unquestioned.

Section 131 of the Customs Act, 1962 is as follows:
B
"131: REVISIONBYCENTRALGOVERNMENT-(1)
The Central Government may, on the application of any
person aggrieved by-

(a) any order passed under section 128, or

(b) any order passed under section 130 otherwise c
than on the application of any aggrieved person, or

(c) any order passed on the application of any
aggrieved person under section 130 where the order
is of the nature referred to in either of the provisions D
to sub-section (1) of that section,

annul or modify such order.

(2) An application under sub-section (1) shall be made
within six months from the date of the communication to E
the applicant of the order against which the application is
being made: ·

Provided that the Central Government may, if it is
satisfied that the applicant was prevented by sufficient
cause from presenting the application within the aforesaid F
period of six months, allow it to be presented within a
further period of six months.

(3) The Central Government may of its own motion
annul or modify any order passed under section 128 or
section 130. G

(4) No order enhancing any penalty or fine in lieu of
confiscation or confiscating goods of greater value shall be
passed under this Section-

(a) in any case in which an order passed under H
108 SUPREME COURT REPORTS I 19901 3 S.C.R.
section 128 or section 130 has enhanced any penalty
A or fine in lieu of confiscation or has confiscated goods
of greater value; and
(b) in any other case, unless the person affected by
the proposed order has been given notice to show
cause against it, within one year from the date of the
B order sought to be annulled or modified.
(5) Where the Central Government is of opinion that any
duty of customs has not been levied or has been short-
levied, no order levying or enhancing the duty shall be
made under this section, unless the person affected by the
proposed order is given notice to show cause against it
c within the time-limit specified in section 28."
The Tribunal seems to take the view that sub-section (3) of section
131, if employed, eclipses sub-section (5) of section 131. In other
words, the Tribunal seemingly is of the view that when the Central
Government on its own motion proposes to annul or modify any order
D passed under section 128 or section 130 then it is not fettered by the
time-limit specified in section 28 even though it entertains the opinion
that any duty of customs has either not been levied or has been short-
levied. This approach appears to us to be wholly erroneous. There is
nothing in the language of sub-section (3) to suggest that it over
powers or renders otiose sub-section (5). Both the sub-sections need
E not militate against each other, components as they are of the singular
power conferred by the legislature on the Central Government for
revision. The harrnoneous way to read these sub-sections would be
that the Central Government is empowered on its own motion to annul
or modify any order passed under section 1::!8 or section 1:111. but if it is
an order whereby any duty of customs has either not been levied or has
F been short-levied, the Central Government can levy or enhance the
duty by giving the person affected by the proposed order a notice to
show cause against it but within the time-limit specified in section 28,
which is six months from the date of the order.
Section 28 envisages three kinds of errors in regard to custom
duties. One is non-levy. This means that the goods were not classified
G to duty whereas they could be. The second is short-levy. In this could
be included a case in which the goods could be classified in one Entry
but were erroneously classified under another Entry resulting in short-
levy of customs duty, or the like. The third is the case of erroneous
refund. This category springs up in the process of assessment only
where two kinds of errors. i.e., non-levy or short-levy, may occur and
H lead to an erroneous refund. Since levy is linked to assessment, a case
TEXTILE PAPER TUBE v. COLLECTOR OF CUSTOMS [PUNCHHI.J.] 109
for refund may arise which may be erroneous. These are the three
A
categories of known errors in regard to duties.
In Geep Flashlight Industries Ltd. v. Union of India and Others,
[ 1977] 1 SCR 983, this Court had occasion to deal with a case of
erroneous refund and while examining the scope of section 28 of the
Act ruled as follows:
B
"The provisions contained in section 28 of the Act speak of
non-levy, short-levy and erroneous refund. The provisions
state that notice of non-levy, short-levy or erroneous re-
fund should be given within six months from the relevant
date. Section 28(3) states what the 'relevant date' means.
In the case of duty not levied, the 'relevant date' is the date
on which the proper officer makes an order for the clear- c
ance of the goods. In a case where duty is provisionally
assessed under section 18 of the Act, the relevant date is
the date of adjustment of duty after the final assessment. In
a case where duty has been erroneously refunded, the rele-
vant date is the date of refund. In any other case, the rele- D
vant date is the date of payment of duty."
It can thus be clearly gathered that in cases of duty not levied or
short-levied the "relevant date" is the date on which the concerned
officer makes some orders for the clearance of the goods on payment
of no duty or .the date of adjustment of duty on framing the final
assessment, as the case may be. E

Now reverting to the facts of the instant case it is evident that the
goods were classified and assessed to duty under one heading, say A,

r on 6.8.1979 whereafter claim for refund was made by the appellant
which was rejected by the Assistant Collector on 12.10.1979. The exer-
cise of the Assistant Collector in levying duty under heading A, when
it should have been levied under another heading, say C, despite the
F

appellant's claim that it should be still under another heading, say B,
was a case of short-levy in so far as the goods-were classified as attrac-
ting lesser duty under heading A whereas higher duty· should have
been attracted on classifying it under heading C. So the orders of levy
of duty had two facets. The duty from the point of view of the appel- G
lant had been excessively levied necessitating him to challenge the
same and seek refund. On the other hand, from the pomt cif view of
the revenue the duty had been short-levied giving rise cause to have it
levied under proper heading. If these two facets are understood in the
right perspective, it was incumbent on the Central Government to
exercise its suo motu power under sub-section (3) read with sub-sec- H
tion (5) of section 131 within six months from 6.8.1979, the date when
110 SUPREME COURT REPORTS [ 1990] 3 S.C.R.

the duty was short-levied and undeniably the Central Government did
A not take such timely step even though it had a cause to do so. The ·-(
appellant, however, made claim for the refund of the excess duty
levied taking shelter under another heading and on its refusal by the
Assistant Collector on 12.10.1979 had its appeal accepted on 2.5.1981
from the Appellate Collector who ordered refund. The Central
B Government then got a cause to take suo molt/ action under section
131(3) of. the Customs Act, 1962 to annual or modify the order cf the
Appellate Collector, or the actual refund itself under that order, in
accordance with Geep Flashlight Industries case (supra). It being a case
of erroneous refund sub-section (3) of section 131 was attracted and
not sub-section (5) of section 131 as at that point of time it was not a
case of non-levy or short-levy, and these two categories of errors could
c not be equated with the error of erroneous refund inasmuch as these
three categories of errors are treated separately in the scheme of
things. Merely because the Central Government had the power to suo
motu revise the orders of refund passed by Appellate Collector it does
not follow a fortiori that it had the power to revise the orders of
D short-levy at that stage. The ultimate analysis is that if there was an
error of short-levy in the order of the Assistant Collector in classifying
goods at A instead of C as claimed by the revenue and not classifying
them at B as claimed by the importer, then on the grant of relief by the
Appellate Collector classifying them under heading B, can at best give
occasion to the Central Government to annul or modify the classifica-
E tion brought under head B, and so as to leave it classified at heading
A. but could not have it re-classified under heading C unless the exer-
cise was undertaken within the period of limitation prescribed under
section 28 as required under sub-section (5) of section 131 of the
Customs Act, 1962. The error committed by the Tribunal, for the view
afore-expressed,, is so patent that it cannot be allowed to go uncorrec-
F ted as a tolerable error. Inevitably this appeal is to be, and is. hereby
allowed. modifying the orders of the Tribunal passed in Appeal No. - -<.
CD(SB)(T) 1604/81-C so as to revive the order of the original assess-
ment dated 6.8.1979 and the order of the Assistant Collector of
Customs. Madras dated 12.10.1979, keeping upset the orders dated
2.5.1981 of the Appellate Collector of Customs. Madras passed in
q Appeal No Cr3i212!80.
The appellant shall have their costs.
ORDER
According to the decision of the majority, the appeal stands dis-
missed with costs.
H N.V.K.