Holding

The period of limitation for issuing a notice under Section 11‑A was not extended by the High Court’s stay, the assessment was not provisional, and therefore the recovery of excise duty for the period 1‑April‑1981 to 5‑December‑1981 is barred by limitation.

Summary

The appellant, a textile mill, was served with two show‑cause notices under Section 11‑A of the Central Excises and Salt Act for alleged excise duty on yarn removed within the factory for the period November 1980 to December 1981. The Delhi High Court had stayed the effect of a circular dated 24‑September‑1980, and the Revenue contended that this stay, together with a claim that the earlier assessment was provisional, extended the six‑month limitation for issuing the notice. The Customs, Excise and Gold (Control) Appellate Tribunal held the assessment was not provisional but accepted the stay as an extension of time, allowing recovery of duty. The Supreme Court dismissed the Revenue’s arguments, held that the stay did not constitute a legal stay of service of notice under the Explanation to Section 11‑A, that the assessment was not provisional, and consequently the recovery for the period 1‑April‑1981 to 5‑December‑1981 was barred by limitation. The appeal was allowed and the impugned judgment set aside.

Issues considered

The appeal under Section 35L(b) of the Central Excises and Salt Act was maintainable despite not relating to rate of duty or value of goods.
Whether a court‑ordered stay of a circular amounts to a stay of service of a notice under the Explanation to Section 11‑A, thereby extending the limitation period.
Whether the assessment preceding the notice was a provisional assessment within the meaning of Rule 9‑B and Section 11‑A.
Whether the Revenue may raise a new ground in an appeal treated as a special leave petition under Article 136.
How strictly the elasticity in Section 11‑A should be interpreted.

Legislation cited

Central Excise Rules, 1944s. Chapter VII-A, s. Rule 173-F, s. Rule 49, s. Rule 9, s. Rule 9-B
Central Excises and Salt Act, 1944s. 11-A, s. 35L(b)
Code of Civil Procedure, 1908s. Order 41 Rule 22
Constitution of Indias. Article 136
Finance Act, 1982s. Section 51(2)(d)

Subjects

Excise dutySection 11-ALimitation periodProvisional assessmentStay of noticeSpecial leave petitionStrict constructionCentral Excise Act

Judgment

A J.K. COTTON SPPINNING AND WEA YING MILLS CO. LTD.
v.
COLLECTOR OF CENTRAL EXCISE

MARCH 4, 1998

B [M.M. PUNCHHI, CJ., K.T. THOMAS AND M. SRINIVASAN, JJ.]

Central Excises and Salt Act, 1944 :

Sections 35-L(b) and 1I-A-Appeal to Supreme Court-Filed under an
C inapplicable provision-Appeal filed against CEGA T's order holding the
notices issued under Section 11-A within limitation-Held, such an appeal
not covered by Section 35-L (b)-However, as all the papers for deciding the
question involved available and more so nine long years have lapsed after
filing of the appeal, the same is treated appeal by special leave-Constitution
D of India, Article 136-Excise-Practice and Procedure.

Extending the period of limitation-Mode of interpreting the same-
Held, shouid be construed strictly-Interpretation of-Statutes-Taxing
statutes-Liberal and Strict construction.

Section II-A(/), Proviso and Explanation-Recovery of excise duty-
E
Limitation-Notice issued by the Revenue under Section I I-A-High Court
restraining the enforcement a/Circular dated 24-9-1980 issued by the Central
Board of Exr;:ise and Customs-Held, did not amount to stay of issuance of
notice-Thus; did not attract proviso in Explanation to Section I 1-A(J)-
Limitation-Central Excise Rules, 1944, Rules 9 and 49-Finance Act, 1982,
F Section 5!(2)(d).

Section I l-A(3)(ii)(b)-Notice-Liniitation for issuance of-Revenue
asserting that notice to be within limitation on two alternative grounds that
the notice was saved by Expln. to Section 11-A (1) and that the preceding
G assessment was only a provisional one-CEGAT upholding the first-Held,
untenable-In such circ.umstances, whether Revenue can invoke the second
ground-Held, CEGAT rightly held that the assessment was not a provisional
one as in view of Rule 9-B of the Central Excise Rules that the matter was·
sub-judice was not sufficient to render the assessment made during that
period a provisional one-The right of the Revenue to adopt an alterative
H contention would not enable it lo raise an absolutely new ground/or it-Hence
102
J.K. COTTON SPINNING AND WEAVING MILLS CO. LTD. v. C.C.E. 103

the new plea of Revenue that in view of Chapter VII-A of the Central Excise A
Rules, the· assessment in question was a provisional one, summarily rejected-
Central Excise Rules, 1944, Rules 9-B & 173-F and Chapter VII-A Constitution
of India, Article 136-Civil Procedure Code, 1908, Order 41 Rule 22.

Practice and Procedure-New issues raised by the respondent-Held,
not precluded from canvassing for reversal of any finding contained in the B
impugned judgment despite its end result being in his favour-Appellant
cannot say that the points raised by him only can be canvassed-Power of
Supreme Court not fettered by absence of provision like Order 41, Rule 22
of the CPC-Civil Procedure Code, 1908, Order 41 Rule 22.

The appellant-assessee had a textile mill in which yarn was C
manufactured in a particular division and processed in the mill for making
fabric. According to the Revenue, there was removal of yam from one area
of the factory and hence that commodity was exigible to excise duty as per
Rules 9 and 49 of th~ Central Excise Rules, irrespective of the excise duty
payable on manufacture of fabric. The Department, therefore, issued two D
notices under Section 11-A of the Central Excises and Salt Act for recovering
the excise duty for the period November 1980 to December 1981. By a
Natification dated 20-2-1982, the Department amended Rules 9 and 49 of the
Central Excise Rules creating a fiction of "deemed removal" of the input
goods at the intermediary stage within the factory. The said amendment was
later incorporated in Section 52(2)(d) of Finance Act, 1982 retrospectively E
from 1944. This amendment was upheld by this Court in J.K Cotton Spinning
& weaving Mills Ltd. v. Union of India subject to the provision of Section
11-A of the Act The main question in this appeal was whether the order
passed by the High Court in an earlier case, staying the implementation of
the Central Board of Excise and Customs Circular dated 24-9-1980 amounted F
to an order staying the issuance of show-cause notice and had the effect of
extending the period of issuance of notice under Section 11-A of the Act by
virtue of Explanation to that section. This question was answered by the
CEGAT in the affirmative and against the assessee. Hence this appeal.

One of the preliminary objections raised by the Revenue before this G
Court was that the appeal filed under Section 35-L(b) was not maintainable
,,..;._ as appeal could be entertained only with respect to the determination of any
question having a relation to the rate of duty or to the value of goods for the
purposes of assessment.

Allowing the appeal, this Court H
104 SUPREME COURT REPORTS [1998) 2 S.C.R.

A HELD : I. Before considering the merits of the case, this Court dealt
with a preliminary objection raised by the Revenue regarding maintainability
of this appeal under Section 35-L(b) of the Act. The question sought to be
determined in this appeal has neither any relationship to the rate of duty of
excise nor to the value of the goods for the purpose for assessment. It may
be that the appeal could not have been filed under the aforesaid section on
B the facts of this case. Be that as it may be, this Court is not disposed to
dismiss this appeal on that technical ground at this stage because the
appellant could in that situation have sought for special leave under Article
136 of the Constitution. With all the papers available for deciding the
question involved in this appeal, it would not be proper to drive the appellant
C to file another special leave petition for that purpose, particularly, because
of the lapse of almost nine years since the filing of this appeal. Hence the
present appeal is treated as one filed by special leave. [110-B-E-F-GJ

2. The notice envisaged under Section 11-A(I) of Central Excise and
Salt Act can be issued under any one of the four conditions; (i) when duty
D of excise has not been levied on the commodity; (ii) when such duty has been
short-levied; (iii) when such duty though levied, has not been paid; or (iv) •
when such duty was levied was only short-paid. If any one of the above
conditions exists, the notice contemplated therein can be issued. It cannot be
accepted that Collector of Central Excise was prevented from issuing a
E notice to the appellant in this case as the High Court had restrained the
Department from "gh'ing effect to the contents of the directives of the
Board'i. The said directive of the Board was mainly intended to be observed
by the Collector of Central Excise as well as other officials under him to
carry out certain steps as while exercising powers under Rule 9(1) of the
Central Excise Rules and also for making delegation of such powers to the
F licensing authorities. Even if the said Circular (or directive) had not been
issued at all, the collector could still have issued a notice. If so, the suspension
of the Circular by the order of the Court would not have prevented the
Collector from issuing the notice. The effect of.the Court order was only to
keep the circular in suspended animation so far as the appellant was concerned
G and nothing more. The Explanation to Section 11-A(l) is therefore, not
attracted. [113-D-FJ
J.K. Cotton Spinning & Weaving Mill Ltd. v. Union of India, (1987) 32
ELT 234; Rai Ramkrishhna v. State of Bihar, (1964) I SCR 897 and
Jawaharmal v. State of Rajasthan, (1966] 1 SCR 890, referred to.

H 3.1. This Court has power to decide all points arising from the
J.K. COTTON SPINNING AND WEAVING MILLS CO. LTD. v. C.C.E. 105

impugned judgement and even in the absence of an express provision like A
Order 41 Rule 22 of CPC, this Court can devise appropriate procedure to
be adopted at the hearing. Therefore, the respondents cannot be precluded
in this appeal from canvassing for reversal 'or a finding contained in the
impugned judgment despite its end result being in their favour.
(114-F; 115-B) B
Ramanbhai Ashabhai Patel v. Dabhi Ajitkumar Fulsinji, (1965) 1 SCR
•
712, relied on.

Vashist narain Sharma v. Dev Chandra, (1955) 1 SCR 509 and Babu
Ram v. Prasanni, (1959] SCR 1403, referred to.
c
3.2. However, on a consideration of the arguments raised on the merits
of that point, it is not possible to hold that there was a provisional assessment.
The Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) has
adverted to certain reasons for arriving at such a finding. Rule 9-B of the
Central Excise Rules has been quoted in the impugned judgment. The title D
of the Rule is "Provisional Assessment", in which situations are detailed
when provisional assessment could be made. CEGAT pointed out in its
judgment certain admissions made by the Department such as the absence
of any express order of provisional assessment as required under Rule 9-
B, absence of any circumstance for making a provisional assessment and
that it was not stated in the show-cause notice that the assessment made E
during the relevant period was provisional. The Assistant Collector had
treated the assessment as provisional solely on premise that the matter was
sub judges and hence "all the assessments for the relevant period were,
therefore, made provisional". CEGAT has rightly found that the said yardstick
was hardly sufficient to make an assessment provisional. [115-C-E]
F
4•. As regard the Revenue's contention that in view of the provisions
of Chapter VII-A of the Central Excise Rules and particularly Rule 173-F,
the assessment in question was a provisional on , it is a fact that such a stand
was never adopted by it. It is one thing to say that the respondent can, in an
appeal fded by the oppocite party, recanvass for reversal of a finding reached G
apinst him in the jOOgment, (the OlJerative part of which the respondents are
now supporting) and it is a different thing to permit the respondents to put
forth absolutely new grounds for it. Hence it is not necessary to further
consider whether there was any self-assessment. Therefore, it is not possible
to disturb the finding reached by CEGAT regarding the plea of provisional H
106 SUPREME COURT REPORTS [1998] 2 S.C.R.

A assessment [116-D-E)

Serai Keila Glass Works (P) Ltdv. Collector of Central Excise, (1997)
91 ELT 497, referred to.

5.1. The provision in Section 11-A of Central Excise and Salt Act
B permitting the extension of time should not be stretched more than the
..
elasticity supplied in the section itself. So, the eventuality envisaged in
Section 11-A for the further lengthening of the limitation period must be
strictly construed. [113-A)

C J.K. Cotton Spinning & Weaving Mills Ltd. v. Union of India, (1987)
32 ELT 234, relied on.

5.2. Exclusion of any period from the time provided for issuing notice
which is contemplated in Section 11-A of the Act is mentioned in the
explanation which is incorporated as part of that sectioJL Period of the stay
D can be excluded if ''the senice of the notice is stayed by an order of a court".
The converse is, if there is no stay of service of no~ice, there is no scope
for excluding any time from the period of limitation as per this explanation.
If a very strict interpretation is given, notice should have been is~ued before
passing the order of stay so that service of the notice could be blocked. But
E such an extreme view is not necessary for understanding the contours of the
explanation. [111-H; 112-A-B)

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1735-36of1989.

From the Judgment and Order dated 31.1.89 of the Customs Excise and
p Gold (Control) Appellate Tribunal, New Delhi in A.No, E/2353-54of1988-D.

Joseph Vallapalli, Ms. Arnita Mitra and Ms. Juhi for Mis JBD & Co. for
the Appellant.

M. Gauri Shankar Murthi and S.D. Sharma (V.K. Verma) for
G P. Parmeshwaran for the Respondent.

The Judgment of the Court was delivered by

THOMAS, J. The moot point in this appeal is this: Whether the period
of six months envisaged in Section l lA of the Central Excises Act, 1944 (for
H short the Act) for issuing show cause notice, stood extended by any further
J.K. COTTON SPINNING AND WEAVING MILLS CO. LTD. v. C.C.E. [THOMAS, J.] 107

period so as to enable the Revenue to scale over the hurdle of limitation? A
Respondent°(Revenue) advanced two alternative premises in support of the
·"' plea that the said period of six months stood extended. First is, there was only
a provisional assessment and hence the 'relevant date' for issuing the show
cause notice could be counted only from final assessment. Second is that an
order of stay issued by the High Court of Delhi on 12.8.1981 virtually amounted B
to a bridle against issuing show cause notice and hence the period stood
extended by the entire time when the stay order was in operation .
•
Customs, Excise and Gold (Control) Appellate Tribunal (CEGA T - the
acronym hereafter) held that the assessment was not provisional and hence
the first premise was not available to the Revenue. But it held by a majority C
of2:1 that the interim order of the Delhi High Court dated 12.8.1991 operated
as virtually a stay, though not expressly so, against issuan· e of show cause
notice and hence there was no bar of limitation for recovering the amount of
excise duty levied. Thus, the Revenue was permitted by the CEGA T to
proceed to recover the duty. The said order of CEGAT is challenged in this
appeal. D
.-(
The facts which led to the opening of the aforesaid question can be
summarised as follows: Appellant has a textile mill consisting of various
divisions, among which the division where yam is made is distinct from other
divisions. Yarn is to be used in the manufacture of fabric which is the end E
product of the textile mill of the appellant. Yam is obtained at an intermediary
stage in the composite textile mill and is further processed in the mill for
making fabric. According to the Revenue, there is removal of yam from one
area of the factory and hence that commodity is exigible to excise duty as per
Rules 9 and 49 of the Central Excis.es Rules irrespective of the excise duty
payable on manufacture of fabric. Appellant challenged the aforesaid direction F
of the Department in a writ petition filed before Delhi High Court and its
contention was upheld by judgment dated 16.10.1980. The Department then
filed an appeal in this Court by special leave. When the special leave petition
was pending the Department issued two notices under Section 11 A of the
Act for recovering the excise duty on yam for the period from 6.1 I .1980 to
31.3.1981. However, the Department issued a notification on 20.2.1982 as a G
precautionary step, amending Rules 9 and 49 of the Central Excise Rules
creating a fiction of "deemed removal" of the input goods at the intermediary
stage within the factory. That amendment later gained incorporation in a
legislative enactment also 1 vide Section 51 (2)(d) of the Finance Act 1982 by
which it was given retrospective effect from 1944. Though the appellant H
108 SUPREME COURT REPORTS [1998) 2 S.C.R.

A challenged the aforesaid amendments first in the Delhi High Court and later
in this Court its validity remained undisturbed vide JK. Spinning and Weaving
Mills Ltd and Anr. v. Union of India and others, (32) E.L. Tl 987. 234 - AIR
(1987) SC 191. A three-judge bench of this Court in that decision upheld the
validity of the amendments to Rules 9 and 49 besides upholding the
B retrospectivity granted to the provisions as per Section 51 of the Finance Act
1982.

However, in order to allay the apprehension of the assessees that the
judicial imprimatur accorded to the long distant retrospectivity to Rules 9 and
49 of the Central Excise Rules would precipitate them to unbearable financial
C burden, their Lordships put a rider that the retrospective effect "must be
subject to the provisions of Section 11 A of the Act."

It is advantageous at this stage to read Section 11-A of the Act:

"I IA. Recovery of duties not levied or not paid or short-levied or
D short-paid or erroneously refunded. When any duty of excise has not
been levied or paid or has been short-levied or short-paid or 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 aid or which has been short-levied or
short-paid or to whom the refund has erroneously been made, requiring
E him to show cause why he should not pay the amount 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
F suppression of facts, or contravention of any of the provisions of this
Act or of 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 "six months" the words "five
years" were substituted.
G
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.

(2) considering the representation, if any, made by the person on
H whom notice is served under sub-section (I), determine the amount
J.K. COTTON SPINNING AND WEAVING MILLS CO. LTD. v. C.C.E. [THOMAS, J.] 109
of duty of excise due from such person (not being in excess of the A
amount specified in the notice) and thereupon such person shall pay

-"' the amount so determined.

(3) for the purposes of this section.

(i) "refund" includes rebate of duty of excise on excisable good
B
exported out of India or on excisable materials used in the
~
manufacture of goods which are exported out of India;
... (ii) "relevant date" means"

(a) in the case of excisable goods on which duty of excise has not
been levied or paid or has been short-levied or short-paid- c
(A) Where under the rules made under this Act a monthly
return, showing particulars of the duty paid on the excisable
goods removed during the month to which the said return
relates, is to be filed by a manufacturer or producer or a
licensee of a warehouse, as the case may be, the date on D
which such return is so filed;

(B) where no monthly return as aforesaid is filed, the last date
on which such return is to be filed under the said rules;

(c) in any other case, the date on which the duty is to be paid
E
under this Act or the rules made thereunder;
(b) in a qse where duty of excise is provisionally assessed under
this Act or the rules made thereunder, the date of adjustment of
duty after the final assessment thereof,".

The period of six months envisaged in sub-section (I) thereof can thus F
be extended only under three eventualities. First is, if the impairment of the
levy is attributable of any fraud, collusion or wilful misrepresentation or
suppression of facts, the period of six months will stand stretched upto five
years. The second eventuality is, if the original assessment was provisional,
in which case the period would start running only from the date of final
G
assessment. The third is , if the service of show cause notice on the person
.,...<.. chargeable with duty is stayed by a court, in which case the entire period of
stay shall be excluded from computing the aforesaid limitation time.

The first eventuality mentioned above has no application to the facts
of this case and hence a discussion on that can conveniently be skipped. H
110 SUPREME COURT REPORTS [1998] 2 S.C.R.

A Regarding the second contingency, though the department pleaded that only
a provisional assessment was made, that plea was repelled by CEGA T in
reversal of a finding made by the Assistant Collector as well as the Collector
(Appeals). It is the third contingency which the Revenue has alternatively
relied on which secured approval from CEGA T.

B Before we proceed to consider the meri'5 of the case, we have
to deal with a preliminary objection raised by the Revenue
regarding maintainability of this appeal. In the appeal petition it
is stated that the appeal is filed under Section 35L (b) of the Act
which reads as under:

c "35-L. Appeal to Supreme Court·.-An appeal shall lie to the
Supreme Court from-

(a) xxx xxx xxx

(b) any order passed by the Appellate Tribunal relating, among
D other things, to the determination of any question having a
relation to the rate of duty of excise or to the value of goods
for purposes of assessment."

We agree with the learned counsel for the Revenue that the question
sought to be determined in this appeal has neither any relationship to the rate
E of duty of excise or to the value of the goods for purpose of assessment. It
may be that the appeal could not have been filed under the aforesaid Section
on the facts of this case.

Be that as it may, we are not disposed to dismiss this appeal on that
technical ground at this stage because the appellant could in that situation
F have sought for special leave under Article 136 of the Constitution. With all
the papers available for deciding the question involved in this appeal, we do
not think it proper to drive the appellant to file another special leave petition
for that purpose, particularly becau.se of the lapse of almost nine years since
the filing of this appeal. We, therefore, treat this appeal as one filed by special
G leave.

We will now come down to the question to be determined. Two vivid
periods are involved about which appellant raised the contention that the bar
under section 11-A of the Act would operate. The first period is between
6.11.1980 and 31.3.1981 and the second period is from 1.4.1981 to 5.12.1981
H (there is no dispute regarding the subsequent period as it falls, indubitably,
J.K. COTTON SPINNING AND WEA YING MILLS CO. LTD. v. C.C.E. [THOMAS, J.] J11

within the span of Section 11-A). A
Shri Joseph Vallapalli, learned senior counsel for the appellant fairly
submitted that though the appellant raised the contention relating to the
aforesaid two periods (first and second), he would confine his argument to
the second period only, as a decision of this Court in this appeal need be
given with reference to the second period. B

According to the Revenue, there was a stay of service of notice (to
show cause as envisaged in Section 11-A of the Act) from 12.8.1981. The said
contention is made on the strength of an order of stay passed by the Delhi
High Court on a Writ Petition filed by the appellant challenging a circular C
issued by the Central Board of Excise and Customs (for short 'the Board') on
24.9.1980. That circular was issued by the board purportedly in interpretation
of Rule 9 of the Central Excise Rules. As per the said circular, the Collector
of Central Excise was required to specify in addition to the place where
excisable goods are produced or cured or manufactured premises appurtenant
thereto, if necessary and to take immediate steps to ensure approval to the D
place or production and to delegate the powers of the Collector under Rule
9( I) to the licensing authorities; and further to demand the assesses to submit
fresh ground plans etc.

The appellant had moved a petition in the writ application for an order
of stay in terms of prayer (a) thereof which consisted of the following limbs: E
(i) Stay permitting the petitioners to process yam within. its factory
without payment of duty;

(ii) restraining respondent from giving effect to the contents of the
directive of the Board dated 24.9.1980; and F
(iii) to stay further proceedings pursuant to notiCes dated 4th and 5th
May, 1981 relating to the period 6.11.1980 to 31.3.1981.

The High Court of Delhi has allowed the said petition on 12.8.1981 in
terms of the said prayer. The contention which the Revenue pressed into G
service before CEGA T and which was fond acceptance by them is that as per
the second limb, the stay became operative which virtually amounted to stay
of service of notice under Section 11-A of the Act.

Exclusion of any period from the time provided for issuing notice which
is contemplated in Section I IA of the Act is mentioned in the Explanation H
112 SUPREME COURT REPORT'> (1998] 2 S.C.R.

A which is incorporated as part of that Section. Period of the stay can be
excluded if "the service of the notice is stayed by an order of a court." The
I
converse is if there is no stay of service of notice, there is no scope for
excluding any time from the period of limitation as per this Explanation.

If a very strict interpretation is given, notice should have been issued
B before passing the order of stay so that service of the notice could be
blocked. But such an extreme view is not necessary for understanding the
contours of the Explanation. ~

I-
In considering whether the extension of time permitted in Section 11-A
of the Act can be liberally construed or that it should be a strict construction,
c we think it useful to recall how this Court approached the challenge made
against Section 51 of the Finance Act, 1982 which afforded retrospective
operation to the amended Rules 9 and 49 of the Central Excise Rules. Those
provisions were assailed in the case of J.K. Spinning and Weaving Mills Ltd.
& Anr. (Supra) attributing arbitrariness and unreasonableness to them besides
being violative of Article 19(1) (g) of the constitution.
D
It was contended in that case that excessive retrospective operation ,__
prescribed by a taxing statute would amount to contravention of fundamental
rights and in support of that contention, those appellants made reliance on
the decisions of this Court in Raj Ramakrishna & Others v. The State of
E Bihar, (1964] I SCR 897 and Jawaharmal v. State of Rajasthan of Others,
[1966] I SCR 890. In the former decision, this Court has pointed out that if
the retrospective feature of a law is arbitrary and burdensome, the statute will
not be sustained and reasonableness of the extent of retrospective operation
of a statute will depend upon the circumstances of each case. The apprehension
of the appellants in J.K. Spinning and Weaving Mill (supra) that the long
F retrospectivity attached to the legislative amendments would result in mulcting
the taxpayer with whopping financial burden has gained serious consideration
of this Court 'and an effort was made to find a way out to salvage those
provisions by minimising the gravity of the hardship on the assessees. That
endeavour resulted in the judicial pronouncement in J.K. Spinning and Weaving
Mills (supra) by placing those provisions subject to the time limit fixed under
G
Section 11-A.

If the said rider was not imposed by this Court as per . the decision in .....
J.K. Cotton spinning and Weaving Co, case (supra), what wo'uld have been
the fate of Rules 9 and 49 (as amended) in the wake of the challenge to its
H vires cannot now be reexamined. Whatever it be, the fact remains, that Rules
J.K. COTTON SPINNING AND WEAVING MILLS CO. LTD. r. C.C.E. [THOMAS, l.] JJ3

9 and 49 survived the challenge when this Court nailed their sweep to the A
limitation specified in Section 11-A. Hence that limitation period should not
_.. be stretched more than the elasticity supplied in the Section itself. So, in our
opinion, the eventuality envisaged in Section 11-A for the further lengthening
of the limitation period must be strictly construed.

The notice envisaged in Sub-section (I) of Section 11-A of the Act can B
be issued under any one of the four conditions:

(!) when duty of excise has not been levied on the commodity;

(ii) when such duty has been short-levied; or
c
(iii) when such duty, though levied, has not been paid; or

(iv) when such duty levied was only short-paid.

If any one of the above conditions exists, the notice contemplated
therein can be issued. It is an extremely difficult proposition for acceptance D
that Collector of Central Excise was prevented from issuing a notice to the
appellant in this case as the Delhi High Court has restrained the department
from "giving effect to the contents of the directives of the Board dated
24.9.1980". The said directive of the Board was mainly intended to be observed
by the Collector of Central Excise as well as other officials under him to carry
out certain steps while exercising powers under Rule 9(1) of the Act and also E
for making delegation of such powers to the licensing authorities. Here the
test is, if the said circular (or directive) had i:iot been issued at all, could the
Collector of Central Excise have issued a notice under sub-section (I) to
Section 11-A of the Act. The answer is, that the Collector could still have
issued a notice. If so, the suspension of the circular by the order of the court F
would not have prevented the Collector from issuing the notice. The effect
of the court order dated 12.8.1981 was only to keep the circular in suspended
animation so far as the appellant is concerned and nothing more.

That apart, the mere fact that department issued three notices during
the time when the aforesaid order was in force itself is sturdy proof that even G
according to the Department, there was no stay of service of notice by a court
order. Nobody has advanced a contention, nor could any such contention
have been advanced, that the Collector of Central Excise has flouted the stay
order of the Delhi High Court by issuing such notices.

Shri Gauri Shankar Murthi, learned counsel for the Revenue adopted an H
114 SUPREME COURT REPORTS [1998] 2 S.C.R.

A alternative contention that the period of limitation can be saved by holding
that the assessment which preceded the action was only a provisional one.
Of course, Section 11-A permits the said six months time to go further if the
preceding assessment was only provisional as could be noted from sub-
section 3(ii) (b) of Section 11 A. Tlie same contention was urged before the
CEGA T but after a detailed discussion, it was repelled. Undaunted by such
B adverse finding, Shri Gauri Shankar Murthi pleaded that the Revenue must be
allowed to canvass for reversal of the said finding in this appeal on the
footing of the principle adumbrated in Order 41 Rule 22 of Civil Procedure
Code, 1908. Shri Joseph Vallapalli, learned senior counsel opposed reopening
the said finding on the premise that in this appeal, even after it is treated as
C one by special leave under Article 136 of the Constitution, the points raised
by the appellant alone can be canvassed.

A three-judge bench of this Court in Vashisht Narain Sharma v. Dev
Chandra and Others, [ 1955 ] I SCR, 509 did not permit a respondent, in an
appeal filed by special leave under Article 136 to support the decision
D challenged in the appeal on a ground which had been found against him. The
court held that the corresponding provision in the Civil Procedure Code has
no application to an appeal filed by special leave under Article 136.

The aforesaid decision was· cited before another three-judge bench in
E the case of Sri Baru Ram v. Shrimati Prasanni and Others, [1959] SCR 1403
where it was not dissented from. But in the light of the decision of the
Constitution bench of this Court in Ramanbhai Ashabhai Patel v. Dabhi
Ajitkumar Fulsinji and Others, [1965] I SCR 712, the ratio adopted in the
earlier mentioned two decisions is no more in vogue. The Constitution Bench
held that this Court has power to decide all points arising from the impugned
F judgment and even in the absence of an express provision like Order 41, Rule
22, CPC, this Court can devise appropriate procedure to be adopted at the ';r
hearing. The observations of the Bench which are relevant now are the
following:

"There could be no better way of supplying the deficiency than by
G drawing upon the provisions of a general law like the Code of Civil
Procedure and adopting such of those provisions as are suitable. We
cannot lose sight of the fact that normally a party in whose favour
the judgment appealed from has been given will riot be granted special
leave to appeal from it. Consideration of justice, therefore, require that
H this Court should in appropriate cases permit a party placed in such
J.K. COTTON SPINNING AND WEAVING MILLS CO. LTD. v. C CE. [THOMAS, J.] J15

a position to support the judgment in his favour even upon grounds A
which were negatived in that judgement. We are therefore, of the
opinion that in Vashisht Narain Sharma's Case, too narrow a view
was taken regarding the powers of this Court".

We, therefore, concede that respondents cannot be precluded in this B
appeal from canvassing for reversal of a finding contained in the impugned
•· judgment despite its end result being in their favour.

However, on a consideration of the arguments raised on the merits of
that point, we find it is difficult to hold that there was provis.ional assessment.
CEGA T has adverted to certain reasons for arriving at such a finding. Rule C
9-B of the Central Excise Rules has been quoted in the impugned judgment.
The title of the rule is "Provisional Assessment", in which situations are
detailed when provisional assessment could be made. CEGAT pointed out in
the judgment certain admissions made by the Department such as the absence
of any express order of provisional assessment as required under Rule 9-B,
absence of any circumst~e for making a provisional assessment and that D
it was not stated in the show cause notice that the assessment made during
the relevant period was provisional. The Assistant collector had treated the
assessment as provisional solely on the premise that the matter was subjudice
and hence "all the assessments for the period April 1981 to 15.3.1983 were,
therefore, made provisional". CEGA T has rightly found that the said yardstick E
was hardly sufficient to make an assessment provisional.

Shri Gauri Shankar ·Murthi, in order to surmount a difficult situation
confronted by the aforesaid Rule 9-B of the Central Excise Rules adopted a
new contention as under:
F
Rule 9-B was incorporated in the Central Excise Rules with effect from
1-8-1959 whereas the 'Self Removal Procedure" by manufacturers themselves
has been introduced in the Rules with effect from 14.7.1969 which provides
for a self assessment, the finalization of which could be made as indicated in
Rule 173-F. Learned counsel contended that with the introduction of the said
procedure a self removal by itself would amount to provisional assessment. G
In support of the contention, learned counsel cited the decision of this Court
·in Seraikella Glass Works v. Collector of Central Excise, Patna (I 997) 91 ELT
497 wherein implication of a self assessment has been considered and held
it to be nothing but a provisional assessment which is subject to final
assessment.
H
116 SUPREME COURT REPORTS [1998] 2 S.C.R.

A Shri Joseph Vallapalli, learned senior counsel for the appellant pointed
out, in reply to the said contention, that the concept of provisional assessment f
adverted to in Section 11-A has a connotation which can be traced in Rule
9-B which requires a specific order to be made for provisional assessment and
it should be followed by compliance with certain statutory requirements. In
the absence of any such order there was no provisional assessment as
B envisaged in Section 11-A of the Act, according to the learned counsel. He
further contended that respondent cannot be permitted to advance a new •
ground for supporting his theory of provisional assessment. On the factual
side also, learned counsel submitted that pursuant to the judgment of the
High Court dated 16.10.1980, the appellant has totally excluded captively
C consumed yarn from assessment and hence there was no self assessment at
all on yarn because it was a case of non-levy of a particular commodity and
not one of short levy. The corollary according to the counsel, is that there
was no provisional assessment at all.

It is a fact that Revenue has never adopted a stand based on self
D Removal procedure envisaged in Chapter VII-A of the Rules for establishing
that there was a provisional assessment. It is one thing to say that respondent
can, in an appeal filed by the opposite party, re-canvass for reversal of a
-
finding reached against him in the judgment, (the operative part of which the
respondent is now supporting) and it is a different thing to permit the
E respondent to put forth absolutely new grounds for it. Hence it is not necessary
to further consider whether there was any self-assessment. We are, therefore,
not persuaded to disturb the finding reached by the CEGAT regarding the
plea of provisional assessment.

In the result, we allow this appeal and set aside the impugned judgement.
F We hold that recovery of excise duty for yarn from the appellant for the period '?
between 1.4.1981and5.12.1981 is barred by the period oflimitation prescribed
in section 11-A of the Act. The appeal 'is thus allowi;:d without any order as
to costs.

R.K.S. Appeal allowed.
G