Holding

The amendment to Section 11A is retrospective and validates issuance of show‑cause notices to correct errors even on approved classification lists, overruling Cotspun, and the extended limitation period does not apply as there was no wilful mis‑statement.

Summary

Easland Combines, a small‑scale manufacturer, had its classification list approved and claimed exemption under a notification. The Central Excise authorities later issued a show‑cause notice demanding differential duty, alleging a willful misstatement regarding its SSI registration. The Tribunal invoked the extended five‑year limitation period and upheld the demand. The Supreme Court held that the amendment to Section 11A of the Central Excises and Salt Act, 1944, which is retrospective, authorises a show‑cause notice to correct errors even where duty was levied on the basis of an approved classification list, thereby overruling the Cotspun decision. The Court also ruled that the appellant’s mistake was not a wilful mis‑statement, so the extended limitation period could not be invoked. Consequently, the Tribunal’s finding was set aside, the demand was struck down, and the appeals were allowed with the matters remitted to the Tribunal for fresh determination.

Issues considered

The effect of the amendment to Section 11A of the Central Excises and Salt Act, 1944 on the validity of show‑cause notices issued to correct errors in approved classification lists.
Whether the earlier decision in Collector of Central Excise, Baroda v. Cotspun Ltd. remains good law after the amendment.
Whether the extended five‑year limitation period under the first proviso of Section 11A can be invoked where there is no fraud, collusion, or wilful mis‑statement.
Whether the appellant’s clerical error regarding SSI registration amounts to wilful suppression of facts.

Legislation cited

Central Excise Rules, 1944s. Rule 10, s. Rule 173B, s. Rule 9(2)
Central Excises and Salt Act, 1944s. 11A
Finance Act, 2000s. Clause 106, s. Clause 110

Subjects

central exciseSection 11A amendmentretrospective legislationshow‑cause noticedifferential dutyextended limitation periodsmall scale industry exemptionclassification listCotspun caselegislative overruling

Judgment

)

A MIS. EASLAND COMBINES, COIMBATORE
v.
THE COLLECTOR OF CENTRAL EXCISE, CO I MBA TORE
t-

JANUARY 13, 2003

B (M.B. SHAH AND D.M. DHARMADHIKARI, JJ.}

''t~-
Central Excises and Salt Act, 19441 Central Excise Rules, 1944-Section
/JA and first proviso to sub-section (1) of section /JAi Rule 9(2):

c Section 11A-Amendment-Retrospective effect of-Held: Show cause
notice could be issuedfor correcting errors or mistakes in approval, acceptance
or assessment relating to the rate of duty on or valuation of excisable goods
under the provisions of the Act or the Rules made thereunder within the
>-
prescr.ibed period
D Recovery of differential duty-Extended period of /imitation-When
attracted-Held: Can be invoked when duty could not have been paid, short-
levied or short paid or erroneously refunded because of fraud, collusion,
wilful mis-statement, suppression offact or contravention of any provision or
rules-On facts, mistaken assumption ofemployee ofassessee that as company
--4-
registered at one place it was not required to be registered at other place is
E
'
not wilful mis-statement or suppression offact for attracting extended period
of limitation thus tribunal erred in invoking extended period of /imitation.

The question which arose for consideration in these appeals -is with
regard to the effect of the amendment in section l lA of Central Excises
F and Salt Act, 1944 and whether there was any ground for invoking proviso
to sub-section (1) of Section 1IA of the Act.
J.--
Appellant-assessee contended that once the excise duty is collected
on the basis of the approved classification, price list or on the basis of the
assessment order it cannot be held that there was short levy of excise duty; ('

G that in such cases levying of excise duty on the basis of approved
classification or final assessment order is the correct levy and, therefore,
the amended Section 1 IA would not be applicable; that the amendment
in Section t IA of Act does not change the basis or the foundation of the .,., t-
(

judgment rendered in Cotspun 's case holding that the levy of excise duty
on the basis of approved classification list is not short levy and the
H 98
EASLAND COMBINES v. COLLECTOR OF CENTRAL EXCISE 99
differential duty cannot be recovered; that presuming that the approved A
,.. price list was erroneous or order was erroneous because of mistake of the
department's officer, assessee cannot be put to loss, otherwise it would
cause hardship to the assessee; and that this power can be misused by
invoking the proviso to Section 11(1), merely stating that duty of excise
has been short levied because of wilful statement or suppression of facts.
B

- y
Disposing of the appeals, the Court

HELD: I.I. In view of the amendment of Section 11-A(I) of the
Central Excises and Salt Act, 1944 show cause notice could be issued for
correcting errors or mistakes in approval, acceptance or assessment
relating to the rate of duty on or valuation of excisable goods under the c
provisions of the Act or the Rules made thereunder within the prescribed
period and thus the decision rendered by this Court in Cotspun 's case that
~. that the levy of excise duty on the basis of approved classification list is
not short levy and the differential duty cannot be recovered would not be
a good law. [110-G, H; 114-B] D
Collector of Central Exicse, Baroda v. Cotspun ltd., (1999) (113) ELT
353, held inapplicable.

Rainbow Industries (P) ltd v. Collector of Central Excise, Vadodara,
(1994( 6 SCC 563; Ballarpur Industries ltd v. Asstt. Collector of Customs E
& Central Excise and Ors., (1995] Suppl. 3 SCC 429; Collector of Central
Excise, New Delhi v. Bhiwani Textiles Mills, (1996) 88 ELT 639 and Mis.
Ujagar Prints and Ors. (II} v. Union of India and Ors., (1989] 3 SCC 488,
referred to.

. 1.2. From the statement of objects and reasons for amending section
llA, it is clear that the main purpose of the amendment was to fill in the
lacuna pointed out by this Court by interpreting Rule I 0 of the Central
Excise Rules that it does not deal with the classification lists or relate to
F

.., the re-opening of approved classification lists. It was to validate certain
actions taken under the Section with retrospective effect, by providing that
notwithstanding any approval, acceptance or assessment of duty under the
G
provisions of Central Excise Rules, such show-cause notice could be issued.
It specifically states that the amendment was necessary to overcome certain
judicial pronouncements. Further, validating provision which is clause 110
of the Finance Act also provides to the same effect. Hence it would be
difficult to accept the submission that amended Section HA would not be H
)

100 SUPREME COURT REPORTS [2003) I S.C.R.

A applicable because levy of excise duty on the basis of approved
classification list was the correct levy. (110-D-G(

1.3. This amendment changes the entire basis or foundation of the
judgment rendered in Cotspun's case.holding that the levy of excise duty
on the basis of approved classification list is not short levy and the
B differential duty cannot be recovered on the ground that it is a short levy
and Rule 10 then has no application. After the amendment of law, this
reasoning of the judgment would no longer survive. It is true that the levy
of excise duty on the basis of approved classification list or price-list or
the assessment order is correct levy till such time as the correctness of
C the approved classification list or price list or till the assessment order is
set aside. However, with retrospective effect, the legislature has empowered
the Central Excise Officer to set at naught the erroneous approval of
classification list or acceptance of price list or assessment order. What was
provided by Rule 173 Bis now specifically provided by Section ltA.
--------~------------- ---·----- --- (109-C-F(
--·---n·-···--- -- .
1.4. As amendment is given retrospective effect, it would be ----
applicable to all the pending proceedings. By this amendment, the basis
for arriving at the conclusion that Rule 10 (now Section HA) does not
deal with the classification list or relate to re-opening of classification list
is altered by specifically providing that in such cases also, show-cause
E notice could be issued. Hence the conditions on which the judgment was
based are fundamentally altered and the decision in Cotspun 's case would
not have been rendered if amended Section 11 A was in existence. This is
done by re-enacting retrospectively a valid and legal provision. It is settled
principle that legislature can change the basis on which a decision is given
p by the Court and thus change the law in general. It is also well settled
law that the legislature can always render a judicial decision ineffective
by enacting a valid law on the topic within its legislative field by.
fundamentally altering or changing its character retrospectively.
(110-A-C(
r
G Re: Indian Aluminium Co. v. State of Kera/a, [1996) 7 SCC 637, relied
on.

1.5. Merely because a law causes hardship, it cannot be interpreted --~.
in a manner so as to defeat its object. It is also to be remembered that the
Courts are not concerned with the legislative policy or with the result,
, H whether injurious or otherwise by giving effect to the language used nor
EASLAND COMBINES v. COLLECTOR OF CENTRAL EXCISE ) 0)

it is the function or the Court where the meaning is clear not to give effect A
to it merely because it would lead to some hardship. It is the duty imposed
on the Courts in interpreting a particular provision or law to ascertain
the meaning and intendment or the Legislature and in doing so, it should
presume that the provision was designed to effectuate a particular object
or to meet a particular requirement. [111-D, E[
B
Re: Firm Amar Nath Basheshar Dass v. Tek Chand, [1972f I SCC 893,
relied on.

1.6. The power to levy duty under Section 1lA could be exercised
within a period of one year from the relevant date which is defined under C
Section 11A(3) of the Act. Therefore, this power to correct the errors or
mistakes in approval, acceptance or assessment relating to the rate of duty
on or valuation or excisable goods cannot he said to be unreasonable.
~.
[111-F, Gf

1. 7. It is erroneous to assume that such power would be misused or D
show-cause notice would be issued without any justifiable basis. In any
case, if there is any misuse of power, the Act provides ample remedy for
challenging the same in various forums. [113-H; 114-Af

2.1. It is settled law that for invoking the extended period or
limitation duty should not haye been paid, short levied or short paid or E
I erroneously refunded because or either fraud, collusion, wilful mis-
statement, suppression of fact or contravention of any provision or rules.
Court has held that these ingredients postulate a positive act and,
therefore, mere failure to pay duty and/or take out a licence which is not
due to any fraud, collusion or wilful mis-statement or suppression of fact
or contravention of any provision is not sufficient to attract the extended F
period of limitation. [115-F, G]

2.2. In the instant case it is not that the appellant-company was not
entitled to have registration as small scale unit at C. It was a mistaken
assumption of appellant's clerk that as the Company was registered as G
SSI unit at T, it was not required to obtain such certificate at C from which
it cannot be concluded that it was willful mis-statement or suppression of
fact for getting the benefit of exemption notification. Classification list was
also approved on the said assumption without noticing that separate SSI
certificate for factory at C was required to be obtained. Thus the finding
recorded by the tribunal that there was willful suppression on the part of H
102 SUPREME COURT REPORT~ (2003] 1 S.C.R.

A the Company tn eVailing the benefit of notification and, therefore, extended
period uf lhnitation could be invoked is set aside. (115-H; 116-A, BJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2693 of2000.

From the Judgment and Order dated 5.l.2000 of the Central Excise,
B Customs and Gold (Control) Appellate Tribunal, New Delhi in F.O. No. 1467
99-B in A. No.B/3646 of 1990(B)..

With C.A. Nos. 3437-3438, 3553, 3688, 3805-3807, 4263-4767, 4832-
48341 6272, 7090, 2000, 335, 4249-50, 8113-14/2001and302-303of2002.

C Soli J. Sorabjee, Attorney General, M.N. Chandrashekharan, M.N. Rao.
Prateek Jalan. K. Swami, Ms. Nisha Bagchi, K.C. Kaushik, Ms. Vibha Dutta
Makhija, B. Krishna Prasad, P. Parmeswaran, Tara Chandra Shanna, Rupesh
Kumar C. Harishankar, Ajay Sharma, Rajeev Sharma, Ms. Neelam Sharma, )--
Ms. Manjula Gupta, M.L. Shujatha, C.N. Sreekumar, F. Sorabjee, Ravindra
D Narain, Ms. Sonu Bhatnagar, Ms. Sampada Narang, Ms. Rohini Nath, Umesh
Kumar Khaitan, Balbir Singh, Rajesh Kumar, V. Lakshinikumaran. A.R.
Madhav Rao, V. Balachandran, Ms. V. Mohana, Ravindra Narain, Ajay
Aggrawal, VJ. Francis, P.l.Jose, Jenis V. Francis, S. Nanda Kumar, V. Vijayan,
Yogesh Khanna and Rakesh K'. Sharma for the appearing parties.

E The Judgment of the Court was delivered by

SHAH, J. ·The questions which were considered by the Customs, Excise
& Gold (Control) Appellate Tribunal, New Delhi (hereinafter referred to as
r
'CEGAT) in Final Order No. 1467/99-B dated 5.1.2000 arising out of Appeal
No. E./3646/l 990(B), were-whether, as the clearances in issue were effected
F against approved classification lists, the demand was sustainable in view of
the law laid down by the Constitution Bench of this Court in Collector of
Central Excise, Baroda v. Cotspun Limited (1999] 113 ELT 353 and whether
there was any ground for invoking first proviso to sub-section (1) of Section
l lA of the Central Excise Act, 1944 (hereinafter referred to as 'the Act')?
G fa these appeals, first question which requires decision is - what is the
effect of following amendments in Section l lA of the Central Excise Act,
1994 which came into force w.e.f. 17.11.1980 by the Finance Act, 2000 (10
of 2000).

·H The relevant part of unamended Section 1 lA was as under:-
EASLAND COMBINES v. COLLECTOR OF CENTRAL EXCISE [M.B. SHAH, J.] I 03
"Section I IA-Recovery of duties not levied or not paid or short- A
levied or short-paid or erroneously refunded.-( J) 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 paid or which B
has been short-levied or short-paid or to whom the refund has
erroneously been made requiring 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 suppression C
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." D
Clause 97 of the Finance Act provided that in sub-section (I) of Section
I IA of the Act following shall be added:-

(a) in the opening portion, for the words "erroneously refunded",
the words "erroneously refunded, whether or not such non-levy or E
non-payment, short-levy or short payment or erroneous refund, as the
case may be, was on the basis of any approval, acceptance or
assessment relating to the rate of duty on or valuation of excisable
goods under any other provisions of this Act or the rules made
thereunder", shall be substituted and shall be deemed to have been
substituted on and from the 17th ~ay of November, 1980; F
J (b) for the words "six months", wherever they occur, the words
"one year" shall be substituted;

(c) after the proviso and before the Explanation the following
provisos shall be inserted namely:-
G
"Provided further that where the amount of duty which has not
been levied or paid or has been short-levied or short-paid or
erroneously refunded is one crore rupees or less a notice under this
sub-section shall be served by the Commissioner of Central Excise or
with his prior approval by any officer subordinate to him:
H
104 SUPREME COURT REPORTS [2003] I S.C.R.

A Provided also that where the amount of duty which has not been
levied or paid or has been short-levied or short-paid or erroneously
refunded is More than one crore rupees, no notice under this sub-
section shall be served without the prior approval of the Chief
Commissioner of Central Excise".

B After amendment, relevant part of Section l lA reads thus

''"Section i 1A. -Recovery ofduties not levied or not paid or short-
levie<i 11)' short-paid or erroneously refunded-{l) When any duty of 1
excise has not been levied or paid or has been short-levied or short-
paid or erroneously refunded, whether or not such non-levy or non-
c payment, short levy or short payment or erroneous refund, as the case
may be, was on the basis of a~y approval, acceptance or assessment
relating to the rate of duty on or valuation of excisable goods under
. any other provisions of this Act or the rules made thereunder, a
Central Excise Officer may, within one year from the relevant date,
serve notice on the person chargeable with the duty which has not
D been levied Uf' paid or which has been short-levied or short-paid or
I-

to whom the refund has erroneously been made, requiring 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 short-levied
or short-paid or erroneously refunded by reason of fraud, collusion or
E
any wilful mis-statement or 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
one year, the words "five years" were substituted."
F
For our purpose, relevant part of the amended Section 1lA would be
"when any duty of excise has been short levied or short paid, whether or not
such short levy or short payment was on the basis of any approval, acceptance
or assesment relating to the rate of duty on valuation of excisable goods
under any other provision of the Act or the Rules, a Central Excise Officer
G may within one year from the relevant date, serve notice on the person
chargeable with the duty which has been short levied or short paid requiring
him to show cause why he should not pay the amount specified in the notice."

In the first proviso to the said Section, there is no change.

H At this stage, we would refer to the statement of objects and reasons for

,.: .
EASLAND COMBINES v. COLLECTOR OF CENTRAL EXCISE [M.B. SHAH, J.] ) 05

amending Section I IA:- A

-
"Clause l 06 seeks to validate certain action taken under section
llA of the Central Excise Act with retrospective effect from 17th
November, 1980, so as to prescribe that the notices issued under the
said section for non-recovery or short-recovery or erroneous refund
of duties for a period ofsix months or [we years in certain situations B
will prevail notwithstanding afl)' approval, acceptance or assessment
of duty under the provisions of the Central Excise Rules. The Clause
also seeks to validate actions taken in the past on this basis in
conformity with the legislative intention. This amendment has become
necessary to overcome certain judicial pronouncements." C
Further, the clau$e J 10 of the Finance Act validating actions taken
under Section I IA provides as under:-

"110.(1) Any notice issued or served on any person under the
provisions of section I IA of the Central Excise Act during the period D
commencing on and from the 17th day of November, 1980 and ending
on the date on which the Finance Act, 2000 receives the assent of the
President (hereinafter referred to as the said period) demanding duty
on account of non-payment, short payment, non-levy, short-levy or
erroneous refund within a period of six months or five years, as the
case may be, from the relevant date as defined in clause (ii) of sub- E
section (3) of that section shall be deemed to be and to always have
been, for all purposes, validly and effectively issued or served under
that section, notwithstanding any approval, acceptance or assessment
relating to the rate of duty on or value of, the excisable goods by afl)'
Central Excise Officer under any other provisions of the Central Excise F
Act or the rules made thereunder.

(2) Any action taken or anything done or purporting to have been
taken or done under section 11 A of the Central Excise Act at any
time during the said period shall be deemed to be and to have always
been, for all purposes 'as validly and effectively taken or done as if G
sub-section (I) had been in force at all material times and, accordingly,
notwithstanding anything contained in any judgment, decree or order
of any court, tribunal or other authority :-

(a) all duties of excise levied, assessed or collected during the period
specified in sub-section (I) on any excisable goods under the H
""Ill!

106 SUPREME COURT REPORTS [2003] I S.C.R.

A Central Excise Act, shall be deemed to be and shall be deemed
to always have been, as validly levied, assessed or collected as
y
if sub-section ( l) had been in force at all material times;
(b) no suit or other proceedings shall be maintained or continued in
'
any court, tribunal or other authority for the refund of, and no
B enforcement shall be made by any court of any decree or order
directing the refund of any such duties of excise which have
been collected and which would have been validly collected if
sub-section (1) had been in force at all material times; 1
(c) recovery shall be made of all such duties of excise which have
c not been collected or, as the case may be, which have been
refunded but which would have been collected or, as the case
may be, would not have been refunded, if sub-section (1) had
·been in force at all material times.
>-.
Explanation-For the removal of doubts, it is hereby declared
D that no act or omission on the part of any person shall be punishable
as an offence which would not have been so punishable if this section
has not come into force."

The aforesaid amendment is given retrospective effect from 17.11.1980
i.e. the date on which Section 1l(A) of the Act was introduced. .~
E
In the light of the aforesaid statutory provisions, let us now consider
the relevant portion of the judgment rendered in Cotspun 's case (supra). The
said case was referred to the Constitution Bench as there were two conflicting
three-Judge Bench decisions of this Court on the point in issue. In paragraph
8, the Court approved the finding in Rainbow Industries (P) Ltd v. Collector
F of Central Excise, Vadodara [1994] 6 SCC 563 by holding thus:-

8. In Rainbow Industries (P) Ltd. v. Collector of Central Excise,
Vadodara [ 1994] 6 SCC 563 the appellant was a manufacturer of
dyestuff. He had filed a price list as required by Rule J73C of the
Central Excise Rules which was approved by the Excise authorities
G with effect from 1st October, 1975. About a year thereafter, the
Assistant Collector issued a notice requiring the appellant to show
cause why the net assessable value should not be ·revised and
y .....
differential duty recovered. The appellant replied to the show cause
notice but his contentions were not accepted up to the stage of the
H Tribunal. In the challenge before this Court to the order of the Tribunal
EASLANO COMBINES v. COLLECTOR OF CENTRAL EXCISE [M.B. SHAH, J.] l 07
it was contended that the price list submitted by the appellant having A
been accepted and acted upon, the Excise authorities were precluded
from challenging the same and, therefore, from claiming that the
appellant was liable to pay the differential duty. A Bench of two
learned Judges of this Coull said:

"Once the Department accepted the price list, acted upon it B
and the goods were cleared with the know ledge of the
Department, then, in absence of any amendment in law or judicial
pronouncement, the reclassification should be effective from the
date the Department issued the show cause notice. The reason
for it is clearance with the knowledge of the Department and no C
intention to evade payment of duty."

The Court thereafter observed-

"In the case of Ballarpur Industries ltd. v. Asstt. Collector of
Customs and Central Excise and Ors., [1995] Suppl. 3 SCC 429
decided by a Bench of three learned Judges, the observations in the D
judgment in Rainbow Industries were "confined to the facts of that
case". The Bench placed reliance upon Rule 10 and held that, on a
plain reading of that provisions as also of Section 11 A, the show
cause notice "which could be issued within the time limit prescribed
under the relevant provision could only be in relation to the duty of E
excise for a period prior to the issuance of show cause notice. There
could be no reason for the issuance of a show cause notice for the
period subsequent to the notice as in that case the necessary corrective
action could always be taken. But Rule I 0 with which we are
concerned as well as Section I IA to which a reference is made in the
case of Rainbow Industries, the show cause notice which must be F
issued within the time-frame prescribed in the said provisions must
relate to a period prior thereto as the purpose of the show cause
notice is recovery of duties or charges short-levied etc. We, therefore,
find it difficult to accept the contention that the ratio of the decision
in Rainbow Industries is that under Section 1 IA past dues cannot be G
demanded We must, therefore, reject that contention."

Thereafter, the Court held that the decision rendered in Ballarpur
Industries (supra) does not lay down the law correctly and the decision
rendered in Rainbow Industries (supra) on the other hand correctly lays down
the law as it was delivered in context of Rule 173 dealing with approved H
?
108 SUPREME COURT REPORTS (2003] I S.C.R.

A price lists and the provisiOns of Rules l 73C and 173B. The Court also referred
to the earlier decision in Collector of Central Excise, New Delhi v. Bhiwani
Textiles Mills, ( 1966) 88 EL T 639 wherein it was held that uniil the proposal
for modification of the classification was mooted, the earlier classification
would operate. Relevant discussion (in paragraphs 12 to 15) is as under:-

B "12. Rule 173B deals with classification lists. It entitles the proper
officer of Excise to make such inquiry thereon as he deems fit and
requires him to approve the list only thereafter, and that with such
modifications as are considered necessary. The assessee must
determine the excise duty that is payable by him on the goods he
c intends to remove in accordance with the approved classification list.
Sub-rule (5) provides for modification of an approved classification
list.

13. Rule JO is a provision for recovery of duties that have not
been levied or paid in full or part. So far as is relevant for our
c purposes, it provides that where any duty has been short-levied, the
Excise Officer may, within six months from the relevant date, serve
notice on the assesse requiring him to show cause why he should not
pay the amount that had been short-levied. Rule IO does not deal
with classification lists or relate to the re-opening of approved
classification lists. That is exclusively provided for by Rule l 73B.
E
14. The levy of excise duty on the basis of an approved
classification list is the correct levy, at least until such time as to the
correctness of the approval is questioned by the issuance to the
assessee ofa show cause notice. It is only when the correctness of the
F approval is challenge that an approved classification list ceases to be
such.

15. The levy of excise duty ori the basis of an approved classification
list is not a short levy. Differential duty cannot be recovered on the
ground that it is a short levy. Rule IO has then no application."
G
Learned counsel appearing on behalf of the assessee submitted that the
aforequoted amendment in the Act does not change the basis or the foundation
of the judgment rendered by this Court in Cotspun 's case (supra). It is his
contention that once the excise duty is collected on the basis of the approved
classification, price list or on the basis of the assessment order it cannot be
H of
held that there was short levy excise duty. In such cases levying of excise
EASLANDCOMBINES v. COLLECTOR OF CENTRAL EXCISE [M.B. SHAH, J.] ) 09

duty on the basis of approved classification or final assessment order is the A
correct levy and therefore the amended Section 11 A would not be applicable.
•'.

In our view, there is no substance in this submission. As stated earlier,
the relevant amended portion of Section 11 A inter a/ia makes it abundantly
clear that when any duty of excise has been short levied or short paid,
whether or not such short levy or short payment was on the basis of any B
approval, acceptance or assessment relating to the rate of duty on or valuation
of excisable goods under any other provisions of the Act or the rules, the
Central Excise Officer, can without one year from the relevant date, serve
notice on the person chargeable with the duty, which has been short levied
or short paid, requiring him to show cause why he should not pay the amount C
specified in the notice. This amendment changes the entire basis or foundation
of the judgment rendered in Cotspun 's case (supra). The entire discussion in
the said case is based upon Rule 1738 which dealt with classification list and
that assessee must determine the excise duty which is payable by him on the
goods which he intends to remove in accordance with approved classification
list. The Court based its reasoning by holding "Rule 10 does not deal with D
classification list or relate to reopening of approved classification lists. That
is exclusively provided by Rule 1738." The Court further held that the levy
of excise duty on the basis of approved classification list is not short levy and
the differential duty cannot be recovered on the ground that it is a short levy
and Rule IO then has no application. After the amendment of law, this E
reasoning of the judgment would no longer survive. It is true that the levy
of excise duty on the basis of approved classification list or price-list or the
assessment order is correct levy till such time as the correctness of the approved
classification list or price list or till the assessment order is set aside. However,
with retrospective effect, the legislature has empowered the Central Excise
Officer to set at naught the erroneous approval of classification list or F
acceptance of price list or assessment order. What was provided by Rule
' 1738 is now specifically provided by Section l lA. Rule 1738 (5) also
provided thus:-

"When the dispute about the rate of duty has been finalised or for
any other reasons affecting rate or rates of duty, a modification of the G
rate or rates of duty is necessitated, the proper officer shall make
such modification and inform the assessee accordingly."

Now, after amendment, this can be done by the Central Excise Officer
within a period of one year from the relevant date. As amendment is given H
110 SUPREME COURT REPORTS (2003] 1 S.C.R.

A retrospective effect, it would be applicable to all the pending proceedings. By
this amendment, the basis for arriving at the conclusion that Rule 10 (now
Section I IA) does not deal with the classification list or relate to re-opening
of classification list is altered by specifically providing that in such cases
also, show-cause notice could be issued. Hence, the conditions on which the
B judgment was based are fundamentally altered and the decision in Cotspun 's
case would not have been rendered if amended Section 11 A was in existence.
This is done by re-enacting retrospectively a valid and legal provision. It rs
settled principle that legislature can change the basis on which a decision is
given by the Court and thus change the law in general. It is also well settled
law that the legislature can always a render a judicial decision ineffective by
C enacting a valid law on the topic within its legislative field by fundamentally
altering or changing its character retrospectively. Re: Indian Aluminium Co.
v. State of Kera/a, (1996] 7 SCC 637.

Further, learned Attorney General rightly referred to the statement of
objects and reasons in support of the contention that the law is altered so as
D to change the entire basis of the judgment rendered in Cotspun's case (supra).
From the statement .of objects and reasons, it is ab.undantly clear that the
main purpose of the amendment was to fill-in the lacuna pointed out by this
Court by interpreting Rule 10 as it existed. As quoted above, the objects and
reasons clearly provide that it was to validate certain actions taken under
E Section I IA of the Central Excise Act with retrospective effect from 17th
November, 1980, by providing that notwithstanding any approval, acceptance
or assessment of duty under the provisions of Central Excise Rules, such
show-cause notice could be issued. It specifically states that the amendment
was necessary to overcome certain judicial pronouncements. Further, validating
provision which is clause 110 of the Finance Act also provides to the same
F effect. Hence, it would be difficult to accept the contention raised by the
learned couns~l for the assessee that amended Section 11 A would not be
applicable because levy of excise duty on the basis of approved classificatiorl
list was the correct levy. Even in Cotspun 's case, the Court has specifically
stated that such levy would be correct levy, at least until such times as the
G correctness of the approval is questioned by the issuance to the assessee of
a show cause notice. The entire provision is amended by providing that-
whether or not non-levy or non-payment, short-levy or short-payment or
erroneous refund of excise duty even on the basis of any approval, acceptance
or assessment relating to the rate of duty on or valuation of excisable goods
made under the Act or the Rules, a Central Excise Officer can within one
H year from the relevant date serve show-cause notice on the person chargeable
EASLAND COMBINES,.. COLLECTOIROF CENTRAL EXCISE [M.B. SHAH, J.] ]]]

with the duty which has not been levied or paid or which has been short- A
levied or short-paid or to whom the refund has erroneously been made.
--;

Learned counsel for the assessee pointed out that the assessee would be
placed in a precarious situation because in a genunie case once the assessee's
classification list is approved he W•ould recover the duty from purchasers on
that basis. Thereafter, within one year of the relevant date a show cause B
notice is issued stating that such ap1proval of classification list was erroneous,
he would not be in a position to recover the difference of excise duty from
the purchaser of the excisable gocids. It is contended that presuming th.at the
approved price list was erroneou1s or order was erroneous because of the
mistake of the concerned officer of the department, assessee cannot be put to
loss otherwise it would cause hardship to the assessee. It is also cont.,nded
c
that this power can be misused by invoking the proviso to sub-section (I) of
Section 11, merely stating that d1uty of excise has been short levied because
of willful statement or suppression of facts.

In our view, it would be d,ifficult to accept the aforesaid contention. It D
is well settled Jaw that merely because a law causes hardship, it cannot be
interpreted in a manner so as to defeat its object. It is a)so to be remembered
that the Courts are not concerned with the legislative policy or with the
result, whether injurious or oth<:rwise, by giving effect to the language used
~-
nor it is the function of the 0Jurt where the meaning is clear not to give
effect to it merely because it would lead to some hardship. It is the duty E
imposed on the Courts in interpreting a particular provision of law to ascertain
• the meaning and intendment of the Legislature and in doing so, it shouldl
presume that the provision was designed to effectuate a particular object or·
to meet a particular requirement. Re: Firm Amar Nath Basheshar Dass v. Tek
Chand. (1972] 1 sec 893. F
This power under Section l lA could be exercised within a period of
'"" one year from the relevant date. Therefore, this power to correct the errors
or mistakes in approval, acce.ptance or assessment relating to the rate of duty .
,, on or valuation of excisable goods cannot be said to be unreasonable. In case
where first proviso is applicable, by invoking larger period of five years such 1G
show-cause notice could be: issued. The relevant date is defined under sub-
section (3) of Section I IA, which is as under-
"....:..
"11A(3) For the purpose of this section,-

(i) "refund" inclu·des rebate of duty of excise on excisable goods H
112 SUPREME COURT REPORTS (2003) I S.C.R.

A exported out of India or on excisable materials used in the manufacture
of goods 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-
B
(A) where under the rules made under this Act a periodical
return, showing particulars of the duty paid on the excisable
goods removed during the period to which the said return
relates, is to be filed by a manufacturer or a producer or a
c licensee of a warehouse, as the case may be, the date on
which such return is so filed;

(B) where no periodical return as aforesaid is filed, the last
date on which such return is to be filed under the said
rules;
D (C) in any other case, the date on which the duty is to be paid
under this Act or the rules made thereunder.
(b) in a case 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;
E
(c) in the case of excisable goods on which duty of excise has been
erroneously refunded, the date of such refund."

Considering this meaning of the 'relevant date', it is abundantly cl.ear
that in case of excisable goods on which duty of excise has not been levied
F or paid or has been short-levied or short-paid, the relevant date is the date on
which periodical return is filed or where no periodical return is filed, the last
date on which such return is to be filed or in any other case the date on which
the duty is to be paid under the Act or the Rules. Similarly, sub-clauses (b)
or (c) also provide the date of final assessment or date of erroneous refund
as a relevant date, which cannot be stated to be in any way unreasonable for
G correcting the errors or mistakes.

These contentions are exhaustively dealt with in Mis. Ujagar Prints
~-
and Ors. (II) v. Union of India and Ors., (1989) 3 SCC 488 wherein after
considering various decisions, this Court held thus:-

H. "A competent legislature can always validate a law which has
EASLANDCOMBINES v. COLLECTOR OF CENTRAL EXCISE (M.B. SHAH, J.) 113
been declared by courts to be invalid, provided the infinnities and A
vitiating factors noticed in the declaratory judgment are removed or
cured. Such a validating law can also be made retrospective. If in the
light of such validating and curative exercise made by the legislature-
,.
granting legislative competence-the earlier judgment becomes
irrelevant and unenforceable, that cannot be called an impennissible
legislative overruling of the judicial decision. All that the legislature B
does is to usher in a valid law with retrospective effect in the light
of which earlier judgment becomes irrelevant.

Such legislative expedience of validation of laws is of particular
significance and utility and is quite often applied, in taxing statutes. C
It is necessary that the legislature should be able to cure defects in
statutes. No individual can acquire a vested right from a defect in a
statute and seek a windfall from the legislature's mistakes. Validity
--- ... of legislations retroactively curing defects in taxing statutes is well
recognised and courts, except under extraordinary circumstances,
would be reluctant to override the legislative judgment as to the need D
for and wisdom of the retrospective legislation. In Empire Ind Ltd.,
this Court observed-

" ... not only because of the paramount governmental interest in
obtaining adequate revenues, but also because taxes are not in the
nature of a penalty or a contractual obligation but rather a means of E
apportioning the costs of government amongst those who benefit from
it."

In testing whether a retrospective imposition of a tax operates so
harshly as to violate fundamental rights under Article 19(1 )(g), the
factors considered relevant include the context in which retroactivity F
was contemplated such as whether the law is one of validation of
.......
taxing statute struck down by courts for certain defects; the period of
such retroactivity, and the degree and extent of any unforeseen or
unforeseable financial burden imposed for the past period etc. Having
• regard to all the circumstances of the present case, this Court in G
Empire Ind. Case [1985) 3 SCC 314 held that the retroactivity of the
amending provisions was not such as to incur any infinnity under
. >..
Article 19{ I )(g)."

Further, it is contended that such power is likely to be misused and the
assessee would suffer. In our view, it is erroneous to assume that such power H
114 SUPREME COURT REPORTS [2003) 1 S.C.R.

A would be misused or show-cause notice would be issued without any justifiable
basis. In any case, if there is any misuse of power, the Act provides ample ,....
remedy for challenging the same in various forums .

. Hence, it is held that in view of the amendment of Section 11-A (1),
the decision rendered by this Court in Cotspun 's case (supra) would not be
B a good law. Show cause notice for correcting errors or mistakes in approval,
acceptance or assessment relating to the rate of duty on or valuation of
excisable goods under the provisions of the Act or the Rules made thereunder
could be issued within the prescribed period.

Next question is-whether there was any ground for invoking first
C proviso to sub-section ( 1) of Section 11 A of the Act? It is submitted that Ml
s. Easland Co'llbines (hereinafter referred to as 'the Company') is a small
scale industrial undertaking established in the year 1973 with the factory at
Trivandrum and engaged in the manufacture of various types of Water Taps
out of Iron, Aluminium and Brass classised under sub-heading 8481.80 of the
D Schedule of the Central Excise Tariff Act. The said factory at Trivandrum
was registered with the Department of industries at Kerala State as a Small
Scale Industry vide Registration No. T/Sl/235/75 dated 23.5.1973. The
Company set up another factory at Coimbatore holding Central Excise licence
B.4 No.1/T.I.68/82. as a branch of the main undertaking at Trivandrum.

E For the year 1986-87, the Company filed a classification list-S. No.A/
51/86-87 dated 26.5.86 in respect of excisable goods produced by them and
claimed exemption applicable to small scale manufacturers in terms of
Notification No. 175/86 dated l.3.1986 (as amended). The said classification
list was verified by the Central Excise authorities and duly approved by the
Asstt. Collector of Central Excise, Coimbatore-I Division.
F
During the year 1986-87 and 1987-88, the Company cleared their goods
availing the exemption in terms of Notification No. 175/86 dated l.3.1986
(as amended) and submitted their monthly RT 12 returns which were duly
assessed by the Range Superintendent, Coimbatore-I Division and returned to •
G the Company.

In October, 1986 and October, 1987, the factory at .Coimbatore was
visited by the Central Excise Revenue Audit authorities. On 5.2.1988, the
factory was visited by Central Excise Internal Audit Authorities, Coimbatore.

H Thereafter, on 7.12.1989, a show-cause Notice C. No. V/Ch. 8481.80/
EASLAND COMBINES v. COLLECTOR OF CENTRAL EXCISE [M.B. SHAH, J.] 115

15/92/89, CxAdj. (CERA) dated 7.12.1989 was issued to the Company by A
-the Collector, Central Excise, as to why differential duty amounting to Rs.
7,59,501.28 be not demanded from the Company under Rule 9(2) of the
Central Excise Rules; 1944 read with Section 11 A of the Central Excise &
Salt Act, 1944 and penalty be not imposed on them under Rules 9(2) and
l 73Q of the Central Excise Rules, 1944.
B
On 10.8.1990, the Collector, Central Excise, Coimbatore, by Order-in-
Original C. No.V/Ch.8481.80/15/92/89 dated I 0.8.1990 confll111ed the demand
of duty of Rs. 7,59,501.28 raised in the show-cause notice, under Rule 9(2)
of the Central Excise Rules, 1944 read with Section I IA of the Central
Excise and Salt Act, 1944 and imposed a penalty of Rs. I 0,000 upon the C
Company under Rule 9(2) and I 73Q of the said Rules.

In appeal, the Tribunal considered whether the extended period of
limitation is invokable for demanding Central Excise Duty under Section
I lA of the Act. The Tribunal considered that as per the Notification No.175/
86 exemption is available only to a factory which is an undertaking registered D
with the Director of Industries and that the factory where the goods are
manufactured and removed should be an undertaking registered with the
Director of Industries before the exemption provided by the notification could
be extended. Therefore, merely because factory of the Company at Trivandrum
was registered as SSI unit, the benefit of notification was not available in
respect of a branch factory at Coimbatore. The factory at Coimbatore was an E
independent unit which is required to be registered as SSI unit with the
Director of Industries. The Tribunal, therefore, held that as there was
misstatement by the appellant, the duty is demandable from the appellants-
Company for the extended period and hence dismissed the appeal.
F
It is settled laws that for invoking the extended period of limitation
duty should not have been paid, short levied or short paid or erroneously
refunded because of either fraud, collusion, wilful mis-statement, suppression
of fact or contravention of any provision or rules. This Court has held that
these ingredients postulate a positive act and, therefore, mere failure to pay
duty and/or take out a licence which is not due to any fraud, collusion or G
wilful misstatement or suppression of fact or contravention of any provision
is not sufficient to attract the extended period of limitation.

The present case is not a case where the Company was not entitled to
have registration as SSI unit at Coimbatore. It was a mistake of the concerned
clerk on the assumption that as the Company was registered as SS! unit at H
116 SUPREME COURT REPORTS [2003) I S.C.R.

A Trivandrum, the Company was not required to obtain such certificate at
Coimbatore. From such mistake it would be difficult to arrive at a conclusion
that it was wilful misstatemerit of suppression of fact for getting the benefit
'lf exemption notification. Classification list was also approved on the said
assumption without noticing that separate SSI certificate for factory at
B Coimbatore was required to be obtained.

In this view of the matter, in our view, the finding recorded by the
Tribunal that there was willful suppression on the part of the Company in
availing the benefit of Notification and therefore extended period of limitation
could be invoked, requires to be set aside and is hereby set aside.
c The appeal is allowed to the aforesaid extent.

C.A. Nos. 3688, 4263, 4767 and 4832-34 of 2000.
~-
In these appeals, the Tribunal arrived at the conclusion that in two of
the cases, demands were within six months and in one case exte11ded period
D was invoked and set aside the order by holding that there was no suppression
and only normal period of six months would be available. However, relying
upon the decision in Cotspun 's case. Appeals were allowed. Hence, these
appeals.
--l.
Considering the reasons recorded in the aforesaid judgment, the
E
impugned order passed by the Tribunal holding that the demand in these
cases is not enforceable in view of Cotspun 's case, requires to be set aside
and is hereby set aside.
r
In the result, the appeals are allowed.
F
C.A.Nos. 3437-3438 of 2000
,.>-
We have heard the learned counsel for the parties. It is agreed by the

G
learned counsel for the parties that the question-whether extended period of
limitation could be invoked in the present case by the Revenue or not-requires
to be re-determined by the Tribunal.
.
In the result, the appeals are allowed and the matters are remitted to the
Tribunal for deciding the matters in accordance with law.

C.A. Nos. 3553 and 6272 of 2000. CA Nos. 335, 8113-14 and 4249-4250 of
H 2001.
EASLAND COMBINES v. COLLECTOR OF CENTRAL EXCISE (M.B. SHAH, J.J ( J7

The appeals were allowed by the Tribunal relying on the decision A
rendered by this Coun in Cotspun 's case. However, on facts, it is agreed that
the matter requires to be remitted to the Tribunal for deciding the question
of classification and other issues.

In the result, the appeals are panly allowed. The impugned order passed
by the Tribunal is set aside. The Tribunal to decide the contention raised by B
the respondents with regard to classification of the goods in question and
.x other issues, if any.

CA. No. 7090 of 2000

Jn view of amended Section 11 A, it is agreed by the learned counsel C
for the panies that for determining other questions, matter is required to be
remitted. Hence, the appeal is allowed. The impugned order is set aside and
the matter is remitted to the Tribunal for deciding it afresh in accordance
with law.

C.A. Nos. 3805-3807 of 2000
D

These three appeals arise out of the common order passed by the
Tribunal. Jn two cases, demands were within six months from the date of the
show-cause notice. In one case, extended period was invoked. The Tribunal
arrived at the conclusion that considering the facts of the case, the extended E
period could not be invoked and, therefore, charge of misclassification,
suppression etc. requires to be set aside. The Tribunal held that normal period
of limitation of six months would be available. The Tribunal however held
that in view of the decision in Cotspun's case, the demand was not enforceable
and the appeals were allowed.
F
In view of the amended statutory provisions and for the reasons recorded
above, the demands which are within period of limitation could be enforced.

In the result, the appeals are panly allowed accordingly.

CA Nos. 302-303 of 2002 G
In these appeals, final order No. 83/2000-A dated 18.2.2000 and Misc.
Order No. 147/2000-A dated 22.I2.2000 are challenged.

By order dated I 8.2.2000, the Tribunal held that the clearances of the
goods were effected pursuant to the approved classification list and price list H
118 SUl>REME COURT REPORTS (2003) I S.C.R.

A and that being the position, the entire exercise undertaken by the department
in pursuance of the show-cause notice dated 31.3 .1986 was illegal. The :r--
Tribunal, therefore, set aside the order passed by the adjudicating authority
and the department was directed to refund the amount expeditiously. That
order was challenged by filing applications to rectify the mistakes on the
ground of subsequent amendment of the statute. The Tribunal dismissed those
B applications relying upon the Cotspun 's case and held that the subsequent
amendment of statute cannot be a reason for entertaining a petition for
rectification of a mistake.

In view of the interpretation rendered by us with regard to statutory
C provisions, these appeals are required to be allowed and the matters are
required to be remitted to the Tribunal for deciding it on merits with regard
to the other contetttion which are sought to be raised on facts.

In the result; appeals are allowed accordingly and the orders of CEGAT
are set aside. The matters are remitted to the Tribunal for deciding the same
D on merits in accordance with law.

There shall be no order as to costs in all these appeals.

N.J. Appeals disposed of.