Central Excise Circular No. 677 dated 3^rd December 2002

(i) Hon�ble Supreme Court's judgment in the case of Commissioner of Customs, Mumbai vs. Virgo Steels [2002 (141) ELT 598 (SC)] &

(ii) Tribunal�s Larger Bench judgment in the case of Mohinder Steels Ltd. vs. CCE, Chandigarh [2002 (145) ELT 290 (Tri. -LB)]

Kind attention is invited to the above-mentioned judgment of the Hon�ble Supreme Court. In this case, M/s. Virgo Steels had obtained an advance licence under �Deemed Export Scheme� for duty free import of M. S. Billets under Notification No. 210/ 82-Cus, for supply to M/s Associated Cement Company Ltd. (ACC) for substantial expansion and modernisation of their factory. The project was however, subsequently abandoned by M/s ACC, yet M/s Virgo Steels imported the goods under the advance licence and sold the material in the market, contrary to the terms of the Advance Licence and the Notification. On adjudication demand of duty was confirmed by the Commissioner under Section 28(2) of the Customs Act, 1962. No show-cause Notice was issued in this case as the same was waived by the party. However, before the Tribunal, Party raised a plea that issuance of a notice under Section 28 is a mandatory requirement and that if this requirement is not followed the duty demand cannot be confirmed. Tribunal allowed the appeal of the Party on the ground that a notice under Section 28 cannot be oral but has to be in writing; that there is no provision in the Section for waiver of written notice and that as no notice as required under Section 28 was issued to the appellant, the order confirming the duty cannot be sustained. Reliance in this regard was placed by the Tribunal on Hon�ble Supreme Court�s judgment in the case of CCE vs. Tin Plate Co. of India Ltd. [1996 (87) ELT 589]. This judgment of the Tribunal was reported in [2001 (136) ELT 641 (Tribunal)].

2.     Appeal was filed by the Department against the above-referred judgment of the Tribunal and the same has been allowed by the Hon�ble Supreme Court vide their above mentioned judgment, setting aside the order of the Tribunal. In their judgment the Hon�ble Supreme Court has, inter-alia, held that:

(i)     ������� the jurisdiction of a proper Officer to initiate proceedings for recovery of duty which has escaped collection, is not traceable to Section 28. The power to recover duty, which has escaped collection, is a concomitant power arising out of the levy of customs duty under Section 12 of the Act, and the same does not emanate from Section 28 of the Act. In our opinion, Section 28 only provides for procedural aspect for recovery of duty, hence, any irregularity committed by a proper Officer in following the procedure laid down in Section 28 would not denude that Officer of his jurisdiction to initiate action for recovery of escaped duty but it may make such proceedings initiated by that Officer voidable. In that view of the matter, in our opinion, the term �condition precedent� used in the case of Tin Plate Co. (supra) is referable to the procedural requirement of Section 28 and not to the jurisdictional aspect of the proper Officer to recover the escaped duty �������

(ii)    ������� that even though a provision of law is mandatory in its operation if such provision is one which deals with the individual rights of person concerned and is for his benefit, the said person can always waive such a right. Bearing in mind the above decided principle in law, if we consider the mandatory requirement of issuance of notice under Section 28 of the Act, it will be seen in that requirement is provided by the Statute solely for the benefit of the individual concerned, therefore, he can waive that right. In other words, this Section casts a duty on the Officer to issue notice to the person concerned of the proposed action to be taken. This is not in the nature of a public notice nor any person other than the person against whom the proceedings are initiated has any right for such a notice. Thus, this right of notice being personal to the person concerned, the same can be waived by that person �������

3.     Another judgment favourable to the Department has recently been rendered by a Larger Bench of the Tribunal in the case of Mohinder Steels Ltd. vs. Commissioner of Central Excise, Chandigarh [reported in 2002 (145) ELT 290 (Tri-LB)], over-ruling the judgment of a Division Bench of two Members in the case of Shri Guru Hargobind Steel Industries [reported in 2001 (136) ELT 1047 (Trib)]. The issue in this case was whether the provisions of time limit and the procedural requirement of issuing notice, determining the amount etc., in terms of Section 11A of the Central Excise Act, 1944, are required to be followed mandatorily for recovery of the amounts due under the Compounded Levy Scheme for collection of duty based on the annual capacity of production under Section 3 of the Central Excise Act, 1944 and Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997. Relying on the judgments of the Hon�ble Supreme Court in the cases of Commissioner vs. Venus Castings (P) Ltd. [2000 (117) ELT 273 (SC)] and Commissioner vs. Raghuvar (India) Ltd. [2000 (118) ELT 311 (SC)], the Tribunal held that:

(i)     ������� The Compounded Levy Scheme for collection of duty based annual capacity of production under Section 3 of the Central Excise Act and Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 is a separate scheme from the normal scheme for collection of Central Excise duty on goods manufactured in the country ������ Thus, this is a comprehensive scheme and general provisions in the Central Excise Act & Rules are excluded.�

(ii)    �The importing of elements of one scheme of tax administration to a different scheme of tax administration would be wholly inappropriate as it would disturb the smooth functioning of that unique scheme. A time limit prescribed for one scheme could be wholly inappropriate for another scheme and time limit under Section 11A is no exception. Therefore, in the light of the judgment of the Apex Court in the cases of Venus Casting, and Raghuvar (India) Ltd., we hold that recoveries of amounts, under the compounded levy scheme for re-rollers is not covered by the general time limit prescribed under Section 11A of the Central Excise Act.�

4.     The above two judgments lay down important principles of law and are in favour of the Revenue. It is therefore, requested that these may be circulated to all the field formations under your charge for their information. Complete texts of the judgments may however, be referred to for better appreciation of the facts and understanding of the judgments.

5.     While on the issue, it may also be stated that in cases of this nature, it is advisable that provisions of the Scheme/ Notification/ Bonds in terms of which the concession/ exemption of duty is granted, are also invoked for confirmation of the demand of duty. All the adjudicating authorities under your charge may please be advised accordingly.