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Retrospective validation of action taken under Section 11A of Central
Excise Act, 1944, under Finance Act 2000
Circular
No. 588 dated 19th September 2001
Attention
is invited to the provisions contained in Sections 97 and 110 of the Finance
Act, 2000.
2.
Queries have been raised from field formations about the exact scope and
amplitude of these changes. The matter has been examined in consultation with
Additional Solicitor General. A copy of the opinion of ASG dated 20.04.2001 is
enclosed. The Board has accepted the opinion given by the Learned Additional
Solicitor General. You are requested to take follow up action in accordance with
the advice of the ASG.
3.
This may be brought to the notice of field formations.
4.
Receipt of this Circular may please be acknowledged.
OFFICE
OF SHRI KIRIT N.RAVAL
ADDITIONAL
SOLICITOR GENERAL SUPREME COURT
NEW
DELHI
My
opinion is sought on the question of the scope and amplitude of the
retrospective amendment to Section 11A of the Central Excise Act, specifically
enacted to protect the Revenue�s interest after the judgment of the Hon�ble
Supreme Court in the case of Collector of Central Excise vs. M/s Cotspun Ltd.,
1999 (113) ELT 353 (SC). My attention is drawn to the fact that by virtue of
Section 110 of the Finance Act, 2000, any action taken under Section 11A of the
Central Excise Act, demanding duty on account of non-payment, short-payment,
non-levy, short-levy etc. 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-section (3)
of said section, shall be deemed to be and to always have been for all purposes
validity and effectively issued or served under that section, notwithstanding
any approval, expense or assessment relating to the rate of duties on or value
of the excisable goods by any Central Excise Officer under any other provision
of the Central Excise Act, or the Rules made thereunder. Sub-section (2) of the
said Section also provides that any action taken anything done under section 11A
at any time during the said period shall be deemed to be and to have always
been, for all purposes, as validity and effectively taken or done as if
sub-section (1) had been in force in all material times, notwithstanding
anything contained in any judgment, decree or order of any court, Tribunal or
other authority.
2.
Thus, it can be seen from section 110 of the Finance Act, 2000 that the
section seeks to grant legitimacy to all the actions taken for the recovery of
the duty from the period 17.11.1980 and that any action initiated in respect of
any case after such date shall be deemed to have been validity taken and any
judgment, decree or order of any court, tribunal or other authority shall not be
an impediment to such an action.
3.
In this background, my opinion is sought on the following queries:
(1)
Whether it is correct to hold that the amendments would only cover
demands for a period of six months prior to issue of SCN?
(2)
Whether demands for the extended period, where such demands were held as
time barred on the ground that there was approved classification list/ price
list etc. would be covered by the amendments?
(3)
Whether these provisions would apply to proceedings that have attained
finality and where appeal periods have expired?
(4)
Could recoveries be made in such cases, and what would be the period upto,
which such proceedings could be reopened and recoveries made?
(5)
What would be the time limit, if any, for initiating proceedings under
the amended provisions?
(6)
What is the kind of notice/ order that should be issued for recoveries of
dues in respect of proceedings, which have attained finality?
(7)
How should the department proceed in respect of matters which are pending
in appeal in Tribunal and Courts?
4.
My answer to the queries is as under.
Query
No. 1
In
the �Negative�- in view of the fact that the word �one year� has been
substituted by the word �six months� by section 97-B of the Finance Act.
Further, the amendment has been stated to be effective from 17th
November 1980.
Query
No. 2
In
the �Affirmative�- such demands, which were earlier, held to be time barred
because of the approval of the classification list would also be covered by the
amendment as the amendment has been made retrospective w.e.f. 17th
November, 1980. The factum of approval after that date will not come in the way
of recovering the amounts, which would be covered by such an amendment.
Query
No. 3
Under
Section 110 of the Finance Act, any notice issued after the 17th of
November 1980 will be protected by the validating Act. The necessity for the
amendment arose to over-come the judgment of the Hon�ble Supreme Court in the
Cotspun Ltd Case. Further, the power to amend the law retrospectively has been
recognized judicially in a number of pronouncements
(for example, Prithvi Cotton Mills Ltd. vs. Broach, (1969) 2 SCC 284).
The said judgement, in para 4, clearly provides. �If the legislature has the
power over the subject matter and competence to make a valid law, it can at any
time, make such a valid law and make it retrospectively so as to bind even past
transactions.� Therefore, where notices have already been issued, the
judgement rendered in the context of the earlier provision would cease to be of
relevance. In fact, in the case of Cotspun itself, where the judgement of the
Supreme Court was rendered, in view of the validating provisions, recovery could
be made notwithstanding the Cotspun judgement. Under these circumstances, if the
SCNs have been issued then even in respect of past proceedings where even
judgements have been rendered, it will be open to the Department to make
recoveries.
Query
No. 4
Recoveries
can be made in such cases for the period subsequent to 17th November
1980 when the retrospective operation of the amended provision has come into
play. However, this is subject to the SCNs having been issued in time. It is
also worth nothing that if SCNs have not been issued so far, now it will not be
open to issue SCNs for the past period unless it is within the period of
limitation as prescribed under the amendment provisions.
Query
No. 5
The
time limit for initiating proceedings under the amended provisions would be one
year for issuance of fresh notices. However, as far as recoveries pursuant to
notices already issued or subject matter of pending proceedings are concerned,
the same are covered by answer to the previous queries.
Query
No. 6
In
respect of matters which have received finality, the demand notices should be
issued referring to the amendment carried out and pointing out that in view of
the amended provision, it is necessary for the assessee to make the payment, as
demanded. Reliance should be placed on the amendments for the purpose of making
recoveries.
Query
No. 7
As
far as the pending matters are concerned, the Department should file an
affidavit indicating the amendment having been carried out and the request that
the controversy be decided in the context of the amended provisions.
I
have nothing further to add.
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