Important Point
The period of six months envisaged in Section 11A of the Central Excise Act, 1944 for issuing show cause notice did not stand extended by any further period so as to enable the Revenue to scale over the hurdle of limitation in this case.

Judgment

Thomas, J.- The moot point in this appeal is this: Whether the period of six months envisaged in Section 11A of the Central Excises Act, 1944 (for short ‘the Act’), for issuing show cause notice, stood extended by any further period so as to enable the Revenue to scale over the hurdle of limitation? 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 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.

2. Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT-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 of 2:1 that the interim order of the Delhi High Court dated 12.8.1991 operated as virtually a stay, though not expressly so, against issuance 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 CEGAT to proceed to recover the duty. The said order of CEGAT is challenged in this appeal.

3. 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 yarn is made is distinct from other divisions. Yarn is to be used in the manufacture of fabric which is the end pro­duct of the textile mill of the appel­lant. Yarn 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 yarn from one area of the factory and hence that commodity is exigible to excise duty as per Rules 9 and 49 of the Central Excises Rules irrespective of the excise duty payable on manufacture of fabric. Appellant challenged the afore­said direction 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 yarn for the period from 6.11.1980 to 31.3.1981. However, the Department issued a notification on 20.2.1982 as a 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, vide Section 51(2)(d) of the Finance Act, 1982 by which it was given retrospective effect from 1944. Though the appellant challenged the aforesaid amendments first in the Delhi High Court and later in this Court, its validity remained undisturbed vide J.K. Spinning and Weaving Mills Ltd. & Anr. v. Union of India & Ors.1. A three-Judge Bench of this Court in that decision upheld the validity of the amendments to Rules 9 and 49 besides upholding the retrospec­tively granted to the provisions as per Section 51 of the Finance Act, 1982.

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

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

“11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.-- When any du